doi:10.1111/j.1365-2575.2008.00305.

Info Systems J (2008) 18, 405–426 405

The process of enterprise resource planning

implementation and business process
re-engineering: tales from two Chinese
small and medium-sized enterprises
Mike Newman* & Yu Zhao†
*Manchester Business School (Crawford M29), University of Manchester, Manchester
M15 6PB, UK and NHH, Bergen, Norway, email: mike.newman@manchester.ac.uk,
†
Manchester Business School, University of Manchester, email: yufanzhao@hotmail.com

Abstract. Using an innovative process model, we describe and analyse the

process of introducing enterprise resource planning (ERP) systems in two Chinese
small and medium-sized enterprises and especially their decisions concerning
business process re-engineering. First we compared the results from our cases
with Martinsons’ earlier work (2004). One case seemed to fit most of the charac-
teristics of a private venture (PV) whereas the other case, also a PV, had a very
low degree of fit. We used the process model to offer further insights and features
such as its predictive power. Second, and as predicted, we also observed the
differential role of top management support in the two Chinese companies. But
thirdly, and somewhat surprisingly, we found that cultural issues were only of
limited importance. Finally, the ability of the project team to deal with unexpected
events was seen as critical in ensuring the stability of a project. In contrast, project
drift is shown to lead to a degree of chaos. We offer some suggestions as to how
stakeholders can improve their chances of implementing ERP systems more
successfully.

Keywords: ERP implementation, BPR, information systems, ISD, success,

failure

1. INTRODUCTION

By implementing enterprise resource planning (ERP) systems, organizations are supposedly

able to connect different divisions and functions together, thus many problems associated with
using diverse legacy systems can be ameliorated, if not solved. ERP systems are believed to
have had the most profound effect on an organization compared with any other information
technology (IT) innovations (Rajagopal, 2002; Shang & Seddon, 2002). ERPs are considered

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 406 M. Newman & Y. Zhao

‘the price of entry for running a business’ (Kumar & Van Hillegersberg, 2000) and we have
witnessed a rapid worldwide growth in the number of such systems. A study by IDC (http://
www.idc.com) anticipated that worldwide spending on ERP software and related functions
would grow at a compound annual rate of 13.5% between 2001 and 2006, hitting $187 billion
in 2006. However, much of the research into ERP development has had a distinctly Western
flavour and has emphasized large organizations (Davison, 2002). In this paper we wish to
focus on ERP development in two Chinese small and medium-sized enterprises (SMEs).
SMEs are defined in Wikipedia as enterprises whose sizes range from 25–500 employees
although Chinese SMEs tend to be larger than those in the West.
In China, market reform along with the entry to the World Trade Organisation has stimulated
heavy investments in IT by local companies striving to become more globally competitive. In
contrast, Martinsons (2002) gives an account of the struggles of Chinese companies to adopt
electronic commerce systems. Constituting the bulk of software investment, the ERP market
in SMEs is expected to reach RMB 24.3 billion by 2010 up from RMB 7.28 billion in 2005, an
annual growth of 27.3% (CCW Research, 2007). Attracted by such tremendous growth
potential, not only have many domestic ERP vendors emerged, but also global giant vendors
such as SAP (http://www.sap.com) and Oracle have entered the Chinese market. China is now
the third-largest IT market after the US and China’s IT market is growing at double-digit annual
rates (Martinsons, 2004). However, market expansion does not mean that ERP implementa-
tions are easily accomplished. On the contrary, a large number of organizations failed to
implement their ERP or did not fully achieve expected goals following major investment in this
area. Furthermore, this failure rate among SMEs is particularly high (Davison, 2002; He, 2004;
China High-tech Industry Herald, 2005).
In order to realize the advantages of the ‘best practices’ of ERP, it is often advocated that
organizations should re-engineer their business processes to match processes embedded in
ERP systems (Markus & Tanis, 2000) but this can bring other problems to the fore, as no two
organizations are identical (Wagner & Newell, 2004; Olsen & Sætre, 2007). One of the major
hurdles to successful ERP implementation is that many Chinese SMEs regard implementing
ERP as a means to achieve modernization rather than to replace legacy systems and realize
organizational change. Therefore, conflicts between ERP processes and extant business
processes may arise and, as we will show, this applies particularly to efforts to re-engineer.
The purpose of this paper is to study the outcomes of ERP projects in two Chinese SMEs
and show how the outcomes are related to the process of implementation while at the same
time paying special attention to business process re-engineering (BPR) decisions. Two com-
parative cases are analysed in some detail to demonstrate the relationship between ERP
implementation and BPR, applying a parallel process model as a framework for case analysis
(Newman & Zhu, 2007). With our aim of studying ERP implementation processes in Chinese
SMEs and their relationship with BPR, this paper is specifically guided by two research
questions:

1 What are the major issues associated with accommodating BPR when implementing ERP
systems in Chinese SMEs?

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 Process of ERP implementation and BPR 407

2 How can the success or failure of ERP projects be better explained using a socio-technical
parallel process model compared with a more conventional factor study approach?

The remainder of this paper is structured as follows. Firstly, the main literatures related to ERP
and BPR issues, and information systems (IS) implementation are reviewed. We then sum-
marize the conceptual process model we employ. This is followed by a section detailing the
qualitative research method chosen and a description of the research sites. Thereafter we
present results from the two case studies, which are analysed and discussed. Finally, the
paper ends with implications for various stakeholders and pointers for future research.

