Int. J. Management Practice, Vol. 6, No. 2, 2013
The real SAP® Business One cost: a case study
of ERP adoption in an SME
Marie Griffiths*, Aleksej Heinze
and Anthony Ofoegbu
Salford Business School,
The University of Salford,
Salford, M5 4WT, UK
Fax: 0161 295 4237
Fax: 0161 295 5024
Fax: 0161 295 5000
E-mail: [email protected]
E-mail: [email protected]
E-mail: [email protected]
*Corresponding author
Abstract: This paper reports on a UK based service management Small and
Medium-sized Enterprise (SME) that invested into SAP® Business One. The
action research case study highlights the real cost and difficulties faced in
moving to the one single SAP system and the process that was followed in
order to identify third-party vendors that can integrate or customise SAP®
Business One. This paper highlights the additional costs required to ensure a
‘fit-for-purpose’ solution to close the gap between strategic needs and the
existing SAP Business One solution. The gap itself is illustrated by highlighting
10 key functionalities expected by the given service management SME. The
actual implementation cost of the Enterprise Resource Planning (ERP) was
found to be approximately double the initial SAP costs. The real costs
involve time for, among other things, process reengineering, strategic decision
making, software add-ons, staff-training, project-management and software
maintenance.
Keywords: SAP Business One; ERP; enterprise resource planning; service
management solutions; SME vendors; action research; IT adoption; IT gap;
strategic service management needs.
Reference to this paper should be made as follows: Griffiths, M., Heinze, A.
and Ofoegbu, A. (2013) ‘The real SAP® Business One cost: a case study
of ERP adoption in an SME’, Int. J. Management Practice, Vol. 6, No. 2,
pp.199–215.
Biographical notes: Marie Griffiths has significant experience gained working
on varied digital research projects which have explored the commercial
and societal implications of technological change. Her current research
agenda focuses upon young people and digital media, exploring their behaviour
in virtual spaces, their roles as ‘prosumers’ in social networking sites, the
extensive media hubs that now surround even very young children and
understanding the potential consequences of this digital saturation. She also
researches identity, privacy and surveillance technologies and works with
Fletcher and Kutar on the Day in the Digital Life project.
Copyright © 2013 Inderscience Enterprises Ltd.
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Aleksej Heinze is active in the area of Search & Social Media Marketing,
Enterprise 2.0 and Customer Relationship Networking (CRN). He is the
programme leader for Search & Social Media Marketing commercial courses
offered as part of the Salford Business School’s Executive Education:
http://www.searchmarketing.salford.ac.uk. He works on a number of KTPs and
is involved in a number of European Projects.
Anthony Ofoegbu has a broad range of business analytics skills having worked
in the IT departments of a number of SMEs. More recently he has gained
significant expertise in the customisation of SAP® business and specialises as a
consultant in this area.
1
Introduction
What is the real cost of implementing the SAP Business One Enterprise Resource
Planning (ERP) system? This question is often asked by many senior managers in micro,
Small and Medium-sized Enterprises (SMEs), however there is a scarcity of literature
showing the costs and complexities involved in implementing such a solution. It is a
particularly significant question, since in countries such as the UK, SMEs constitute
99.9% of total enterprises and employ 59.1% of the private sector, where they generate
48.7% of turnover (ONS, 2010). With the trend for manufacturing activities relocating to
competitive labour markets, an increasing number of UK based SMEs are moving their
activities to service industries, for example, offering servicing of printers and
photocopiers, or IT support. Consequently, within the last decade, innovation in service
industries has placed emphasis on improvements in service quality, customer
management, service management and operations management (Hertog et al., 2010).
