Enterprise Resource Planning Systems in India

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Table of Contents

Introduction
Purpose and Objectives
Adopted Theory
Framework and Hypotheses
Methodology
Results
Conclusion

Introduction

The advancement in technology and the increase in globalization forces compel organizations to adopt and use information systems to automate most of their activities and operations. Organizations in India have adopted advanced information systems, for example, enterprise resource planning (ERP) systems, but they experience numerous failures and difficulties among the end-users. The existence of challenges in the adoption and use of ERP systems inspired Christy Angeline Rajan and Rupashree Baral to publish their work on a journal article titled “Adoption of ERP system: An empirical study of factors influencing the usage of ERP and its impact on the end user.” Therefore, the purpose of this report is to examine the research article by describing its objectives, framework, hypothesis, methodology, results, implications, and limitations.

Purpose and Objectives

The purpose of the study was to identify factors that influence the adoption and the use of ERP systems by organizations in India. The study categorized the external variables into technological, organizational, and individual, and then formulated two broad objectives. The first objective examined the influence of technological, organizational, and individual factors on the usefulness of ERP systems. The second objective focused on the influence of technological, organizational, and individual factors on the ease of using ERP systems. Subsequently, the objective of the study was to examine the relationship between the ease of use and usefulness of ERP systems and how each influence the intention to use them. Ultimately, the objective of the study was to measure the impact of the intention to use on the usage of ERP systems and subsequent individual impact based on panoptic empowerment and performance.

Adopted Theory

The study adopted the theory of reasoned action (TRA) in evaluating factors that influence the adoption and use of ERP systems among Indian organizations. According to the TRA, the perceptions of ease of use and usefulness of a system are two elements that affect the intention to use. The perceived ease of use determines the extent of belief on the usability of a system in performing certain functions. Comparatively, the perception of usefulness measures the level in which an individual believes that a system improves work performance. The study incorporated this theory into the technology acceptance model (TAM) to elucidate factors that influence the adoption and use of ERP systems. Additionally, the TAM conceptualizes that the ease of use and usefulness determine the intention of use, which in turn affects the usage of ERP and individual performance.

Framework and Hypotheses

The study employed a composite framework comprising of external factors, the TAM variables, and user outcomes. The study categorized the external characteristics of organizations into technological, organizational, and individual factors. Technological factors were compatibility and complexity of ERP systems, while organizational features constituted of support and training. The study used computer self-efficacy to appraise individual attributes. Based on the TRA, the study incorporated the ease of use and usefulness of ERP systems into the TAM. The intention to use and the usage of ERP systems are other variables integrated into the TAM. User outcomes comprised of panoptic empowerment and individual performance. The study formulated eight hypotheses, which predict the existence of positive relationships between computer efficacy, support, training, and compatibility and the ease of use and the usefulness of ERP systems. The study also formulated two hypotheses predicting the presence of negative relationships between the complexity of technology and the ease of use and usefulness of ERP systems. In the TAM, the study had additional six hypotheses assessing relationships between variables. These hypotheses hold that there are positive relationships between the TAM variables and they have a positive influence on individual performance.

Methodology

The study employed surveys in collecting data from users of ERP systems in selected organizations in India. In sampling, the study used the purposive method to select organizations that had recently adopted and implemented ERP systems in less than five years and administered questionnaires to regular users. With permission from respective organizations and individual employees, the study managed to get 154 completed questionnaires that were usable. In the measurement of each variable in the conceptual framework, the study utilized established scales. The survey comprised of computer self-efficacy (ten items), organizational support (seven items), training (five items), technology complexity (four items), compatibility (five items), the ease of use (four items), usefulness (four items), intention to use (two items), panoptic empowerment (15 items), usage (three items), and individual performance (two items).

In data analysis, the study used partial least squares (PLS) to determine the validity of the model based on convergent and discriminant validity. Items in the established scales with Cronbach’s alpha greater than 0.7, composite reliability more than 0.7, and average variance extracted larger than 0.5 met the convergent validity. A threshold of 0.8 in multicollinearity and variance inflation factor were used to measure discriminant validity of the external variables in the TAM. Moreover, PLS was used to test the hypotheses of the study. The explanatory power of each variable (R²), the direction of relationships (positive and negative), and the significance of path coefficients (beta weights) were used in the interpretation of results.

Results

Correlation analysis of the external variables, which are the independent factors, shows that the complexity of technology has a negative relationship with computer self-efficacy, organizational support, training, and compatibility. Hypothesis testing of the influence of these external variables on the ease of use and the usefulness of ERP systems supports the existence of statistically significant effects at alpha levels of 0.001 and 0.05. Individuals influence ease of use (β = 0.297) and usefulness (β = 0.200) of ERP systems because they have significant positive relationships with computer self-efficacy. Organizational support has a significant positive relationship with the ease of use (β = 0.112) and the usefulness (β = 0.201). In the organizational factors, training also has a significant positive influence on both the ease of use (β = 0.474) and the usefulness (β = 0.202). In the aspect of technology, the complexity of technology relates negatively with both the ease of use (β = -0.103) and the usefulness (β = -0.066). In contrast, the compatibility of ERP systems has a significant positive influence on the ease of use (β = 0.080) and the usefulness (β = 0.105).

The analysis of TAM variables showed statistically significant positive relationships (p < 0.001) as hypothesized. The ease of use has a significant positive influence on the usefulness of ERP systems (β = 0.329). Moreover, the ease of use (β = 0.266) and the usefulness (β = 0.518) have a significant positive effect on the intention to use (β = 0.453), which in turn has a significant positive influence on the usage of ERP systems. In the measurement of individual outcomes, the study established that the usage of ERP systems has significant effects on panoptic empowerment (β = 0.302) and individual performance (β = 0.446). Regression analysis demonstrated that the external variables accounted for 67.2% and 68.5% of the variations in the ease of use and the usefulness of ERP systems, respectively. Both the ease use and the usefulness accounted for 54.9% of the variation in intention, which sequentially explained 20.5% of the variation in the usage of ERP systems. The assessment of individual outcomes revealed that the usage of ERP systems accounted for 19.9% and 9.6% of the variations in the performance and panoptic empowerment, correspondingly.

Implications

Since the external variables play a significant role in the ease of use and usefulness of ERP systems, it implies that managers have to leverage them to ensure that technological, organizational, and individual factors have a synergistic effect for successful adoption and implementation of complex information systems. The extension of the effect TAM variables on employees has significant implications for management because it highlights the essence of considering their satisfaction, performance, and empowerment in the adoption and use of ERP systems.

Limitations

As far as the limitations are concerned, the study has low external validity because it assessed numerous variables and hypotheses, which are not commensurate with the sample size used. Moreover, given that the study used a cross-sectional survey in data collection, it failed to capture variations that exist at different stages of implementing ERP systems.

Conclusion

The analysis of the article reveals important information regarding factors that influence the adoption and use of ERP systems. The study demonstrated that technological, organizational, and individual factors influence the ease of use and the usefulness, leading to improved intention to use, usage, and individual outcomes. Therefore, findings imply that successful implementation of ERP systems requires managers to leverage the external factors and TAM variables for employees to achieve optimal performance and panoptic empowerment.

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