Business Transformation Through ERP A Case Study of An Asian Company

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Journal of Information Technology Case and Application

Research

ISSN: 1522-8053 (Print) 2333-6897 (Online) Journal homepage: https://www.tandfonline.com/loi/utca20

Business Transformation Through ERP: A Case


Study of an Asian Company

Alemayehu Molla & Arjun Bhalla

To cite this article: Alemayehu Molla & Arjun Bhalla (2006) Business Transformation Through
ERP: A Case Study of an Asian Company, Journal of Information Technology Case and Application
Research, 8:1, 34-54, DOI: 10.1080/15228053.2006.10856081

To link to this article: https://doi.org/10.1080/15228053.2006.10856081

Published online: 12 Sep 2014.

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Business Transformation Through ERP

Business Transformation Through ERP:


A Case Study of an Asian Company
Alemayehu Molla
School of Business Information Technology, RMlT University, Australia
and
Arjun Bhalla
IDPM, The University of Manchester, UK

ABSTRACT
Research into enterprise resource planning systems ( E m ) has investigated how these systems
add value to an organization, implementation issues and how these systems should be linked with
other technologies within the organization and across the supply chain. This case study takes a
slightly dzflerent approach and explored the potential of ERP to transform a business. The result
indicates that key dimensions of the case organization, that is its strategy, structure, system, sta8
skill, style, and shared values changed materially following the implementation of ERP. The
transformation is greatly enabled by ERP but its cause might not necessarily be attributed to ERP
only. The marketing and production innovations and work practices complexities that the
implementation and use of ERP allowed and the acceptance and assimilation of those practices
by the case organization's stafland management have contributed to the transformation of the
case organization. Based on the experiences of the case company, several theoretical and
practical implications that are relevant to managing and sustaining IT-enabled changes are
outlined and discussed.

Keywords: ERP, Business Transformation, ERP Success, ERP Outcome, Seven S, Asia
Developing Countries,

MOTIVATION FOR THE STUDY


The wider acceptance of Enterprise Resource Planning (ERP) systems by organizations globally
is one of the significant developments in information technology (IT) implementations. Prior
research has studied ERP from various perspectives:
theoretical models and frameworks development (Bradley, 2003; Davenport, 1998;
Markus and Tanis, 1999; Molla et al; 2005; Pereira, 1999);
investigations of the strong-order drivers and second-order facilitators1 inhibitors of ERP
adoption and implementation (Arif et al, 2005; Ross and Michael, 2000; Stewart et al,
2000);
investigations of project, change management and other implementation issues
(Aladwani, 2001; Fleisch et al, 2004; Markus et al, 2000; Scott and Vessey, 2002);
defining ERP success criteria and investigations of the critical factors that influence ERP
outcomes (Al-Mashari et al, 2003; Bingi, 1999, Nah and Lau, 2001; Volkoff, 1999;
Worthen, 2002; Zhang et al, 2003);
investigations of ERP in different cultural contexts (Gulla and Mollan, 1999; Sheu et al,
2003; Skok and Doringer; 2001).

JITCAR, Volume 8, Number 1, 2006 34


Business Transformation Through ERP
analyses of the changes and impacts on organizations as a result of implementing ERP
(Adam and Sammon, 2003; Scott and Vessey, 2002; Sumner, 2000; Wall and Seifert,
2003).

This study is in the tradition of the sixth stream of research and direction in that it investigates the
transformative potential of ERP systems. Earlier studies of ERP acknowledge its disruptive
nature and identified some of the changes/transformation that it might bring on the structure,
people, and technological infrastructure of organizations (Adam and Sammon, 2003; Wall and
Seifert, 2003). However, organizational transformation in the context of ERP is often assumed
rather than examined. In particular, there has been comparatively little ERP research reflecting
the experiences of companies in Asia in general and on the topic of transformation in particular.
Exceptions are studies such as Dasgupta (2004), Kanungo (2001) and Tarafdar and Roy (2003).
These authors focused on the second, third and fourth research streams identified above. Other
studies that fall into the sixth stream (see Reimers, 2003 and Martinsons, 2004), while
recognizing the potential of ERP as a harbinger for organizational transformation, they come
short of providing details of the organizational dimensions that have been transformed, the before
and after ERP situations and how the process has been managed.

Overall, previous literature yields little in the way of case studies of companies from Asia that
contributes to a wider understanding of ERP related organizational transformation. Against this
background, this research aims to investigate this topic through a case study of an Asian
company. Research questions addressed in this paper are: (1) what are important contextual
characteristics that influence transformation (2) what are organizational dynamics that are key
indicators that transformation is happening (3) what key lessons can be drawn in terms of
achieving and sustaining Information Technology (IT)-enabled organizational transformation.

The remaining part of the paper proceeds as follows. Section two reviews the literature on IT and
organizational transformation. The third section introduces the analytical framework used in the
paper which is followed by a description of the research setting and methodology. Results of the
study that depict the pre and post-ERP scenarios are presented in the fifth section. This is
followed by a discussion of the major findings of the study. The final section offers some
concluding remarks. We will refer to the case company by a pseudo-name "Almab".

IT AND ORGANIZATIONAL TRANSFORMATION


Seveial researchers investigated the interaction of IT with organizations. While earlier studies
work from the technological imperative perspective and consider IT as the main driving force of
organizational change and growth (Carter, 1984), contemporary research takes a situational and
contingency view of the interaction of IT with organizations (Orlikowski, 1992; Orlikowski,
1996). In her structurational model of technology, Orlikowski (1992) elaborated interpretive
flexibility -the constant interaction between the agents and contexts of technology development on
the one hand and that of use on the other hand. She argued that the nature of this interaction and
the interpretive scheme either built into the technology during design or appropriated during use
shape the role of technology in organizations.

