Spon Press

Construction Management and Economics (July 2003) 21, 511-521 l.iylraMrsririiC.itKip

Enterprise Resource Planning in a large construction

firm: implementation analysis
HANS VOORDIJK'*, ARJEN VAN LEUVEN^ and ALBERTUS LAAN^
'Twente University, Technology and Management, P.O. Box 217, 7500 AE Enschede, The Netherlands
'Balance & Result, P. O. Box 2382, 7500 CJ Enschede, The Netherlands

Received 10 June 2002; accepted 22 January 2003

In most large Dutch construction firms, Enterprise Resource Planning (ERP) systems have replaced non-
integrated information systems with integrated and maintainable software. The implementation of ERP
systems in such firms is a difficult task. So far, ERP implementations have yielded more failures than
successes. This study tries to understand the factors that lead to the success or failure of ERP in large
construction firms by focusing on the fits between the following pairs of elements in ERP implementations:
business and IT strategy, maturity of the IT infrastructure and the strategic role of IT, and the implementation
method and organizational change. The premise of this study is that for an ERP implementation to be
successful these elements must somehow fit together. Empirical research was conducted through a case
study of three ERP implementations in different business units of a Dutch-based construction firm.
Implementing different systems within one company is typical of the way large construction firms in the
Netherlands have dealt with ERP. The study shows that the success of ERP implementations depends on
consistent patterns between: IT strategy and business strategy, IT maturity and the strategic role of IT,
and the implementation method and organizational change.

Keywords: Enterprise Resource Planning, construction, information technology

Introduction information between all the processes in an organization.

ERP systems can also be an instrument for transforming
In recent years, most of the large construction firms in functional organizations into process-oriented ones. When
the Netherlands (firms having more than 1000 employees) properly integrated, ERP supports process-oriented
have implemented an Enterprise Resource Planning businesses effectively (Al-Mashari and Zairi, 2000).
(ERP) system (Dolmans and Lourens, 2001; Depart- Recently, several practitioners have stated that ERP
ment of Economic Affairs, 2002 ). An ERP system may implementations have so far yielded more failures than
be defined as a packaged business software system that successes in large construction firms. A typical ERP
enables a company to manage the efficient and effective implementation in a large construction firm takes between
use of resources (materials, human resources, finance, one and three years to complete and costs tens to hun-
etc.) by providing an integrated solution for the organi- dreds of thousands of euros. For these reasons, there is
zation's information processing needs (Fui-Hoon Nah an urgent need to understand the underlying factors that
et al., 2001). ERP systems provide firms with two new and lead to the success or failure of ERP implementations in
different types of functionality: a transaction processing such firms. This study seeks an understanding of these
function, allowing for the integrated management of factors by analysing the fits between the following pairs
data throughout the entire company, and a workflow of elements in ERP implementations: business and IT
management function controlling the numerous process strategy, maturity of the IT infi-astructure and the stra-
flows within the company. ERP facilitates the flow of tegic role of IT, and the implementation method and
organizational change. In the theoretical framework, it
*Author for correspondence. E-mail: [email protected] will be argued that the fit between these elements is an
Comtruciiim Managemem and Ecoitomics
ISSN 0144-6193 print/ISSN 1466-433X online «:: 2003 Taylor & Francis Ltd
http://www.tandf.co.uk/ioumals
DOl: 10.1080/0144619032000072155
512 Voordijk et al.

