Post on 19-Jun-2015
description
Dr. Lisa SeymourUniversity of Cape Town
Prof. Dr. Joachim SchulerPforzheim University, Germany
Julian Faasen University of Cape Town
SaaS ERP adoption intent:the South African SME perspective
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Importance• Critical role of SMEs in developing countries in
national development [6]
• ERPs enable competitiveness but are high risk and high cost [26]
• The SaaS model is seem as a critical enabler to allow SMEs to access
The purpose of this study• Gain an understanding of the reluctance to adopt
SaaS ERP software within South African small and medium enterprises (SMEs).
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SaaS Applications
Aberdeen Group, 2009; Panorama, 2012
SaaS Application Small Medium LargeEnterprise Resource Planning 9% 1% 3%
Business Intelligence 14% 7% 3%
Talent Management 30% 16% 11%
CRM for Salesforce Automation 43% 23% 22%
SaaS ERP: "Last Bastion of Resistance to SaaS" (Aberdeen Research, 2007)
ERP Options
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Model derived from the broad literature
Intention to adopt SaaS ERP
Technological Factors• Perceived technological
benefits• Software functionality fit• ERP alternatives• Systems reliability• Integration capabilities
Organizational Factors• Perceived business
benefits• Resource constraints• Top management support• Reluctance to outsource
strategic assets
Environmental Factors• Competitive pressure• Data security & privacy• Uncertainty & Vendor
Trustworthiness
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Method
South African SMEs • between 50 and 200 employees
• within traditional ERP focused industries (e.g. manufacturing, logistics, distribution, warehousing and financial services, etc.)
7 Semi-structured interviews with key decision makers General inductive analysis [26], member checking,
thick descriptions, code-recode and audit trail strategies [27]
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Company and Participant Demographics
Company
code
Participant
Code
Position Experience Industry No. of
employees
A A1 Digital Director 10 years + Book publishing and
distribution
250
A A2 IT Operations Manager 17 Years Book publishing and
distribution
250
B B Head of IT 20 years + Financial Services 120
C C1 Chief Operating Officer 20 years + Specialized Health
Services
50
C C2 IT Consultant 7 years + Specialized Health
Services
50
D D Financial Director 20 years + Freight Logistics
Provider
200
E E Managing Director 20 years + Medical Distribution 137
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Software landscape for companies interviewed
Company code
Current Software Landscape A B C D E
Using industry-specific ERP software Yes No No No No
Using component-based ERP software No No Yes Yes Yes
Using off-the-shelf software Yes Yes Yes Yes Yes
Using Bespoke (customized) software Yes Yes Yes Yes No
Implementation of ERP software in progress No Yes No No No
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Results
The following 7 themes, in order from most significant to least, emerged based on the participant perceptions, personal experience and organizational context
• 1. Systems performance and availability risk (inhibitor)
• 2. Sunk cost and Satisfaction with existing system (inhibitor)
• 3. Loss of control and Vendor trust (inhibitor)
• 4. Data security risk (inhibitor)
• 5. Improved IT reliability (driver)
• 6. Perceived cost reduction (driver)
• 7. Functionality Fit and Customization Limitations (inhibitor)
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1. System performance and availability risk
Associated with the risk of losing access to mission-critical systems and the resulting impact on business operations. Predominantly bandwidth cost, internet latency limitations and bandwidth reliability
“The cheapest, I suppose is the ADSL, with 4MB lines, but they tend to fall over, cables get stolen” (D).
“They can’t guarantee you no downtime, but I mean there are so many factors locally that they’ve got no control of. You know, you have a parastatal running the bulk of our bandwidth system” (E)
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2. Sunk cost & Satisfaction with existing systems
Irrecoverable costs incurred during the acquisition and evolution of existing IT systems
“...if we were starting today with a clean slate, with not having a server room full of hardware, then definitely...SaaS would be a good idea” (D)
The perception of participants that their existing enterprise software was fit for purpose
“...whenever you’ve got a system in place that ticks 90% of your boxes and it’s reliable...why change, what are we going to gain, will the gain be worth the pain and effort and the cost of changing” (A1).
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3. Loss of Control and Lack of Vendor Trust
A number of participants associated SaaS ERP with a loss of control over their software and hardware components. They also raised concerns around trusting vendors with their mission-critical software solutions.
“...if they decide to do maintenance...there’s nothing we can do about it...you don’t have a choice” (C2).
“...they sort of cut corners and then you end up getting almost a specific-to-SLA type of service” (A2).
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4. Data Security Risk
Related to concerns around the security and confidentiality of business information hosted on SaaS vendor infrastructure.
“...somebody somewhere at some level has got to have access to all of that information and it’s a very off-putting factor for us” (E).
“they’ve got a large number of other clients accessing the same servers” (D)
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5. Improved IT Reliability
Due to sophisticated platform technology, regular software updates, more effective backups and better systems redundancy
“I think it will be a safer option ...if they’ve got more expensive infrastructure with redundancy built in” (C1).
“...it’s probably more often updated...because it’s been shared across a range of customers; it has to really be perfect all the time” (A1)
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6. Perceived cost reduction
Initial hardware and infrastructure; high cost of maintaining on-premise ERP and
potential long term operational cost savings with SaaS ERP.
“..it’s the ongoing running costs, support and maintenance, that makes a difference” (Participant B).
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7. Functionality Fit and Customization Limitations
Only three participants raised concerns around lack of flexibility of SaaS ERP software due to concerns around the ability to customize the software.
“They do have a certain amount of configurability in the program...but when it comes down to the actual software application, they (ERP vendor) say this is what you get...and if you want to change, that’s fine but then we’ll make the change available to everybody...so you lose your competitive advantage” (D)
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Explanation of SME reluctance to adopt SaaS ERP
SME intention to adopt SaaS ERP
Data security risk
Loss of control & Lack of
vendor trust
System performance & Availability
risk
Sunk cost & Satisfaction with existing
systemsPerceived
cost reduction
Improved IT reliability
Reduced functionality fit
& customization limitations
+
+
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-
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Going Forward
Lack of control and vendor trust concerns dominate in SA and this is exacerbated by high risks of unavailability attributed to the poor network infrastructure of the country.
Due to the lack of SaaS ERP vendor presence in South Africa, it is reasonable to assume that South African organizations lack sufficient awareness around SaaS ERP
ERP SaaS Adoption issues ERP Retirement research
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Thank you!
Questions?