Moreover, innovations in service management are increasingly driven by the strategic
need to improve service and these improvements are made possible using the latest
information technology advances such as mobile devices and increasingly web integrated
e-business systems, which extend the conventional ERP features. Johnston (2005), in a
longitudinal study, evaluated 250 papers from three journals of service management
literature and concluded that only three papers covered service management operations,
so highlighting an opportunity for more research to be conducted in this area (Johnston,
2005). This concern regarding the scarcity of service management research is echoed by
Frei (2006), Wan and Chan (2008), Kim and Soo (2010) and Lofberg et al. (2010); other
studies contributing to this debate add that there is a lack of service management studies
concerning SMEs (Buonanno et al., 2005; Basu et al., 2011).
The aim of this paper therefore is to explore the strategic service management needs
of a UK based SME, which currently has a SAP® Business One system, and identify
available options which could be applied to address the gap between strategic needs and
the existing SAP Business One solution. Our review is guided by the need to bridge the
gap between business and IT infrastructure (Peppard and Ward, 1999; Peppard, 2001)
resulting in the examination of existing business processes, legacy systems, potential
solutions, and vendors with the aim of establishing the range of service management
options available for this SME. This paper thus goes beyond the rhetoric of theorising
and explores the challenges and complexity involved in estimating the real costs of
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201
implementing SAP Business One to an SME and the need to customise it to meet all
strategic business needs.
In the next section, the paper examines the practical software solution options offered
by SAP for service management SMEs. Then, theoretical IT management options for
narrowing the gap between business needs and IT solutions are examined. Subsequently,
we discuss research method, case study settings and findings. Finally, we propose
theoretical and practical contributions.
2
Service management ERPs for SMEs
There are a number of studies in service management (Balzarova et al., 2004; Reijers,
2006; Woo, 2007; Kemp and Low, 2008), yet despite this trend, the majority of these
studies have little advice to offer to those SMEs interested in evaluating business needs
and selecting service management ERP related technological features (Howcroft and
Light, 2006). This lack of relevant research could explain the reasons for failure in
identifying appropriate applications within this sector (Asif et al., 2009). Additionally,
some authors argue that ERP software often lacks functionalities because the ERP
solution contains a business model different from that of the organisation, thereby
demanding business process reengineering to provide good fit-for-purpose (Light, 2001).
The UK market of suppliers of service management solutions is mature with a
number of competing vendors offering options. This can be overwhelming to SMEs,
given that the majority are owner-manager led and their main focus is on strategic
business development and day-to-day management of their business (Lloyd-Reason and
Mughan, 2002) not on IT investment decision making. These solutions prompt strategic
investment decisions of about £100k as a headline figure, more to install and customise a
service management ERP system followed by a yearly financial commitment for support
and maintenance. These complex financial investment decisions require time from an
SME owner-manager, who doesn’t always have access to an IT manager or an IT
department to help in evaluating these strategic options (Basu et al., 2011). One of the
global players in service management solutions for SMEs is SAP® Business One
(Moeller and Rechnitzer, 2008), which is also a popular option for UK based SMEs.
In terms of practical solutions for SMEs there are a number of software vendors,
however, this paper pays particular attention to SAP, which claims to be the market
leader (Moeller and Rechnitzer, 2008; SAP AG, 2011). A software house, founded in
1972, SAP (Systems Applications and Products in Data Processing), has become a world
market leader in a number of segments such as ERP, Customer Relationship Management
(CRM) and a wide portfolio of other business application systems (Moeller and
Rechnitzer, 2008). SAP is relatively new to the SME market and entered it through an
acquisition in 2002 of Israeli based TopManage Financial Systems Ltd (SAP AG, 2002).
This proved to be a lucrative move since nearly a decade later in 2011 SAP counted 78%
or 67,000+ of world-wide SAP users as SMEs (SAP AG, 2011).
As highlighted in Table 1, the SAP® Business One solution targets the market
segment of ‘under 100 employees and about 50 users’ and aims to offer an entry-level
affordable solution to provide the core functionality for an SME, whereas the more
advanced suite offered by Business-All-in-One targets businesses of 100–2500
employees (Moeller and Rechnitzer, 2008). One notable characteristic, important for
service management focused SMEs, is that all three solutions claim to be applicable to
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‘professional services’ – which in our interpretation means covering ‘services
management’ – i.e. the focus of our paper.