JITCAR, Volume 8, Number 1, 2006 35


Business Transformation Through ERP
Orlikowski's notion of technology implies that a more complex approach is needed to study and
understand the implications of implementing enterprise-wide systems. ERP systems can be
conceptualized as socio-technical systems (Molla et al, 2005). ERP is not only a technological
artifact that bundles material and symbolic properties, but also one whose structural properties are
shaped by the human agents and institutional properties that develop, appropriate and use it
(Ibid). Organizations implementing ERP are not just buying a piece of software. Rather, they are
subscribing to a gamut of practices that touch almost all dimensions of an organization.
Therefore, an ERP implementation is a significant intervention in both the technical and social
dimensions of organizational life with a potential to transform business processes, IT architecture,
enterprise infrastructure and culture (Davenport, 2000). This is more so in Asian and other
companies in the developing region where implementing ERP is often motivated due to a desire
to "modernize" an organization instead of just to replace legacy systems (Reimers, 2003).

Evidence form the wider IT literature suggests that effective utilization of IT can be associated
with changes in the jobs, skills, and control processes (Zuboff, 1988) in the behavior, values and
norms (Davenport, 1998) and in the organization structure and role of managers ( Srinivasan and
Jayaraman, 1999). Likewise, ERP can help organizations to reset their values in terms of
discipline, change and processes (Sumner, 2000), reconfigure their internal and external
boundaries (Adam and Sammon, 2003; Wall and Seifert, 2003) and bring changes in mangers'
and employees' skills base, capabilities and working practices (Seethamraju, 2005). With ERP,
companies often change their technical systems, business processes and users' competencies and
develop new ways of doing business both internally and across the supply chain (Jaiswal and
Kaushik, 2005; Scott and Vessey, 2002 ). In the parlance of Dillard et a1 (2005), the "power and
inclusiveness" of ERP force mangers to shape their organization in the "image of the ERP". This
implies that several dimensions of an organization can be potentially transformed during a large
scale ERP project. However, the scope of this transformation might depend on management's
decision about the scope of the ERP project, that is, the number of business processes, units and
functional areas to be covered by an ERP project (Davenport, 2000).

Previous studies of ERP in Asian businesses noted some contextual characteristics that make its
implementation challenging and that influence its outcome. ERP represents solutions that are
based on what are seen to be Western business best practices and most organizations change their
business processes to fit ERP (Lamonica, 1998). Soh et a1 (2000) surveyed "misfits" observed in
ERP implementations and found that these tend to be higher in Asian companies because of
differences from European and US businesses. Most Asian businesses lack organizational
preparedness for ERP (Kanungo, 2001). As a result, they needed to make a "quantum jump" to
operate in an ERP configured organizational environment (Sharma (1999) IN Tarafdar and Roy,
2003). Often, managers and employees resist implementation projects both for fear of
displacement of existing practices and for genuine lack of adequate skill to operate in the new
environment (Tarafdar and Roy, 2003 and Reimers, 2003). Further, the informality of business
practices in some companies clash with the formality requirement of ERP (Martinsons, 2004).
Overall, from the literature of ERP in developing countries, we can learn that when ERP is
implemented in the context of very few preexisting operational, control and managerial
information systems and very limited business IT experience overall, it represents a major change
initiative (Tarafdar and Roy, 2003). This implies that as a result of implementing ERP, businesses
JITCAR, Volume 8, Number 1,2006 36
Business Transformation Through ERP
will be required to change their routines, processes, skill base and decision making and
communication styles. The host organization will be configured using the ERP solution and can
be transformed into a "modern business". The study of ERP in this context is therefore a study of
change and transformation. To understand the important aspects of an organization that
potentially may be transformed during ERP implementation, a comprehensive framework that
enables to encapsulate both the social and technical dimensions of an organization is needed. The
Seven S fkamework (Galliers and Sutherland, 1994; Pascale and Athos, 1981) provides a useful
analytical tool to succinctly capture these aspects. The following section provides a brief
overview of this framework.

THE SEVEN "S" FRAMEWORK


The role of IT in organizational transformation can be captured in terms of its influence on key
organizational dimensions. Pascale and Athos (1981) outlined these organizational dimensions as
Seven "S"s - strategy, structure, systems, st@ skill, style, and shared values. The Seven S
framework stresses that organizational effectiveness depends on the interaction between all the Ss
of an organization. These elements are interconnected and must be coordinated properly to avoid
conflicts and bottlenecks. The framework can be used to analyze either an entire organization
(Pascale and Athos, 1981) or one functional unit (Galliers and Sutherland, 1994). However it is
worth noting that transformation in these dimensions might not take place uniformly throughout
an organization. Rather, different parts of an organization may show different patterns of change
(Galliers and Sutherland, 1994). We now describe each of the "Ss".

Strategy: Strategy refers to the mechanisms by which a business allocates its resources to operate
in its environment, propose value to customers and ensure its survival and profitability (Pascale
and Athos, 1981). Generic strategies include differentiation, cost leadership and growth (Porter,
1985). In any one of these strategic contexts, IT might play either a supportive or a strategic
partner role (Galliers and Sutherland 1994). To evaluate to what extent the strategic dimension of
an organization has been influenced in the course of ERP, it is instrumental to assess if an
organization has modified or improved its strategy to develop a strategy that makes the best
utilization of the power and information generated by the system. Further, one needs to assess if
there is a shift in the perceived role of IT within the business.