2. LITERATURE REVIEW

2.1 ERP success and failure

By streamlining data flows throughout the organization, ERPs promise dramatic gains to a
company’s efficiency and profitability (Davenport, 1998; Fahy, 2001). However, implementing
ERPs is also associated with high risks. According to Escalle et al. (1999), ERP spending can
run as high as 2–3% of company revenues. Many companies have been threatened with
bankruptcy after their ERP projects failed. Researchers have reported negative outcomes
of several major ERP projects in organizations such as FoxMeyer, Mobil Europe, Dell, Dow
Chemical (Davenport, 1998), Siemens, Panasonic and Bruno Magli (Robey et al., 2002).
Therefore, an ERP system’s ability to transform and streamline organizations cannot be taken
for granted, but should be subject to investigation. Consequently, the success and failure of
ERPs have been broadly studied by both academics and industry professionals. Owing to
space considerations, we will not be addressing the complex question as to what constitutes
success and failure in ERP implementation in this paper. Where the matter is not obvious, we
will adopt a stakeholder view that may involve multiple and conflicting opinions on the subject.
Researchers have revealed a number of common issues that influence outcomes of ERP
implementation projects. Rather unsurprisingly, Kwon & Zmud (1987) have concluded that the
success or failure of an organization’s introduction of an IS depends on the understanding of
internal and external organizational environments, the IS itself and the implementation
process. Features that affect ERP implementation vary across cases. However, some critical
factors recur in the literature. Top management support is considered an indispensable
success factor in ERP implementation (Bingi et al., 1999; Chen, 2001; Martinsons, 2004). In
his study of eight ERP projects in China, Martinsons (2004) reports that top management
initiated ERP projects in five of his eight cases. Four of these were judged to be successful
implementations, whereas all three cases promoted by IT managers were deemed failures.
This was also supported by further evidence from a wider survey of Chinese businesses
(Martinsons, 2004). While Reimers (2002) in his earlier study of ERP systems also found
support for this argument, he noted that it was the type of management that was key. He claims
and offers evidence to show that more modern types of management (e.g. consensus-building,
empowerment) are crucial to supporting the introduction of ERP systems. This suggests that

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 408 M. Newman & Y. Zhao

if you delegate ERP responsibilities to middle managers and the IT group in particular, this
may be seen by stakeholders as a signal that the ERP project is not highly critical to the
organization.

2.2 BPR

In order to take advantage of the ‘best practices’ embedded in ERP systems, vendors
commonly suggest that companies restructure (or re-engineer) their business processes. As
indicated by Hammer (1999), ‘a successful ERP implementation must be managed as a
program of wide-ranging organisational change rather than as a software installation effort’.
Companies such as IBM and Owens Corning implemented ERP systems and conducted BPR
simultaneously (Hammer & Champy, 2001). According to Hammer (1990), re-engineering
‘strives to break away from the old rules about how we organise and conduct business’.

2.2.3 BPR challenges in China

BPR, with its promise of changing radically an organization’s business processes and dra-
matically improving performances (Hammer & Champy, 2001), has attracted the attention of
many Chinese companies. However, academics have claimed that adopting new business
methods and specific technologies depends on various cultural, social, economic and political
factors as well as interactions between them (Ein-dor et al., 1993). Among these factors,
cultural issues have been considered the most important ones in Chinese companies
(Martinsons, 2004).
The tenets of Confucianism suggest that a BPR effort will challenge Chinese ideology and
the workforce will resist radical change including changes to the management hierarchy
(Schein, 1992; Martinsons & Hempel, 1998; Martinsons, 2004). Confucius considered it
important to maintain a state of harmonious equilibrium in society. This implies that incremental
change is preferable in such societies. In contrast, BPR is based on radical change and rapid
transformation of business processes. Therefore, most Chinese companies, following this
tradition, would be more inclined not to re-engineer their business processes. In addition, as
Confucianism stresses the importance of duty and obedience, the transformation from a
hierarchical structure with management control to a flatter one with more participation is likely
to meet with resistance from both managers and employees. The original study by Hofstede
(1980) supports this argument: the power distance measure in Chinese societies, an expres-
sion of hierarchy in businesses, was significantly greater than in Western countries (c.f.
Redding, 1990; Martinsons & Davison, 2007).
Most Chinese managers advocate stability and want to maintain power and control. Indeed,
many employees are satisfied with getting explicit work instructions and are not willing to
initiate actions that are often associated with risks (Martinsons & Hempel, 1998). Davison
(2002) explores this issue, claiming that ‘. . . many clerical staff at the bottom of the hierarchy
in a Chinese organisation feel much safer if they are told what to do; they know what is
expected’. Furthermore, as the dominant organizations in China are still State enterprises, the

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 Process of ERP implementation and BPR 409

government may take actions to hold back re-engineering efforts if they affect employment
negatively (c.f. Hammer & Champy, 2001; Martinsons, 2004). However, in our empirical cases,
this State influence can only be an indirect one: both are privately owned and managed SMEs.
This may challenge some of the previous findings concerning culture and ERP systems
implementation in China. However, many of the results reported above come from factor
studies, which, as we shall show, have significant epistemological limitations.
From a Chinese business perspective, Western ERP systems ignore some of the most
cherished traditions and practices in China such as access to information and even basic
numbering systems (Davison, 2002). Also the situation in China is that many organizations do
not see the need to re-design their business processes. ERPs are the embodiment of Western
values, bringing them into conflict with Chinese traditions (Davison, 2002). This suggests that
Chinese companies implementing ERP systems are less likely to carry out BPR than their
Western counterparts (O’Leary, 2000). But of course this is relative: many of these issues
also apply to Western companies buying ‘foreign’ ERP systems. For example, a European
company purchasing an American product may also find the address conventions have to be
modified (e.g. zip codes to postal codes) and have to adapt systems of measurement from
imperial to metric.

2.3 Studying Information Systems Development

The several models for studying Information Systems Development (ISD) can be categorized
into two major streams of research: factor studies and process modelling.

