Critical success factors of enterprise resource planning systems implementation success in vietnam

The results of the study indicate Top management support, Teamwork, Enterprise-wide communication and Project management program as critical success factors of ERP implementation success

LÊ THỊ THU CHUNG

CRITICAL SUC CESS FACTORS OF ENTERPRISE RESOURCE PLANNING SYSTEMS IMPLEMENTATION SUCCESS

IN VIETNAM

THESIS OF MASTER OF BUSINESS ADMINISTRATOR

HO CHI MINH CITY – 2012

LE THI THU CHUNG

CRITICAL SUCCESS FACTORS OF ENTERPRISE RESOURCE PLANNING SYSTEMS IMPLEMENTATION SUCCESS

DR NGUYỄN THỊ NGUYỆT QUẾ

HO CHI MINH CITY – 2012

I would like to take this opportunity to express my gratitude to all those who have helped and supported me during the time I conducted the study

First of all, I would like to express my deepest gratitude to my advisor,

Dr Nguyen Thi Nguyet Que, for her generous and patient guidance to my thesis Her inspiring advices are extremely essential and valuable for me to finish this thesis The advisor is very knowledgeable, professional, and nice to

me all the time I feel very lucky and deeply appreciate her to give a chance to

be her student

Secondly, I would like to show sincere gratitude to faculty members for their enthusiastic support

Thirdly, I would like to send special thank you to my friends, members

of ERP forum, my work partners who supportively help me so much to finalize the questionnaire, take part in the survey for pilot test as well as the main study

Lastly, I would like the send the most special thanks to my family, especially my parents who are always there for me with so much love, care and encouragement

Le Thi Thu Chung

Ho Chi Minh, October 2012

COMMITMENT

I hereby would like to commit that the thesis, “Critical success factors

of Enterprise Resource Planning systems implementation success in Vietnam”, was accomplished based on my independent and serious studies and researches The data was collected in reality and it has clear origins In addition to that, the data would be trust-worthily handled and it has never been released in any menu