Table 1
Business management solutions – emphasis added
SAP® Business One
SAP Business
ByDesign™
SAP Business All-in-One
What It Is
A single, integrated solution The best of SAP,
to manage your entire
delivered on demand
business
A comprehensive,
integrated industry
solution to power your
business end to end
Best For
Small businesses that have
outgrown their packaged
accounting-only solutions
Companies that need
Mid-size companies with
business software but do industry needs that want
not want to support a
a scalable foundation
large IT backbone
No. of
Employees
Up to 100
100–500
Industry
Primarily used in
wholesale, retail,
professional services, and
light manufacturing
Primarily used in
Used in all major
manufacturing,
industries
professional services, and
distribution
Key
Functionality
General business
General business
management functionality management functionality
and 550+ add-on solutions,
many of them industry
specific
Deployment
On premises
100–2500
General business
management
functionality and 700+
industry specific
solutions
On demand
On premises
Implementation 6–8 weeks
4–8 weeks
8–16 weeks
How to Buy
Monthly subscription
Traditional licensing
Traditional licensing
Source: SAP AG (2011)
In their recent developments, SAP also recognise that services play an increasingly
important role in business and they have developed a number of flexible solutions
such as SAP Business byDesign (Scheithauer et al., 2009), however, this again
focuses on larger organisations targeting the 100–500 employees market. SAP Business
byDesign is built on Service Oriented Architecture (SOA) principles and offers
opportunities for integration with different vendors, facilitated by the SAP Netweaver
application platform.
However, for the entry level SME, the SAP® Business One is the solution that is
based on the ‘old technology’ but does not specifically target the basic ERP needs
of an SME. One of the core features of SAP Business One is that it allows users to
customise their systems using their Software Development Kit (SDK). This has resulted
in over 550 add-ons, which are produced by third party software houses to plug the gaps
in the features of the standard model. An add-on is a solution or application that enhances
the standard functionality of a primary solution such as SAP® Business One. Moreover,
the wide range of add-on options is classed as a ‘Feature’ of SAP Business One, as
highlighted in Table 1, since these features are supposed to be providing industry specific
customisation. Therefore, those SMEs in service management niches should be well
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placed to find an add-on to satisfy their specific needs – or at least that is the view we
have formed from analysing the product literature from SAP.
3
How to get alignment between business strategy and IT infrastructure?
Due to the special practices undertaken by organisations in the service management field,
such as the need to adequately match the hours paid to field engineers with the hours
invoiced to customers for whom the service was provided, it is recognised that these are
distinctly different from manufacturing related practices (Helo et al., 2008). As a
consequence, a number of good practice models have been developed – most notable
perhaps is the international standard for service management: the International
Organization for Standardization (ISO) 20000. This was necessary because of the need
for service management organisations to reconcile their desire to provide the highest
possible quality service with commercial pressures to achieve the economy, effectiveness
and efficiency required to maintain profitability (Ottewill et al., 2000). The ISO 20000,
formerly known as the British Standard (BS) 15000 is the first standard for service
management (Wan, 2009) although a British standard, it has been adopted worldwide and
at its best provides the platform to mitigate the service management needs mentioned
above. Whilst this is aspirational, ISO models do tend to favour larger organisations and
are not economically feasible for SMEs.
In this paper the framework selected as providing structure for the discussion of
business and IT for an SME is the “framework for managing the relationship between the
IT organisation and the rest of the business” (Peppard and Ward, 1999; Peppard, 2001).
Despite the fact that this framework was conceptualised within three larger organisations,
the authors feel that the model is sufficiently generic for the discussion and is often
recognised as a way of linking the business and IT discussions (Pawlowski and Robey,
2004). The five criteria that Peppard and Ward (1999) propose for the discussion of IT
and business alignment in order to create high performance of IT are: Leadership,
Structure and Processes, Service Quality, Values and Beliefs and finally Roles.
