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An ERP Adoption Evaluation Framework: Proceedings of Fifth International

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 An ERP Adoption Evaluation Framework

Sanmurga Soobrayen1*, Mohammad Zawaad Ali Khan Jaffur2*, Bibi Zarine

Cadersaib3*

University of Mauritius*
sanmurga.soobrayen1@umail.uom.ac.mu1
mohammad.khan1@umail.uom.ac.mu2
z.cadersaib@uom.ac.mu3
Abstract. Small and Medium Enterprises (SMEs) are confronted to highly
competitive markets and need to have recourse to more efficient and effective
solutions. An Enterprise Resource Planning (ERP) system could be one
solution. A review was performed to identify factors affecting ERP adoption by
SMEs in developing countries including Mauritius. The benefits and challenges
regarding ERP implementation together with the Balance Scorecard (BSC) has
been used to derive dimensions to be considered and a cause and effect analysis
diagram is presented. An ERP evaluation framework is then proposed which
consists of an ERP dimension weightage matrix and quantitative ERP
implementation assessments. Key Performance Indicators (KPIs) are derived
for each dimension and the latter is used to propose a matrix for defining the
weightage against each dimension. The dimension weightage together with the
KPI impact (positive or negative) are then used to derive a formula to be used
to evaluate an ERP implementation for SMEs.
Keywords: ERP, ERP adoption, ERP Adoption Evaluation Framework, SMEs

1. Introduction

SMEs have an essential part in Mauritius both as a facilitator and as a leading factor
for a balanced development [1], [2]. In a competitive market, SMEs are often faced
with a lot of difficulties to compete among themselves so as to become more efficient
and creative. Currently there is a low technology utilization among SMEs in
Mauritius [3]. To overcome such difficulties and to improve competitiveness, one
way might be the embracement and usage of a suitable Information System [4]. An
Enterprise Resource Planning (ERP) can be adopted by SMEs to enhance their
business processes as well as to become more competitive, profitable and to achieve
efficiency. ERP improves data processing which helps businesses in making better
decision to increase productivity [5]. However, the decision to embrace an ERP
system is challenging due to the complexity, risks involved, costs and time factor [6],
[7] thus ERP adoption rate is still low in developing countries [1], [8], [9], [10]. The
purpose of this research is to identify the current status of ERP adoption in Mauritius
and to propose and evaluate an ERP adoption evaluation framework. It is expected
that this study will be beneficial for the research community since there is a lack of
study for ERP adoption in Mauritius and a limited number of research carried out on
ERP adoption evaluation. The research question of the study is set as follows and is
addressed in section 3: RQ1: Can an ERP evaluation framework be derived and used to
assess the ERP implementation results for SMEs?

2. ERP adoption in developing countries including Mauritius

A Systematic Literature Review (SLR) was carried out making use of Kitchenham
and Charters (2007) practical guidelines. It was found that there is a lack of potential
research work carried out on ERP adoption in Mauritius, therefore the study was
extended over developing countries. Out of 856 papers considered, only 15 were
found to be relevant to ERP adoption in developing countries and Mauritius. Due to
space restriction, only the major findings are discussed in this paper. It was observed
that adoption of ERP system in developing economy is relatively low. For example,
some of the findings showed that there is a low usage of ERP by SMEs due to nature
of business, lack of reliance, lack of knowledge about ERP, time constraint, financial
constraint, user resistance, perceived ease of use, internet connectivity issues and data
security issues [3], [8], [9]. The benefits of adopting ERP included: operational
benefit, strategic benefit, IT infrastructure benefit, managerial benefit and
organizational benefit. The challenges included: inadequate organizational fit,
inadequate management structure and strategy, inadequate user involvement and
training, inadequate technical skills, lack of knowledge, security issues and
inadequate software system designs [3], [5], [7], [8], [9], [10], [11], [12], [13], [14],
[15], [16], [17], [18], [19].

3. Proposal and Evaluation

This section considers the benefits and challenges regarding ERP implementation
together with Balance Scorecard (BSC) [20] to derive dimension to be considered and
proposes the cause and effect analysis using the Ishikawa diagram. The proposed ERP
evaluation framework is then derived based on the cause and effect analysis.

