Critical success factors of enterprise resource planning systems implementation success in Vietnam

MINISTRY OF EDUCATION AND TRANNING UNIVERSITY OF ECONOMICS HO CHI MINH CITY  LÊ THỊ THU CHUNG CRITICAL SUC CESS FACTORS OF ENTERPRISE RESOURCE PLANNING SYSTEMS IMPLEMENTATION SUCCESS IN VIETNAM THESIS OF MASTER OF BUSINESS ADMINISTRATOR HO CHI MINH CITY – 2012 MINISTRY OF EDUCATION AND TRANNING UNIVERSITY OF ECONOMICS HO CHI MINH CITY  LE THI THU CHUNG CRITICAL SUCCESS FACTORS OF ENTERPRISE RESOURCE PLANNING SYSTEMS IMPLEMENTATION SUCCESS IN VIETNAM Subject: Master of Business Administrator Code: 06.34.01.02 THESIS OF MASTER OF BUSINESS ADMINISTRATOR ADVISOR: DR NGUYỄN THỊ NGUYỆT QUẾ HO CHI MINH CITY – 2012 i ACKNOWLEDGEMENT I would like to take this opportunity to express my gratitude to all those who have helped and supported me during the time I conducted the study First of all, I would like to express my deepest gratitude to my advisor, Dr Nguyen Thi Nguyet Que, for her generous and patient guidance to my thesis Her inspiring advices are extremely essential and valuable for me to finish this thesis The advisor is very knowledgeable, professional, and nice to me all the time I feel very lucky and deeply appreciate her to give a chance to be her student Secondly, I would like to show sincere gratitude to faculty members for their enthusiastic support Thirdly, I would like to send special thank you to my friends, members of ERP forum, my work partners who supportively help me so much to finalize the questionnaire, take part in the survey for pilot test as well as the main study Lastly, I would like the send the most special thanks to my family, especially my parents who are always there for me with so much love, care and encouragement Le Thi Thu Chung Ho Chi Minh, October 2012 ii COMMITMENT I hereby would like to commit that the thesis, “Critical success factors of Enterprise Resource Planning systems implementation success in Vietnam”, was accomplished based on my independent and serious studies and researches The data was collected in reality and it has clear origins In addition to that, the data would be trust-worthily handled and it has never been released in any menu Le Thi Thu Chung iii TABLE OF CONTENT ACKNOWLEDGEMENT I COMMITMENT II TABLE OF CONTENT III LIST OF TABLE V LIST OF FIGURE VI ABSTRACT .1 CHAPTER INTRODUCTION .2 1.1 Research background 1.2 Research questions and objectives 1.3 Practical significances of the study 1.4 Scope and approach 1.5 Research method 1.6 Structure of the thesis CHAPTER LITERATURE REVIEW 2.1 Definition of ERP 2.2 Situation of ERP in Vietnam 10 2.3 Proposed conceptual model and hypotheses 11 CHAPTER 25 3.1 Research purpose .25 3.2 Research design 26 3.3 Questionnaire design 27 3.3.1 Questionnaire development 27 3.3.2 Questionnaire translation .31 3.4 Research strategy 32 3.4.1 Qualitative pilot study 32 3.4.2 Quantitative pilot study .32 3.5 Targeted population 33 3.6 Research sampling 33 CHAPTER 38 4.1 Descriptions of sample 38 4.2 Reliability and validity of the measurement scale 40 4.3 Testing the research model and the hypotheses 45 iv 4.3.2 Testing hypothesis 49 4.3.3 Testing the moderating relationship .50 4.3.4 Description of statistics of overall ERP implementation success 55 4.4 Findings 56 CHAPTER 58 5.1 Discussion of findings 58 5.2 Practical implications 59 5.3 Contribution of the current study 61 5.4 Limitation and future research 61 LIST OF REFERENCE 63 APPENDIX .6973 APPENDIX 73 APPENDIX 80 APPENDIX 84 APPENDIX 87 v LIST OF TABLE Table 1: ERP systems history Table 2: Unified CSFs model by Esteve & Pastor (2000) 12 Table 3: 22 CSFs proposed by Somers & Nelson (2001) 13 Table 4: seven broad categories of CSFs by Nah & Delgado (2006) 13 Table 2.5: Eleven key CSFs by Nah, Lau & Kuang (2003) 14 Table 6: Four CSFs and moderator proposed by Nah et al (2007) 15 Table 2.7: Measurement of ERP implementation success by Petroni (2002) 23 Table 3.1: Survey items in the study 29 Table 4.1: Sample characteristics 