Le Thi Thu Chung

TABLE OF CONTENT

ACKNOWLEDGEMENT I COMMITMENT II TABLE OF CONTENT III LIST OF TABLE V LIST OF FIGURE VI

ABSTRACT 1

CHAPTER 1 INTRODUCTION 2

1.1 Research background 2

1.2 Research questions and objectives 3

1.3 Practical significances of the study 5

1.4 Scope and approach 5

1.5 Research method 5

1.6 Structure of the thesis 6

CHAPTER 2 LITERATURE REVIEW 7

2.1 Definition of ERP 7

2.2 Situation of ERP in Vietnam 10

2.3 Proposed conceptual model and hypotheses 11

CHAPTER 3 25

3.1 Research purpose 25

3.2 Research design 26

3.3 Questionnaire design 27

3.3.1 Questionnaire development 27

3.3.2 Questionnaire translation 31

3.4 Research strategy 32

3.4.1 Qualitative pilot study 32

3.4.2 Quantitative pilot study 32

3.5 Targeted population 33

3.6 Research sampling 33

CHAPTER 4 38

4.1 Descriptions of sample 38

4.2 Reliability and validity of the measurement scale 40

4.3 Testing the research model and the hypotheses 45

4.3.2 Testing hypothesis 49

4.3.3 Testing the moderating relationship 50

4.3.4 Description of statistics of overall ERP implementation success 55

4.4 Findings 56

CHAPTER 5 58

5.1 Discussion of findings 58

5.2 Practical implications 59

5.3 Contribution of the current study 61

5.4 Limitation and future research 61

LIST OF REFERENCE 63

APPENDIX 1 6973

APPENDIX 2 73

APPENDIX 3 80

APPENDIX 4 84

APPENDIX 4 87

LIST OF TABLE

Table 2 1: ERP systems history 7

Table 2 2: Unified CSFs model by Esteve & Pastor (2000) 12

Table 2 3: 22 CSFs proposed by Somers & Nelson (2001) 13

Table 2 4: seven broad categories of CSFs by Nah & Delgado (2006) 13

Table 2.5: Eleven key CSFs by Nah, Lau & Kuang (2003) 14

Table 2 6: Four CSFs and 1 moderator proposed by Nah et al (2007) 15

Table 2.7: Measurement of ERP implementation success by Petroni (2002) 23

Table 3.1: Survey items in the study 29

Table 4.1: Sample characteristics 39

Table 4.2: Reliability of scales 40

Table 4.3: KMO and Barlett's Test (DV) 43

Table 4.4: Total variance explained 43

Table 4.5: Rotated Component Matix(a) 44

Table 4.6: Correlation of constructs 1 45

Table 4.7: Model sumary(b) (MRL) 1 47

Table 4.8: ANOVA (Regression) 1 47

Table 4.9: Coefficients (Regression) 1 47

Table 4.10: Testing H1, H2, H3, H4 1 49

Table 4.11: Model Summary of H5 1 51

Table 4.12: Coefficients of H5 hierarchical regression 1 51

Table 4.13: Model summary of H6 1 51

Table 4.14: Coefficients of H6 hierarchical regression 1 52

Table 4.15: Model Summary of H7 1 52

Table 4.16: Coefficients of H7 hierarchical regression 1 53

Table 4.17: Model summary of H8 1 53

Table 4.18: Coefficients of H8 hierarchical regression 1 54

Table 4.19: Testing H5, H6, H7, H8 1 54

Table 4.20: Descriptive statistic of ERP 1 55

Table 4.21: Levels of importance of factor 1 56

LIST OF FIGURE

Figure 2.1: Modules of ERP system 9

Figure 2.2: Proposed conceptual framework 16

Figure 3.1: Research procedure 26

Figure 4.1: The revised research model 1 55

ABSTRACT

Enterprise resource planning (ERP) systems with high level of integration can help improve capability of customer service, productivity, cost reduction, inventory turnover and provide effective supply chain management and e-commerce ERP has been widely adopted in many countries, but in Vietnam it is still very limited Trend of globalization and fierce competition push Vietnamese enterprises into having effective management and optimize cost However, there have been many failed attempts in implementing ERP systems This research aims to examine the critical success factors of success of ERP implementation

The study was conducted in twenty five companies in Hochiminh, Dong Nai, and Binh Duong (out of eighty one companies throughout Vietnam) with “go live” ERP systems The results of the study indicate Top management support, Teamwork, Enterprise-wide communication and Project management program as critical success factors of ERP implementation success The results also show that Organizational culture is the moderator which positively moderates the relationships between Top management support, Teamwork, Enterprise-wide communication, Project management program and

ERP implementation success

CHAPTER 1 INTRODUCTION

1.1 Research background

For the last few decades, business management strongly relies on the information The use of Management Information system (MIS) is being proved to lead to better planning, better decision making and better result MIS is defined by Davis and Olsen (1985) as an integrated user-machine system for providing information to support information management and decision making functions in

an organization This study will look into one of the most advanced and sophisticated MIS, the Enterprise Planning System (ERP) and the critical success factors for its successful implementation

Generally, ERP systems help organizations increase level of customer service, productivity, cost reduction, inventory turnover and provide effective supply chain management and e-commerce The ERP systems are designed to develop plans and schedules so that the right resources (manpower, material, machinery and money) are available in the right amount when needed (Wallace and Kremzar, 2001)

In reality, ERP implementation is costly, complicated and time-consuming According to survey result in 2010 by Panorama Consulting Group, on average, an ERP project takes about 18.4 months with total cost of $6.2 mil 51.4 % of ERP projects exceed budget, 35.5% of projects take longer than expected duration and 40% of company face with operational disruption after “go-live” In extreme cases, companies have even had to close because of vast ERP investments that did not go live, an example being the FoxMeyer Drug Company that ends into bankruptcy (Scott and Vessey, 2002)

In developing countries in Asia, the rate of ERP adoption was very low and several years behind advanced countries (Rajapakse & Seddon, 2005; Ngai et al., 2008) In Vietnam, ERP systems are still new to the companies The system just started to be seriously considered after WTO joining Based on the information found on ERP forum (www.erpsolution.vn, http://eac.vn), there are about 81 corporate throughout Vietnam that implemented ERP systems as in Appendix 1 attached to this thesis At present, there hasn’t been specific statistics or numeral analysis on successful and failed projects as well as the costs which were spent to gain an effective ERP system However in general, the effectiveness of ERP implementation in Vietnam hasn’t been high yet A great number of businesses have implemented ERP but haven’t used up capacity of the system Most of them only come to a halt at the level of control These businesses can apply little of planning feature, while it is the prominent feature of the ERP

The difficulties and high failure rate in implementation ERP systems have been widely attracted many researchers to discover critical success factors for ERP adoption in the world Through comprehensive literature review, Ngai et al (2008) indicate that much of the research focused on Western developed nations while there has been lack of research on the success or failure of ERP adoption in developing regions/countries This study attempts to study critical success factors (CSFs) affecting ERP systems implementation success in Vietnam

1.2 Research questions and objectives

There’s no doubt about the benefits that ERP systems bring to organization However, there are still many issues relating to ERP implementation which can become potential risks for ERP projects The research aims to answer to the following question:

Question 1: What are the critical success factors for the ERP implementation success?

Question 2: What are the levels of effects that critical success factors have on the ERP success?

Question 3: Does organizational culture enhance the relationship between critical success factors and ERP implementation success?

Question 4: What is the state of ERP adoption in Vietnam?

This study is conducted to identify factors influencing ERP implementation success It seeks to examine and understand whether factors such as top management support, teamwork and composition, enterprise-wide communication and project management influence success of ERP adoption It also seeks to examine whether organizational culture positively moderates the relationship between these factors and ERP implementation success The specific objectives are:

- To examine the relationship between top management support and ERP implementation success

- To examine the relationship between teamwork and ERP implementation success

- To examine the relationship between enterprise-wide communication and ERP implementation success

- To examine the relationship between project management program and ERP implementation success

- To examine the moderating effect of organizational culture on the relationship between top management support and ERP implementation success

- To examine moderating effect of organizational culture on the relationship between teamwork and ERP implementation success

- To examine moderating effect of organizational culture on the relationship between enterprise-wide communication and ERP implementation success

- To examine moderating effect of organizational culture on the relationship between project management program and ERP implementation success