important condition for a successful ERP implementation refiects the integration of ERP and corporate manage-
(Drazin and Van de Ven, 1985). ment in order to improve organizational effectiveness.
Empirical case study research was conducted using ERP may also contribute to the three generic competitive
three ERP implementations in different business units of strategies of Porter (1985): cost leadership, differendadon,
a Dutch-based construction firm. The implementation and focus. ERP, as part of a cost leadership strategy,
of different ERP systems within one company is typical aims to achieve the lowest cost of production. In a
of large construction firms in the Netherlands. The data differentiation strategy, ERP contributes to the develop-
collection methods used in this case study research ment of a unique product or service, and long-term cus-
included both desk and field research (Yin, 1994). Based tomer relationships- In a focus strategy, the contribution
on the results of this study, factors leading to the success of ERP will be limited to certain segments (in products,
or failure of ERP in a large construction firm are related in clients, or in geographic markets).
to concepts in the existing literature on I T and strategy. In addition to generic competitive strategies, distinct
The paper is structured as follows: the theoretical frame- generic I T strategies can also be identified. The generic
work is presented first. Following this, attention is focused IT strategies identified by Parson (1987) represent
on the case study research design. In the subsequent different approaches to managing IT resources. This
sections, the cases are presented and analysed. Finally, strategy typology can also be used to analyse different
insights from the case studies are combined with the ERP implementations. The six IT strategies identified
theoretical framework and conclusions drawn. by Parson are:
• Free market: users determine their own needs and
how to satisfy them. I T specialists compete
Thoretical framework against outside vendors for users' customers. A
firm buys its I T at the lowest possible costs from
Following the strategic alignment model of Henderson
the software products market.
and Venkatraman (1999), the basic premise of this study
• Scarce resource: I T resources and expenditure are
is that a successful implementation of IT depends on
constrained, and their use determined by resource
different effective patterns of logical links, or 'fits',
allocation procedures, such as ROI criteria. Any IT
among the following 'domains' of a firm: business
proposal must clearly define expected costs savings.
strategies, IT strategy, organizational infrastructure and
• Necessary evil: I T is not used unless there is no
processes, and IT infrastructure and processes. We trans-
altemative.
lated these fits into factors for success or failure of ERP
• Centrally planned: a central decision-making unit
implementation by focusing on the 'fit' between the
integrates business needs with IT capabilities from
following pairs of elements:
its understanding of die competitive opportunities
• the fit (or lack of it) between business strategy and and requirements of the firm, and die potential of
IT strategy; IT for creating or increasing competitive advantage.
• the fit between the level of maturity of the IT • Leading edge: state of the art IT is developed to
infrastructure and the strategic role of I T in create new business opportunities.
relation to ERP; • Monopoly: an internal I T group is set up as the
• thefitbetween the methods used for implementing sole source for meeting IT demands within reason-
ERP and the change in organisational processes. able costs. An IT development programme is
managed by an internal I T group that reviews IT
Each ERP implementation can be characterised in terms
demands in terms of their potential contribution to
of these three pairs of elements or 'fits'.
the business strategy.
Porter's competitive strategies and Parson's I T strategies
Business and IT strategy
can be combined into one matrix (see Table 1). In this
The extent to which I T strategies are aligned with a study, it is initially assumed that the fit between business
firm's strategies varies widely among firms (Earl, 1989; and I T strategy is an imponant condition for the success
Betts, 1999). These differences reflect the three evolu- of ERP.
tionary roles that IT plays in firms Johnston and
Carrico, 1988; Grover et al, 1994; Gupta et al, 1997).
These differences can also be seen in the role of ERP. A The level of IT maturity, and the strategic role
'traditional' role for ERP would be a supportive one with of IT
no integration between ERP and business strategy. An Since IT was first introduced into organizations, there
'evolving' role would reflect a one-way link: ERP supports has been an ongoing effort to understand the managerial
the strategy but does not infiuence it. An 'integral' role issues associated with the evolution of IT and the
ERP in a large construction firm 513

Table 1 Relationship between generic competitive strategies and generic IT strategies

Competitive strategies
Cost leadership Differentiation Focus
IT strategies Free market Centrally planned Depends on the
Scarce resource Leading edge chosen strategy
Necessary evil Monopoly