39 Table 4.2: Reliability of scales 40 Table 4.3: KMO and Barlett's Test (DV) 43 Table 4.4: Total variance explained 43 Table 4.5: Rotated Component Matix(a) 44 Table 4.6: Correlation of constructs 45 Table 4.7: Model sumary(b) (MRL) 47 Table 4.8: ANOVA (Regression) 47 Table 4.9: Coefficients (Regression) 47 Table 4.10: Testing H1, H2, H3, H4 49 Table 4.11: Model Summary of H5 51 Table 4.12: Coefficients of H5 hierarchical regression 51 Table 4.13: Model summary of H6 51 Table 4.14: Coefficients of H6 hierarchical regression 52 Table 4.15: Model Summary of H7 52 Table 4.16: Coefficients of H7 hierarchical regression 53 Table 4.17: Model summary of H8 53 Table 4.18: Coefficients of H8 hierarchical regression 54 Table 4.19: Testing H5, H6, H7, H8 54 Table 4.20: Descriptive statistic of ERP 55 Table 4.21: Levels of importance of factor 56 vi LIST OF FIGURE Figure 2.1: Modules of ERP system Figure 2.2: Proposed conceptual framework 16 Figure 3.1: Research procedure 26 Figure 4.1: The revised research model 55 ABSTRACT Enterprise resource planning (ERP) systems with high level of integration can help improve capability of customer service, productivity, cost reduction, inventory turnover and provide effective supply chain management and e-commerce ERP has been widely adopted in many countries, but in Vietnam it is still very limited Trend of globalization and fierce competition push Vietnamese enterprises into having effective management and optimize cost However, there have been many failed attempts in implementing ERP systems This research aims to examine the critical success factors of success of ERP implementation The study was conducted in twenty five companies in Hochiminh, Dong Nai, and Binh Duong (out of eighty one companies throughout Vietnam) with “go live” ERP systems The results of the study indicate Top management support, Teamwork, Enterprise-wide communication and Project management program as critical success factors of ERP implementation success The results also show that Organizational culture is the moderator which positively moderates the relationships between Top management support, Teamwork, Enterprise-wide communication, Project management program and ERP implementation success CHAPTER INTRODUCTION 1.1 Research background For the last few decades, business management strongly relies on the information The use of Management Information system (MIS) is being proved to lead to better planning, better decision making and better result MIS is defined by Davis and Olsen (1985) as an integrated user-machine system for providing information to support information management and decision making functions in an organization This study will look into one of the most advanced and sophisticated MIS, the Enterprise Planning System (ERP) and the critical success factors for its successful implementation Generally, ERP systems help organizations increase level of customer service, productivity, cost reduction, inventory turnover and provide effective supply chain management and e-commerce The ERP systems are designed to develop plans and schedules so that the right resources (manpower, material, machinery and money) are available in the right amount when needed (Wallace and Kremzar, 2001) In reality, ERP implementation is costly, complicated and time-consuming According to survey result in 2010 by Panorama Consulting Group, on average, an ERP project takes about 18.4 months with total cost of $6.2 mil 51.4 % of ERP projects exceed budget, 35.5% of projects take longer than expected duration and 40% of company face with operational disruption after “go-live” In extreme cases, companies have even had to close because of vast ERP investments that did not go live, an example being the FoxMeyer Drug Company that ends into bankruptcy (Scott and Vessey, 2002) 79 Số lượng nhân viên: □ 1000 80 APPENDIX CRONBACH ALPHA ANALYSIS Cronbach alpha analysis of Top management support (SUPP) Reliability Statistics Cronbach’s N of Items Alpha 797 Item-Total