Structure: This defines allocation of responsibilities and authority relationships in an


organization that is the skeleton of the organization (Pascale and Athos, 1981). It highlights
where and who makes important organizational decisions, the number and role of organizational
units and the nature of communication among them. While some organizations concentrate
decision making at the top level and create a hierarchical structure, others opt for a more
decentralized approach with as a few middle level managers as possible (Pascale and Athos,
1981). Likewise, organizations might follow different ways of structuring their IT function -
from subordinating it to one of the functional departments (oftentimes to finance) to treating it as
one of the major functions directly reporting to top management.

System. This refers to key processes that support the business, covering reward, control,
information, work flow and feedback mechanisms. Systems populate the structure and influence
how an organization makes decisions, relates to customers, shares information and rewards its
JITCAR, Volume 8, Number 1, 2006 37
Business Transformation Through ERP
employees (Pascale and Athos, 1981). The transformation of these systems can be seen in terms
of their level of formal development, degree of automation, extent of interconnectedness,
integration, external orientation and contribution to value add (Galliers and Sutherland 1994).

Stafi The demographic profile of the people working for an organization makes this dimension.
Crucial in this category is the quality of those staff critical to the success of the business (Pascale
and Athos, 1981). The emphasis an organization places on staff development and the way it
empowers its employees also reflect the staffing practice (Ibid). In terms of IT, while some
organizations predominantly employ IT staff with strong technical skill (such as programming),
others look for hybrids (with a strong mix of IT and business skills) that can be involved in
strategic decision making (Galliers and Sutherland 1994). Due to the pervasiveness of IT, most
organizations also expect basic IT literacy for most positions. Transformation in this dimension
can be evaluated by observing the labor force either in the entire organization or in some of its
functional areas.

Skill: Skill refers to the core competence and capabilities of an organization (Pascale and Athos,
1981). Pascale and Athos (1981) considered the skill of an organization as a by-product of the
interaction and operation of all the other dimensions. This implies that transformation in the other
dimensions of the organization can lead to skill transformation. On the other hand, Galliers and
Sutherland (1994) indicated that organizational IT skill might be transformed from one which
individual technical expertise dominate, through an IT'S understanding of the business needs and
works and vice versa to a situation where there is an adequate understanding of IT and its
potential at a very senior level.

Style. Mangers differ in terms of their treatment of information, conflict resolution, problem
solving, communication and motivation of staff. Style reflects the manner and approach of key
managers and leaders of an organization in dealing with these management issues (Pascale and
Athos, 1981). Styles are strongly related to the staffing, structure and shared values of an
organization (Ibid). Transformation in this dimension can for example be seen if there is a change
in managerial approach towards the use of information produced through formal systems (in our
case ERP), in terms of the role and value of IT in the organization (Galliers and Sutherland 1994).
Equally important are, IT managers' understanding of the impact of the IT shop on the business
and customers and their approach in relating to business managers.

Shared values. Organizations impose different values and beliefs (also commonly known as
culture) on their members. Often, this defines both expected and accepted behavior modes,
working relationships and communication patterns. Transformation here can be gauged if
following ERP implementation, employees' perceptions about their activities, the activity of
others and their relationship to the object of their work and the organization as a whole has been
modified or changed.

The above discussion captures the most important aspects of an organization that might be
affected because of implementing ERP. These dimensions are very interrelated and often it might
be difficult to freeze just one dimension without seeing its relationship to other dimensions. Next,
we will investigate to what extent transformation along these seven dimensions happened in the
JITCAR Volume 8, Number I , 2006 38
Business Transformation Through ERP
case organization. However, it should be noted that the scope of this transformation may not be
uniform and visible across all the units of the organization and across all the seven dimensions
(Davenport, 2000; Galliers and Sutherland 1994).

RESEARCH SETTING AND METHODOLOGY

The Site
Almab is a leading newspaper company that operates in one of the Asian countries. It has it's
headquarter in the Capital and 52 offices in more than eleven major cities. The company
publishes more than 67 publications nationwide and has the highest number of readers among the
English publications in the country. It is the number one national daily in the capital and the third
highest read publication nationwide.

The industry within which Almab operates is characterized by some growth (annual growth rate
of 6%) and high rivalry (on the basis of reputation, circulation, and readership) both from within
and from alternative media. Historically, government legislation imposed on the print industry
had protected the market from international players. But following the liberalization of the
industry in 2002 to limited foreign direct investment, a number of international media giants have
entered the market by forming strategic partnership with local companies. This has intensified the
competition as smaller players are accessing international capital to enter the market. Over 80%
of Almab's revenue is generated from advertising. Customers have enormous alternatives to
advertise not only in the print but also in the electronic media. Because of ease of switching to
rivals, efficient handling of the advertising process-from booking to billing- has a major impact
on business bottom line.

Almab publishes approximately fifteen to twenty thousand classifieds advertisements on weekly


basis. Its survival and competitive advantage depend on its ability to offer clients with as many
packages as possible, with least cost, maximum visibility, and increased flexibility. Moreover,
because of Almab's physical scale of operation, it depends on a number of advertising agencies to
solicit and retain customers. This requires effective coordination of the activities of the agencies
and management of their contracts, invoices, premiums and relationships. However, back in
1999, the company had serious problems that motivated the implementation of ERP. Following
the implementation, Almab has not only solved its problems and streamlined its business
processes but has managed to double its turnover to US $400million within three years. This is a
significant gain in an industry where total annual advertising revenue was estimated above
US$800 million. As a result, Almab's senior mangers now believe that the system has provided
them with significant competitive gains in terms of "speed, efficiency and turnaround time".