It is believed that these five stages are more detailed compared to the SAP proposed
value-engineering methodology, which takes a one-dimensional view on the process of
implementation through stages such as Value Discovery – which aims to develop a
business case for aligning IT with business objectives; Value Realisation – which aims at
planning and deployment of the business solution; and finally Value Optimisation –
focusing on learning from benefits measurements and optimisation of the solution.
Thus the discussion of the Business and IT gap in the current paper will use the ‘Mind the
Gap’ model proposed by Peppard and Ward (1999).
4
Research settings
This study is based on an SME in the North West of England, UK, which was established
in the late 1980s, for which we are using the pseudonym of Alpha Ltd. Alpha Ltd evolved
from an original manufacturing only focus to the provision of specialist supply and
maintenance services. The company has expanded through acquisitions and growth,
which has seen an increase in a number of disparate information systems used as part of
their IT infrastructure. Due to the multiple failures of new IT systems selection in the
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past, Alpha Ltd is conscious about repeating mistakes with a new system. Their current
main ERP system is the SAP® Business One version 2007, in addition to this, due to
SAP’s limitations, another system is used for the engineer booking calendar and yet
another system for job costing. Alpha has 65 employees 17 of which are SAP Business
One users, according to these numbers SAP Business One should be ideal for Alpha
based on the SAP sales literature as highlighted in Table 1.
This empirical study takes place within a Knowledge Transfer Partnership (KTP)
framework. KTPs are government funded UK-wide initiatives that help businesses
improve their competitiveness and productivity through better use of knowledge,
technology, and skills (Technology Strategy Board, 2011). A KTP is the formation of a
three-way partnership between:
•
A company (Alpha Ltd) – which has a strategic problem.
•
Academic supervisors – (based in a UK University), who are interested in applying
theories in practical settings.
•
A KTP Associate – an individual who is employed by the University but spends his
or her entire working time leading this strategically important project for the
company. The associate is immersed in the company for the duration of the project.
This particular KTP was over 18 months in the planning phase. This included a two-year
project plan drawn up as part of the bidding process. As a collaborative process this
required a rigorous review of the client systems’ infrastructure, understanding
the industry landscape and positioning Alpha Ltd amongst its competitors, establishing
the business’s limitations, strengths and future business strategies. This allowed us
to see the strategic needs of the company and understand the IT infrastructure required to
service those needs.
One of the key criteria for a successful KTP funding application is that all three
stakeholders will benefit from the project in their own way. For example, the academic
team have to produce academic outputs in the form of research papers and publications;
the company needs to demonstrate that it has a strategic business problem to be solved;
and finally, the associate has the opportunity to develop their knowledge and skills in
leading and managing projects and potentially also to study for a postgraduate
qualification. In order to produce academic outputs, the current project needs to make a
theoretic contribution as well as helping in the practical problem solving process.
The academic research team work closely with Alpha Ltd’s senior management team
and are on site for half a day each week. From the threshold of this project, the academic
team were interventionists rather than passive observers, so adopting an Action Research
(AR) approach was an instinctive route to follow. In their critical review of AR, several
information systems researchers (Baskerville and Wood-Harper, 1998; Baskerville and
Myers, 2004), argue that AR facilitates the bringing together of theory and practice
so enabling a ‘real’ impact on the company with the opportunity for academics to
conduct meaningful research in a ‘live environment’. These comments resonate with the
authors of the current project, as the project is critical to the future growth of Alpha Ltd
and is dependent upon decisions made due to this research process. We are aware that AR
is not without negative criticism (Oates, 2006) regarding paradigmatic assumptions
often being labelled as consultancy activities. Further, some argue that the researcher is
unable to remain impartial, as there is a risk of blurring roles within the project domain
(Avison et al., 2001). We look to McKay and Marshall’s (2001) work, to add more rigour
The real SAP® Business One cost: a case study of ERP adoption
205
and credence to AR, on developing an AR model that explicitly includes both a problem
solving interest cycle and a research interest cycle. They argue that the strengths of AR
lie in its potential to generate meaningful, practical solutions so empowering practitioners
to engage with scientific knowledge that informs project implementation and useful
outcomes. MacKay and Marshall (2001) call for systematic reflection on the process of
change. Therefore, this paper fulfils the role of critical reflector in the first part of AR
process, which is concerned with ‘problem identification’ and applies the concept of
dialogic reasoning (Klein and Myers, 1999) by relating the data to literature such as
Peppard’s (2001) concept of ‘Bridging the Gap’ which provides links but not constraints
for our discussion.