2.3.1 Factor studies

A large number of IS implementation studies have tried to identify factors that are related to IS
implementation success and failure in general (e.g. Burke et al., 2001; Poon & Wagner, 2001;
Somers & Nelson, 2001; Umble et al., 2003; Kanter & Walsh, 2004), and in particular ERP
systems in China (Reimers, 2001; 2002; Martinsons, 2004). They use independent, control
variables which are statistically associated with dependent variables, i.e. the project outcomes
(Lyytinen, 1987). The value of these studies is that they use cause-effect patterns to investi-
gate IS implementation difficulties, that have provided some valuable insight into the nature of
IS problems (De Abreu & Conrath, 1993).
Nonetheless, some researchers (e.g. Markus & Robey, 1988; Newman & Robey, 1992)
have noted that despite the prevalence of such studies, factor models have little practical utility
in coping with IS problems due to their lack of understanding of implementation process
features, i.e. they only emphasize what factors are associated with outcomes, not how they
shape those outcomes (Barki & Hartwick, 1994; Robey, 1994). Processes are largely ignored
and are closed boxed. For example, Holland & Light’s (1999) model grouped critical success
factors into strategic and tactical factors; the model suggested by Mandal & Gunasekaran
(2003) focused on change management. However, all these models have some limitations
when applied to ERP implementations (Makipaa, 2003). Moreover, cultural factors are often

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 410 M. Newman & Y. Zhao

treated uncritically in the literature just like another set of variables and these, like other factors,
do not reveal how processes unfold over time.

2.3.2 Process modelling

Process modelling sees IS implementation as a sequence of events and seeks to explain

how and why outcomes unfold over time (Boudreau & Robey, 1999). One of the premises of
process research is that outcomes can only be interpreted in the light of the process (Newman
& Zhu, 2007). According to Kwon & Zmud (1987), ISD can be represented as a socio-technical
change process. Therefore, a process approach which focuses on the dynamics of social
change can help researchers to analyse IS implementation processes practically. Process
models typically examine critical events in sequence, linking antecedent conditions with
outcomes. But, as pointed out by Newman & Robey (1992), process and factor models can
complement each other, providing a more comprehensive explanation of IS implementation
issues (De Abreu & Conrath, 1993).

3. RESEARCH MODEL

The conceptual foundation of this research model combines two streams of organizational
change literature: a socio-technical model and punctuated equilibrium theory (Gersick, 1991)
combined with social process theory. Leavitt’s (1965) socio-technical change model (see
Figure 1 below) is used to identity the relationships between structure, people, technology and
task and their effects on IS implementation. The social process model is applied to describe the
project outcomes through the study of the entire implementation process, where system
change is seen as a construction of a sequence of critical events representing equilibrium
periods (or incremental change between critical events) and disequilibrium periods (or ‘revo-

Figure 1. Leavitt’s diamond (Leavitt,

1965).

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 Process of ERP implementation and BPR 411

lutionary change associated with instability) played out in organizational and external contexts
(Tushman & Anderson, 1986; Pettigrew, 1990; 1992; Gersick, 1991; Newman & Zhu, 2007).
The appeal of the Leavitt model is its simplicity: changing technology (e.g. introducing ERP
systems) cannot be done in isolation. The criticisms of it centre on the static nature of the
model and the frequent need to discuss other components such as power, politics and culture.
However, the processual dimension and change element can be augmented when combined
with the other models.

3.1 Punctuated socio-technical model

During an ERP implementation process, when one component of the socio-technical system
is affected by a significant event, a gap will emerge between this component and another one,
thus breaking the process equilibrium. Gaps were interpreted by the researchers based
on empirical evidence. This can be illustrated in Newman & Zhu’s (2007) event model for
socio-technical analysis (Figure 2). After the gap appears and is recognized, some actions may
take place to remove the gap resulting either in restoring a balance (a successful intervention),
a sustained existence of the gap (a failure) or a new set of gaps (a deepening crisis).

3.2 Parallel socio-technical process model

The model is predicated on the belief that a careful explication of the process of IS imple-
mentation projects will reveal outcomes. Integrated with Leavitt’s socio-technical model and
the punctuated equilibrium theory, Newman & Zhu (2007) described an innovative parallel
process model (Figure 3). This is the model we apply as a framework to comprehensively
analyse two ERP implementation cases in Chinese SMEs and to develop pictorial trajectories.
Because we are interested in explaining how ERP projects can result in different outcomes, we
chose two companies who experienced contrasting results.

Event X

Structure Structure
Gap

Task Technology Task Technology

People People
Time

Figure 2. An event model for socio-technical analysis (following Newman & Zhu, 2007).

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 412 M. Newman & Y. Zhao

Use legacy system

Work
Antecedent conditions level W1 Wx W
process n
(W)

Outcomes
Project started Interaction Project finished
Project
level
process
(P) P1 P2 Px Pn

Time

Figure 3. Parallel process model with socio-technical entities (adapted from Newman & Zhu, 2007).

4. METHOD

In our research, two comparative cases in Chinese SMEs are examined empirically, guided by
the principles of interpretive research suggested by Klein & Myers (1999). The examination in
this research is framed in the form of ‘events’, ‘gaps’ and ‘balances’. The cases trace the
crucial interactions between the socio-technical elements and focus on the role of BPR.

4.1 Research sites

Our two cases were selected from the clothing industry. The figures from the National Bureau
of Statistics of China (2007) show that the annual retail sales in the clothing industry in 2007
(including garments, shoes, caps and other fashions) have increased by 23.5% compared with
the same period in 2006. In order to fulfil the requirements of both internal organizational
management and external coordination with business partners, more companies are investing
heavily in IS. ERP, as large management software packages, have become popular in this
industry. As most companies in the Chinese clothing industry are SMEs, it is important to pay
attention to ERP implementations in SMEs within this industry.
The research sites of this study are two privately owned and managed Chinese medium-
sized retail companies in shoes and fashions, respectively. At the time of writing, one company
had successfully implemented its ERP and was actively using it while the other one had
experienced delays, resistance and finally abandoned the project. There are differences
between the two companies. Olmec has manufacturing facilities, and so an ERP makes more
sense as a way to vertically integrate the value chain. Farina, on the other hand, has
design/marketing/retailing functions but without manufacturing. The backgrounds of the two
companies are described in the following sections.