organization. The growth curve of Gibson and Nolan (4) Integration: the use of information resources
(1974) has become a standard, and widely known, tnodel increases rapidly, providing new benefits and
for analysing this computing evolution within organiza- supporting the overall business strategy. The
tions. In this study, the Nolan model is used to analyse responsibility for operating the systems is trans-
the level of IT maturity both before and after the ferred to the users. Conventional data processing
implementation of ERP. activities are tightly controlled.
The Nolan model offers a framework in which dif- Nolan has modified his curve several times, due to tech-
ferent stages of IT maturity can be discussed. Nolan nical developments and a better insight into computer
characterizes each stage in terms of slack and control. budgeting. The central idea, however, has remained the
The four stages are (Nolan, 1979; Reynolds, 1992): same and so the focus remains on the four stages detailed
(1) Initiation: the computer is placed in the organ- earlier. Nolan's approach can be used to indicate the
ization. Applications are the replacement of transition from one stage to the other (see Figure 1).
existing manual systems (low slack) and are After implementing ERP, the level of IT maturity is
paid for out of a discretionary budget (low con- expected to increase.
trol). In this stage, the focus is on functional An increasing level of IT maturity may result in a
cost-reduction applications. changing strategic role for IT. IT can have different
(2) Contagion: a period of rapid and controlled strategic roles inside firms, and these can be categorised
growth in the number and kinds of informa- using the framework of McFarlan and McKenney
tion system apphcations developed. In order to (1983). This framework contains two criteria. The first
nurture widespread use of computer applications is that for some firms the existing IT operations are
in the firm, slack is high. Control remains low crucial for survival, for others not. The second criterion
in order to promote extensive experimentation is that new IT applications under development are for
with applications in multiple functional areas. some firms of great strategic importance for future com-
(3) Control: top managetnent gains control over infor- petitive success, for others not. When the two criteria are
mation system resources by implementing formal integrated into one framework, four roles for IT can be
control processes and standards that stifle nearly identified (see Table 2). This typology will be used to
all new information system projects. Management analyse the changing strategic role of IT within a firm
actions aim to control and reduce slack. following ERP implementation.

Building the
appiications
porifoiio

Buiiding the
organization

Buiiding thedept.
management
pianning and
controi

Deveioping
user
awareness

Stage I Stage Stage Stage iV Time

Initiation Contagion Control Integration

Figure 1 The Nolan growth curve

514 Voordijk et al.

Table 2 Existing and future roles of IT systems (McFarlan fundamental changes in many aspects of the organization
and McKenney, 1983) (Soliman and Youssef, 1998). In the case of BPR, I T
Future strategic role of IT management works closely with corporate management
in formulating and implementing an I T enabled or
Low High facilitated strategy (for example e-procurement). The
Existing strategic Low Support Turnaround through-put time and the risk of failure (i.e. the desired
role of IT High Factory Strategic results not being realized) of this revolutionary imple-
mentation method are high. Here, implementation is an
iterative process, particularly in the design stage: the
Where IT plays a strategic role, it is essential for same steps are repeated several times until the optimal
executing current strategies and operations, and for solution is found.
future competitive success. The IT strategy, the back- In the method known as As Soon As Possible (ASAP),
bone of such a firm's competitive success, will receive the implementation time needed is the critical factor.
considerable attention from senior management. Where Implementation starts with a predefined model, and the
IT plays a turnaround role, a firm is not absolutely ERP system is adapted to this standard. If processes
dependent on the functioning of the I T to achieve its differ from this standard, they are redesigned. From
operating objectives. New IT applications, however, are this perspective, ASAP can be seen as a revolutionary
essential to enable the firm to achieve its strategic objec- implementation method. When implementation starts,
tives. This role fits with the transition of the IT function some iterations are possible. The subsequent stages of
inside a firm from computer management to information the implementation process are linear: the process is
management (from stage three to four on the Nolan composed of a series of distinct steps in one sequence.
curve). If IT plays a turnaround or a strategic role, the IT In the AS-IS method, ERP implementation is aimed
maturity inside a firm is likely to be high. The IT func- at automating existing processes. An important differ-
tion has evolved from data-processing into a strategic ence to BPR is the evolutionary nature of this method,
one (McFarlan et al., 1982; McFarlan and McKenney, and the lower risk attached. This implementation method
1983). is related to the traditional and supportive orientation
Where I T plays a factory role, firms are heavily of IT towards strategy. I T is not linked to the business
dependent on cost-effective, fully reliable, IT support strategy. I T primarily serves as a utility (i.e., efficiency
to enable internal operations to run smoothly. The IT and reliability are paramount). The implementation
applications under development are, however, not funda- process is linear.
mental to a firm's ability to compete in the future. Where Characteristics of the ERP implementation methods
IT plays a support role, a firm could continue to operate are summarized in Table 3.
in the event of a major I T failure. There is no commit- As the need for organizational change, and the strate-
ment to linking IT to the business strategy. Th.e factory gic interest in an ERP implementation, increases, a more
and support strategic IT roles fit with the early stages of iterative implementation model can be expected. In this
approach, all the possibilities of an ERP system are
the Nolan growth curve: the strategic impact of IT on
thoroughly checked for their potential contribution to
operations and future strategy is low.
the business strategy. Therefore, it is anticipated that
companies who are pursuing an integral role for ERP
Implementation method and organizational change in their business strategy will undertake a more careful
analysis of the systems to be implemented.
The main differences in I T implementation methods are
in their revolutionary or evolutionary nature, and the risk
and time needed to implement a system. A 'revolution-
ary' method requires a fundamental process change.
Case study: research design
An IT implementation method is labelled evolutionary
when no fundamental process changes are required, and Research approach
only pre-existing processes are automated. Using these ERP is a relatively new topic for research, and most
criteria, the following strategies can be identified for of its implications have hardly been researched at
use in ERP implementation. all (exceptions being Soliman and Youssef (1998),
In the implementation method known as Business Al-MashaH and Zairi (2000), and Soliman etal. (2001)).
Process Redesign (BPR), IT is used as an agent for stra- As such, an exploratory research approach is considered
tegic change. IT systems enable firms to be more focused appropriate and, for this reason, a qualitative case study
on enhancing their customer-service offerings, expand- technique was used for data collection to gain insights
ing into new industries, and entering into mergers and into the topic investigated (Yin, 1994). In this case study,
acquisitions (Zairi and Sinclair, 1995). BPR leads to three business units of a large Dutch-based construction
ERP in a large construction firm 515