Statistics Scale Scale Variance if Corrected Item- Cronbach’s Mean if Item Deleted Total Correlation Alpha if Item Item Deleted Deleted Supp1-sufficient incentive from top 12.91 13.771 599 753 Supp2-considered as strategic decision 13.18 13.261 608 749 Supp3-sufficient top mgnt commitment 12.70 12.794 558 767 12.84 13.110 582 757 12.88 13.738 552 766 mngnt Supp4-active support from CEO, CIO, COO Supp5-explicitly indentified as critical priority Cronbach alpha analysis of Teamwork (TEAM) Reliability Statistics Cronbach’s N of Items Alpha 880 Item-Total Statistics Team1-having ept business & tech Scale Mean if Scale Corrected Cronbach’s Item Deleted Variance if Item-Total Alpha if Item Item Deleted Correlation Deleted 14.60 15.035 671 865 Team2-cross functional 14.75 14.623 720 853 Team3- full time working for project 14.54 14.411 727 852 knowledge 81 Team4-sufficient incentives/compensation Team5-relocated together 14.60 15.216 650 870 14.86 14.654 810 834 Cronbach alpha analysis of Enterprise-wide Communication (COMM) Reliability Statistics Cronbach’s N of Items Alpha 880 Item-Total Statistics Comm1-well prepared to epts cate w users Comm2-understood the goals/objectives Comm3-enough epts cate n channel Comm4-enough reviews for user satisfaction Comm5-enough evaluation on ERP workings Scale Mean if Scale Variance Corrected Cronbach’s Item Deleted if Item Deleted Item-Total Alpha if Item Correlation Deleted 16.02 12.156 680 862 16.12 12.046 699 857 16.06 11.474 772 839 16.28 12.120 621 878 16.23 12.278 824 834 Cronbach alpha analysis of Project Management Program (PROJ) Reliability Statistics Cronbach’s N of Items Alpha 836 82 Item-Total Statistics Scale Mean if Scale Corrected Item- Cronbach’s Item Deleted Variance if Total Correlation Alpha if Item Item Deleted Proj1-milestone set with measurable Deleted 14.20 13.480 663 795 14.34 13.904 700 785 Proj3-education, training, support 13.86 14.513 596 814 Proj4-well defined task assignment 14.04 13.681 689 787 Proj-well managed customization 14.07 15.382 538 828 results Proj2-commitment to promote & manage project Cronbach alpha analysis of Organization culture (CULT) Reliability Statistics Cronbach’s N of Items Alpha 821 Item-Total Statistics Scale Mean if Scale Corrected Cronbach’s Item Deleted Variance if Item-Total Alpha if Item Item Deleted Correlation Deleted Cult1-supportive & helpful employees 19.17 17.291 514 809 Cult2-adequate org resources 19.64 16.694 533 806 Cult3-willingness for collaborating 19.10 15.588 720 763 18.63 18.145 514 808 Cult5-individual development 18.90 16.436 645 781 Cult6-encourage to analyze mistakes 18.71 16.908 609 789 Cult4- encouraged & rewarded by superiors Cronbach alpha analysis of ERP implementation success (SUCC) Reliability Statistics Cronbach’s Alpha N of Items 83 835 Item-Total Statistics Succ1-reduction of informal systems Succ2-improvement on planning, cost estimation Succ3-improved cooperation btwn epts Succ4-job satisfaction improved Succ5-reduct in “expediting” requirements Scale Mean Scale Corrected Item- Cronbach’s if Item Variance if Total Alpha if Item Deleted Item Deleted Correlation Deleted 11.84 14.473 686 788 12.58 15.421 591 815 11.61 14.571 679 790 12.73 16.188 524 831 12.20 14.362 701 783 84 APPENDIX EXPLORATORY FACTOR ANALYSIS (EFA) Appendix 3.1: The first EFA implementation of four independent variables KMO and Bartlett’s Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy .899 Approx Chi-Square Bartlett’s Test of Sphericity 3445.447 df 465 Sig .000 Total Variance Explained Co Initial Eigenvalues Extraction Sums of Squared Rotation Sums of Squared Loadings Loadings mpo nent Total % of Cumulative Variance % 10.993 35.460 2.210 7.130 42.590 2.003 6.460 1.706 Total 35.460 10.993 % of Cumulativ Variance e% Total % of Cumulative Variance % 35.460 35.460 3.609 11.644 11.644 2.210 7.130 42.590 3.486 11.245 22.889 49.050 2.003 6.460 49.050 3.474 11.206 34.095 5.505 54.555 1.706 5.505 54.555 3.148 10.154 44.249 1.454 4.690 59.245 1.454 4.690 