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 Process of ERP implementation and BPR 413

4.1.1 Olmec case background (antecedent conditions)

The first research site selected is the Olmec Shoe Company (pseudonyms are used to mask
the identity of both companies – a condition of access). The brand of Olmec shoes has been
fashionable all over China since the early 1990s. Founded in 1989, Olmec now has 12
branches, seven modern outsourced shoemaking factories, and a large number of unified
stores nationwide.
In order to improve its competitive position in the marketplace, Olmec realized that its old IT
infrastructure could not efficiently handle new processes and increasing volumes of data from
different locations that came with its aggressive expansion. Olmec’s product variety is
acknowledged in the industry. At the time of considering an ERP, Olmec sold almost 2000
types of shoes, each type offered in more than 10 sizes. With the legacy system, it was
increasingly difficult to handle large quantities of product information such as the production
area, sales status, etc. Already well known for its excellent customer service, Olmec invested
a great deal to support its multi-channel business. The top management of Olmec therefore
decided that it was time to make some organizational changes. After extensive consultation,
Olmec finally chose to implement an ERP system called real time enterprise (RTEN). This
project was carried out with the clear support and leadership of top management.

4.1.2 Farina case background (antecedent conditions)

The other company in this study is the Farina Group, which is a luxury goods retailer with more
than 70 fashion houses nationwide. Farina designs, markets and distributes luxury clothing,
accessories, fragrances, make-up and home furnishings under the various brands of the
Farina Group. At the time the authors finished collecting data, the ERP project was still ongoing
at Farina but was experiencing some significant difficulties and delays. We subsequently
discovered that the ERP development was abandoned.
Farina has a comparatively flat organizational structure. Up to the time of purchasing their
ERP system, the existing business processes had been working reasonably well in Farina. The
decision to implement the enterprise application suite (EAS) was made by top management
because they saw many companies in the same trade had already implemented ERP systems,
and also because ERP vendors were competing to sell their products to the company. The top
management of Farina made this decision with the purpose of modernizing the company.
However, they specifically did not want to change existing business processes. Moreover, the
project of implementing EAS was delegated to the IS department. Both of these decisions
proved to be critical in the unfolding implementation story.

4.2 Data collection

Eleven semi-structured interviews were conducted in each company with stakeholders related
to the two ERP implementation projects. With the purpose of pursuing rich, in-depth informa-
tion, interviewees were selected from different levels within the two companies. Before the

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 414 M. Newman & Y. Zhao

Table 1. Interview schedules in Olmec and Farina

Title Transcript (Y/N)

Olmec
IT service manager Y
General manager Y
Internal consultant Y
Technician Y
IT service manager Y
Vice general manager Y
Vendor Y
Staff from Department of Finance Y
Store staff N
Retail manager N
Vendor N
Farina
IT manager N
Vice IT manager Y
Vice IT manager N
Vendor Y
Vice IT manager Y
Technician Y
Store staff Y
Staff from Department of Accounting N
General manager Y
Vendor Y
Vice IT manager Y
IT, information technology.

interviews, secondary data from media accounts, Internet resources, company websites and
annual reports were collected and carefully examined. These data were extremely helpful in
planning interview questions. Interviews were all conducted one-to-one with open-ended
questions. Respondents were encouraged to express their opinions freely, which revealed
much insightful information in this research. As recommended by Myers & Newman (2007),
we used a mirroring technique in questions and answers in order to elicit respondents’ stories
in their own words. We asked them to talk about both current events and to reflect on previous
events, i.e. retrospectively. In order to focus on issues related to the research topic, respon-
dents were not only invited to tell what they felt to be critical events occurring in the ERP
implementation process, but they were also encouraged to focus on the BPR effort and its
relation to the ERP project. Notes were made during all interviews and most of the interviews
were tape-recorded (see below). These recordings were then transcribed forming the main
data resource for subsequent detailed case analyses. Details of interviewees’ titles and
whether a transcript was made are shown in Table 1. The 22 interviews were conducted
between March and July 2005. The interviews were conducted in Chinese and varied in
duration between 25 and 80 minutes, averaging about 50 minutes each. One of the research-

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 Process of ERP implementation and BPR 415

ers then translated sections of the transcripts into English and discussed the findings with
the other author before using them in the description. In order to enhance the validity of
interviews, we asked for feedback on the completed narrative from one key informant in
each company.
Since the authors had the opportunity to see the two companies’ systems in use, we
obtained first-hand experience by observing how people worked with the systems. Besides
this, we had access to companies’ internal documentation such as project plans, the ERP
model and structure, business process, test documents, manual, help texts and some inter-
office memos were accessed and examined. Information obtained from those documents was
very helpful as supplementary data for case analysis.

4.3 Data analysis

The transcripts or sets of notes taken from documentary analysis and observation were
subjected to an iterative multi-step process of data analysis. The research process started with
the frameworks that have been explained in the previous section, which describes socio-
technical change, social process and critical events associated with the two IS projects.
Essentially, the process is a ‘tacking’ back and forth between the textual realm (the details) and
the social realm of contexts and history (the whole). In hermeneutics it would be referred to
as the hermeneutical circle (Klein & Myers, 1999). Hence, the generation of concepts and
frameworks forms an ongoing part of the data analysis as well as its conclusion. Our analysis
involved a detailed process mapping supported by a textual description. As a final step, the
authors compared the results from the two cases looking for similarities and differences. These
are highlighted in the discussion below.