At the time of writing this paper, we are just over one year into the project and we can
argue that from a ‘helicopter’ stance, the project has been through the Diagnostic and
Action Planning stage of AR and is now moving into an action implementation stage see
Figure 1 as illustrated by Lewin’s cyclical model. However, from our close proximity we
have travelled the cyclic route of AR in many different situations to arrive at our current
position. The KTP team meet on a monthly basis and formally report back to the funding
agencies on the current stages of the project. These meetings provide an environment
conducive to the AR philosophy as each problem stage is diagnosed, an action plan is
discussed and the actions needed to achieve the objectives are established, these are then
reflected upon. The evaluation and reflection stage is conducted in a commercial setting
and Alpha Ltd is forthright with little time for niceties if the senior management team
have any concerns. However, this is also a space for the transferring of knowledge and
learning amongst the partnership facilitating the dialectic reasoning process. AR is ideally
matched to the knowledge transfer ethos of placing the academic team in a helping role
as they work closely with the KTP Associate to drive the project on a day-to-day basis.
The KTP Associate is able to both observe and participate in the project from the
requirement gathering stage through to the implementation of the solution, which has
enabled rich insights to be gained from Alpha Ltd’s real life context.
5
Diagnostic stage: documenting the current position
As part of the diagnostic stages of AR (see Figure 1), one of the first activities of the
associate was to fully map the business processes of the back office, conduct an IT audit
and identify key performance indicators that are to be reviewed in the light of the future
technological upgrade. The process related data gathering was done by conducting
interviews with key stakeholders and staff using the various systems at Alpha Ltd. Staff
were interviewed in front of their office computers so that they felt comfortable in
explaining the issues they are currently facing and were able to demonstrate their points
with examples. A total of 20 internal interviews, lasting from 15 to 25 minutes, with key
staff members were conducted. Close staff involvement was important in this research
because of its strength in providing in-depth access to people, issues and data as
suggested by Walsham (2006). The documentation was subsequently given to the staff
for validation. We estimate that the full duration of the analysis was at least a month of
the KTP associate’s time and approximately one week of collective downtime for those
staff who were interviewed or helped to confirm and refine the requirements and the
current processes.
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Figure 1
Lewin’s cyclic model
Source: Adapted after Burns (2000)
The output of the diagnostic stage of AR was the production of a Value Stream Mapping
(Lu et al., 2011) of the state of the present and future processes’, which helped to identify
areas of improvement within the present business processes. As part of the action
planning stage, via a collaborative process of the KTP partnership, a set of desired
features and functionality required by the company’s strategic plans was decided upon.
This features and functionality list was then used to develop the proposal of a
“Requirement/feature Mapping Model” (see Table 2) that could be used for evaluating
potential IS solutions that would align organisational business processes and desired
systems functionality. A detailed account of this process will be discussed in the
following section.
