Estimating the impact of enterprise resource planning project management decisions on post-implementation maintenance costs: a case study using simulation modelling

Abstract

Organisations often make implementation decisions with little consideration for the maintenance phase of an enterprise resource planning (ERP) system, resulting in significant recurring maintenance costs. Poor cost estimations are likely related to the lack of an appropriate framework for enterprise-wide pre-packaged software maintenance, which requires an ongoing relationship with the software vendor (Markus, M.L., Tanis, C., and Fenema, P.C., 2000. Multisite ERP implementation. CACM, 43 (4), 42–46). The end result is that critical project decisions are made with little empirical data, resulting in substantial long-term cost impacts. The product of this research is a formal dynamic simulation model that enables theory testing, scenario exploration and policy analysis. The simulation model ERPMAINT1 was developed by combining and extending existing frameworks in several research domains, and by incorporating quantitative and qualitative case study data. The ERPMAINT1 model evaluates tradeoffs between different ERP project management decisions and their impact on post-implementation total cost of ownership (TCO). Through model simulations a variety of dynamic insights were revealed that could assist ERP project managers. Major findings from the simulation show that upfront investments in mentoring and system exposure translate to long-term cost savings. The findings also indicate that in addition to customisations, add-ons have a significant impact on TCO.

Keywords:

• enterprise systems
• total cost of ownership
• ERP
• system dynamics
• project management
• cost estimation model

Notes

1. Fluor is a large US-based engineering and construction firm operating in all major business sectors all over the world, with revenues in excess of US$20 Billion in 2008.

2. A reference mode is a graphical representation of the behaviour of a variable over time.

3.  http://www.albany.edu/about.php (Accessed November 21, 2009)

4. The Beer Game was developed to introduce students, managers and executives to concepts of system dynamics. The purpose of the game is to illustrate the key principle that ‘structure produces behaviour’. Players experience the pressures of playing a role in a complex system and can see long range effects during the course of the game. Each player participates as a member of a team that must meet its customers' demands. The object of the game is to minimise the total cost for your team. (Source: System Dynamics Society Website)

5. STRATAGEM is an operational game specifically designed for use with corporate and public managers and with university students. The game was originally developed to educate government officials responsible for energy and environment programmes in Latin America. It offered them the opportunity to gain experience in making decisions required to achieve balanced growth in the capital stocks influencing their country's population growth, material standard of living, economic output, international trade, environmental quality, and energy use. However, it has also been used by officials with similar responsibilities in industrialised countries in East and West (Meadows et al. 2000).