5. RESULTS

5.1 General interpretation

Figures 4 and 5 illustrate the two companies’ ERP project trajectories, which are drawn
according to the framework of the parallel process model using the socio-technical entity
concept. By iteratively combing through interview transcripts and combining them with infor-
mation obtained from document analysis and observations, a set of critical events at both
project level processes and organization work level processes was identified by the authors.
These events were described in Leavitt’s diamond and arranged chronologically in the two
diagrams (Langley, 1999; Pentland, 1999). Finally, gaps that emerged between components of
Leavitt’s socio-technical system – structure, task, people and technology – were interpreted
and distinguished.
In Figures 4 and 5, the third row of project level encounters offers a short description of
critical events affecting the equilibrium of a project’s implementation. The two projects are both
viewed as punctuated equilibrium processes. The process in each company is mapped as a

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 416 M. Newman & Y. Zhao

2002----------------------------------------------------------- ----------------------------------------------------------------------2005

Merge with
ORGANIZATIONAL Contract
another
A ISSUES signed,
company
N budget
T allocated
E
C Top Project Buy in
E PROJECT management team middle-
D MANAGEMENT -led structure training ware
E ISSUES established
N
T
RTEN Tasks unclear Task Pilot Crises with Middle- New pilot RTEN
C PROJECT LEVEL started amongst project
defined test database ware store test rolled
O ENCOUNTERS team members synchronization added out
N
D
I
T PROJECT LEVEL P1 P2 P3 P4 P5 P6 P7 P8
I PROCESS
O
N
S
WORK LEVEL Legacy systems still
being used New
PROCESS W1 W4 W5 W7 W8
system
Business process in use
continuously changed

Structure

W1
Task Technology

People 74

Figure 4. Olmec’s real time enterprise (RTEN) project trajectory 2002–2005.

sequence of socio-technical entities (represented as diamonds in the diagrams) with gaps

(indicated by thick grey arrows) between components. In the following two sections, a process
analysis of ERP implementations in both Olmec and Farina are summarized based on Fig-
ures 4 and 5. Issues related to BPR are also highlighted.

5.2 The project implementation in Olmec – a brief description

5.2.1 Process analysis

In 2002, it was realized by senior management that the old IT infrastructure of Olmec (the
legacy systems) was too inefficient. Therefore, in order to sustain the company’s competitive
position, top management started the process of organizational change by implementing a new
IT system. The planning period lasted for almost a year before the vendor was selected and
an off-the-shelf package was bought in.
The start of the project was motivated by a gap between functions of the legacy system and
requirements for an expanding business (W1 in Figure 4). The initiative of this project was to
fill the gap by adopting a new system and optimising the company’s business processes (P1).
After extensive consultation, a vendor was selected and the ERP package was bought. The
project team was established to implement the RTEN system.

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 Process of ERP implementation and BPR 417

2003----------------------------------------------------------------------------------------------------------------------------------

Contract signed Conflict between Vice IT

ORGANIZATIONAL
A project leader (IT manager
ISSUES manager) and empowered
N
other departments
T
E
C Project team Project leader Important
E PROJECT formed leaves file deleted
D MANAGEMENT by accident
E ISSUES
N
T
EAS Problem with Project team First pilot System Re-install the Second
C PROJECT LEVEL implementation leadership restructured test collapsed in system and pilot
O ENCOUNTERS started one store backup added
N
D
I
T PROJECT LEVEL P1 P2 P3 P4 P5 P6 P7
I PROCESS
O
N
S Work continues
Work continues using using legacy
WORK LEVEL W1 W2 legacy systems W4 W5 systems W7
PROCESS

Structure

W2
Task Technology

People

Figure 5. Farina’s enterprise application suite (EAS) implementation trajectory 2003–.

At Olmec, top management actively supported this project. However, at the beginning stage,
although the project team was formed, the responsibility of each team member was not clearly
defined. Therefore there was a gap between people and task since each team member did not
fully realize their mission (P2 in Figure 4). To deal with this situation, extensive communication
and consultation with the vendor was made. After that, tasks were clearly defined amongst
project team members (P3). Hence the project manager was in charge of the project that was
implemented by the vendor. The vice general manager’s task was to align BPR with both
business objectives and IT objectives. Along with the ERP system being implemented, busi-
ness processes in Olmec had been under review continually. Although RTEN is a standardized
system, in practice, company tests are still necessary because new problems may arise when
the system is applied to different platforms and operating systems. In the summer of 2004, the
system was first ready for testing at the head office and one branch of Olmec. Before testing,
end users were trained to operate the new system. During testing, they detected some
technical problems. For example, a ‘bug’ occurred in the interface that could cause operators
to skip the value of the key in the database thus interrupting the programme. Therefore, a gap
emerged between technology and task (P4 and W4). This gap was solved after errors were
systematically removed by the project team.

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 418 M. Newman & Y. Zhao

Totally unrelated to the implementation, and in order to enlarge its business, Olmec made
a strategic decision to merge with another national shoe company. In Figure 4, this is shown
in the line ‘organizational issues’. The database of the other company was even larger than
Olmec’s. This merger increased the requirements for data transmission, requiring real-time
data sharing but this resulted in a gap between technology and task in both process level and
organizational work level (P5 and W5). They decided to buy a mature middleware package:
Structured Query Language (SQL) Server Replication was added to solve the data transmis-
sion problem and database synchronization was finally realized (P6).
Olmec’s workflow was improved to match the ‘best practice’ of the new system. By the end
of 2004, the project team had carried out pilot tests at stores. They also trained the users to
operate it. From this test, some technical problems were detected and also some practical
problems associated with the invoicing system and account management system were uncov-
ered. Hence, a gap appeared between technology and task (P7 and W7). In the following
months, all project team members worked together to remove these bugs and solve other
problems. The new system was successfully rolled out to all branches and stores in the first
quarter of 2005. The business processes of Olmec improved dramatically and sales and
revenues were beginning to increase. RTEN later entered the maintenance phase (P8). It was
interesting to note that although Olmec’s project was deemed successful by top management,
the implementation was not without difficulties.