6
Action planning: plugging the gap between business strategy and IT
infrastructure
As discussed above in the action planning stage, the list of desired features in an ideal
system which would plug the gap for Alpha Ltd between the business strategy and IT
infrastructure is as follows:
•
job costing – to be able to cost the service job requirements
•
calendar scheduling – which allows a view of more than the current 7 service
engineers on one screen
•
service call management – to track the progress of work of service engineers
•
time sheet entry – to track the payment of service engineers
The real SAP® Business One cost: a case study of ERP adoption
207
•
equipment link/site maintenance – to link a service call to site equipment views to
ease service scheduling and better estimation of the required equipment
•
Enterprise Resource Planning (ERP) functionality – to track equipment stock levels
and resources available
•
Global Positioning System (GPS) – to track service engineers on a service call and
be able to allocate engineers to a job that is nearer to them
•
e-mail functionality – to be able to e-mail invoices and receipts directly from the
ERP systems
•
online customer login – ability for customers to directly report service needs online
and track the progress of their service delivery
•
integration with hand held devices – ability for the service engineers to receive and
upload the service related details and their time sheets.
Based on these and other secondary requirements, vendors were identified and
their solutions’ documentation analysed. Where appropriate, this was followed
by interviews consisting of predefined questions, as well as demonstrations by a shortlist
of ten vendors focusing on assessing how their service management solutions
matched the functionalities required. Among the main questions explored were the
various functionalities contained within the proposed solution. These options included
those that would eliminate the need to use SAP® Business One altogether, or options of
SAP add-ons building on the existing SAP system. Additionally, based on Alpha Ltd.’s
past experience, the interviewing process also analysed the ability of the vendor to have
a good working relationship with the company. This was mostly in the form of initial
fact-finding meetings with the vendors for them to understand what features and service
management processes Alpha Ltd required. This was followed by a labour intensive
period of vendor demonstrations of over 1–4 meetings dependent on where clarifications
were necessary. A total of 30 vendor interviews were conducted, some of which were
over 4 hours long, with a total of 100 hours attended by up to 5 KTP team members (the
company management, KTP associate and the academic supervisory team) at any given
time. As listed, this study has accumulated a vast volume of qualitative data which is a
feature of KTP schemes given the intensity of the research process and the two-year time
frame, these findings will result in a number of interconnected research studies.
Nevertheless, for this paper, the focus has been directed towards the analysis and findings
of the data collection process rather than a presentation of the qualitative data itself.
A major contribution of this study is Table 2, The Requirement/Feature Mapping Model
and the trajectory taken in the developmental process of this model.
7
Forming a general action plan: vendor selection process
As mentioned above, the potential IT solutions were critically evaluated to ascertain
those that would provide a possible match to the features while assessing potential
further problems in the business process. To get the functionalities completely mapped
out Table 2, the requirements/feature mapping model, was developed to track the
organisational needs and features available within each solution (see Table 2).
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Table 2
M. Griffiths et al.
Requirements/feature mapping model (see online version for colours)
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The solutions in Table 2 are also grouped into two distinct categories, namely
•
add-ons to SAP Business One
•
third party solutions.
These categories have been chosen because they are both possible solutions for the
company. In most cases, various software companies other than the developers
of the primary solution develop the add-ons, these usually have the same user interface
but with functionality that is not available in the main SAP Business One system. Unlike
the add-ons, third party solutions do not necessarily have the same look and feel as the
main or primary solution. Another issue with third party solutions is the integration with
the existing primary solution, in most cases both solutions could be running on different
databases.
These possible solutions were entered in the table rows (product and names
anonymised) using randomly allocated letters. Importantly, the cost of each solution is
entered corresponding to the specific number of potential users. The first row of the
model is the weighting associated with each feature or functionality as decided by Alpha
Ltd. However, any organisation will be able to use their values in these fields making the
decisions uniquely appropriate to their needs. For example, ‘Job Costing’, ‘Calendar
Scheduling’ are weighted at 10 – meaning they are essential; the ‘Hand held devices’ as a
feature is only rated 5 – indicating the medium importance of this task and the ability for
customers to log-in to check the service status online is the least important with a
weighting of only 2.