- To examine the state of ERP adoption in Vietnam

1.3 Practical significances of the study

The results of the study are practically meaningful for implementation ERP systems in Vietnam The study helps organization to master the main factors influencing the success of ERP implementation The results of the study will provide necessary measures to improve the success rate of adopting ERP systems, which results in improvement in performance and competition capability The study will also enrich necessary knowledge for people who are working the field of ERP

as well as those who are implementing or will implement ERP systems

1.4 Scope and approach

Based on the list of corporate that have implemented ERP systems, the author attempts to conduct the study in twenty five companies in Ho Chi Minh, Binh Duong and Dong Nai with “go live” ERP systems

The study is conducted in 2 phase: pilot study and main study The purpose

of pilot test is to test the content as well as the measurement of scales Then the main study is to test the hypotheses and research model

1.5 Research method

The study was carried out within 2 steps relating to two different methods:

Qualitative method: The author would use the qualitative method by

carrying out group discussions with five experienced people working in the field of ERP business The purpose of this step is to adjust and amend the translated questionnaire suitable with the subjects and purposes of the study

Quantitative method: Quantitative study would be carried out based on the

data collected from the questionnaire Quantitative study is implemented to evaluate the scale, verify the theoretical model The scale is preliminarily tested the reliability and validity using Cronbach alpha and exploratory factor analysis carried

out by the SPSS 20.0 software Multiple linear regression analysis and hierarchical

regression would be used to test the proposed model and the hypotheses of the study

1.6 Structure of the thesis

This study includes 5 chapters:

Chapter 1- Introduction, mentions about research background, research objectives and research scope and approach

Chapter 2 – Literature review, provides theoretical and empirical background supporting for hypothesized research model

Chapter 3 – Research methodology, is about the methodologies that author used to conduct the research

Chapter 4 – Data analysis and findings, discusses about the analysis that author conduct to test hypothesis and to answer the research question

Chapter 5 - Conclusion and implication, is about the results, implication, and recommendation for future research

CHAPTER 2 LITURATURE REVIEW

This chapter presents the theories behind ERP critical success It will also discuss about measurement for ERP implementation success The research framework and hypotheses will also be proposed in this chapter

2.1 Definition of ERP

Kumar et al (2000) define enterprise resource planning (ERP) systems as

“configurable information systems packages that integrate information and information-based processes within and across functional areas in an organization” ERP systems are expensive, and once ERP systems are implemented successfully, significant benefits such as improved customer service, better production scheduling, and reduced manufacturing costs can be gained

The following table shortly summarizes the history of ERP and its precedents

Table 2 1: ERP systems history

Inventory Inventory Management

& Control

Inventory management and control

is a combination of information technology and business processes in order to maintain the appropriate ratio in a warehouse

1970’s Material Requirement

Planning (MRP)

Material requirements planning (MRP) software applications used for planning and tendering

processes MRP plans for activities and purchase raw materials based on production requirements, current inventory levels and procedures for

each activity

Requirements Planning (MRP II)

MRP II applications using software

to coordinate the production process, including a range from product planning, parts purchasing, inventory control to shipping finished goods and distribution

1990s Enterprise Resource

Planning (ERP)

In the enterprise resource planning

or ERP, software applications used for that purpose, to improve the performance of internal business processes Modern integrated ERP business on body functions,

including planning, inventory, purchasing, distribution, sales and tracking orders ERP systems may include application modules to support other business functions

(http://www.sysoptima.com/erp/history_of_erp.php) Initially, manufacturing systems emphasized on inventory management and control Most of software packages were individually designed and developed to automate inventory Since 1970s, the software packages were developed and extended to Material Requirement Planning (MRP and MRP II) In the early 1990s,

MRP II was further extended to some other areas, such as Finance, Engineering, Human Resource, Project Management etc., and the term Enterprise Resource Planning started to be used

Considered as the most important development in the corporate use of technology in the 1990s, ERP has been undertaken by many organizations Generally, ERP systems nowadays compose of several modules, such as human resources, sales, marketing, finance and production, providing cross-organizational integration of transaction-based data management throughout embedded business processes support

Figure 2.1: Modules of ERP system (www.abouterp.com) 1

The potential benefits of successfully implementing an ERP system is large, and even, according to Markus et al (2000), critical to organizational performance and survival ERP systems can potentially allow a company to manage its business better with potential benefits of improved process flow, better data analysis, higher quality data for decision-making, reduced inventories, improved coordination throughout the supply chain, and better customer service (Gattiker and Goodhue,

2005; Lengnick-Hall et al., 2004; Gupta, 2000; Fan et al., 2000) Moreover, Zheng

et al (2000) suggest that ERP systems improve the efficiency of management decisions and plans and increase the flexibility with adjustments of functionality to react to business needs while Huang and Palvia (2001) suggest that ERP helps a manufacturer or a service business manage the important parts of its business All of the benefits can help improve profit margins (Fan et al., 2000) Businesses have been quick to embrace ERP Willis and Willis-Brown (2002) observe that the ERP market is one of the fastest growing markets in the software industry and Yen et al (2002) and Adam and O’Doherty (2000) suggest that ERP will continue to be one

of the fastest growing and influential players in the application software industry through to the next decade

2.2 Situation of ERP in Vietnam

After 1990s, many companies in the world have been implementing ERP systems to have a uniform information system in their business In Vietnam, ERP appeared in 1998 However, the application and construction of ERP in enterprise was developed in 2002 The number of more than 80 enterprise companies with “go live” ERP systems indicates that the status of ERP application in Vietnamese enterprises is very limited Most of businesses are still not aware of the importance

of ERP as well as their material and technical basis and financial resource are not adequate to implement ERP Some enterprises, which provided ERP solution, recognized that the number of experts in this field in Vietnam is quite low