5.3 The project implementation in Farina – a brief description

5.3.1 Process analysis

The project trajectory and organizational work process trajectory in Farina are shown in
Figure 5. By the time the project started, the existing processes in Farina were working
reasonably well (see W1 in Figure 5). The decision to implement EAS was made by top
management for two reasons. First, Farina saw that many companies in the same trade had
already implemented ERPs. Second, vendors were competing to sell their software products
to the company. Therefore, Farina decided to buy in a software package in expectation of
modernizing the company. The top management delegated the implementation of ERP to the
IS department. The project began with an IS department-led structure (P1).
The project team was formed with the IT manager in charge of the implementation process.
However, under time pressure from the project and due to insufficient communication, there
were conflicts between the project management and various departments. Top management
did not act swiftly to resolve this conflict and work drifted. Subsequently, the IT manager left the
company under pressure leaving a leadership vacuum and delaying the implementation. Gaps
therefore emerged amongst people, task and structure (P2 and W2). The problem of poor
project leadership was then discussed in a meeting held by top management. Because it was
not easy to recruit a new person to lead both the IS department and the EAS project in a short
space of time, the decision was made to empower the vice IT manager to take over the role

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 Process of ERP implementation and BPR 419

of project leader. The gap caused by the IT manager’s leaving was filled for that moment and
balance was restored (P3).
In the next period the project team members did little to align the processes of EAS with
those existing in Farina. They seemed to assume that the business processes of Farina would
not conflict with those embedded in EAS. On the one hand, no attempt was made to redesign
existing processes or design new ones within the company. On the other hand, the system was
implemented by the vendor without any customization. When the system was first ready for
testing in mid-2004 at the head office and two clothing stores, operators felt that many of their
requirements could not be met by using the new system. They claimed that it was more
convenient to handle business using the legacy system. Therefore, the pilot test revealed gaps
between people and technology, task and technology at both project level and organizational
work level (P4 and W4). The vendor and project team were trying to make some changes to
EAS processes in order to match the end users’ requirement.
Just after the pilot test was conducted, the new system suddenly failed in one pilot store
because of a software problem. Since no backup was made in the system, EAS crashed and
could not be rebooted. Gaps subsequently emerged between people, technology and task (P5
and W5). The only solution to the situation was to reinstall the whole system in that store. A
method of backups to the EAS system was then introduced to prevent the problem from
recurring. Training was provided to end users instructing them how both to operate and to
maintain the system. As a result, process balance was restored (P6).
EAS was in a testing phase at the beginning of 2005. Because the customized system was
not stable and could not be upgraded, many new technical problems were detected. Moreover,
because end-users from different levels, different positions and working in different types of
stores had different requirements, the system still needed modification in many places. Farina
chose not to transform its business processes during the EAS implementation process.
Consequently, the software package had to be modified again and again. Gaps revealed from
the first pilot test in both project level and organizational work level were not eliminated but
became more visible (P7 and W7). Since the investment was nearly 5% of total revenue, if the
EAS project failed, the company would face a disadvantaged future, financially and competi-
tively. Staff continued to use the legacy systems and we learned later that the EAS system was
abandoned by Farina.

6. DISCUSSION

We begin by revisiting in turn the two research questions raised at the beginning of the paper:

1 What are the issues associated with accommodating BPR when implementing ERP systems
in Chinese SMEs?

One way of displaying the results of our process studies is to compare our findings with
those of previous ERP implementation research in China. Martinsons’ (2004) paper summa-
rizes the findings of 189 SAP customers drawn from Reimers’ (2001; 2002) survey work.

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 420 M. Newman & Y. Zhao

Table 2. A comparison of Olmec’s and Farina’s results with Martinsons (2004)

PVs
Martinsons (2004)
Results Olmec Farina

Common characteristics

Projects are rarely completed on time. Not supported. Completed on time Some support. Never completed
Budgets are massaged informally within budget
Lack of improvements after ERP Not supported. Management was N/A
implementation raises questions pleased with results
about value
Projects led by general management Supported Supported
are judged to be much more
successful than those let by IT
managers

Eight ERP differences (PV vs. SOEs)

Primary project aims. Competitive General support. Olmec wanted to Not supported. No clear aims.
improvements (PVs) vs. Cost cutting expand and become more Farina was interested in
and automation (SOEs) competitive. The merger reinforced automating existing processes
this.
Role of top management. PVs – hands Supported Not supported
on approach. SOEs – delegate
Role of steering committee. More Supported Not supported. Problems escalated
frequent meetings and sharper focus and were never resolved
on problem solving in PVs
Role of consultants. PVs use outside Supported Supported
help from ERP experts
Scope of implementation. Cross Not studied Not studied
functional emphasis in PVs
Pace of implementation quicker in PVs Some support for this and probably Not supported. Farina got mired in
related to TM support ERP system-business process
incompatibilities.
Implementation problems. Less Some support. They still experienced Not supported
frequent and less serious problems major issues from unexpected
in PVs sources (e.g. the merger)
Evaluation and outcomes. PVs Supported Not supported. Poor outcome and
undertake more systematic conflictual process were never
evaluation and control. under control
Summary of findings Strong support Mostly no support
PVs, private ventures; ERP, enterprise resource planning; IT, information technology; SOEs, state-owned enterprises; TM, Top Management.

Reimer’s works are factor studies but Martinsons supplements Reimer’s results with eight
intensive case studies (a simple form of process model), four in state-owned enterprises
(SOEs) and four in private ventures (PVs), which the author uses in a indicative manner. The
findings are summarized in Table 2 with the first column used for both the common charac-
teristics of ERPs in China (three rows) and differences between SOEs and PVs (eight rows).