Hence, any organisation can list their requirements based on importance to business
process and organisational goal and assign a weighting of 1–10. The next stage is for
each feature to be assigned a mark between 1 and 10, with 10 indicating that the feature is
very well implemented and 0 that the feature does not exist in a potential solution. Marks
in-between indicate the quality of the feature in terms of speed and ease of use.
The column ‘Service Management’ provides a generic assessment of the extent to which
each of the solutions meet all the required service management processes as defined by
each organisation. These processes differ from one service organisation to another
depending on the type of services rendered, the customers and locations.
At the end of the interview/demonstration, staff involved in the selection process
filled in their subjective figures based on their understanding/impressions of solutions.
The collective results were discussed amongst the team, which comprised the MD and the
office manager, the academic team of three and the associate, in relation to the previously
agreed strategic business aims and objectives. The average scores for each feature were
taken and a final table was then compiled. Based on these results, a weighted total was
calculated giving a quantitative dimension for decision-making. For example, it can be
argued that solution F from the model (Table 2) seems to be favoured over solution E in
the case where solution F scores 0 for 6 different features while solution E on the other
hand scores 0 for 4 high rated features. As a result, this model ensures that the strategy
for organisations not only meets the requirements of a business process for now but also
factors in planning for future expansion and changes in business processes.
As can be seen in Table 2, there are very few options that meet the majority
of the current company’s requirements. Also, from the illustration in Table 2, the two
highest-ranking options are both add-ons for SAP® Business One. This on its own
provides an interesting finding: although SAP® Business One is not a service
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management tool with relevant add-ons, it does still offer higher scores when compared
to ‘best in breed’ service management solutions available on the market for SMEs
in the UK.
8
Discussion
Peppard and Ward’s (1999) conceptual framework has five dimensions:
•
role
•
structures and processes
•
leadership
•
value and beliefs
•
service quality.
Each of these dimensions is explored separately in the following discussion.
8.1 Dimension 1: Value and beliefs
Organisational values and beliefs can significantly determine behaviour and practices
(Peppard, 2001), if organisational actors have conflicting opinions of the strategic vision
this can be damaging to the overall business. Whilst technological innovations – such as
the cost-effectiveness of mobile phones – drive opportunities for strategic change, there is
an expectation that new systems would be ‘better’ than the older legacy options.
However, the reality is that some good features don’t feed into the latest versions, so a
long-term view of the product’s development has to be taken into account when selecting
the most relevant option. These experiences have definitely shaped the management team
at Alpha Ltd. Though they are more knowledgeable, about their requirements, they have
become more risk averse and there is an apprehension of failing again, so this has
possibly hindered or lengthened the selection of IT solutions processes. The more rigour
the management expects in evaluating the options, the more time is required and
consequently higher costs are incurred.
8.2 Dimension 2: Leadership
Peppard and Ward’s (1999) model is concerned with the leadership of IT Management
and Business management. This paper broadens this viewpoint by including the notion
that some SMEs do not have distinct roles and despite this, their business models have
adapted to the pace of technological change. However, the roles of Managing Director
(MD), IT Directors, IS managers and leadership of the third party vendors also require
scrutiny. The costs associated with the leadership taking time to engage with the
integration of a new SAP system are significant but inevitable since it is a strategic
decision and would require senior management buy in.
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8.3 Dimension 3: Service quality
The aspect of service quality is present across many areas of the business. Alpha Ltd,
maintains a service quality to its clients, it also expects a level of service from its IT
support supplier and the SAP partner. The current systems at Alpha Ltd require labour
intensive work-arounds to maintain this high quality of service; there are high
expectations across the company for the add-on to the existing SAP Business One
system. System outages have a much bigger impact on SMEs compared to large
enterprises – some statistics suggest that seven out of ten SMEs can go out of business
after a major data loss event (Bilan, 2010). Hence the service quality that SMEs offer has
to be high to keep them in business, which in-turn relies on the resilience of the IT
infrastructure installed and maintained by the SAP partners.