In 2006, Oracle was the only ERP solution provider for the whole market of small and medium enterprises in Vietnam However, until now most of leading ERP solution providers in the world have appeared in Vietnamese market, including famous ones such as SAP, Tectura, Atos, Soltius, IBM Most ERP vendor have partnership with Vietnamese companies in order provide ERP solution to end-users FPT seems be the biggest ERP provider who have partnership with most of ERP vendor

Until February 2011, there were about 80 Vietnamese companies that already adopted ERP systems, and the number was anticipated to increase significantly This result came from a report released on the website http://eac.vn on March 2011 which was attached in Appendix 1 at the end of this research

Until the present moment, there hasn’t been detailed statistics on the success

or failure, the cost as well as effectiveness of ERP systems in Vietnam However in general, the effectiveness of ERP implementation in Vietnam hasn’t been high yet

A great number of businesses have implemented ERP but haven’t used up capacity

of the system Most of them only reach to the level of control These businesses can apply little of planning feature despite the fact it is the prominent feature of ERP systems

2.3 Proposed conceptual model and hypotheses

According to Amberg (Amberg et al, 2005), the first author who developed the concept of critical success factors on the basis for determining information needs of managers is Daniel (1961) Then , the idea was popularized by Rockart (1979) and have been widely used in the information system “CSFs are the limited number of areas in which results, if they are satisfactory, would ensure competitive performance for the organization They are few key areas where things must go right for the business to flourish” (Rockart, 1979, 85)

Implementing an ERP system is a complicated process which many factors potentially affect on There have been recently many research published on the factors contributing to ERP adoption Author will mention about several researches used as main reference of the study

Esteves and Pastor (2000) categorize CSFs into Organizational and Technological, and then sub-devide them into strategic and tactical factors

Table 2 2: Unified CSFs model by Esteve & Pastor (2000)

 Sustained management support

 Effective organizational change

management

 Good project scope management

 Comprehensive business process

re-engineering

 Adequate project champion role

 User involvement and participation

 Trust between partners

 Dedicated staff and consultants

 Formalised project plan/schedule

 Adequate training program

 Preventive trouble shooting

 Appropriate usage of consultants

 Legacy system knowledge

The organizational factors relates to organizational structure and culture and, business process The technological perspectives mention a particular ERP products

in terms of technical issues such as hardware and software

Also through citations in the studies that they reviewed, Esteves and Pastor supposed that organizational aspects are more important than technological one, and top management seems to be the most important factor

Somers and Nelson (2001) proposed twenty two critical success factors which can be seen in Table 2.3

Table 2 3: 22 CSFs proposed by Somers & Nelson (2001)

1 Top management support 12 Dedicated resources

2 Project team competence 13 Use of steering committee

3 Interdepartmental cooperation 14 Users training on software

4 Clear goals and objectives 15 Education on new business processes

6 Interdepartmental

7 Management of expectations 18 Architecture choice

10 Careful package selection 21 Use of vendors’ tool

11 Data analysis & conversion 22 Use of consultants

These twenty two factors are evaluated across stages of ERP adoption such

as initiation, adoption, adaptation, acceptance, routinization and infusion (i) Top management support, (ii) project team competence, (iii) interdepartmental team competence, (iv) clear goals and objectives, (v) project management, and (vi) interdepartmental communication are top six factors

Seven broad categories of critical success factors developed by Nah and Delgado (2006) which were derived from the eleven critical success factors identified by Nah, Lau, and Kuang (2001) is another comprehensive examination of the critical success factors of ERP implementation

Table 2 4: seven broad categories of CSFs by Nah & Delgado (2006)

1 Business plan and vision

2 Change management

3 Communication

4 ERP team composition, skills and compensation

5 Project management

6 Top management support and championship

7 System analysis, selection, and technical implementation

Table 2.5: Eleven key CSFs by Nah, Lau & Kuang (2003)

1 Teamwork and composition

2 Change management program and culture

3 Top management support and championship

4 Business plan and vision

5 Business process reengineering with minimum customization

6 Project management

7 Monitoring and evaluation of performance

8 Effective enterprise-wide communication

9 Software development, testing, and troubleshooting

10 Project champion

11 Appropriate business and IT legacy systems

According to a survey conducted by Nah et al (2003), Chief Information officers of 1000 companies identify top six factors from eleven critical factors in table 2.5 to be the most critical factors They are: (i) Top management support and championship, (ii) Project champion, (iii) Teamwork, (iv) Project management, (v) Change management and culture, and (vi) Effective enterprise-wise communication

The last comprehensive study reviewed in this chapter is four critical success factors and one moderator model proposed by Na et al (2007)

Table 2 6: Four CSFs and 1 moderator proposed by Nah et al (2007)

1 Top management support

2 Teamwork

3 Enterprise-wide communication

4 Project management program

5 Organizational culture (moderator)

The three among four factors in Nah et al (2007) (top management support, project management and enterprise-wide communication) are the three common factors between Nah et al (2003) and Somers and Nelson’s (2001) list of top factors Teamwork in Nah et al (2007) is mentioned in Nah et al.’s (2003) list and it covers the two factors in Somers and Nelson’s (2001) list – project team competence and inter-departmental cooperation For this reason, these four factors are listed in Nah

et al.’s (2007) research were chosen as independent variables for this study This set

of four factors (Top management support, Teamwork, Enterprise-wide communication, and Project management program) is also ranked among the top five factors in Nah and Delgado’s (2006) What is new in Nah et al (2007) is the presence of moderator – organizational culture which moderating the relationship between the four independent variables and the dependent variable – ERP implementation success

