5: Correlation Between Research Factors – ERP and Information Systems

5
Correlation Between Research Factors

This chapter studies the correlation between research factors. Based on the literature review and a logical deduction, we explored potential relationships between the research factors. Once relationships were illustrated, we assessed and determined the nature of the correlations between these factors. A correlation is the measurement of the relationship between two variables or more. We define two principal types of correlations: “positive correlation” (PC) is a direct relationship where, as the amount of one variable (factor) increases, the amount of a second variable also increases; “negative correlation” (NC) describes a relationship where, as the amount of one variable goes up, the amount of another variable goes down.

The study of the above research factors raised some questions to explore, for example:

  1. – Could the Project management ERP (PMER) be easy if the enterprise resource planning (ERP) package is a complex product?
  2. – Could a desired independence from the vendor (guaranteed by ERP package modularity) be affected by the lack of the interoperability of the ERP (INTE)?
  3. – Would a total overhaul strategy be less expensive during a period of economic crisis and competitiveness (ECCO)?
  4. – Could the competitiveness of firms within the framework of an economic crisis be affected by the total dependency on the ERP vendors (TDEV)?
  5. Would an evolution strategy of ERP system vendors from 1st to 2nd G that is based on an external acquisition decrease the return on investment (ROI) because of difficulties in updating and upgrading the system?
  6. – Would an evolution strategy of ERP system vendors that is based on internal development affect the firm’s competitiveness because of the potential unreliability of some modules?

According to Ayağ and Özdemi [AYA 07], ERP system selection criteria may be classified into seven dimensions and 22 criteria. All criteria of one dimension are connected and influence each other either positively or negatively. Productivity directly correlates with the system’s support efficiency. Profitability influences more than half (13 out of 22) of the criteria mentioned in their research paper (upgrade possibility, ease of integration, ease of in-house development, functionality, module completion, function fitness, security level, reliability, stability, possibility of recovery, ease of use, ease of operations, ease of learning, technology advance, standardization and integration of legacy systems).

We will first explore the general correlations between many factors, followed by an analysis of potential correlations between any two factors, as explained in the following sections.

5.1. Correlations between economic crisis and competitiveness (ECCO) and PMER and INTE and COER

The complexity of selecting an ERP package can add a lot of time to the ERP system project (Computer Technology Research Corporation 1999). In the mid-1990s, systems, applications and products for data processing (SAP) generated a significant amount of negative publicity claiming that SAP was too expensive, too complicated and took too long to implement. There has been an ongoing effort for over a decade to add a greater level of simplicity to SAP deployments. The complexity of ERP (COER), high costs and implementation problems force numerous organizations to reconsider their new plans in relation to this enterprise system [KUM 00]. According to [CAR 04]:

“Customizing the already complex ERP created yet more complexity and even larger risks. Without intimate knowledge of how the integrated pieces of these modular software packages actually worked, customizing could lead to in-house bugs and glitches that were hard to foresee and expensive to fix”.

Most ERP packages are very complex systems, so interfacing with these systems is not an easy task. Testing the links between ERP packages and other corporate software links that have to be built on a case-by-case basis is another time- and cost-consuming project task [LEO 07]. The total costs of ownership and deployment time are considerably increased by significant implementation efforts, business configuration and customization complexity [UFL 07]. Challenges with solution complexity and cost continue to be an issue, according to Christian Hestermann, an analyst at Gartner [ROB 11].

5.2. Correlations between ECCO and PMER and INTE and ESEV

Different manufacturers of ERP packages are developing common integrated solutions helping to integrate different systems quickly and cost-efficiently [RAT 12]. This kind of partnership is supported by scientists who consider systems integration to be one of the three most problematic areas of ERP implementation [THE 01], strongly related to the success of the whole project [BIN 99]. Most companies will have some system that will not fit into the functionality of ERP packages and that will have to be interfaced with the ERP package.

Today, the functionality of universal and modern ERP systems includes almost all standardized business processes. However, in some cases, the activity area of a company is unique and cannot be satisfied by an ERP system. In these cases, the implementation project must lead to integration between the ERP system and other systems already in use [RAT 12]. In order to meet a specific need, it is not advisable to program the ERP system with many specifically developed programs that prevent any reliable ERP system’s evolution in the future, thereby making it difficult to interface with other subsystems.