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 Process of ERP implementation and BPR 421

Table 3. Summary of additional findings from a process perspective

Feature Olmec Farina

History (antecedent conditions) Strong motivation to change. Great Limited felt need to change. Limited
care in choosing the vendor. Strong search for vendors. Seemed
and active Top Management excessively influenced by vendors.
support Top management delegated the
work to the IT group
Process of ERP implementation Some difficulties especially over the Many difficulties, conflict and
including context merger. BPR part of the process. resistance. No BPR conducted.
Gaps Some Many and persistent
Interventions Yes and successful Some but mostly fruitless
Interactions between Work and Extensive and significant Extensive and significant
Project processes
BPR Yes. Planned and conducted as part No. An explicit management decision.
of the implementation process
A priori prediction based on the Success. Continued use of RTEN Failure
model (at data collection phase)
Outcome (at time of writing) ERP system delivered successfully ERP system abandoned. Legacy
and actively used. system is still used.
IT, information technology; ERP, enterprise resource planning; BPR, business process re-engineering; RTEN, real time enterprise.

The support for these characteristics from the Olmec and Farina cases are presented in the
two remaining columns.
In summary, Olmec, a PV, exhibited many of the characteristics summarized in Martinsons’
(2004) study. In contrast, Farina offered little support for the earlier study. In fact, it appeared
as if Farina was acting like a classic SOE.
Next we look at what the process model adds to our understanding of ERP implemen-
tation in China. This is to address our second research question:

2 How can the success or failure of ERP projects be better explained using a socio-technical
parallel process model compared with a more conventional factor study approach?

Our findings are summarized in Table 3 where salient features of the model are used to show
the differences and similarities between the two cases.
The process model is explicit concerning the importance of history (antecedent conditions).
The difference in motivation to change was marked between Olmec and Farina. Olmec had an
urgent and growing need to replace its ageing legacy systems. Farina it appears did not and
seemed to be excessively influenced by the ERP vendors. Farina’s search for an ERP system
was consequently limited. There were also clear differences in the support of top management
and the care taken in choosing a vendor. It is reasonable to suggest that early decisions in
projects require greater care due to path dependency.
The process diagrams (Figures 4 and 5) show the trajectory of a project, linking antecedent
conditions to outcomes. As a general guide, the reader can judge the difficulties a project is
experiencing by the number of gaps that occur (thick arrows), the persistence of these gaps

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 422 M. Newman & Y. Zhao

and the project team’s ability to resolve these gaps, thereby restore equilibrium. In Olmec there
were several gaps but fewer than at Farina, where there were many, several of which
represented on-going, unresolved problems. Gaps are common even in successful imple-
mentations: the crucial point is how the project team and management resolve them. It was
interesting to note that although Olmec’s project was deemed successful by top management,
the RTEN implementation was not without difficulties. There were gaps at several points and
management had to cope with these by devising interventions. Crucially, Olmec was able to
resolve all these problems and in particular cope with the merger that occurred during the
project (i.e. context).
Additionally, the model introduces the innovation of parallel processes. In most situations,
as in our cases, an organization establishes a project team separate from the legacy or work
processes. As one of the novelties of our model, these are considered as parallel processes. In
Figures 4 and 5 we can see the advantage of treating these processes separately. A project is
often initiated as a result of a problem, which arises from the work process, as at Olmec. The
larger the problem the greater the motivation to ‘unfreeze’ the workforce to make changes.
However, in both Olmec and Farina we also see how the project and work processes interacted
at various points. For example, when the ERP systems were piloted, this produced several gaps
in both cases. But this interaction was not confined to pilot tests: there were other times when
there were significant interactions all of which influenced the trajectories of the projects.
In contrast to the situation in Farina, Olmec gave high priority to changing business pro-
cesses. Top management was actively involved in both the planning and implementing phases
of the project. They always discussed with the vendor to make sure the ‘best practices’
embedded in RTEN matched the company’s requirements. The ERP implementation inter-
acted with the BPR initiative thus facilitating organizational change. However, in China, since
most SMEs lack a formal business process model (Martinsons & Hempel, 1998), companies’
structures and processes often do not match processes in the ERP systems. Therefore, most
Chinese SMEs need to re-engineer their business processes either before or during ERP
implementation projects. Olmec’s decision to carry out BPR during the ERP implementa-
tion process appears to be a good practice to emulate for other SMEs.
As neither ERP project was fully complete at the time of data collection, the researchers
could make a prediction of outcomes based on the features of the process model and the
detailed evidence from the two SMEs. As the authors predicted, Olmec’s RTEN was not only
well received but it continued in use whereas Farina abandoned EAS and continued to use the
legacy system.
To summarize, the disadvantage of process models is that they can only examine a
relatively few cases. In contrast, factor models can look for statistical associations across many
cases, linking factors such as top management support, culture, resistance, etc., with mea-
sures of outcomes. In our two cases, top management support and successful outcomes
appear to be related, as predicted by factor studies. However, many of the findings from
Farina are at odds with those in Martinsons’ (2004) study. The explanations for these
differences emerged only through a study of processes. Moreover, ERP implementations often
require ongoing adjustment in work practices. Robey et al. (2002) showed that such changes

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 Process of ERP implementation and BPR 423

were necessary to overcome learning barriers, where learning is a continuous process follow-
ing an ERP implementation. Such explanatory power cannot be derived from factor
studies alone. It is probably no coincidence that Martinsons used case studies to further
interpret the earlier survey findings (Martinsons, 2004).
As an aside, it was surprising to us that cultural issues did not play a more important role in
the implementation processes at both companies. Where culture does seem to exert an impact
is in the respect for authority by employees at both Olmec and Farina. In Farina, however, the
lack of senior management support for the project and handing project leadership to the IT
group was seen as a signal to workers about the importance of the project. This lack of
leadership and direction and the turmoil over the IT leadership seemed to contribute to the
resistance we observed at Farina. But in many other respects, we could have been describing
ERP implementation processes in the West. However, the point has already been made that
adopting software packages built abroad is not straightforward for companies, even in devel-
oped countries.