The model proposed by Nah et al (2007) seems the most complete which is selected for the study

Hypotheses from H1-H4 show the effect of the independent variables (top management support, wide-enterprise communication, teamwork and project management program) on the dependent variable (ERP implementation success), whereas hypotheses H5-H8 show the moderating effect of organizational culture on these relationships Figure 2.2 shows the proposed conceptual framework for this research

Figure 2.2: Proposed conceptual framework 1

Top management Support: Many studies (Nah et al (2007 ), Sommers and

Nelson (2004), Akkeman & van Helden (2002), Esteves & Pastor (2000), Nah et al (2001), Al-Mashari et al (2003), Umble et al (2003), Zhang et al (2002)) have stressed the importance of top management support as a top crucial condition in successful ERP implementation Sarker and Lee (2003) suggested strong and committed leadership as necessary ingredient for ERP implementation success Willocks and Sykes (2000) stated that there must be public, explicit, and sincere support for the project ERP project needs to be publicly and explicitly identified by

Independent variables: Top management support, teamwork, wide-enterprise communication,

project management program

Moderator: Organizational culture

Dependent variable: ERP implementation success

H1

H2

H3

top management as top priority (Wee, 2000) According to Holland, Light and Gibson (1999), in order for ERP successful implementation, commitment of valuable resources to the implementation efforts should be a must Top management support can be considered the most widely-studied factor in IS implementation success (Dong, 2001) Top management support is even more important for a ERP project since ERP is a highly integrated information system which requires cooperation of line and staff members from all segments of the business as well as the large scale of resources For this reason, author hypothesizes that:

H1: Top management support increases the level of success of ERP implementation

Teamwork: In order to maximize the chance for ERP successful project, the

ERP team should consist of the best people in the organization (Buckout et al 1999; Bingi et al., 1999; Rosario, 2000) Moreover, these people should be cross-functional and have both business and technical knowledge (Bingi et al., 1999; Summer, 1999, Nah and Delgado., 2006) Members of ERP team have to devote full time to the implementation (Wee, 2000, Nah et al., 2007) They even need to be re-located for working together (Nah et al., 2007) On the other hand, according to Wee, 2000, the ERP project members should be paid with compensation and incentives for complementing the system successfully and on time and within the budget Author therefore hypothesizes that:

H2: The use of cross-functional teams that consist of people with the best

business and technical knowledge increase the level of success of ERP

implementation

Enterprise-wide communication: Organizations are necessarily required to

have communication across different levels of functions and units (Akkermans & van helden, 2002; Falkowski, Pedigo, Smith, & Swanson, 1998) Expectations and goals must be effectively communicated among stakeholders and across all levels of the organization (Al-Marshari et al., 2003) Organizations should have monthly

bulletins, newsletter, weekly meeting and e-mail updates on ERP implementation situation Both “outward” communication to the whole organization and “inward” communication to project team are every important (Esteve and Pastor, 2000) Communication needs to be open and complete to ensure honesty (Nah et al., 2007) Project teams are prepared to be able to convince users that the new ERP system brings numerous benefits while convincing them to abandon the old, uncomfortable systems Project teams should encourage users to send feedback Users should be informed that their feedback will be considered and acted on (Rosario, 2000) It is very important for stakeholders to understand the capacities and limitations of ERP system, hence the working of ERP should be fully assessed and communicated to stakeholders (Nelson & Somer, 2001, Nah et al., 2006) From the above discussion, author hypothesizes that:

H3: Enterprise-wide communication during the implementation increases the

level of success of ERP implementation

Project Management Program: According to Dennis Lock (1996), “project

management has evolved in order to plan, to coordinate and to control the complex and diverse activities of modern industrial and commercial projects.” ERP systems implementation is a set of complex activities, involving all business functions and often requiring between one and two years of effort, thus companies should have an effective project management strategy to control the implementation process, avoiding overrun of budget and ensuring the implementation within schedule Effective project management is essential for ERP implementation success (Nah et al., 2003) The formal project implementation plan defines project activities, commits personnel to those activities, and promotes organizational support by organizing the implementation process According to Bangranoff & Brewer (2003) and Rosario (2000), ERP project management must have clear and well-defined task assignments and project control program Moreover, Customization of the ERP system was well-managed by the project team (Rosario, 2000) The project scope

should also be clearly defined, established and managed (Shanks et al., 2000) The project milestones should be also realistic and clearly stated (Al-Marshari et al.,

2003, Nah et al., 2007) Conducting periodic project status meetings in which each team member reports progress, challenges, training and education problems is an invaluable means for evaluating the progress of the ERP implementation (Nah et al., 2007) In short, project management program is very important to ERP implementation success For this reason, author hypothesizes that:

H4: A Project management program increases the level of success of ERP

implementation

Organizational Culture: Avision and Malurent (2007) believed that the

culture issues in an organizations have a dramatic effect on ERP implementation success A main difference between studies conducted in developed and developing countries is organizational culture, but it has been ignored in previous ERP implementation research (Al-Mashari et al., 2003; Motwani et al., 2002; Zhang et al., 2005) Schein (1992) defined organizational culture as “A pattern of shared basic assumptions that the group learned as it solved its problems of external adaptation and internal integration, that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way you perceive, think, and feel in relation to those problems.” There are proofs from studies of Johnson & Scholes (2005) and Sitkin (1992) that organizational culture promoting learning and innovation can strongly influence on success or failure of the IT innovation or strategies of an organization Employees in the organization should be given opportunities for individual development, other than formal training, such as work assignment, job rotation… (Nah et al., 2007) There is evidence to show that strong organization culture where there is willingness to collaborate among organizational can impact the success or failure of ERP implementation (Scott and Vessey, 2000) According to Skok and Legge (2002), generally ERP problems are caused by the employees feeling uncomfortable with cultural changes following from process changes in the ERP implementation Consequently, if there aren’t

openness in communication and facilitates learning in organizational culture, employees may resist new ERP system, which results in ERP failure Resistance is

an artifact of corporate culture and is largely unconscious (Fowki, 1991) Also according to Fowki, 1991, an organizational culture that doesn’t support information sharing and organizational learning will discourage employees from discussing the likelihood of ERP systems implementation failure Employees should

be encourages and rewarded to express, exchange ideas regarding to wok Furthermore, employees should be encouraged to analyze mistakes and learn from them

Organizational culture as a Moderator of ERP implementation success:

Based on findings of research conducted in Asian developing countries (Nah et al., 2007; Ramayah et al., 2007; Hong and Kim, 2002), organizational culture is considered moderator that moderates the effects of critical factors on ERP implementation success

Organizational culture is essential for motivating organizational learning, sharing information, and making decision so that cultural readiness is the precondition for promoting change management (Motwani et al., 2002) The fact that a management team who readily accepts new concepts, new tools is able to drive the implementation of corporate-wide system more effectively (Dong, 2001) Learning in an organization must be led from all levels, specially from top management and project team who are conductive to change These people will more likely to convince and persuade the rest of organization to accept the new systems, which results in ERP implementation success

H5: Organizational culture moderates the relationship between top

management support and the success of ERP implementation

ERP software integrates business processes of many departments The project team should be cross-functional Umble et al (2003) indicated that to make the best of ERP system, the cross-functional team should be not only able to work together, but also understand and appreciate the special skills and strength that

members contribute to the team Employee oriented companies are more expected

to facilitate coordination and teamwork among cross-functional team members in ERP implementation project (Nah et al., 2007) Unopened or non-learning organizations tend to have more difficulties in facilitating the cooperation and teamwork among cross-functional team members (Nah et all.,2007)

H6: Organizational culture moderates the relationship between ERP

teamwork and the success of ERP implementation

The relationship between enterprise-wide communication and ERP implementation success is positively moderated by the existence of an open culture According to Nah et al (2007), the complexity of ERP implementation forced all company staffs to learn new tools and new method of working A company with open culture can facilitate the learning practice which is important to ERP implementation success Open system culture explains the communication environment in an organization (Hofstede, 2001) An organizational culture that supports openness in communication helps the organizational learning process, which contributes to the success of ERP implementation (Nah et al., 2007) In addition, a supportive and open organizational culture encourages improved relations and increased communication

H7: Organizational culture moderates the relationship between

enterprise-wide communication and the success of ERP implementation

Team leaders faced with the many challenges, such as training, clearly specifying responsibilities, establishing and controlling project scope, evaluate proposed changes, set project milestones, enforcing timeline A learning culture results in success of implementation (Nah et al., 2007) Furthermore, ERP systems usually requires substantial changes in the company This often leads confusion, resistance and errors in implementing For this reason, ERP projects often fail to gain the projected benefits (Summer, 2006) It is important that employees are prepared to change and accept the new ERP system (Hong and Kim, 2002) According to Somers and Nelson, 2004, change management is important in early

phases and go on all the way of later phases A result oriented culture and open system can facilitate the carrying out of project management plan, which supports learning and changing process (Hofstede, 2001) The probability of ERP implementation success will raise accordingly (Nah et al., 2007)

H8: Organizational culture moderates the relationship between a project

management program and the success of ERP implementation

Success in ERP implementation: Information system (IS) success is one

issue that is most discussed in ongoing research in IS field (Delone and McLean, 1992) The measurement of IS success is important in accepting the effectiveness and value of IS investment as well as management achievement (Delone and McLean, 2003) Since ERP systems have company-wide impact, academics and practitioners are still struggling in determining the best constructs which could best represent ERP implementation success (Wang and Chen, 2006)

ERP implementation success can be defined in different way based on different perspectives (Markus and Tanis, 2000) For project leaders, a successful ERP implementation project means that the project is completed on time and within project

On the other hand, from a strategic point of view, success means the business value and performance value, such as smooth transition to stable operations in new system, achieving intended business improvement like inventory reductions and gaining improved decision-support capabilities (Markus and Tanis, 2000) Author will apply perspective of business value and performance value in this study This perpective is also adopted in previous studies of Langdon, 2006, Mukhopadhyay, Kekre and Kalathur, 1995 and Tallon and Kranemer (2006) Based on business and strategic perspectives, Petroni (2002) suggested a comprehensive measurement of ERP implementation success Petroni proposed a set of criteria for success of ERP implementation as in Table 2.7, which inclued assessment of both performance and user satisfaction Author adapts this measurement in this study These criteria are

also in line with Gable, Sedera and Chan’s (2003), Nah et al (2007) measurement model for enterprise success which consists of organizational, individual impact and user satisfaction