5.3. Correlations between ECCO and PMER and COER and ESEV

“Perhaps customization of the already complex ERP made changing the software later, or upgrading to a newer version, far more difficult, and in some cases prohibitively expensive” [CAR 04]. The Evolution strategy of ERP vendors (ESEV) should take into account the ERP system’s customization process, which is often complex and costly. According to Ayağ and Özdemir [AYA 07], ERP system functionality directly affects the company’s productivity level and can be assessed by considering the complexity of the modules. The evolution strategy of ERP system vendors should lead to an ERP 2nd G for which the upgrading is not complex and is not costly.

5.4. Correlations between ECCO and TDEV and PMER

Modularity helps to significantly decrease ERP system implementation time and project costs, as firms pay only for the system features that will actually be used. Before making a decision about which standard and additional modules will be used, internal and external business processes should be analyzed [ZIA 06].

5.5. Correlations between ECCO and ESES and COER

Urbanization is essential to describe complex information systems (IS) and to develop standards that enable business competitiveness and flexibility. It is considered to be the way to understand and manage the complexity of an organization. It allows organizations to act and perform in increasingly dynamic environments [TRA 13].

5.6. Correlations between ECCO and ESES and ESEV

The assumption that an ERP system could improve firms’ competitiveness requires the fulfillment of certain conditions:

  1. – an expansion of the functional scope is to be implemented by the vendors to evolve an ERP system from 1st G to 2nd G. It is necessary to provide new modules (supply chain management (SCM), customer relationship management (CRM), e-business, etc.) that allow companies to improve their competitiveness and to reduce the costs with their partners;
  2. – a strategy on the part of firms to accompany this expansion (urbanization or a total overhaul);
  3. – an acceptable Total Cost of Ownership (TCO), which is crucial for firms.

5.7. Correlations between PMER and ESES and ESEV

The book has suggested various practices that are critical during the implementation of the ERP system. For example, almost every firm will discover inconsistencies between the ERP packages, current processes and organizational structure. Managers must determine whether they want to revise the ERP package or to adapt the current process and structure to the package [GRI 98]. The decision affects the implementation process and effectiveness of the ERP system.

5.8. Correlations between INTE and ESES and COER

Enterprise application integration (EAI) achieves internal data integration and can support process integration without replacement of legacy systems [IRA 03, SHA 05]. This allows a firm to retain legacy systems for some operations and keep extant production databases [BID 12]. Application programming interfaces (API) allow limited degrees of interoperability without requiring any formal architectural planning. In this approach, the individual application is king and the pragmatic need to connect at a superficial level requires the development and maintenance of software bridges linking application to application. Their development may be haphazard and may, over time, become a bricolage of programming. If the organization and its systems grow substantially, the complexity of maintaining these individual software APIs may overwhelm or force a move to other more formal or systematic integration approaches [BID 12].

For the purpose of our research, we reorganized and classified the literature describing the correlations between the research factors into the correlations between any two factors. Thus, the relationships between each pair of factors are studied below in more detail.

5.9. Correlation between ECCO and TDEV

In the case of a total dependency, the ERP system vendor could impose exaggerated financial conditions (consulting, maintenance and updates) that the company will not have the right to refuse or even to negotiate. For example, SAP has decided to abandon the initial rate of 17% (standard maintenance) and impose a single rate of 22% (enterprise support) on all customers. The majority of commentators use the word of “impose” to talk about this decision [FLE 08]. The good news accumulates for companies that have fallen into the SAP trap, dare I say SAP sect. Back in 2007, SAP had announced to all its customers a gradual increase in maintenance costs of 30% by 2012 [NAU 07].

In a situation of dependence, refusal of the vendor’s conditions would mean that the firm may need to proceed to a difficult replacement of its ERP system. A refusal such as this may be explained by the fact that such an operation would be too expensive: “Increased dependency on ERP vendors and integrators is noted and recognized but freedom from ERP systems is difficult, long and painful. This is like a detox for alcoholics and for drug addicts or leaving a religious sect that selects new rich clients and rejects them when they are finally ruined” [NAU 07].

The ERP system’s modularity (independence from the ERP vendor = TDEV–) could significantly decrease the system implementation costs (competitiveness would be improved due to an ERP system: a positive arbitration of ROI = ECCO+). The advantage to the ERP system vendor of the independence given to firms is the ability to better satisfy their budget. This allows the vendor to deal with clients without a large budget within the context of economic crisis.