59.245 3.050 9.838 54.087 1.372 4.427 63.671 1.372 4.427 63.671 2.971 9.585 63.671 957 3.088 66.760 889 2.869 69.629 843 2.720 72.349 10 723 2.332 74.681 11 672 2.168 76.849 12 614 1.979 78.829 13 589 1.901 80.729 14 557 1.795 82.525 15 520 1.677 84.202 16 481 1.553 85.755 17 466 1.504 87.260 18 460 1.483 88.742 19 407 1.312 90.054 20 384 1.239 91.294 85 21 361 1.164 92.458 22 338 1.091 93.549 23 324 1.044 94.593 24 281 908 95.501 25 269 866 96.367 26 254 818 97.186 27 226 730 97.916 28 190 611 98.527 29 184 592 99.119 30 144 466 99.585 31 129 415 100.000 Extraction Method: Principal Component Analysis Rotated Component Matrix a Component Proj3-education, training, support 699 043 116 176 195 099 Proj1-milestone set with measurable results 689 274 126 164 149 058 Proj2-commitment to promote & manage project 676 226 180 143 133 292 Proj4-well defined task assignment 638 231 209 175 322 110 Proj-well managed customization 542 101 110 015 267 148 Team5-relocated together 105 854 147 099 185 172 Team3- full time working for project 070 807 151 087 192 187 Team2-cross functional 192 730 145 184 145 165 Team1-having 219 599 306 102 068 231 Team4-sufficient incentives/compensation 197 598 133 216 116 091 Comm3-enough 165 134 831 124 105 007 025 127 803 023 212 083 Comm2-understood the goals/objectives 018 151 785 161 142 144 Comm5-enough evaluation on ERP workings 317 164 762 252 131 061 Comm4-enough reviews for user satisfaction 380 188 596 165 015 116 Succ3-improved cooperation btwn epts .165 250 076 772 111 079 Succ5-reduct in “expediting” requirements 227 132 157 751 210 056 151 126 078 673 098 207 Succ1-reduction of informal systems 263 028 237 672 101 314 Succ4-job satisfaction improved 044 036 117 638 156 210 ept business & tech knowledge epts cate n channel Comm1-well prepared to epts cate w users Succ2-improvement on planning, cost estimation 86 Cult3-willingness for collaborating 335 148 212 045 723 076 Cult5-individual development 119 122 179 193 716 204 Cult6-encourage to analyze mistakes 093 108 141 252 715 131 Cult4- encouraged & rewarded by superiors 128 080 121 120 619 295 Cult1-supportive & helpful employees 274 164 059 050 592 025 Cult2-adequate org resources 127 206 043 198 522 045 Supp3-sufficient top mgnt commitment 104 115 023 146 139 734 Supp4-active support from CEO, CIO, COO 096 022 113 299 113 673 Supp2-considered as strategic decision 282 204 -.006 128 116 669 Supp1-sufficient incentive from top mngnt 230 179 107 194 048 653 Supp5-explicitly indentified as critical priority 279 330 177 045 194 570 Extraction Method: Principal Component Analysis Rotation Method: Varimax with Kaiser Normalization a Rotation converged in iterations 87 APPENDIX MULTIPLE LINEAR REGRESSION ANALYSIS (MLR) Testing correlation of constructs Correlations Supp Pearson Correlation Supp Pearson Correlation 509 ** 000 200 200 200 200 ** ** 200 ** ** 494 Sig (2-tailed) 000 000 N 200 200 ** ** 509 509 000 200 349 349 Succ ** 000 N 583 494 583 444 ** 000 000 000 200 200 200 ** 506 434 ** 000 000 200 200 200 ** 506 495 ** Sig (2-tailed) 000 000 000 N 200 200 200 200 200 ** ** ** ** Pearson Correlation Succ ** Proj ** 000 000 Pearson Correlation Proj 503 200 503 Comm ** Sig (2-tailed) Pearson Correlation Comm Sig (2-tailed) N Team Team 509 444 434 000 495 Sig (2-tailed) 000 000 000 000 N 200 200 200 200 ** Correlation is significant at the 0.01 level (2-tailed) Testing assumptions for residuals of dependent variable 200 88 Mutiple Linear Regression Model Summary Model R R Square 795a Adjusted R Std Error of the Square Estimate 632 622 73626 a Predictors: (Constant), Top management suport, Teamwork & composition, Enterprise-wide Communication, Project management program a ANOVA Model Sum of df Mean Square F Sig Squares Regression 74.299 18.575 Residual 124.701 195 639 Total 199.000 199 29.046 000 b a Dependent Variable: ERP Success b Predictors: (Constant), Top management suport, Teamwork & composition, Enterprisewide Communication, Project management program a