Table 2.7: Measurement of ERP implementation success by Petroni (2002)

Improved ability Ability to meet volume/product changes

Capacity planning Cost estimation Inventory control Delivery dates Production scheduling Improved efficiency and

users satisfaction

Cooperation between managers and employees Coordination between finance, marketing and sales

Informal system for material management Informal system for inventory control Informal system for production control Expediting shipments

Expediting of incoming materials Work in progress (WIP)

Summary:

This chapter summarizes the results of the previous studies concerning critical success factors and ERP implementation success The studies highlighted the great importance of ERP implementation towards organizations The studies showed that many critical factors were identified to have effects on ERP implementation success Among of the studies, Nah et al (2007) proposed the model of four factors influencing ERP implementation success, Top management support, Teamwork, Enterprise-wide communication, Project management program

and of one moderator – Organizational culture moderating the relationship between the four factors and ERP implementation success

This research consulted the theoretical model of ERP implementation success proposed by Nah et al (2007) According to the proposed conceptual model and theoretical review from existing studies, eight hypotheses for this research were also constructed and presented in this chapter

CHAPTER 3 RESEARCH METHODOLOGY

This chapter presents the methodology used in this study including research design, questionnaire development, translation of the questionnaire, research strategy, targeted population, sampling, data collection and methods of data analysis and research process

3.1 Research purpose

The purpose of academic research purpose can be exploratory, descriptive and explanatory and these are also most used in research methods’ literature (Saunder et al 2009)

An exploratory study is often used to develop for an initial and rough understanding of a problem It has an open, flexible and inductive approach to find all relevant data one the problem (Blanch et al., 2004)

A descriptive is objected “to portray an accurate profile of persons, events or situation” (Robin, 2002) It may either be an extension of a piece of exploratory research or explanatory research (Saunder et al., 2009) It often answer the

questions- who, what, where, when and how

An explanatory research is used to established causal relationship between

variables (Saunder et al., 2009) This study often answers the questions – what and

why

Regarding to this thesis, the research purpose is mainly explanatory and partly descriptive It is mainly explanatory because it explains how the CSFs affect the success of ERP implementation It is partly descriptive because it aims to bring

a clear picture of the ERP situation in Vietnam

Conclusion and Recommendation

Problem Statement Objectives Literature review

Research Model and Hypothesis Hypotheses Draft questionnaire - Pilot test

(Wording (n=5) and scale’s internal consistency (n=30))

Final questionnaire – Main study (field survey n=200)

Data collection, data analysis and

hypothesis testing Hypothesis testing

3.2 Research design

The research procedure is depicted in Figure 3.1

Figure 3.1: Research procedure 1

This study is divided into 2 phases: pilot test and main study

In pilot test, author first met and discussed with 5 correspondents to check if they could clearly understand the meaning of the questions After that, author conducted online survey (googledocs) on 30 participants in order to examine the internal consistence of measurement scales, response rate, and quality of response

Based on the results, necessary adjustments were made and the final questionnaire could be completed for the main study in next step

After the pilot study, the main study was conducted using 250 administered questionnaire copies distributed to 25 companies The purposes of the main study were to testing the reliability and validity of the scale, to analyze multiple linear regression of the independent variables on the dependent variable and to analyze the effect of moderating variable on the relationship between each independent variable and the dependent variable

3.3 Questionnaire design

3.3.1 Questionnaire development

A questionnaire, also called measuring instrument is defined as a formalized set of questions for obtaining information from respondents (Malhotra, 1996) Any questionnaire has three specific objectives First of all, it should transform necessary information related to the study into a list of questions that the respondents could answer Secondly, the questionnaire should bring about good dynamic, thus encourage respondents to participate in the interviews and complete the questionnaire Thirdly, the questionnaire should ensure minimum response errors (Malhotra, 1996)

The questionnaire in this study contained 2 main sections: The first part consisted of total 31 items divided into 6 groups responding 6 factors requiring measurement in the research model: top management support, teamwork, enterprise-wide communication, project management program, organizational culture and ERP implementation success In this part, the respondents were asked to identify the extent to which they agree/disagree with the statements related to ERP systems used in their organization Each item was measured on five-point Likert-type scales on which 1 represents “strongly disagree” and 5 represents “strongly agree” The second part of the questionnaire consisted of some demographic information on gender, education level, working years and information on

organization revenue and number of employees

The survey questionnaire was adapted from Nah et al (2007), Nah et al (2003) and Petroni (2002)

Top management support

Top management support would be evaluated based on 5 criteria: sufficient incentive for ERP implementation, ERP implementation is/was viewed as a strategic decision, sufficient top management commitment to this ERP implementation, active support from CEO, CIO or COO, and explicit identification from top management as a critical priority

Teamwork

Teamwork consisted of 5 items: people chosen for ERP teams had the best business and technical knowledge; ERP teams are cross-functional, ERP team work on the project full-time as their only priority, sufficient incentives or compensation were given to ERP team, and ERP project team were relocated together