Consequently, we can suggest a relative correlation between these two factors. It could be a positive correlation between TDEV– and ECCO+ (the more independent a firm is from an ERP system vendor, the more its competitiveness would increase due to an ERP system: a positive arbitration of ROI). However, we suggest a positive correlation between TDEV+ and ECCO– (the more dependent a firm is on an ERP system vendor, the more its competitiveness could not increase due to an ERP system: a negative arbitration of ROI).

5.10. Correlation between ECCO and PMER

Managing an ERP system project involves relatively large expenditures for the acquisition of the hardware, software, implementation, consulting and training [DAV 00, MCK 98], and can last for an extended period of time. ERP implementation projects are lengthy, and there have been many cases of unsuccessful implementations, which have had major impacts on business performance [PAR 00]. A survey conducted by “Panorama Consulting Group” (PCG) in 2011 found that ERP projects took longer than expected for 61% of the 185 surveyed companies, and costs exceeded budgets for 74% of these companies. More than half (53%) of the projects were reported to cost 189% of their original estimates [FIS 11].

Failure of ERP system implementation projects has been known to lead to problems as serious as organizational bankruptcy [BUL 96, DAV 98, MAR 00a]. There have been various definitions of failure of ERP implementation. Failure has been defined as an implementation that does not achieve a sufficient ROI identified in the project approval phase. Practitioners tend to discuss the impact of unreliable ERP project management (PMER–) in a relative sense, referring to the shutting down of the system, being able to use only part of the ERP system, suffering business loss, dropping market price, losing both market share and competitive advantage (ECCO–) due to implementation failure and so on [DEU 98, DIE 98, NEL 99].

ERP practitioners also give much attention to an inadequate analysis of ERP implementation costs. According to Langenwalter [LAN 00], ERP implementation projects fail in 40–60% of cases. Assessing an ROI of ERP software (ECCO–), the rate of unsuccessful projects (PMER–) becomes even higher 60–90% [PTA 00]. Leon [LEO 07] identified costs related to interruption possibilities and work efficiency fluctuations of internal staff members during the ERP project: trainings, brain drain (employee turnover) and ongoing maintenance. He also highlighted insufficiently identified costs related to an incorrect calculation of the direct amount of project work: customization, interaction and testing, data conversion and data analysis.

Though the cost of an ERP system is high, it becomes insignificant (ECCO+) compared to the benefits that a successful ERP implementation (PMER+) provides in the long run [SAD 99]. Consulting firms use techniques such as guided learning, formal training and knowledge creation activities to direct clients to the necessary knowledge required for a successful implementation. This guidance saves the client considerable time and effort in knowledge search costs [GAB 03].

Customizing an ERP system is also expensive. So, sticking to the basic configuration saves time and money. Some ERP system vendors propose solutions that are parameterized in advance using and classifying the most popular business processes by companies’ size or industry. A reduction in customization time and efforts is achieved when the system is preconfigured (PMER+) according to high-level characteristics of the customer organization. By offering such services to customers, vendors can significantly reduce the hurdle that is raised by purchase (ECCO+) and implementation costs [UFL 07]. According to Bueno and Salmeron [BUE 08], partly customized solutions significantly decrease the ERP system implementation period (PMER+) and system support costs (ECCO+).

As a result, we can suggest a relative correlation between these two factors. It could be a positive correlation between PMER+ and ECCO+ (the more reliable an ERP system’s project management is, the more competitiveness would increase due to an ERP: a positive arbitration of ROI). However, we suggest a positive correlation between PMER– and ECCO– (the more unreliable an ERP system’s project management is, the more competitiveness could not increase due to an ERP: a negative arbitration of ROI).

5.11. Correlation between ECCO and INTE

According to Hillestad et al. [HIL 05], the multi-level interoperability (INTE+) in health information communication has the potential to improve the care processes and decrease costs (ECCO+). Competitive advantage and profitability directly correlate with ease of integration and integration of legacy systems [AYA 07].

Consequently, we can suggest a relative correlation between these two factors. It could be a positive correlation between INTE+ and ECCO+ (the more reliable the ERP system’s interoperability is, the more competitiveness would increase due to an ERP system: a positive arbitration of ROI). However, it could also be a positive correlation between INTE– and ECCO–(the more unreliable an ERP’s interoperability is, the more competitiveness could not increase due to an ERP: a negative arbitration of ROI).

5.12. Correlation between ECCO and ESES

The amount of resources required depends on how well the ERP system fits with existing business processes:

  1. – if business processes are closely aligned with the best practices model built into the ERP system, the need for extra resources will be minimized;
  2. if there is not a close match, a process of mutual adaptation is needed, in which the company may need to both adapt some of its business processes to align with those of the ERP system, and have the ERP system adapted to existing processes that cannot be changed [HON 02].