3.1 Deriving Dimensions

The BSC consists of four different perspective: financial perspective, internal

business process perspective, customer perspective, and learning and growth
perspective. In the financial perspective, the Total Cost of Ownership (TCO)
associated with ERP implementation will be considered as a KPI to be evaluated. For
the Internal Business Process Perspective, the KPI that will be used for evaluation is
speed of service. Customer Perspective deals with the internal users using the system.
It is very important to have the point of view of the end users since they are the one to
be using the system once it has been adopted. Thus customer satisfaction measure will
be very useful to have a clear indication of whether the user is satisfied with the
system. KPIs used to measure the Innovation (Growth) and Learning Perspective
include; number of training hours and the adaptation time to new system. Dimensions
were derived by regrouping factors from the SLR with the perspectives from the BSC
to simplify the process and to remove duplications. The dimensions IT infrastructure,
management involvement and software system design dimensions were not regrouped
in the BSC as these did not fit with the BSC perspectives. The compiled dimensions
include: 1) Financial Perspective, 2) Customer Perspective, 3) Innovation and Growth, 4)
Internal Business Process, 5) IT Infrastructure, 6) Management Involvement and 7) Software
System Design.

3.2 Cause and Effect Analysis

A cause and effect analysis was performed to diagrammatically represent all the
possible causes of ERP implementation based on the different dimensions and the
factors from each dimension as shown in Fig.1

Software Internal
Customer System Business
Perspective Design Process
Financial
Perspective
Development of Speed of Service
Functionality external Linkage
Customer Involvement (Suppliers, Decision Making
Capital fit in Module
Customers) Capabilities
Available Benefit Realization
Redesign
TCO (Total Knowledge about ERP Implementation Business Process
Cost of Strategy
Ownership) IT Knowledge Business Growth
ERP
Implementation
Results
Adequate Adaption time to Skilled Trainers
Hardware new system
Proper Communication
Security
Training IT Development
Internet Adaptability to Troubleshooting Skills
Network change to new Top Management
technology Support

IT Innovation Management
Infrastructure and growth Involvement
Perspective

Fig. 1. Ishikawa diagram

3.3 Proposed ERP adoption evaluation framework

The proposed ERP adoption evaluation framework consists of an ERP dimension

weightage matrix and quantitative ERP implementation assessments. Key
Performance Indicators (KPIs) are derived for each dimension. The dimensions are
used to propose the matrix for defining the weightage of each dimension. This KPI
weightage together with the KPI impact (positive or negative) are then used to derive
a formula to be used to evaluate an ERP implementation for SMEs. The following
sections provides justifications and discussion of these different components. Fig. 2
provides a visual presentation of the framework.

Deriving KPI and ERP dimension weightage matrix

KPIs should be SMART, that is Specific, Measurable, Attainable, Relevant and Time-
bound [21], [22]. It was important to identify the key feature of each dimension and to
consider only those which were SMART as shown in Table 1. SMART KPIs to be
evaluated for each dimension together with the dimension ID is provided. Table 2
illustrates the ERP dimension weightage matrix constructed based on the dimensions
identified in Table 1 and weightage importance will be assigned against each
dimension. This matrix derivation has been adapted from a previous study [23]. A
weightage of 0.2(Less important), 1.0 (Equal Importance), 5.0 (More Important) and
10.0 (Much More Important) has been used to rate one dimension against another. So
if D1 against D2 is rated as 10.0, then D2 against D1 will be rated as 0.1 (being 1/10).

Fig. 2. ERP Adoption Evaluation Framework

Quantitative ERP implementation assessments

The Weightage Matrix will provide the ‘Percentage of Total Criteria’ for each
dimension which will be used as the Weightage for each dimension, DNw, where N
represents each dimension set in Table 1. KPIs included in each dimension can
represent a positive outcome, a negative outcome or null. If the KPI is found to be a
positive outcome, the total positive outcome of the dimension will be increased by 1
point else if it is a negative outcome, the total negative outcome of the dimension will
be increased by 1 point. A null means that the KPI has not been use in the case
evaluated. A zero (0) point is given to both the positive outcome and negative
outcome to denote a null KPI.
 Table 1. Allocate ID to dimension

Dimension Dimension KPI

ID
D1 Financial Perspective  Capital available
 TCO- Total Cost of Ownership
D2 Customer Perspective  Benefit realization

D3 Software System Design  Functionality fit in module

 Development of external linkage(Suppliers,

D4 Internal Business Process customers)
Perspective  Speed of service
 Redesign business process
 Business growth
D5 IT Infrastructure  Adequate hardware
 Internet network
 Security
D6 Innovation and Growth  Adaptability to change to new technology
Perspective  Adaption time to new system
 Training
D7 Management Involvement  Skilled trainers
 Top management support
 IT development capabilities
 Proper communication
 Troubleshooting skills