7. CONCLUSION

In this final section, based on our findings, we offer suggestions to stakeholders including
senior managers, project leaders and researchers. For senior management, we see their
importance in supporting major IT projects both initially when the vendor is chosen and the
budget agreed, and later when important decisions and interventions have to be made. In
Chinese SMEs this is particularly crucial as workers generally rely on clear leadership and
direction. If that is missing, as at Farina, projects tend to drift or get mired in conflicts. Top
management also need to issue clear directives about the need to conduct BPR. The practice
at Olmec seems to be a good one to follow. Many of the ongoing struggles at Farina can be
traced to their failings in this area and in particular their early decision not to conduct BPR.
It is trite so say that implementation is a process and that project leaders need to manage
the process. But again our cases showed clear differences between the practices at Olmec
and Farina. The crucial factor here was not that gaps (punctuations) appeared in the process
– in both cases there were major gaps. It was the ability of the project leader to deal with the
gaps and design appropriate interventions, which was the distinguishing feature. In Olmec, the
project leader seemed particularly effective at problem solving and not allowing the RTEN
project to drift, a stark contrast to what was happening at Farina. However, in fairness to the
project leader at Farina, he was experiencing problems that were structural and not of his own
making, following the decision by top management not to re-engineer business processes.
For researchers, the message is that empirical process models, while being labour-
intensive and time consuming, yield many insights missing from the conventional factor studies
(Table 3). While factor studies tell us what variables may be related to outcomes, process
models tell us how the story of implementation unfolds over time, linking history to outcomes
and placing the story within the context of the organization and beyond. We would recommend
that others, including PhD candidates, consider similar approaches to research. More cases,

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 424 M. Newman & Y. Zhao

using a process approach in Chinese SMEs and other research settings will increase our
knowledge in this area.

7.1 Future research

The data we have analysed above have already suggested further lines of research that will
bear fruit and we will not repeat them here. Generally, with the purpose of examining problems
associated with using BPR techniques when implementing ERP systems, more cases in
different countries, different industries and different sized companies could be selected for
further analysis. We also suggest that the surprising finding of how limited the effect of Chinese
culture was on ERP implementation and BPR in our cases could be fruitfully explored. Two
issues come to mind here. First, both of our companies were privately owned and managed.
The effects of culture might be much more pronounced in SOEs where traditional values and
structures may be highly prized and the reward systems are different from those in private
companies. Second, traditional factor studies may find associations between cultural ‘variables’
and outcomes that were absent from our process studies. Consequently a combination of factor
studies and process modelling may yield further insights here, each informing the other.

ACKNOWLEDGEMENT

The authors would like to acknowledge the helpful and constructive comments of the AE,
Robert Davison and two anonymous reviewers.

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Biographies
Rajagopal, P. (2002) An innovation – diffusion view of
implementation of enterprise resource planning (ERP) Michael Newman (BSc, MSc, PhD) is Professor of Infor-
systems and development of a research model. Informa- mation Systems at the Manchester Accounting and
tion and Management, 40, 87–114. Finance Group, Manchester Business School, University
Redding, S.G. (1990) The Spirit of Chinese Capitalism. of Manchester, UK and is a Visiting Professor at NHH,
DeGruyter, New York, NY. Bergen, Norway. Since graduating with a PhD in MIS
Reimers, K. (2001) Implementing ERP Systems in China: from the University of British Columbia in 1981, he has
report on a questionnaire survey. [WWW document]. authored many academic articles in leading MIS and
URL http://www.kai-reimers.net/downloads.htm management journals in Europe and the US, including
Reimers, K. (2002) Implementing ERP systems in China. MISQ, ISR, JIT, JMS, AMIT, ISJ, EJOR, I&O, EJIS and
Proceedings of the 35th Hawaii International Conference Omega. Professor Newman’s research focuses on the
on Systems Science, 7–10 January 2002, Big Island, HI, process of information systems development and he has
USA. IEEE Computer Society, Los Alamitos, CA. conducted several empirical studies in a variety of orga-
Robey, D. (1994) Modeling interpersonal processes during nizations. He currently serves on the editorial board of
systems development: further thoughts and sugges- JIT. He has just finished a term as Associate Editor for
tions. Information Systems Research, l5, 439–445. MIS Quarterly. In 2005 he was appointed as Associate
Robey, D., Ross, J.W. & Boudreau, M.-C. (2002) Learning Editor for Information and Organization and in 2007 he
to implement enterprise systems: an exploratory study of was appointed Associate Editor for JAIS. He has held
the dialectics of change. Journal of Management Infor- visiting positions at the University of Connecticut, Florida
mation Systems, 19, 17–46. International University, Erasmus University, Rotterdam
Schein, E. (1992) Organizational Culture and Leadership, and the Free University, Amsterdam. Professor Newman
2nd edn. Jossey Bass, San Francisco, CA. has served as a track co-Chair, doctoral consortium
Shang, S. & Seddon, P.B. (2002) Assessing and managing co-Chair and programme co-Chair at the International
the benefits of enterprise systems: the business manag- Conference on Information Systems.
er’s perspective. Information Systems Journal, 12, 271– Yu Zhao graduated from Manchester Business School
299. in 2005 with an MSc in Information Systems, Organiza-
Somers, T.M. & Nelson, K. (2001) The impact of critical tions and Management. She is currently working in South
success factors across the stages of enterprise resource America for a Chinese company as a contractor with
planning implementation. IEEE: Proceedings of the 34th Oracle ERP systems.

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