Table 3 Aspects of ERP implementation methods

BPR ASAP AS-IS
Involvement of the High: create support for the Middle: convince employees to Low: the system supports
management system use the new system existing rules and
structures
User participation High: particularly in the Low: users only evaluate the Low: users only approve
design stage new system the software used
Training and instruction High: learning new processes Low: learning new skills I-ow
interftity and skills
Number of implementation High: laboratory tests, pilot Low: predefmed models are Low: existing processes
tools used projects, prototyping, and used starting point
process simulations
Implementation process Iterative: particularly in the Iterative at the start, subsequent Linear
design stage stages linear
Organizational change High: fundamental changes Middle : no changes in
processes or structures

firm were investigated. These business units itnple- implementation, plus subsequent maintenance. The
mented ERP in very different business environments. turnover of VL Infrastructure is €250 million (£166
The implementation of different systems within one million). VL Infrastructure is divided into seven auton-
company is typical of the way large construction firms otnous business units that work closely together. The
in the Netherlands have dealt with ERP. By focusing on multiple case study focuses on the following three
different business environments, it is possible to analyse business units: Projects, Services, and Equipment.
the different patterns of logical links between: business The Projects unit focuses on large-scale construction
and IT strategies, the level of IT maturity and the stra- and renovation infi-astructure projects. This business unit
tegic role of IT, and the implementation methods and has 400 employees and a turnover of €90 million (;C60
organizational change. million). In this business unit, the most imponant busi-
ness functions are calculation, purchasing, and project
control. The major cost categories are personnel (35%),
Case study design equipment (15%), and materials (50%).
The selection of the case study company was theory- The Services business unit has 1200 employees and a
driven, rather than on the basis of statistical or random turnover of aboutfelOOmillion (jC66 million). Its major
sampling. Armed with the 'ex ante constructs', as service product is the maintenance and repair of civil
Eisenhardt (1989) calls them, we wanted to see if there infrastructure and related installations. In this business
were different patterns of logical links between ERP unit, the most important business functions are mainte-
and the IT and business strategy, the level of IT maturity nance management, activity planning, and engineering.
and the strategic role of IT, and the implementation The major cost category is personnel (80%). Other costs
method and organizational change. Therefore, a cover equipment (10%) and materials (10%).
construction firm was selected since it was known to The Equipment unit has 200 employees and a turnover
be operating under different conditions in various sectors of €23 million (;C15 million). It is responsible for sup-
of the construction industry. plyitig equipment to the other business units inside VL
This case firm is one of the leading construction firtns Infrastructure. This business unit also supplies equip-
in the Netherlands, and appears here under the fictitious ment to Dutch competitors of VL Infrastructure. Other
name of VL Construction Group. Its activities are activities include the maintenance and development of
divided into four clusters: infrastructure, construction, equipment for other business units and third parties. The
consultancy and engineering, and trade and industry. most important business functions are resource platining,
The case study focuses on the infrastructure cluster. This maintenance planning, logistics, and inventory control.
part of the firm we call VL Infrastructure and it is a As in Services, the major cost categories are personnel
major player in the field of infrastructure in the Nether- (80%), equipment (10%), and materials (10%).
lands. VL Infrastructure is an integrated provider of
civil engineering works, maintenance, and services; and
on the basis of this experience is also active in transport ERP systems analysed
systems. Over 2100 employees work on projects; covering, Two types of ERP system have been implemented in
all aspects from involvement in the design phase to the business units. Services implemented Baan ERP, a
516 Voordijk et al.