Firms have to adopt new architectures in response to new business strategies to cope with environment problems. In this way, they will probably be competitive [TRA 13].

Organizations develop IS strategies that interrelate with their business strategies and that together support corporate missions [ROG 94]. Therefore, the evolution strategy of existing systems (ESES) information technology (IT) is impacted by the business strategy of the firms. So, if the business strategy targets a reduction of costs, in this case it is better to adopt urbanization, because a total overhaul would be more expensive. “How to modernize without erasing the past, within the cost limits set, and do so while continuing to operate business while the work is carried out?” [LON 09]. The author explained that the principles of urbanization (ESES–) are to modernize and judiciously profit from technological advances within the cost limits set (ECCO+). Urbanization may be regarded as one of the keys to achieving competitive advantage through IT [TRA 13].

However, making a clean sweep (ESES+) of the existing IS on the basis of a new homogenous and modern solution does not seem to be the best solution functionally or economically (ECCO–) or humanly [LON 01]. Making a clean sweep is costly. Therefore, urbanization offers an evolution possibility that would be less expensive within the context of an economic crisis.

Consequently, we can suggest a relative correlation between these two factors. It could be a positive correlation between ESES– and ECCO+ (the more urbanization is performed, the more competitiveness would increase due to an ERP system: a positive arbitration of ROI). It could also be a positive correlation between ESES+ and ECCO– (the more total overhaul is performed, the more competitiveness could not increase due to an ERP: a negative arbitration of ROI). In other words, it could be a negative correlation between ESES+ and ECCO+ and the same between ESES– and ECCO–.

5.13. Correlation between ECCO and COER

An ERP system must be simple and easy to understand for the average IT user, because ERP systems work efficiency influences the results of the organization [MON 96]. In order to maintain productivity, the software has to be simple to understand and easy to use after a reasonable amount of time spent getting acquainted with the system [ZET 04]. Competitive advantage and profitability correlate directly with ease of use, ease of operations and ease of learning. The simplicity of use of an ERP system determines the productivity of an organization [AYA 07]. Thus, in order to maximize work performance (ECCO+) and user satisfaction, the amount of complexity perceived by the user must be minimized (COER+).

The introduction of complex ERP systems has often shown to have negative unexpected side-effects such as decreased instead of increased order and control [HAN 06]. Eliminating difficult or obstructive interaction patterns on the user interface level is important. The usability of business software has become an important differentiator for success. Product training is often a reaction to front-end complexity (COER–), major changes in personal workflows and steep learning curves. Yet, it is an effective way to simplify the user’s acquaintance with a new complex product and to increase productivity. However, end user training is costly (ECCO–) and only reasonable for central software products that are used frequently and continuously [UFL 07]. Thus, expensive training that could affect or decrease the competitiveness of firms (ECCO–) is necessary when the ERP system is complex (COER–).

Consequently, we can suggest a relative correlation between these two factors. It could be a positive correlation between COER+ and ECCO+ (the more simple an ERP system is, the more competitiveness would increase due to an ERP system). It could also be a positive correlation between COER–and ECCO– (the more complex an ERP system is, the more competitiveness could not increase due to an ERP). In other words, it could be a negative correlation between COER+ and ECCO– and the same between COER– and ECCO+.

5.14. Correlation between ECCO and ESEV

System upgrade is one of the main jobs of post-implementation and a system support phase [NAH 01]. It helps to extend the duration of the system’s use as a long-term investment. ERP systems can provide the organization with a competitive advantage through improved business performance by integrating supply chain management, receiving, inventory management, and customer orders management, among other things [HIT 02, KAL 03]. A reliable ERP system’s functionality helps to optimize business processes and lead to an increase in work efficiency [HAN 04]. Competitive advantage and profitability (ECCO+) correlate directly with functionality (ESEV+) and module completion [AYA 07].

ERP system functionality should be focused on the functional areas that are closest to generating profit, e.g. the supply chain, inventory or client relationships management. This functionality must work properly and efficiently with the goal to extend the system’s functional capacity [RAT 12]. Firms are affected by decreases in their market share (ECCO–) because their ISs are not flexible enough to support new products, new services or customers’ needs (ESEV–). As an alternative, firms have to adopt new architectures in response to new business strategies to cope with environment problems. In this way, they will probably be competitive [TRA 13]. Consequently, new subsystems or new modules (CRM, product lifecycle management (PLM), SCM, etc.) should be developed to provide these new functionalities.

