Total Cost of Ownership, User Acceptance and

Perceived Success of ERP Software

Simulating a Dynamic Feedback Perspective in the Higher Education

EnvironmentMeg FrylingAssociate DirectorClient Support ServicesInformation Technology ServicesUniversity at Albany

Agenda

• Overview and Rationale

• Approach, Methods and Design

• Case Study Institution

• Model Conceptualization Review

• Policy Analysis

Overview and Rationale

The Problem• Underestimate time and

resources required• BPR vs. customization• Implementation decisions

driven by short-term goals• Lack of framework to

predict long-term TCO• Homegrown vs. ERP -

Paradigm shift

Research Questions

• What are the dynamic relationships involved in maintaining ERP systems? 

• How can we better predict long-term total cost of ownership of maintaining ERP systems?

• What is the impact of customization versus business process reengineering on total cost of ownership, system acceptance and perceptions of success?

Research Objectives

• Investigate impact of ERP implementation decisions on long-term recurring costs, system acceptance and perceptions of success

• Develop a formal ERP dynamics simulation model

• Provide an effective communication framework via simulation modeling– Policy analysis

Model Building Blocks• Literature Review

• Researcher’s Mental Model

• Case Study Data – Identify model constructs and calibrate

• Interviews– Case study project participants– Experts from other institutions

Approach, Methods and Design

System Dynamics

• “…computer-aided approach to policy analysis and design”

• Applicable to…– “dynamic problems arising in complex social,

managerial, economic, or ecological systems”– “dynamic systems characterized by

interdependence, mutual interaction, information feedback, and circular causality.”

Richardson, G. P. (1996). System Dynamics. Encyclopedia of Operations Research and Management Science. S. Gass and C. Harris. Norwell, MA, Kluwer Academic Publishers.

Feedback Relationships

Bundles/Upgrades

Rework/Recustomization

Time to

Implement ERP

Dynamic Behavior to Consider

• Recurring reapplication of customizations• TCO of customization increases

indefinitely– Must eliminate customization to stop growth

• Expectation that customization will always exist

• Difficult to justify selective customization– political slippery slope

Dynamic Behavior to Consider

• Customizations often break delivered software components– Domino effect– Vendors do not support

customizations

• Upgrade preparation– Tasks completed multiple times

• Resources tied up on upgrade work – Task backlog

Case Study Institution

The University at Albany (UAlbany)

Institution Overview

• Established in 1844

• Designated a University Center of the State University of New York in 1962

• Public research institution

• 13,000 undergraduate students, 5,000 graduate students, 1,040 faculty and 4,330 non-faculty employees

Case Study Institution

• Data sources– Documentation– Archival records– Interviews

• Time boundary– 6 years (2003-2009)– Post-Implementation– One Major Upgrade

Project Milestones• March 1999 – Prospects• June 2000 – Human Resources• November 2000 – Admissions• March 2001 – Orientation• September 2002 – UPGRADE• June 2003 – Student Records• January 2004 - Financial Aid• May 2005 – Student Financials• August 2008 - UPGRADE

Project Charter• Reengineered and policy changes to fit the

software...

• The PeopleSoft software has been built based on “best business practices” ....

• Software customizations will be kept to a minimum…

• The project management teams must make every effort to manage and reduce costs

Percentage of Rework Tasks Each Month

Tasks Opened Per Month

Upgrade vs. Non-Upgrade Tasks

Upgrade Task Percentages

Upgrade Task Effort (%)

Percentage of High Effort Tasks by Task Type

Summary of Opportunities

Actual Cost Breakdown From 1998-2006

Model Conceptualization Review

Semi-Structured Interviews

Interview Protocol

• Semi-structured interviews– Functional and Technical– Case Study Institution and 3 Others– Likert-type scale questions (agree/disagree)

and follow-up discussion– Open ended questions

Customization vs. BPR

Technology Acceptance

Communication and Collaboration

Perceptions of Success

Policy Analysis Scenarios

• Base Run – Based on case study data

• No Customizations and/or Add-ons

• No Bundles and/or Upgrades

• Increase pre-implementation relationship building efforts

• Add consulting partner for initial implementation

No Bundles/UpgradesFatigue

2

1.5

1

0.5

0

0 22 44 66 88 110 132 154 176 198 220 242 264 286Time (Week)

frac

tion

Fatigue : No UpgradesFatigue : No Bundles

Fatigue : Base Run

Thank you!

Copyright Meg Fryling 2010

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