product fi:om the Baan Company. Projects and Equip- co-ordination and management decision-making), to the
ment implemented Metacom 6. Metacom 6 is an ERP operations of the firm (enhancing operational fiexibility,
system supplied by a Dutch niche player. This niche improving labour productivity, enhancing utilization of
player dominates, with SAP and Baan, the ERP market equipment), to product and service (reducing titne to
in the Dutch construction sector. Modules included in market for new products/services, etihancing product/
the Metacom system follow the different stages of a service quality), on supplier relationships (developing
building project: acquisition, calculation, purchasing, closer relationships with suppliers, improved tnonitoring
planning of the project and resources, and fmancial of the quality of products/servicesfiromsuppliers). Based
administration. Baan ERP has the following three basic on this analysis, the dominant goal of the ERP system
modules: purchasing, logistics, and services. emerged. Information about the business strategy was
Both systems qualify as ERP systems when applying gained by interviewing senior management and analysing
the definition of Markus and Tanis (2000): the firm's strategy documents. This information was
confronted with the IT strategy being followed.
•Both ERP systems are commercial packages: that The maturity of the IT infrastructure was analysed
is, they are purchased from software vendors by framing interview questions in terms of the bench-
rather than developed in-house from scratch. marks that characterize the different stages of the Nolan
• The systems are built to support generic business curve. These benchmarks are the information processing
processes that differ fi-om the way the units technology, data-processing organization and expend-
analysed do business. iture, IT use, data processing and control, and the
• The systems integrate the software, not the organization's ponfolio of applications (Wiseman, 1985;
computing platform on which it runs. Sabherwal and Kirs, 1994). By determining where a
• The integration depends on 'configuring' (setting business unit fits on the various benchmark scales, before
up) the system in particular ways. Configuration and after the ERP implementation, Nolan's approach
means certain modules are installed. could be used to indicate the transition from one stage
• ERP systems are rapidly changing architecturally to another. This information was confi-onted with data
and in terms of functionality. Baan and Meta- on the strategic role of IT inside the business unit, based
com are pursuing a strategy of componentization, on the process-oriented approach mentioned above.
consisting of an open 'backbone' to which the
The implementations of the difi"erent ERP systems
offerings of other vendors can be connected. Both
were analysed by discussing the items given in the imple-
vendors are releasing extensions to their core
mentation methodologies used by the ERP vendors.
products designed to handle 'front office' (i.e.
Interview questions focused on: the project organization
sales management), 'supply chain' (i.e. advanced
(involvement of senior management, steering and work-
platining and scheduling), data warehousing, and
ing committees, project management); the training of
other flinctions.
project members, core users and final users; the analysis
of relevant processes to be supported; the role external
Data collection of consultants; and the implementation tools used.
In addition to these aspects of the implementation
The main approaches used for data collection were itself, pre- and post-implementation documents were
semi-structured interviews, observations, and documents analysed: implementation proposals, justification for
related to ERP implementations. In each business unit, the implementation, test reports, and formal reviews
tnanagers were interviewed who were knowledgeable after implementation. The required change in the
about both the ERP system itself and its implementation organization was confronted with the characteristics
process: senior managers in the business unit including of the implementation method.
the IT manager, the project manager(s) of the HRP
itnplementation, and core users. The interview questions
concerned the business and IT strategy, the level of IT
maturity, and different aspects of the implementation The Projects unit
method.
Business and IT strategy
In analysing the business and IT strategy, a process-
oriented assessment of IT business value was followed The ERP system was implemented because of the
(see Tallon et al, 2000). This process-oriented approach need to replace the existing IT system. Examined more
also provided information on the strategic role of IT in closely, this ERP impletnentation was not the result of a
the business units analysed. Following this approach, the strategic choice by the management but rather a response
focus in the interviews was on the contribution of ERP: to the need to upgrade several outdated systems. External
to process planning and support (improving internal factors (no support for the outdated systems by the
ERP in a large construction firm 517