Enterprise-wide communication

Enterprise-wide communication was measured by 5 items: ERP project team were well- prepared to communicate effectively with the users, ERP project people clearly understood the goals/objectives/purposes of the implementation, enough communication channels to inform the users of the stage of the ERP project and help users resolve problems, enough reviews were conducted to ensure continued ERP end-user satisfaction, and enough evaluations to assess the workings of ERP system

Project management program

Project management program was evaluated by 5 items, milestones were set with measureable results, commitment to promote and manage the ERP implementation project, regular communication for expectation and challenges, education, training, and support were provided during the ERP implementation, well-define task assignments, and well-managed customization of ERP system

Organizational culture

Organizational culture was measured by 6 items They are: employees are supportive and helpful, adequate organizational resources are available to the employees, willingness to collaborate across organizational units, encouragement or reward for employees’ opinions and ideas regarding work, opportunity for individual development,

and encouragement for analyzing mistakes and learning from them

ERP implementation success

ERP implementation success was evaluated by 5 items, including reduction

in informal system, improvement in capacity planning, cost estimation, inventory control, improvement in cooperation among the department in organization, improvement in job satisfaction, and reduction in “expediting” customer orders The final item list was presented in the Table 3.1 and the completed questionnaire was presented in Appendix 2

Table 3.1: Survey items in the study 1

Top management support (Independent variable) (cronbach alpha: 797)

Supp1 Sufficient incentive for ERP implementation was provided by top

management Supp2 The ERP implementation is/was viewed as a stratefic decision by top

management Supp3 There is/was sufficient top management commitment to this ERP

implementation Supp4 The CEO, CIO or COO is/was actively supporting this ERP

implementation

Supp5 The ERP implementation received explicit identification from top

management as a critical priority

Teamwork (Independent variable) (cronbach alpha: 880)

Team1 The people selected for ERP implementation teams had the best

business and technical knowledge Team2 A variety of cross-functional people were selected for the ERP

implementation Team3 Those selected for the ERP implementation were working on the

project full-time as their only priority

Team4 Sufficient incentives or compensation were given to those selected

for ERP project

Team5 Those selected for the ERP project were relocated together

Enterprise-wide Communication (Independent variable) (cronbach

alpha: 880)

Comm1 The project team and core design team were well- prepared to

communicate effectively with the users

Comm2 Persons involved in ERP project clearly understood the

goals/objectives/purposes of the implementation

Comm3 There were enough communication channels to inform the users of

the stage of the ERP project and help users sesolve problems

Comm4 Enough reviews were conducted to ensure continued ERP end-user

satisfaction

Comm5 There were enough evaluations to assess the workings of te ERP

system

Project Management Program (Independent variable) (cronbach alpha: 836)

Proj1 During the ERP implementation, milestones were set with

measureable results

Proj2 There was commitment to promote and manage the ERP

implementation project

Proj3 Regular communication for expectation and challenges, education,

training, and support were provided during the ERP implementation

3.3.2 Questionnaire translation

Surveys were translated and back-translated into Vietnamese in line with

Proj4 Task assignments were well-defined during the ERP

implementation

Proj5 Customization of the ERP system was well-managed by the

business team

Organization culture (Moderator) (cronbach alpha: 821)

Cult1 In my organization, employees are supportive and helpful

Cult2 Adequate organizational resources are available to the employees Cult3 There is willingness to collaborate across organizational units

Cult4 Employees are encouraged or rewarded by their superiors to express

and exchange their opinions and ideas regarding work

Cult5 Opportunities are provided for individual development, other than

formal training (e.g work assignments and job rotation) Cult6 Employees are encouraged to analyze mis-takes that have been

made and learn from them

ERP implementation success (Dependent variable) (cronbach alpha: 835)

Succ1 There is a reduction in informal systems for either materials

management, inventory, or production control Succ2 Capacity planning, cost estimation, and inventory control has

improved Succ3 Cooperation between finance, marketing, production, engineering,

and sales have improved

Succ4 Employee job satisfaction and morale has improved

Succ5 There is a reduced need for “expediting” business requirements such

as customer ordors

cross cultural translation procedures (Harkness & Schoua-Glusberg, 1998) Translation procedure used the committee approaches Committee or parallel translation requested the participation of some translators Based on the original questionnaire, as instructed by Brislin (1980) (cited in Harkness & Schoua-Glusberg, 1998), the translations were simultaneously and independently implemented After that, the translators compared different translation versions and chose the final one

In this study, author used the committee with two friends as the translators

According to Harkness & Schoua-Glusberg (1998), the term back translation was the method transforming the translated version back to the source language The purpose of back translation was to compare and refer the translated version with the source language version, so that the quality of the translated version could

be evaluated

3.4 Research strategy

3.4.1 Qualitative pilot study

When the translation of the questionnaire was completed, the pretest or called alpha test would be carried out with the participation of 5 persons who have experience with ERP systems Participants of this study would not be interviewed in the main study in next step The comments related to the translation of the questionnaire were mainly suggestions concerning words and phrases that make the translations better and the questions more understandable for Vietnamese respondents, e.g “các hệ thông không chính thức khác” was revised to “các hệ thông riêng lẻ khác”, “Việc tùy biến của hệ thống” was revised to “Sự thay đổi của

hệ thống”, “Trong công ty tôi” was added in front of all six statements of organizational culture After the revision finished, the author had the final draft questionnaire

3.4.2 Quantitative pilot study

In this quantitative pilot study (or beta test), the author used the final draft