Innovations Through Information Technology 877 Copyright © 2004, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Change Management: The Real Struggle for ERP Systems Practices Paul Hawking & Andrew Stein School of Information Systems, Victoria University, MMC 14428, Victoria University of Technology, Melbourne, 8001, Victoria, Australia, Tel: 61 3 96884031, Email: Paul.Hawking@vu.edu.au Susan Foster School of Information Systems, Monash University, Victoria, Australia, Tel: 61 3 99032404, Email: Sue.Foster@sims.monash.edu.au ABSTRACT Enterprise Resource Planning (ERP) systems have become an essential information systems infrastructure for large organisations. These organisations are now looking for ways to leverage their ERP investment by introducing new functionality. However no matter how many implementations these companies have undertaken the same people issues still provide barriers. This research looks at the change management practices of Australian companies and identifies the main success factors and barriers associated with implementing change management strategies. The paper presents the results of a survey of 37 major Australian organisations that have implemented an ERP system. Many of these organisations have long histories of ERP usage and multiple ERP implementations and upgrades. The main findings indicate that the respondents considered change management crucial to successful ERP implementations, yet their organisations did not perform change management very well. The main success factor to change management was provision of adequate resources with the main barrier being lack of communication up and down the organisation. INTRODUCTION ERP sales have represented a significant proportion of total outlays by business on information technology infrastructure. The global market for ERP software, which was $16.6 billion in 1998, is estimated to have had 300 billion spent over the last decade (Carlino, 2000). The level of their sales and penetration reinforces the impor- tance of these types of systems. A survey of 800 U.S. companies confirmed that almost half of these companies had installed an ERP system and that these systems were commanding 43% of the company’s application budget (Carlino, 1999). While research into U.S. Fortune 1000 companies indicated that over 60% have implemented an ERP system (Stein,1999; Piturro, 1999). The market penetration of ERP systems varies considerably from industry to industry. A report by Computer Economics Inc. stated that 76% of manufacturers, 35% of insurance and health care companies, and 24% of Federal Government agencies already have an ERP system or are in the process of installing one (Stedman, 1999). The major vendor of ERP systems is SAP with approximately 50% of the market(McBride 2003). Table 1 Top Ten ERP Benefits (Davenport et al 2002) Benefit Improved management decision making Improved financial management Improved customer service and retention Ease of expansion/growth and increased flexibility Faster, more accurate transactions Headcount reduction Cycle time reduction Improved inventory/asset management Fewer physical resources/better logistics Increased revenue Although ERP systems have the potential to deliver a number of benefits (Table 1), initially for many companies an ERP system was a technological solution to the Y2K issue (Deloitte 1999). Companies were forced to initiate business process engineering for the purpose of “gap analysis” to determine what either had to change in their company or in the ERP to facilitate an effective implementation. Some companies initially struggled with their ERP implementation. Reasons cited included: inexperience with projects of this scope, underestimating the impact the system would have on their organization, and lacking skilled resources. For some companies these barriers have been insur- mountable (Calegero, 2000). In a worldwide CSC study (2001), 1009 IS managers identified as their main priority “optimising enterprise wide systems”. Companies are revisiting their ERP implementations in an attempt to leverage their investment by attaining the purported benefits. In the landmark Deliotte’s study (1999) 49% of the sample considered that an ERP implementation is a continuous process as they continue to gain value propositions from their system. This is a reasonable expectation as companies attempt to realise previously unattained benefits and addi- tionally, as companies evolve, their ERP system must also evolve to support new business processes and information needs. Barriers to Benefit Realisation Recent research by Hawking and Stein (2002) identified the expected ERP benefits and level of realization of these benefits in 48 Australian companies. Their research indicated that although the companies gained a number of benefits from their ERP implementation they did not attain the expected level of benefits. The sample were asked to rate on a five point likert scale the barriers to benefit realisation of their current ERP implementation. Each barrier was categorised as per the Deloitte Consulting (1999) study: People, Process or Technology (Table 2). Table 2. Barriers to Benefit Realisation(N=48) Current R/3 Barrier/Obstacle Mean Deloitte Category Lack of Discipline 4.4 P Lack of Change Management 4.3 P Inadequate Training 4.2 P Poor Reporting Procedures 4.2 T Inadequate Process Engineering 3.9 PR Misplaced Benefit Ownership 3.8 P Inadequate Internal Staff 3.3 P Poor Prioritisation of Resources 3.0 T Poor Software Functionality 2.9 T Inadequate Ongoing Support 2.7 T Poor Business Performance 2.4 PR Under Performed Project Team 2.3 P Poor Application Management 2.2 T Upgrades Performed poorly 1.6 T 701 E. Chocolate Avenue, Suite 200, Hershey PA 17033-1240, USA Tel: 717/533-8845; Fax 717/533-8661; URL-http://www.idea-group.com 162#'" IDEA GROUP PUBLISHING This conference paper appears in the book, Innovations Through Information Technology, edited by Mehdi Khosrow-Pour. Copyright © 2004, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.