Data Collection and Analysis


The data were collected using retrospective participant observation, unstructured interview and
document analysis (Creswell, 2003; Yin, 1994). One of the authors of this paper had worked for
Almab and was involved in the ERP project as an officer in the classified and data processing
departments. The observer, based on his experience of working in Almab, various meetings,
seminars and briefings attended and from countless informal encounters with members of the
company over a three-year period produced a retrospective account of the pre and post ERP
JITCAR, Volume 8, Number 1, 2006 39
Business Transformation Through ERP
scenario. In order to control for possible observation and retrospective bias, we followed Golden
(1992) recommendation and the other author reviewed and questioned the observation data. This
process, in itself, provided an in-depth insight into the firm and its process of ERP
implementation but, as per norms of triangulation, this was supplemented by interview and
document analysis (Yin, 1994).

A total of five interviews were conducted with the Executive Director, Brand Director, Head of
the Department of the Classified Marketing, Head of Operations and Customer Care and ERP
project leader and Head of the IT. Materials reviewed included project documentation and
briefings (which showed the nature of the project, the kinds of resources, detailed information on
the composition of the project team and change management issues) samples of the ERP
managerial reports (which allowed evaluation and comparison of pre and post ERP information
flow) and Intranet documents (which allowed the examination of help and trainings given to end
users).

Data were analyzed using qualitative techniques informed by the Seven Ss framework. Interview
transcripts, documents and observation notes were read to produce a pre and post ERP description
for each of the seven S dimensions. These were re-examined to identi@ key dimensions that were
transformed in the course of implementing ERP. After data analysis, a draft case report was
produced and shared with the heads of the department of classified marketing and electronic data
processing. They offered helpful comments and verified the analysis and interpretation.

RESULTS
ERP Project Background
Back in 1999, Almab was facing many challenges related to "slow customer response times,
inefficient billing systems and inefficient decentralized business and production processes". At
the time, each department (booking, accounts, planning and pagination and publishing) worked in
isolation and the information resource of the company was fragmented among the many branch
specific servers. Considerable time was spent on coordination and transfer of data from one sub
office to the main branch and between branches. As a result, customer response time was slow,
invoices were inaccurate and delayed and there was an overall problem of managing a
decentralized production and distribution process.

In its strive to provide maximum value to customers, stay profitable and gain strategic flexibility
needed to maintain its competitive position in the industry, Almab decided to look for solutions
that resolve its problems and that meet its core criteria of "integration, speed and scalability". In
addition, Almab's environmental scanning exercise had predicted a change in the regulatory
regime that protected the industry from foreign competition. Management was convinced that
Almab needed "to clear its house and develop its competitive capability" before the liberalization
of the industry, which eventually happened in 2002. Because of advertising's impact on business
bottom line, Almab was particularly looking for a solution that improves its handling of
advertising, that combines "booking, billing, data warehousing and human resources" and that
can be easily integrated with its ppi Media production system. After searching the market by
employing the service of a sourcing consultant, the company selected SAP AG and reached a
JITCAR, Volume 8, Number 1, 2006 40
Business Transformation Through ERP
memorandum of understanding about expectations from the system, resource commitment and
delivery plans.

Championed by the top management, the implementation project began in the first quarter of
2000. The main departments to be integrated via the implementation of ERP were the Classifieds,
Display, Finance, Production and Print departments. A total of 120 senior managers from all parts
of Almab were briefed about the business change that was to take place. An implementation team
comprised of senior managers, heads of various departments was formed. Users fiom various
departments were brought to the head ofice to test the system and participate in the training of
trainers. The system went live on time after 14 months in the 2"dquarter of 2001. In the following
two subsections, the pre and post-ERP profile of Almab using the Seven S framework will be
constructed.

Almab: Pre-ERP

Strategy: Almab's strategy has been to develop and maintain the market leadership, attract new
customers and innovate. The strategy was mainly leveraged fiom Almab's historical advantage as
one of the early operators of the industry with large distribution network. However, Almab was
facing serious challenges to operate in the industry whose rule of competition is significantly
changing because of technological advancements. To achieve its goals, the company needed to
have flexibility to maneuver its marketing and production strategy. This was, however,
significantly constrained due to inefficient processes and systems. Because of lack of integration
among its marketing and production systems, Almab was failing to deliver high value to
customers. IT was mainly supporting, albeit with many problems, the operational aspects of the
organization and many of the legacy systems developed did not meet the competitive needs of the
organization.

Structure: The structure was characterized by a top down approach and was highly hierarchical,
mirroring the nations' culture of high power distance. It generally took a long time to make and
implement decisions. Even minor changes required the approval of either the headquarter or
branch top management. In terms of the place of IT in the organization structure, the IT shop was
marginalized and not involved or consulted before strategic decisions were made. The IT
management function however was decentralized and each center was responsible for its IT needs
and management, leading to a number of localized and incompatible in-house developed systems.