8.4 Dimension 4: Roles
SMEs present different challenges with regards to ‘roles’ as they might be too small to
have hierarchical management structures, or as is often the case, there is a reliance on
external IT partners (Bilan, 2010). It is these roles that should come under scrutiny and
when conducting cost estimates of the implementation of a new system these roles should
be made clear and agreed with vendors (Griffiths and Light, 2007).
The current case study highlights the complexity of an extensive review, which was
carried out with representatives of all stakeholders of the project to identify the most
suitable, cost effective and reliable technological solution and vendor. The significance of
the vendor was found to be crucial. Despite the ‘off-the shelf’ nature of the majority of
software products, a reliable vendor offering after sales support is a must for any
business. It transpired from the vendor interviews that there is a feeling amongst SAP®
Business One resellers that any company that supports this entry level SAP product needs
at least 30 customers in order to justify investment in a new member of support staff.
This disadvantages any small resellers who might not have these numbers and with low
profit margins might struggle to construct a viable business model on this product alone.
8.5 Dimension 5: Structures and processes
Peppard and Ward (1999) offer some platitudes regarding inadequate structures and
processes which can severely impinge on the success of IT in an organisation. A rigorous
business process mapping exercise has been conducted to ensure that the best possible
match is selected. Additionally, Alpha Ltd are concerned with a full project life-cycle, not
just with the implementation phase. As noted by many researchers such as Yu (2005),
success in the post-implementation phase of a system is accepted as a crucial indicator of
a successful system implementation overall. Velcu (2007) further supports this by saying
that the journey of system implementation does not end with the ‘switch on’ of the
desired system. Thus, the current project is scheduled to go on for several months beyond
the ‘switch on’ date, during which time the project team will oversee the new system
being used. Inevitably, this extended period of implementation is also costly but to ensure
positive results these costs are justified by long-term gains and a positive return on
investment.
212
9
M. Griffiths et al.
Conclusions
Practical contribution: SAP® Business One is still the market leading solution in the UK
for SMEs who are looking for service management options. However, to make it fit
strategic business needs a number of additional add-ons are required. This is a good
illustration of how an SME must invest considerable time and other resources costing
approximately twice the initial headline figure of SAP Business One, and also includes
the time of senior staff who could be growing the business – resulting in a loss of
opportunity costs. Moreover, the study highlights that the 550+ add-ons are not
necessarily features, as advertised in SAP sales literature, but rather a burden for an SME.
Our case study highlights that major resources are needed to plug the gap between the
business and SAP service management functionality. A recommendation to SAP is to
extend its features of the SAP Business One core application to include a better offering
for service management, closing the 10 common SAP gaps to a typical service
management SME as identified in this paper; these are:
•
job costing
•
calendar scheduling
•
service call management
•
time sheet entry
•
equipment link/site maintenance
•
ERP functionality
•
GPS
•
e-mail functionality
•
online customer login
•
integration with hand held devices.
Theoretical Contribution: using the research framework for diagnosing the gap between
the IT and business systems the framework developed by Peppard and Ward (1999) was
applied in an SME context. The framework was useful in steering the dialogic reasoning
process of our research. Moreover, our application extends this concept further by
highlighting the importance of the third party vendors who provide the solutions and the
relevant software. Therefore, the current paper contributes to the gap in the literature for
research into service management focused SMEs and their special case of owner
managers. Particularly, we have highlighted how important the vendor relationships are
and the importance of their knowledge and skills in supporting SMEs such as Alpha Ltd,
who would not normally have the expertise in-house to conduct the IT evaluation and
selection process. Therefore, any future SME focused studies should place great
emphasis on vendor evaluation – more so where no in-house IT manager exists and the
SMEs rely entirely on third parties.
The real SAP® Business One cost: a case study of ERP adoption
213
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