Since the business environment is constantly changing, some necessary upgrades (from ERP 1st to 2nd G) need to be implemented during the whole ERP lifecycle, or the firm may not be able to remain competitive. The ERP system upgrade incurs costs which are approximately 25–33% of the initial investment [CAR 00]. The cost of each upgrade includes 50% of the original software license fee and 20% of the original implementation cost per user [SWA 04]. The cost of ERP system upgrades is high [MON 04]. Competitive advantage and profitability correlate directly with upgrade potential [AYA 07].

Generally, the significant costs of a future upgrade should not dissuade the client from purchasing an ERP package. It should also not negatively affect the competitiveness of an IS whose ERP system’s upgrading is costly (the more expensive it is to upgrade, the less likely the ERP system is to be selected by clients to be a part of their IS).

Regarding the costs associated with an upgrade, we suggest the following classification:

  1. 1) upgrading to an ERP 2nd G that was developed by a vendor via an internal development is less expensive;
  2. 2) upgrading to an ERP 2nd G that was developed by a vendor via an external acquisition is more expensive. The introduction of new modules, especially after the acquisition of the vendor that made the software by a competitor, generates significant costs [DES 04];
  3. 3) upgrading an IS that is composed of an ERP 1st G that was kept by the vendor without any expansion toward a 2nd G or because that the vendor went out of business is very expensive.

Consequently, we can suggest a relative correlation between these two factors. It could be a positive correlation between ESEV+ and ECCO+ (the more an ERP 2nd G is developed in the first place by a vendor according to an internal development and then in the second place according to an external acquisition, the more the firm’s competitiveness could increase due to this ERP system). It could also be a positive correlation between ESEV– and ECCO– (the more an ERP 1st G is kept without any expansion toward a 2nd G, the more the firm’s competitiveness could not increase due to this ERP). In other words, it could be a negative correlation between ESEV+ and ECCO– and the same between ESEV– and ECCO+.

5.15. Correlation between TDEV and INTE

“According to the vendor SAP, its software package is highly modular (TDEV–) and components coexist harmoniously with other vendors (INTE+) such as Microsoft and Oracle” [NAU 08]. The ERP system modules were integrated one after another, but companies generally only incorporated between one and three [DES 04]. Therefore, ERP interoperability plays an important role within the IS and it should be improved.

As a result, we can suggest a relative correlation between these two factors. It could be a positive correlation between TDEV– and INTE+ (the more independent the firm is from the ERP system vendor, the more reliable the ERP system’s interoperability should be). It could also be a positive correlation between TDEV+ and INTE– (the more dependent the firm is on the ERP vendor, the more unreliable the ERP system’s interoperability could be. For example, the ERP system’s interoperability is not important when the IS of the firm consists only of an ERP 2nd G). In other words, it could be a negative correlation between TDEV– and INTE– and the same between TDEV+ and INTE+.

5.16. Correlation between TDEV and ESES

One of the advantages of independence from an ERP system vendor (TDEV–) is the ability of firms to freely choose the evolution strategy of their existing systems: total overhaul or urbanization, which is widely preferred by firms. For example:

  1. – if a firm prefers to complete its ERP 1st G by other subsystems such as IS number 5 as shown in Table 1.2, urbanization would be possible;
  2. – it is not difficult for a firm whose architecture consists of only two modules of an ERP system with other subsystems to adopt a total overhaul or an urbanization strategy that leads to the replacement of its existing system or at least the replacement of its ERP system).

On the contrary, total dependence on the ERP system vendor (TDEV+) does not allow the firms to freely choose a given strategy. For example:

  1. – if all modules of an ERP 2nd G are chosen by a firm to replace its existing system that is not an ERP 1st G, a total overhaul would be the only possible strategy to apply;
  2. – if a firm asks its ERP system vendor for a migration from 1st to 2nd G, urbanization would be the only possible strategy to apply;
  3. – it is very difficult for a firm, whose architecture consists mainly of many modules of an ERP system, to adopt a total overhaul because this evolution strategy leads to the replacement of its ERP system (virtually all IS needs to be replaced). In fact an urbanization that completes and improves its ERP system would be easier to achieve.