ANOVA Model Sum of Squares Regression df Mean Square 66.292 16.573 Residual 112.927 195 579 Total 179.219 199 F 28.618 Sig .000 b 89 a Dependent Variable: Succ b Predictors: (Constant), Proj, Comm, Supp, Team Coefficients Model Unstandardized Standardized Coefficients Coefficients B Std a t Sig Collinearity Statistics Beta Tolerance VIF Error (Constant) 148 291 510 611 Supp 320 074 301 4.345 000 675 1.481 Team 085 076 085 1.118 026 562 1.781 Comm 207 076 186 2.707 007 683 1.464 Proj 204 079 199 2.590 010 550 1.820 a Dependent Variable: Succ Collinearity Diagnostics Mode Dimension Eigenvalue Condition l Index a Variance Proportions (Constant) Supp Team Comm Proj 4.878 1.000 00 00 00 00 00 042 10.780 16 65 00 15 01 034 11.989 28 27 24 00 30 026 13.619 00 00 72 00 61 020 15.640 56 07 03 84 09 a Dependent Variable: Succ a Residuals Statistics Minimum Predicted Value Maximum Mean Std Deviation N 1.3899 4.2305 3.0480 57717 200 -2.30802 2.07364 00000 75331 200 Std Predicted Value -2.873 2.049 000 1.000 200 Std Residual -3.033 2.725 000 990 200 Residual a Dependent Variable: Succ 90 APPENDIX HIERARCHIAL REGRESSION ANALYSIS FOR MODERATING EFFECTS Moderating effect of Organizational culture (Cult) on the Top management support – ERP implementation success relationship Model Summary Model R R Square Adjusted R Std Error of the Square Estimate 361 a 130 126 93631380 430 b 185 180 93608018 a Predictors: (Constant), Supp_c b Predictors: (Constant), Supp_c, Supp_c_cult_c a ANOVA Model Sum of Squares Regression Mean Square 25.863 25.863 Residual 172.707 197 877 Total 198.570 198 26.825 13.413 Residual 171.744 196 876 Total 198.570 198 Regression df F Sig b 29.501 000 15.307 000 c a Dependent Variable: ERP Success b Predictors: (Constant), Top management suport c Predictors: (Constant), Top management suport, Supp_c_cult_c Coefficients Model a Unstandardized Coefficients Standardized T Sig Coefficients B Std Error (Constant) 004 066 Supp_c 361 066 (Constant) 003 067 Supp_c 140 221 Supp_c_cult_c 061 058 Beta 060 952 5.431 000 048 962 140 631 000 072 1.048 002 a Dependent Variable: ERP Success 361 91 Moderating effect of Organizational culture (Cult) on the Teamwork and compostion – ERP implementation success relationship Model Summary Model R R Square Adjusted R Std Error of the Square Estimate 221 a 049 044 97904118 308 b 095 090 98110086 a Predictors: (Constant), Team_c b Predictors: (Constant), Team_c, Team_c_cult_c Coefficients Model a Unstandardized Coefficients Standardized T Sig Coefficients B Std Error Beta (Constant) 003 069 Team_c 221 069 (Constant) 012 073 Team_c 303 209 Team_c_cult_c 024 057 049 961 3.188 002 167 868 304 1.453 003 087 417 049 221 a Dependent Variable: ERP Success Moderating effect of Organizational culture (Cult) on the Enterprise-wide communication – ERP implementation success relationship Model Summary Model R R Square Adjusted R Std Error of the Square Estimate 282 a 079 075 96336948 411 b 169 089 95564647 a Predictors: (Constant), Comm_c b Predictors: (Constant), Comm_c, Comm_c_cult_c Coefficients a 92 Model Unstandardized Coefficients Standardized t Sig Coefficients B Std Error Beta (Constant) 005 068 Comm_c 282 068 (Constant) 015 068 Comm_c 134 214 Comm_c_cult_c 119 058 070 944 4.118 000 216 829 134 626 022 129 2.049 042 282 a Dependent Variable: ERP Success Moderating effect of Organizational culture (Cult) on the Project management program – ERP implementation success relationship Model Summary Model R R Square Adjusted R Std Error of the Square Estimate 346 a 119 115 94209845 370 b 137 128 93514209 a Predictors: (Constant), Proj_c b Predictors: (Constant), Proj_c, Proj_c_cult_c Coefficients Model a Unstandardized Coefficients Standardized t Sig Coefficients B Std Error (Constant) 003 067 Proj_c 345 067 (Constant) 047 070 Proj_c 790 234 Proj_c_cult_c 122 061 Beta 052 958 5.170 000 667 506 791 3.382 001 464 1.985 048 a Dependent Variable: ERP Success 346 93 APPENDIX PLOTTING DIAGRAM FOR MODERATING EFFECT ON ORGANIZATIONAL CULTURE