System: Here we focus on the booking, production, billing and IT systems. Prior to the
implementation of ERP, each branch office in Almab had its own policies with respect to
deadlines as well as printing schedules. The workflow didn't allow digital submission of
advertisements and rather each advertisement had to be sent to the publishing branch where it was
manually scanned and placed on the pages. For an advertisement to appear on a particular date,
bookings had to be stopped many days in advance. Advertisements booked by sub-offices used to
face continuous delay to reach the main office for publication and it was impossible to commit to
customers an exact publication date. This used to affect the production process and the
calculation of spaces for editorial and advertising. Because of lack of automation and integration
of workflows among invoice, display (pre-press) and production processes, the billing process
JITCAR, Volume 8, Number 1, 2006 41
Business Transformation Through ERP
requires "manually verifLing every advertisement that had been published and updating the
invoicing system in term of the size, page position and days it got published". This created a
Seven to Ten days delay in the billing process.
In terms of IT, each branch had its own centralized mainframe server at the main ofice and a
different server at each of the sub offices in the same city. Data transfer and update between
branches involved first uploading the data from sub ofice servers into branch servers and then
transferring it to central server. Considerable time was spent on coordination and transfer of data
between branches. Figure 1, demonstrates the processes involved in transferring data between two
branches. It is easy to contemplate the effort required to transfer data among eleven branches and
numerous sub-offices. Because of the fragmentation of data, it was difficult to generate aggregate
reports required by the top management.
Figure 1. Pre-ERP Data Transfer Between Almab's Branches

Branch 1

Sub Office I

transferred to
Branch I server

tralized server
Branch
Server

Sub Office I Sub Office I1 Sub Office n

JITCAR, Volume 8, Number 1, 2006 42


Business Transformation Through ERP
Staff: Actual data about the staff profile of Almab was not accessible. However, most staff in
their respective functions posses a media, publishing, management, engineering and computing
qualifications. When we turn to the IT area, because Almab used to develop its own systems in-
house, it had a large pool of technical staff with a majority of them well versed with database
management and UNIX platforms. Since most of the programming had been done in-house, the
IT department had strong technical orientation.

Skill: Almab's ultimate goal is to generate revenue through sale of advertisements and this
requires good coordination between all the relevant departments. Because over 80% of Almab's
revenue is generated form advertising, the skill required to handle advertising from booking to
publication is critical. As indicted in the other S dimensions, pre-ERP Almab was facing serious
challenges in all stages of this critical process. In terms of IT skills, mainframes were functioning
on the UNIX platforms and end users faced difficulties to understand interface screens and
needed extensive training on the most basic aspects. However, the IT units possessed adequate
skills that were required to manage and maintain the in-house developed applications.

Style: The senior management approached IT merely as a support function. Because of poor
quality of information in terms of its completeness, accuracy, relevancy and timeliness, its value
in managerial decisions and actions were limited. In terms of IT, most systems had been
developed, installed, and controlled in-house. Although there is a consensus that most of these
systems did not meet the requirements of end users, they nonetheless operated in major business
areas. The IT units were too focused on the operational aspects of their systems. Both Almab's
structure and values didn't allow them to offer suggestions and directions for strategic change.

Shared values: Each department worked in isolation and as a result the employees of one
department did not understand the functionalities of the other. Consequently most work was
dependant on informal relationships and some work orders used to be favored and given priority
on a "man-knows-man" basis. There was also a lack of communication and coordination between
departments which has led to unhealthy inter-departmental relationships. Employees had become
too used to their work and were not willing to take the extra step to be innovative. Repetitive
mistakes were common. The relationship between the IT department and other departments were
mostly unhealthy. When systems fail, reasons for failure were generally kept within the IT
department and few details were let out to senior or operational management.

Almab: Post ERP


The implementation of ERP offered Almab an opportunity not only to diagnose its strengths and
weaknesses but also to clearly communicate its re-assessed objectives and future directions. It
affected back office, financial, editorial, advertising and press operations. However, because of
the focus of the ERP project, major transformation happened in advertising handling and as a
result a significant proportion of the analysis here is going to focus on that.

Strategy: The strategic orientation of Almab to be the market leader and innovative remains
unchanged. However, post-ERP Almab developed a better capacity for change and innovation.
The implementation of ERP and its transformation of the system dimension enabled Almab to
develop strategic and organizational flexibility in terms of constant innovation by reducing the
JITCAR, Volume 8, Number 1, 2006 43
Business Transformation Through ERP
time between the generation and implementation of new ideas. For instance, within two years of
going live, Almab changed the width of its newspaper, the unit of measurement for advertisement
space and its marketing configuration. The ERP system was a great enabler for these marketing
and production strategies. Under the new arrangement and pricing strategy, advertisers submit
materials that are prepared for any other publication irrespective of size and be invoiced for the
actual area, that is, "the actual real estate on newspaper that they bought". This was a clear value-
add and differentiated Almab from its competitors in the market.

In addition, ERP gave Almab the potential to constantly innovate and create differentiated
packages and better services to customers that was not reachable in the past. According to the
company records, because of its value add services, Almab was able to increase its pricing
strategy by an approximate sixteen percent. Even if its chief rival is charging slightly lower price
and other competitors in the industry are charging 70% lower price, clients were willing to pay
the additional premium price. This is because Almab has been enabled to exploit its brand
reputation more effectively, offer more packages, meet client requirements and increase the
quality of advertisements. Further, with the implementation of ERP, managers gained immediate
access to certain reports that were required to respond to customers' demands quickly. Overall,
with the implementation of the new system, the organization was able to seek opportunities for
the true strategic use of IT to gain a competitive advantage in terms of "speed, efficiency and
turnaround times". IT has been elevated to a state of a great strategic enabler to maintain Almab's
competitive position.

Structure: The implementation of ERP in Almab has reconfigured departmental boundaries and
work processes. The new system provided the organization with the "cross-functionality,
discipline and consistency". Almab's intention was to build a centralized yet horizontal structure
facilitating cross functionality. From the information available to us, we are not able to claim if
the pre-ERP hierarchical structure has been transformed at the time of this study. However, the
automated workflow significantly improved intra-organizational communication among booking,
finance and production departments. IT'S structure has been elevated in terms of its involvement
in major strategic decisions. Its management is centralized at the headquarter level and the
company has adopted portfolio management to prioritize projects and balanced scorecard to
monitor overall performance.