software supplier, market demand, and millennium training and instruction were limited. The process could
bugs in the old software) cotnpelled this business unit to be characterized as a linear process: software was adapted
find a new system. The IT strategy used can be charac- to existing processes - starting on a general level and
terized as that of a necessary evil. Management reacted ending on a very detailed one. Developing customized
to external factors and did not have a strategic focus on software overcame thefinalobstacles. During implemen-
state-of-the-art IT solutions. Managerial attention was tation, this structured approach became weakened due
primarily focused on cost control. to time constraints and business schedules.

The level of IT maturity and strategic role of IT

The Services unit
Before implementing the ERP system, the IT maturity of
the Projects unit was at stage 2 ofthe Nolan model with Business and IT strategy
each department using a number of isolated IT applica- In interviews, managers stated that ERP was needed
tions. The level of IT tnaturity did not improve after to increase control and transparency ofthe processes in
ERP implementation: the firm stayed at stage 2. The the Services unit. With more control and transparency.
ERP system integrated only the software modules ofthe Services could react faster to changing market demands.
Calculation and Finance departments. Purchasing (40% Following the liberalization of the market for infrastruc-
ofthe turnover of this business unit) and overall project ture maintenance services, foreign firms have been
planning were not linked with each other through the entering the Dutch market. The ERP implementation
ERP. This means that delivery schedules would not be was part of the strategic answer to this increasing
adapted following changes in the project planning. Sen- competition. The IT strategy of this business unit can
ior management feared a weakening of their negotiating be characterized as a free market strategy. Services tried
position if purchasing was linked to external suppliers. to integrate different business functions into one ERP
Since only Calculation and Finance were now linked system. The management, however, gave the different
with each other, this ERP implementation is only the departments freedom to buy and use tools other than
start of a transition from stage 2 to 3. Further integration those provided by the ERP system. The resulting system
and standardization of IT applications is needed to thus consisted of different IT tools bilaterally linked
complete this transition. In terms of strategic roles, IT to the ERP system.
still has a support function. Both before and after ERP
implementation, IT was not of strategic importance to
the organization.
The level of IT maturity and strategic role of IT
A few years ago. Services could be placed at stage 2 on
Implementation method and organizational change the Nolan growth curve. Since then, the implementation
As mentioned earlier, this ERP implementation was a of ERP has led to substantial integration of localized IT
replacement for an outdated IT system, and as such was functions. The company has been redesigning its work
a typical example of an AS-IS implementation. In an processes to enable further integration and standardization.
evolutionary approach, that lasted about two years, the As noted, the ERP system is supported by a number of
ERP system had to be adapted to existing businesses other software tools due to missing functionalities in the
processes. The implementation focused on supporting ERP system. Baan ERP bave supported and integrated
the existing processes of the Calculation and Finance tbe financial aspects of tbe sales function, the technical
departments. It was planned that Purchasing would maintenance ofthe infrastructure objects, and the invoice
be the next department to use ERP. The Projects unit and report function. Strict labour regulations and the
wanted to implement the system itself, and hardly irregular working hours ofthe employees of this business
any external advisers were hired. Management feared unit partly explain the use of IT tools that are not sup-
high consultancy costs and the leaking away of sensitive ported by the ERP system. In particular, purchasing
information. This led to a strong intra-company focus. and product quality (measurements ofthe services deliv-
This was also the reason why a supply chain context for ered) required non-ERP software. The widespread use
the ERP implementation was not developed since such of IT tools is an aspect of stage 2 of the Nolan model.
an implementation would require co-ordination with Implementing an ERP philosophy that integrates these
suppliers and customers. The implementation started as tools into one system reflects the organisation being in
a very structured process with regular meetings of the transition from stage 2 to stage 3. The role of IT has
management, the internal project leader, and a small changed from support to factory. IT has become much
group of core users (representatives of the different more important in tbe daily operations ofthe firm. In the
departments). Few implementation tools were used, and long term, IT may even achieve a strategic position
518 Voordijk et al.

where the applications become fundamental to the firm's was used as an internal tool to increase productivity by
ability to react to changing market demands. improving the planning process.