Consequently, we can suggest a relative correlation between these two factors. It could be a positive correlation between TDEV+ and ESES+ and – (the more independent the firm is from the ERP system vendor, the more freely the firm could choose its evolution strategy of existing systems). However, it could be a negative correlation between TDEV+ and ESES+ and – (the more totally dependent the firm is on the ERP system vendor, the less freely the firm could choose its evolution strategy of existing systems).

5.17. Correlation between PMER and INTE

Implementation and administration of additional functionality mostly requires special skills related to a specific system support (PMER+), because the biggest ERP vendors (SAP, Oracle and Microsoft) create solutions using their own platforms’ technological linkages (INTE+) between hardware and software [AYA 07].

Consequently, we can suggest a relative correlation between these two factors. It could be a positive correlation between PMER+ and INTE+ (the more reliable the project management of an ERP system is, the more reliable the ERP system’s interoperability with other subsystems could be; or vice versa, the more reliable an ERP system’s interoperability is, the more reliable the project management of the ERP system could be). However, it could also be a positive correlation between PMER– and INTE– (the more unreliable the project management of an ERP system is, the more unreliable the ERP system’s interoperability with other subsystems could be; or vice versa, the more unreliable the ERP system’s interoperability is, the more unreliable the project management of the ERP system could be).

5.18. Correlation between PMER and ESES

An ERP system implementation project may cause a significant number of changes within an organization [DAV 00]. Several reasons prompted the 33.3% of firms that do not urbanize their IS. According to Trabelsi et al. [TRA 13], the main reason firms did not update their IS was the absence and unavailability of skilled labor (16.6%) or the lack of high and specific qualification (PMER–) crucial for urbanization (ESES–). In fact, within the framework of an ERP system’s project management, a high level of skills is crucial regardless of the evolution strategy of the existing system (urbanization or total overhaul: ESES – or +).

Therefore, we can suggest a relative correlation between these two factors. It could be a negative correlation between PMER– and ESES– or + (the more unreliable the project management of an ERP system is, the less likely urbanization or total overhaul could be performed with success). However, it could be a positive correlation between PMER+ and ESES– or + (the more reliable the project management of an ERP system is, the more likely urbanization or total overhaul could be performed with success).

5.19. Correlation between PMER and COER

ERP system implementation is a complex process, and there have been many cases of unsuccessful implementation [PAR 00]. Complexity of implementation is a measure of the internal effort with respect to the time and effort involved in the configuration, documentation, training and support functions of the ERP system implementation [LAL 06].

Training users to use an ERP system is essential because it is not easy to use even with good computer skills (ZHA 02, NAH 03, WOO 07]. ERP systems are extremely complex and demand rigorous training. Wei et al. [WEI 05] define the simplicity of an ERP system using ease of use (COER+) as a measure for the simplicity of training and use (PMER+). The less complex an ERP system is, the more successful project management can be, because training will be easier. Selection of a complex ERP system leads to complex project management.

Consequently, we can suggest a relative correlation between these two factors. It could be a positive correlation between COER+ and PMER+ (the more simple an ERP system is, the more reliable the project management of an ERP system could be). It could also be a positive correlation between COER– and PMER– (the more complex an ERP system is, the more unreliable the project management of an ERP system could be). However, it could be a negative correlation between COER+ and PMER– (the more simple an ERP system is, the less unreliable the project management of an ERP system could be) and the same between COER– and PMER+ (the more complex an ERP system is, the less reliable its project management could be).

5.20. Correlation between PMER and ESEV

A sophisticated definition of ERP vendor reputation has been introduced by Verveille and Hallinten [VER 03], which highlights vendor recognition, technological and strategical vision, longevity and experience performing implementation projects. According to Ayağ and Özdemir [AYA 07], implementation and administration of additional functionality (ESEV+) mostly requires special skills (PMER+). In order to successfully manage the whole upgrade process (ESEV+ and –), appropriate implementation and planning methodologies (PMER+) should be used to define changes in the organizational structure [RAT 12].

No matter what generation an ERP system is (1st or 2nd), the project management should be reliable. However, we remember that an external acquisition strategy does not allow a vendor to develop its ERP 2nd G on the founding principles of a total integration “TIIS” (see section 4.7). As a result, the project management should be more organized, sophisticated and difficult for an ERP 2nd G developed by a vendor according to an external acquisition compared to an ERP 2nd G developed according to an internal development.