System: Major transformation in Almab happened in the system dimension. ERP allowed Almab
to automate the booking and billing process and integrate it with its ppi-Media production system.
In terms of booking and distribution, all centers (branches and sub offices) are now able to accept
and book advertisements in digitized format, which are then stored in the central server with
unique booking number. Because of integration with the production process, availability of space
desired by the advertiser is verified and confirmed automatically. Once an advertisement material
is available in the digital form and associated with a corresponding order number, the system
transmits the same to the relevant center for publication and get on with preparing invoice for the
customer automatically. Customers can make change almost up until publication time. Invoices
are issued within 12 hours of publication. Post-ERP, Almab is able to identi@ and schedule
urgent materials for immediate transmission and low priority materials for off peak hours.
Published advertisements are kept for a period of four months and advertisers do not have to
JITCAR, Volume 8, Number 1, 2006 44
Business Transformation Through ERP
submit fresh material if they want to run the same material again. In addition, advertisements can
be moved between pages and the latest editorial incorporated in much less time.

In terms of IT, the company moved from the mainframe based computing architecture to client-
server technology. IT was centralized at the head office with backup servers in one of the regional
branches. Data transfer and sharing has been enhanced significantly (see figure 2). This has
created easy coordination and organizational flexibility at the level that could never have been
achieved prior to the implementation of the new system. The implementation of ERP in Almab
offered one way of performing a task throughout the nation, one way of booking advertisements,
and creating linkages and coordination between departments (see Figure 2). Operationally, it
becomes possible to plan pages automatically, calculate space accurately and generate reports
timely. Clients are offered more options and external agencies that were responsible for bringing
in business were linked via the new system. This offered increased flexibility, meeting of
deadlines and tracking of advertisements.

StaB The implementation of ERP resulted in staff reductions. Actual numbers are classified
information, but one of the senior managers indicated that "along with the competitive advantage
have come other benefits in terms of efficiency, reductions in staff and better customer service".
Obviously, other groups and especially those affected by the reductions do not consider this as
good transformation. However, Almab placed greater emphasis in training staff involved in
handling advertising in the styles of the new system. This required redefinition of some jobs,
especially in the print production and distribution from purely physical tasks to incorporate the
information dimension required by the ERP. This has a mixed reaction. While some staff were
happy to adapt to the new task arrangement, others resented the additional "complexity the
system created to perform the job". Likewise, in the IT shop, there was greater emphasis in
upskilling IT staff through training and participation in the implementation of the system. One
major change in the IT area is that Almab's IT staff skill requirement has shifted from "those that
are smart at cracking source codes, to those that provide effective support to the core business".

Skill: Almab developed a competency and capability to introduce major changes and innovations
in its handling of booking, page planning, advertisement unit measurement, paper width and
pricing policy. The system transformation ERP enabled has empowered booking executives to
make up-selling proposals and offer clients various options at the time of booking advertisements.
Managers gained immediate access to reports that were required to respond to customers' needs.
Almab has used the system to build complex relationships with clients and advertising agents.
The process of codification and documentation assisted the introduction of one way of
performing tasks and significantly reduced errors and mistakes. There is now a consensus
amongst the senior managers that the ability to pre-empt the market and understand the needs of
the customer significantly contributed to the competitiveness of the organization. In terms of IT,
the skill base has shifted from managing and maintaining in-house developed systems to
providing support to the ERP system, to managing relationship with the ERP vendor and
consultants. Very knowledgeable IT personnel were the mandate for the successful
implementation of the system. But the entrepreneurial, marketing and other operational skills
drove innovation afterwards.

JITCAR, Volume 8, Number I , 2006 45


Business Transformation Through ERP
Figure 2:Post-ERPworkflow in Almab
.....................
The advertiser can now get the advertisement
booked at the external agency :
I
Suppliers and Agencies
1
k
I - - - -- ----- - - , 1

1------I
Via the Extranet

The External Agencies can directly book


advert-t flow into the centralized
Server

server wherein they can be extracted by


the production department.

Centralid Server at
the Head Office

The MIS Department can


Pages can quite easily be
retrieved from the centralized
server for printing purposes -
Business Transformation Through ERP

Style: The successful implementation of product and marketing configuration innovations has
renewed the trust and value of IT among senior managers. As one of the mangers reported, "IT
has graduated from one source of our problems to a tremendous enabler of our solutions". The
informal working relationships and prioritization of bookings were effectively replaced by
automated and transparent formal systems that improved advertisement tracking. Senior
management viewed IT as a major strategic tool to make possible the innovations, promotions
and the strategic flexibility that was required to compete in the industry. Likewise, IT was able to
improve its level of service and support to business. As the manger stated, "this system has given
us a tremendous amount of flexibility to support change in production and marketing strategy as
management team sees the need -almost at will". As a result of better alignment between IT and
business and renewed trust, senior management is now committed to invest in "CRM solution
that support multiple communication channels with clients and agencies on a 2417 basis".

Shared values: The implementation of the new system has brought together a number of
departments on local as well as national basis. The implementation'generated an open culture
within the organization with improved coordination between departments, thereby increasing
organizational flexibility. Prior to implementing ERP, Almab was characterized closed culture.
To mitigate the undesirable effects of this, Almab trained its people and put in place mechanisms
that encourage free flow of information and open communication. This effort of cultivating the
culture of information sharing has even helped to navigate the cultural differences between the
white and the blue-collar employees. Since the system was developed in collaboration with
operational staff, management and the IT people, everyone became willing to identify and act on
opportunities for strategic advantage. "Flexibility, speed and innovations' define the reassessed
common values.