Implementation method and organizational change Implementation method and organizational change
According to the management, the ERP implementation The implementation method used could be characterized
had to be part of a BPR methodology. In their vision, as AS-IS (existing processes were the starting point) with
the BPR would rely heavily on the use of IT to create some elements of BPR. The BPR elements included were
radically different working methods in order to achieve an iterative implementation method and high user par-
organizational improvements. Redefining business proc- ticipation. Right from the start of the implementation,
esses was one of the objectives of this implementation. core users were involved. These users acted as inter-
Several aspects of existing processes were, however, dif- mediaries between the departments and the software
ficult to change (strict labour regulations and irregular supplier and they commented on the system prototype
working hours). Using the/ret; marker IT strategy, the on behalf of their departments. Since the old system
external and internal project managers for this imple- functioned well, there was much resistance to change.
mentation gave much freedom to the core users involved. The high level of user participation was an attempt to
Management delegated their responsibility to an external decrease this resistance. The low level of training and
project manager, and user participation, training, and instruction, and the limited use of implementation tools,
instruction intensity were low. Various implementation were typical AS-IS elements.
tools were used. Overall, the approach became a typical
example of a linear AS-IS implementation: software
tools were adapted to existing processes. Discussion
Using the data from the case studies, the success or
failure of the ERP implementations can be explained by
The Equipment unit analysing the fits between the following pairs of ele-
ments: business and IT strategy, the maturity of the IT
Business and IT strategy
infrastructure and its strategic role, and the implementation
The Equipment unit followed a centrally planned method and organizational change.
IT strategy. Senior management chose a centralized
approach and, in their view, ERP was a tool that had
Business and IT strategy
no direct relationship with the business strategy. The
focus was on increasing the efficiency of the planning From the case studies, it is concluded that only the
process. The management compelled the employees necessary evil IT strategy of the Projects unit fits with
to work with only the new system. Importing data the actual competitive strategy of this firm: the focus is
from the earlier IT systems (used before the ERP on cost control (see Table 4, Business and IT strategy
implementation) into the new one was forbidden. column). There appears to be misfits between xh^ free
market IT strategy of Services, and the centrally planned
IT strategy of Equipment, and their respective competi-
The level of IT maturity and strategic role of IT tive strategies. Services wanted to implement ERP in
Before implementation. Equipment used three systems order to react faster to market demands. The business
that could not exchange information with one another. strategy, focusing on differentiation, is not aligned with
These different, isolated, applications have been replaced the IT strategy that fits with cost leadership. In the
by one ERP system. In order to get all the IT applica- Equipment unit, the misfit is the other way around. The
tions included in this system, a tailor-made ERP system business strategy focuses on increasing efficiency and
was developed by a software firm. The main objective of lowering costs, while the IT strategy is one that normally
implementing ERP was to improve the planning, the focuses on creating new business opportunities. As a
planning process, and the link between planning and result of these misfits, the implementations of integrated
finance- In terms of Nolan, Equipment advanced from enterprise systems were not a success in the Services
stage 2 to stage 3. IT has been centralized, and current and Equipment units, and they had to deal with much
ERP implementation efforts are focused on further resistance.
integration and standardization. Following implementa- The misfits between the IT and business strategies
tion, the role of IT had changed from support to factory. can be explained by the dominance of cost strategies in
The importance of IT increased in the daily operations, the construction industry. Of the cases analysed, only
but had little impact on future business strategy. ERP Services had the option of following a non-cost strategy
ERP in a large construction firm 519