Consequently, we can suggest a relative correlation between these two factors. It could be a positive correlation between ESEV+ and PMER+ (the more an ERP 2nd G is developed in the first place by a vendor according to an external acquisition and then in the second place according to an internal development, the more reliable the project management to implement this ERP system should be). It could also be a positive correlation between ESEV– and PMER+ (the more an ERP 1st G is kept without any expansion toward a 2nd G, the more reliable the project management to integrate this ERP system with other subsystems should be). However, it could be a negative relationship between ESEV+ and PMER– and the same between ESEV– and PMER–

5.21. Correlation between INTE and ESES

To evaluate ERP software suitability, we have to consider its integration possibilities with software already in use [SPR 00, EVE 00, KUM 02, KUM 03, VER 03, FIS 04, BUE 08, RAT 12]. “One ERP cannot meet all users’ needs and a company may wish to keep an existing specific application. The ERP must coexist with other applications. When the existing system is highly specific and the ERPs cannot meet a part of the business needs, interoperability is crucial” [MAR 01].

Technically, an urbanized IS is interoperable in a manner that demonstrates the faculty for two heterogeneous computer systems to function jointly and to give access to their resources in a reciprocal way [CHE 08a]. The model of system development has changed since the mid-1990s, with a move toward so-called urbanization (ESES–), where systems are constructed from existing components and applications and where new systems have to integrate and interoperate (INTE+) with a range of existing systems [HOP 08]. We address the importance of urbanization to ensure interoperability. The result showed a strong relationship between these two variables. There is statistically significant correlation between urbanization (ESES-) and interoperability (INTE+). That is, increases or decreases in urbanization do significantly relate to increases or decreases in the interoperability of IS. The result confirms that urbanization leads to IS interoperability [TRA 13].

When the existing system is specific or extremely complex and the ERP system’s interoperability is unreliable (INTE–), urbanization (ESES–) to interface this ERP system with the existing system becomes very difficult to achieve. In this case, a total overhaul (ESES+), of this specific or extremely complex existing, would maybe be the only option. However, a total overhaul, which aims to implement an ERP system with some extremely complex software, could also be difficult to accomplish when the ERP system’s interoperability is unreliable (in this case, a reliable interoperability “INTE+” would be crucial). Thus, a relationship could be suggested between ESES– or + and INTE– (unreliable interoperability is not suitable for urbanization or total overhaul). Nevertheless, some exceptions could make this relationship less important. For example, when a total overhaul is adopted to implement an ERP 2nd G, which will be the only component of the IS, ERP system interoperability is not important.

Therefore, we can suggest a relative correlation between these two factors. It could be a positive correlation between INTE+ and ESES– or + (the more reliable an ERP system’s interoperability is, the more urbanization or total overhaul could be performed with success). However, it could be a negative relationship between INTE– and ESES– or + (the more unreliable an ERP system’s interoperability is, the less urbanization or total overhaul could be performed with success).

5.22. Correlation between INTE and COER

With an increase in process integrity and automation, the level of functional interdependency between system modules increases, contributing to system complexity [UFL 07]. Most ERP packages are very complex (COER–), so interfacing with these systems is not an easy task (INTE–) [LEO 07, RAT 12].

Consequently, we can suggest a relative kind of correlation between these two factors. It could be a positive correlation between COER– and INTE– (the more complex an ERP system is, the more unreliable interoperability with this ERP system could be). For example, a complex ERP 1st G would be difficult to be interfaced and then to communicate with other applications within the IS. It could also be a positive relationship between COER+ and INTE+ (the more simple an ERP system is, the more reliable interoperability with this ERP system could be). For example, a simple ERP 2nd G that does not contain all possible modules could be easily interfaced with part of the legacy systems and it could communicate within the IS with them without many difficulties.

However, it could be a negative relationship between COER– and INTE+ (the more complex an ERP system is, the less reliable interoperability with this ERP system could be) and also a negative relationship between COER+ and INTE– (the more simple an ERP system is, the less unreliable interoperability with this ERP system could be).

5.23. Correlation between INTE and ESEV

“To best meet business needs, companies may integrate other specialized software products with the ERP. Interfaces for commercial software applications or legacy systems may need to be developed in-house if they are not available in the market” [BIN 99]. This citation from 1999 lets us suppose that the functionalities (modules) of ERP 1st G were incomplete and that the interoperability of ERP systems was not reliable due to the lack of necessary competency. Most firms will have some system that will not fit into the functionality of ERP packages and which will have to be interfaced with the ERP [LEO 07]. Exchanges with internal and external partners, suppliers and customers require the company to implement an interoperable IS [TRA 13].