Overall, table 1 provides a summary of the pre and post-ERP Seven S snapshots of Almab.

DISCUSSION
Our analysis indicates that the dimensions of Almab (strategy, structure, system, sta# skill, style,
and shared values) and its equilibrium changed materially following the implementation of ERP.
The transformations were major in advertising handling because advertising contributes more
than 80% of Almab's revenue and has therefore been the main focus for the ERP implementation.
Overall, the transformation has been a positive experience as it has contributed to doubling
Almab's turnover within three years and makes it a flexible, efficient and innovative modem
business. Within the bounds of the methodological limitations of the study, a few theoretical and
practical implications can now be outlined.

JITCAR, Volume 8, Number 3


Business Transformation Through ERP '

Table 1 Pre and Post-ERP Comparison of Almab

Dimension Almab: Pre-ERP Almab: Post-ERP

Strategy Develop and maintain market No major shift in strategic orientation.


leadership. Strategy was leveraged Strategy leveraged from IT that
from historical advantage of early entry allowed greater emphasis on flexibility,
into the industry and wider readership. innovation and turnaround time.

Marginalized IT shop but with IT has moved from support to strategic


decentralized IT management. Role role giving Almab the capability to
limited to operational support facing a change and modify its value
lot of obstacles. proposition.
Structure Hierarchical and bureaucratic A trend towards more democratic and
organizational structure. Decision less hierarchical approach
making concentrated at the top level.

Decentralized IT. The IT management Developed an IT governance regime


hnction was also decentralized. that centralized control but distributed
applications.
Systems Semi-automated workflow systems. Fully automated and highly integrated
Non-integrated legacy and in-house booking, production and invoicing
developed information systems workflow and information systems.

Mainframe based technology Client-server technology


Staff Reasonable number of professional Reduction of some staff and upskilling
staff of others

Technically oriented IT staff Business support IT staff


Skills Problems of competency to handle Well developed competency and
advertising effectively. Poor IT capability to handle advertising, and to
support. innovate and change. Improved IT
service level.
Style Informal relationship, limited use of IT Effective use of IT and information to
and information in decision making. support marketing and production
innovations.

Constrained IT-business relationship. Improved IT-business relationship


based on trust.
Shared values Functional fragmentation and localized Flexibility, speed and innovation.
efficiency.
Open communication and culture
Secretive IT

JITCAR, Volume 8, Number 3 48


I Theoretical Implications
Business Transformation Through ERP

In terms of theoretical contribution, we have demonstrated the utility of the Seven S framework in
analyzing and understanding potential transformations in key organizational dimensions
following large scale enterprise systems implementation. Although previous research has
recognized organizational transformation related to ERP, we have expanded this work by using a
comprehensive fiamework that enables to encapsulate both the social and technical dimensions of
1 an organization. In an overall sense, the use of the Seven S framework has proven workable and
useful in analyzing business transformation during large scale ERP implementation. However,
the "Ss" considered here should be seen more as key dimensions rather than as an exhaustive list
of all possible factors.

The findings in some ways confirm previous studies findings of the outcome and impact of
implementing ERP on an organization. In particular, it reinforces the notion of business
modernization that ERP can make possible to organizations in developing countries. In other
ways, though, this case does not quite match earlier work. Previous writings have reported ERP
failure in developing countries because of a number of mismatches between the assumptions
embedded in the design of the system and the reality of host organizations in developing
countries. Here, though, the organization was successful in adapting itself and managing the
changes needed to benefit from ERP. In fact ERP served as a platform to successfully introduce
other production and marketing changes. This could relate to the clarity and articulation of
expectations from the system; to the rigorous pre-selection process; and to the change
management and project governance practices.

Another finding here that is slightly different fiom previous research is the emphasis placed on
the impact of the "developing countries context" on ERP outcomes. The fact that Almab is
operating in a developing country didn't seem to play a significant role in influencing its
transformation. Where decisions were influenced by context, this came mainly in the very
immediate shape of the organizational environment. While not reflected in the majority of earlier
work on ERP in developing countries, this is resonant with the reality of developing countries
where a microcosm of developed and developing environments often operates. Our research
therefore helps to move beyond a gross categorization of developing countries to illustrate how
and when particular contextual factors may or may not impact ERP related organizational
transformation.

Another contribution is related to the value of using organizational transformation in evaluating


ERP outcomes. Further work will, of course, be needed to draw out more consistent patterns and
interaction among the different dimensions that this single case study cannot yet identifl.

Practical Implications
This case study represents a successful ERP outcome. This can be related to Almab's practical
approach in implementing ERP. We can outline six practical lessons that can be useful to other
organizations (especially those in developing countries) in transforming themselves during a large
scale enterprise application.

JITCAR, Volume 8, Number 3 49


Business Transformation Through ERP
First is mustering the momentum for transformation. The top management of Almab had a very
clear vision as to what exactly was expected from the ERP system and as a result was able to
clearly communicate the vision to the senior managers, who in turn were responsible for their
respective departments. Management ensured that the entire organization understood and agreed
to the vision possessed by the senior management and how the technology would be able to
transform the organization as a whole. The commitment of the board of directors ensured the
ready availability of the resources required to develop the system. The management as well as the
employees understood the overall importance of perseverant commitment required for the
successful completion of the project. Because of clear vision and extensive and open
communication, the system was developed within time, within the budget and to the requirements
of the business.