Table 4 The case study results

Cases Business and IT strategy IT maturity and the Implementation method
strategic role of IT and organizational change
Projects Fit Fit Fit
• Cost control Stage 2 to 3 • AS-IS
• Necessary evil Support • No process change
Services Misfit Fit Misfit
• Differentiation strategy Stage 2 to 3 • BPR
• Free market From Support to Factory • No process change
Equipment Misfit Fit Fit
• Cost control Stage 2 to 3 • AS-IS + some BPR elements
• Central planning From Support to Factory • Planning process changed

since this business unit was not so dependent on public realize construction projects, location-bound production,
bids. Services had longer-term contracts. The dominant and the one-off nature of much of the work. Back-office
strategy of most other contractors is, using Porter's functions do not, however, have the primary attention of
strategy typology, a low-cost one for all segments of the management. The cases show that ERP is used as an
the market. This cost-driven nature of the industry intra-company tool, whereas the primary processes in the
makes a fit between a firm, and IT strategies that focus construction industry are characterized by inter-company
on product or service differentiation, unlikely. relationships. This explains why ERP does not play a
strategic role in the three units analysed, and why I T
maturity remains low. Inter-organizational I T tools in
The level of IT maturity and strategic role of IT
the construction industry require a high level of IT
The second element of the analysis focuses on the fit maturity and a strategic orientation.
between the level of IT tnaturity and the strategic role
of IT. Employing an ERP philosophy that integrates
different IT applications into one system refiects that all Implementation method and organizational change
the business units are in transition frotn stage 2 to stage The itnplementation methods used in the Projects
3 (see Table 4, IT maturity and the strategic role of IT and Equipment business units can be characterized as
column). Of the three units. Equipment had transformed AS-IS since software tools were adapted to the existing
itself most clearly fi-om stage 2 to stage 3. In all the cases processes. Projects followed this method most clearly.
analysed, the IT does not have a strategic focus. Both Equipment basically followed an AS-IS approach but
before and after ERP implementation, I T was not of included some elements of BPR. Services tried to use a
strategic itnportance for Projects. For the Services and BPR method but, in the end, the implementation
Equipment units, IT has become tnuch more important turned into a typical example of AS-IS (see Table 4,
in their daily operations. The position of IT has changed Implementation method and organisational change column)
from one of support to one of factory. In all three cases, Adopting BPR methods seetns to be difficult because
the strategic IT roles match the early stages of the Nolan it necessitates changing areas related to strategy, techno-
growth curve. In these stages, refiecting a relatively low logy, culture, management systems, human resources,
level of IT maturity inside a firm, the strategic impact of and structure. The focus on technical aspects, at the cost
IT on operations and future strategy is low. IT may of change management elements, is a tnajor reason for
achieve a strategic position for Services in the future. a sub-optimal implementation process. There are two
Whether the unit advances from the support to either the other reasons why AS-IS implementation methods are
factory or the strategic role depends on whether Services dominant. First, processes have to become transparent
continues to roll out new strategic uses for IT. If this and standardized within firms when implementing
happens, the IT maturity will increase substantially. ERP. Infortnal agreements are no longer possible. For
this reason, ERP is the source of much resistance inside
In all three cases, the ERP implementation focused on
organizations. Second, construction firms operate such
the back-office processes of the construction company.
that each department has its own domains of expertise.
The functionalities provided by the ERP system support
These professional, organizational, and functional
and integrate traditional back-office functions such as
boundaries are rarely crossed. Since ERP requires these
cost control, equipment planning, and calculation. These
boundaries to be crossed, this inflexibility is a major
functions are recurrent and stable, and can therefore
obstacle to radically changing processes and implementing
be standardized. They are not frustrated by industry
intra-organizational IT.
characteristics such as the temporary coalitions formed to
520 Voordijk et al.

Conclusion From an inter-organizational perspective, construc-

tion organizations have yet to reach the first stage of
In this study, the factors leading to the success or failure the Nolan curve. The temporary and multiple nature of
of ERP implementations in the construction industry the organizational structure (a result of the dominance
have been explained by focusing on the fits between the of cost strategies) impedes a high IT maturity at the
following pairs of elements: business and IT strategy, project level. Non-technological aspects, such as stable
maturity of the IT infrastructure and the strategic role of networks and central co-ordination, are essential pre-
IT, and the implementation method and organizational conditions for the development of inter-organizational
change. From this fit analysis the following can be ERP. Once these preconditions are met, opportunities
concluded: for ERP systems to manage inter-com^pany processes may
be realized.
• If the strategies of a firm are of a cost-driven
nature then a fit between the business and IT
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