A given evolution strategy of ERP system vendors (due to incomplete functionalities of an ERP system or lack of functional match, such as incapability of the ERP system to meet the business requirements of the firm) is closely related to its interoperability. For example, if the evolution strategy of an ERP system vendor does not aim to develop a complete functional perimeter (all necessary modules to meet the business needs of the firm), the ERP system’s interoperability should be improved, especially when the IS of the firm consists of an ERP system with other subsystems.

Therefore, we can suggest a relative correlation between these two factors. It could be a positive correlation between ESEV– and INTE+ (the more an ERP 1st G is kept without any expansion toward a 2nd G, the more reliable the ERP’s interoperability should be). It is also a positive correlation between ESEV+ and INTE+ (the more an ERP 2nd G is developed by a vendor according to an internal development or to an external acquisition, the more reliable an ERP system’s interoperability should be). In fact, often even when an ERP 2nd G is selected, firms do not purchase all of the available modules and thus their ISs are generally completed and interfaced with other subsystems. However, the interoperability would only be rarely important when the IS of a firm consists only of an ERP 2nd G that was developed by a vendor according to an internal development, without any another subsystem.

However, it could be a negative correlation between ESEV– and INTE– (the more an ERP 1st G is kept without any expansion toward a 2nd G, the less unreliable the interoperability of this ERP system could be); and it could also be a negative correlation between ESEV+ and INTE– (the more an ERP 2nd G is developed by a vendor according to an internal development or to an external acquisition, the less unreliable the interoperability of this ERP system could be).

5.24. Correlation between COER and ESEV

Generally, the ERPs 1st G were rather complex packages. For example, the following indicators demonstrate the complexity of SAP R/3: this ERP solution currently includes 20 industry-specific solutions, more than 200 finer grained business objects, 400 business application interfaces (BAPIs) and more than 800 reference process models [CUR 98]. The SAP reference data model contains more than 4,000 entity types (see for [ROD 98]). When considering the possible upgrades of the current ERP (ESEV), several issues are important: how easy the transition to the newest version (COER) is and what kind of modifications the systems’ vendors are planning to launch during the next 3–5 years [HEC 97]. When the ERP package is complex, upgrading it would not be easy to accomplish within the IS.

As a result, we can suggest a relative correlation between these two factors. It could be a positive correlation between COER+ and ESEV+ (the simpler an ERP system is, the easier an evolution strategy of ERP vendors toward an ERP 2nd G by an internal development or by an external acquisition is, and thus it would be easier for clients to upgrade). However, it could be a negative correlation between COER– and ESEV+ (the more complex an ERP system is, the less easy an evolution strategy of ERP vendors toward an ERP 2nd G by an internal development or by an external acquisition is, and the less updating for clients is simple).

However, it is possible to better detail this correlation between COER+ and ESEV+. As we have found above in the literature review, it seems that evolving to an ERP 2nd G by an internal development is easier for vendors to achieve compared to evolving to an ERP 2nd G accomplished by an external acquisition. This observation allows us to distinguish inside the variable “ESEV+” between two different levels of upgrading driven by firms:

  1. – the first one is an upgrade to an ERP 2nd G that is achieved by the vendor according to an internal development;
  2. – the second one is an upgrade to an ERP 2nd G developed by the vendor according to an external acquisition.

According to this distinction, it is possible to suggest that the first upgrade strategy could be simpler for clients than the second upgrade strategy. In other words, the more an ERP 2nd G is developed in the first place by a vendor according to an internal development and then in the second place according to an external acquisition, the simpler this ERP system could be, and thus updating would be easier for clients.

It could also be a positive correlation between COER– and ESEV– (the more complex an ERP 1st G is, the more likely an evolution strategy of ERP vendors could be to keep this ERP system without any expansion toward a 2nd G or by the vendor going out of business, and thus the more complex it could be for clients to upgrade this ERP 1st G within the IS). However, it could be a negative correlation between COER+ and ESEV– (the simpler an ERP 1st G is, the less evolution strategy of ERP vendors could consist of keeping this ERP without any expansion toward a 2nd G or by the vendor going out of business, and thus the less complex upgrading this ERP 1st G within the IS could be).

According to an exploration of the literature and logical deduction, we can assume that correlations between our chosen research factors have been established. Generally, the suggested correlations between the research factors could be summarized as illustrated in Table 5.1.

Table 5.1. Correlations between research factors. Positive correlation (PC) negative correlation (NC)