Table 2. ERP dimension weightage matrix

Percentage
Dimension of Total
D1 D2 D3 D4 D5 D6 D7 Criteria Weight Criteria
D1
D2
D3
D4
D5
D6
D7

For e.g. if the KPI “capital available” from the financial dimension is considered as a
positive outcome, the financial dimension positive outcome increases by 1 point else
if it is a negative outcome, the financial dimension negative outcome increases by 1
point. This weightage is applied with each dimension and the sum of the KPIs
(positive or negative) is used to provide a quantitative assessment per dimension. The
formula below will be used to compare DN positive outcome(s) to DN negative
outcome(s).

DNKPI = (∑DNKPI+ve x DNw) - (∑DNKPI-ve x DNw)

Where:
 - DN KPI +ve = KPI with positive outcome
- DNw = percentage of total criteria of DN
- DN KPI -ve = KPI with negative outcome
Interpretation:
1. DNKPI = 0  DN positives outcomes are equal to the negatives of DN.
2. DNKPI > 0 DN positive outcomes are greater than the negative outcomes
of DN.
3. DNKPI < 0  DN negative outcomes are greater than the positive outcomes
of DN.
Lastly to identify whether the SME will adopt the ERP system, the following formula
has been derived which sums up all the DNKPI for each dimension.

Interpretation:
ERPKPI > 0  The possibility for the SME to adopt the ERP system is high.
ERPKPI = 0  The ERP adoption by the SME is neutral.
ERPKPI < 0  The possibility for the SME to adopt the ERP system is low.

Evaluation of Framework
A case study approach was used to evaluate two SMEs, SMEA and SMEB from the
clothing industry. The name of the SME are not disclosed to maintain confidentiality.
An ERP prototype was implemented using an open source ERP (ODOO) where all
business processes of the SMEs were integrated in the software and the evaluation
was carried out using the proposed ERP evaluation framework. Both SMEs were
provided with explanation to fill in the Weightage Matrix properly and were assisted
in filling them. For SMEA, D1, D4, D5 and D6 had more importance compared to
other dimensions as their corresponding Dimension Criteria Weight are greater
compared to the other remaining dimensions. For SMEB, D1, D2, D4, D5 have more
importance compared to the other remaining dimensions. During the evaluation of
the two SMEs, it was found that both SMEs were not ready to embrace ERP system.
This can be supported by the figure received for both SMEs according to the ERP KPI
calculation. SMEA score -1.384 ((- 0.524) + (-0.066) + 0.058 + (-0.214) + (-0.446) +
(-0.36) + 0.168)) and SMEB scored -0.527 ((0 + (- 0.169) + 0.093 + (-0.294) + 0 + (-
0.186) + 0.029)). Based on these results, both SMEs have less probability to adopt an
ERP system. Moreover, the main hurdles identified were lack of finance, lack of
adequate hardware and internet connectivity, insufficient training, high cost involve
for ERP system and customer not realizing the benefits of the ERP system. In
addition, during the interview of both SMEs it was observed that the owners did not
have any idea about ERP, meaning that there was a lack of awareness as well.

4. Limitations, Conclusion and Future Works

The evaluation was carried out within a very limited time period (one month) and it
was not possible to have an in-depth evaluation of the two case scenarios. The SME
owners were reluctant to provide sensitive information about their business activities.
The evaluation has to be carried out with a larger pool of SMEs in the same line of
business as well as other lines of business to provide more conclusive results. Surveys
were also not conducted with local SMEs and the framework was mostly derived
from literature findings. A proposed ERP evaluation framework was designed and a
case study approach to evaluate the framework. It was found that major factors
affecting ERP adoption by Mauritian SMEs include: lack of resources (finance, IT
skilled staff, internet connection), the high cost involved in adopting ERP system,
insufficient training, lack of awareness about ERP system and most importantly
owner of the SMEs not realizing the benefits of ERP system. Future work will entail
in evaluating the proposed ERP implementation framework using other SMEs in
different industries and SMEs in other developing countries to have better insights on
factors influencing ERP adoption. The proposed ERP evaluation framework consists
of seven dimensions which can be extended.

Acknowledgments. The authors gratefully acknowledge the owners of SMEA and

SMEB for their participation in using the ERP system, filling the Weightage Matrix
as well as sharing their feedbacks.

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