Eflective managerial coordination is a second lesson that emerged out of Almab's experience.
The objective of the system was to bring together numerous departments and hence managers
from various departments on geographical basis coordinated with each other for the development
of the system. Because of the positions held by these managers and their empowerment to make
important decisions related to their respective departments, the system was customized to meet
the specification of business requirements. Constant collaboration and working under one roof at
the time of implementing the system improved the understanding of the managers with respect to
the goals of the organization as a whole. It also gave the opportunity to understand the various
issues and challenges faced by the organization as a whole on National basis rather than being
branch centric. Managerial coordination also gave rise to the element of trust, which induced a
more open exchange of ideas and fostered the creativity that was necessary to produce subsequent
marketing and production strategies. There was an organizational wide recognition that for the
organization to utilize the ERP systems effectively, they need to develop both the technical as
well as the managerial capabilities.

The third key lesson that emerges out of Almab's experience is the importance of investing in
human resources development. Because of the extensive process of implementing ERP within the
organization, each and every manager and employee understood the role of the systems within the
organization. In order to sustain the human elements that were critical to the development and
future use of the system, the project team fostered a team spirit amongst the workers on the
project. Almab also spent a lot of time and money on training employees on the system.
Whenever there was an upgrade, the employees were trained and educated about the
functionalities that were made available. To increase retention and reduce turnover, Almab
further introduced a reward strategy in terms of higher pay packages and career development
paths. Overall, the interest that was generated through active participation, reward schemes, open
communication and culture enabled Almab to reduce potential uncertainty that might have been
created because of new jobs and responsibilities.

Fourth, the development of ERP systems requires building mutual relationship within and with
partner organizations and understanding of the organizational processes., Almab developed an
excellent understanding and mutual partnership among the members of the project team and SAP
AGYsemployees. As the implementation team was composed of at least one member from each
department, effort was exerted to open up each and every function of the organization to SAP'S
JITCAR, Volume 8, Number 3 50
Business Transformation Through ERP
employees. Employees of SAP were encouraged to suggest certain ideas at the time of
customizing the ERP solution that were technically as well as organizationally feasible. Overall,
the development of the system was based on the combined tacit knowledge prevalent within the
organization and its partner.

The fifth lesson from Almab's experience is related to its assimilation of ERP with its routines.
Evidence from the literature suggests that many IT-enabled organizational transformations fail (or
delayed) to realize their potential benefit because of limited effort in institutionalizing the change
after the initial period. However, Almab demonstrated a commitment to constantly innovate and
introduce new production, marketing and pricing strategies that were leveraged from its ERP.
Hence, ERP systems played an important role in the development of the complexity of the
organizational processes and routines.

Last but not least is the emphasis placed on organizational learning. The management of Almab
made sure that it did not go live or abandon the legacy systems unless the whole chain had a
complete understanding of the system. Organizations learn only as fast as the slowest link learns.
Almab appeared to acknowledge this notion and concentrated on the learning of the organization
as a whole, that is all the centers and all sub offices rather than just a few of them. The adoption
of the pilot-parallel implementation strategy greatly facilitated this. The process of organizational
learning not only assisted Almab to implement one system but the process had a dual effect of
getting into a habit of coordinative learning and hence shared knowledge across the organization.

CONCLUSION
Several studies have suggested that it is difficult to put a dollar value on the benefits that can be
derived from ERP. In this paper rather than direct economic value, we focused on how ERP
enabled the transformation of the case organization. The results suggest that the organizational
equilibrium has shifted to a new state. The transformation is greatly enabled by ERP but its cause
might not necessarily be attributed to ERP only. The work practices and innovations ERP
allowed, the acceptance and assimilation of those work practices by Almab staff and management
coupled with the desire to gain competitive advantage have all contributed to the transformation
of Almab.

Inevitably, the evidence base from one company is limited but it may give pause for thought
about some of the assumption of misfits between organizations in developing countries and
complex ERP applications. To the contrary, it supports - though by no means proves - a possible
modernization of an organization as a result of implementing ERP. However, the research has
been constrained by data access limitations. We also note that a longitudinal approach of
observing an organization over an extended period of time would be most useful to develop a
better understanding of organizational transformation "enacted slowly, smoothly and subtly". The
Seven S dimensions provide an effective utility to conduct such observations.

JITCAR, Volume 8, Number 3


Business Transformation Through ERP

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Alemayehu Molla [alemayehu.molla@rmit.edu.au] is a lecturer in Information Systems at the


School of Business Information Technology, RMIT University, Australia. He has a PhD and MSc
in information systems, BA in business management, and a Diploma in computer science. Dr.
Molla's research interests include B2B e-business, information systems outsourcing and success,
ERP and culture, diffusion, use and impact of the Internet, and Information and Communications
Technologies and socio-economic development. His research has been published in The
International Journal of Electronic Commerce, Information & Management, Electronic
Commerce Research, Journal of Internet Banking and Commerce, Journal of Information
Technology Management, Information Technologies and International Development, Journal of
ITfor Development and in book chapters and a number of conference proceedings

Arjun Bhalla [arjbhalla@,,gmail.com]has an MSc in Management and Information Systems from


the University of Manchester, United Kingdom. He also holds a Bachelors Degree in Commerce
and a diploma in computer science. Mr. Bhalla's research interests include strategic management,
operations management, strategic impact of information systems, and the strategic role of ERP
systems. Mr. Bhalla's professional career has been in the media industry in Asia. Currently he is
working with one of the larger media giants of the world. His current role in the capacity of a
business analyst involves analyzing the business requirements, linking them to technology and
strategic information management.

JITCAR, Volume 8, Number 3

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