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Characteristics of the Multiple Attribute Decision Making Methodology in Enterprise Resource Planning Software Decisions

by Edward W. N. Bernroider & Johann Mitlöhner

"How Firms Can Avoid Failure by Embracing a Formal MADM-Based Process for Their ERP Software Acquisition"

Abstract

Realizing information technology (IT) decisions and implementations are consistently seen as major challenges of business management faced with increasingly complex IT environments.

This article seeks to increase the awareness of the multiple attributive decision making (MADM) methodology in the context of enterprise resource planning (ERP) projects and provides empirical insights based on 209 datasets originating from a primary, national and industry independent survey. The given MADM topics comprise strategic alignment, attributes with associated importance weightings, considered and chosen systems, methodical utilization, follow-up controlling, and finally MADM relevance in terms of a possible connection between MADM and ERP success.

The results in particular show that while the ERP decision problem seems to be structured based on the MADM principle, the minority of decision makers rely on a formal MADM method. The empirically tested measurement model indicates that success according to expectations was achieved at a greater level of magnitude in firms supported by a formal MADM method, especially in terms of financial firm level impact and service quality.

Keywords: multiple attributive decision making, madm, enterprise resource planning, erp, information systems success, empirical survey, erp software selection, erp software acquisition, erp software evaluation, erp software comparison, enterprise resource planning, madm-based software selection, multi-criteria decision making, mcdm, mcdm-based software selection.

Table of Content

• Introduction
• Methodology
• Sample Demographics
• A MADM-Based View on ERP Projects
• MADM Methods and ERP Success
  • ERP Success Model Development
  • The Effect of MADM on ERP Success
• Conclusion
• References
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Introduction

Enterprise resource planning (ERP) systems are comprehensive packaged information systems (IS) comprising several configurable modules that integrate core business activities (finance, human resources, manufacturing and logistics) into one single environment based on an integrated, shared database. They are embedded with "best practices", respectively best ways to do business based on common business practices or academic theory (Kremers & Dissel, 2000). Besides integration, the aim is to enhance decision support, reduce asset bases and costs, receive more accurate and timely information, higher flexibility or increased customer satisfaction. ERP systems are often seen as enabler for extensions such as supply-chain management and customer relationship management (Boubekri, 2001; Willis & Willis-Brown, 2002).

Several authors have proposed ERP research agendas (Esteves & Pastor, 1999). A recent agenda (Al-Mashari, 2002) gives three dimensions: ERP adoption, technical aspects of ERP, and ERP in information systems curricula. This research targets the first dimension proposed, in particular method application and relevance. Literature reports extensively on diverse problems associated with information system (IS) especially ERP system evaluation (Irani, 2002). Those problems can be derived from the difficulty of understanding the complex factors involved in IS, decision making, such as scope and impact of the decision, the concept of value and its multi-dimensional facets, natures of IS, benefits and costs, associated risks, strategy alignment, human and organizational mechanics or political issues. The evaluation of IS investment proposals has been a recognized research area for a long time resulting in a large number of evaluation techniques available today, e.g. (Irani, Sharif, Love, & Kahraman, 2002; Sassone, 1987). Research exists helping to assess the wide spectrum of methodical aids through classifications (Farbey, Land, & Targett, 1992, 1993) or selection aids (Olsen, 1996).

IS decisions have the propensity to operate under multiple, often conflicting criteria. The decision space is discrete, meaning that a limited number of alternatives and attributes need to be assessed. This is the typical setting in which Characteristics of Multiple Attribute DM in ERP Edward W. N. Bernroider & Johann Mitlöhner Communications of the IIMA 50 2005 Volume 5 Issue 1 the discipline of Multiple Attribute Decision Making (MADM) is grounded. In terms of complex IS in particular ERP decisions, their intuitive, simple and cost effective application should help to comprehend the decision making task at hand. They are relatively transparent, allowing others to see the logic of the results and enabling the inclusion of the full range of intangible consequences. Furthermore, by following a MADM based methodology the decision maker should be able to strengthen his decision outcome in terms of justifiability, accountability, and reasonability, which are regularly seen as pre-requisites of complex and risky IS decisions. The amount and depth of methods available in literature seems to be in contrast to the method application in IS appraisal practice. Since IS and their environmental embedding is becoming increasingly complex due to continuously evolving demands on IT related capabilities, the defiance of common grounds of IS decision making remains problematic. This research seeks to increase the awareness of the MADM methodology in ERP projects and to link its application to project success. With respect to ERP projects at various stages of the system's lifecycle, the targets of this research can be summarized as follows:

1.  to provide a characterization of MADM in the given context
2.  to give an up to date empirical manifestation of MADM elements, such as method diffusion, attribute selection, etc.
3.  to assess if MADM approaches are relevant in terms of promoting ERP success

In the empirical data analysis, this research controls for organizational size and branch of business. The remainder of this article is structured as follows. First, we provide more information on the empirical survey and on the acquired data sample. To avoid redundant information and improve readability, theoretical MADM based considerations were given together with empirical insights in the subsequent section. Thereafter, an ERP success measurement model is given with an empirical validation, followed by an assessment of the effect of MADM on ERP success. Finally, the last section concludes results and sketches on-going research.

"Characteristics of the Multiple Attribute Decision Making Methodology in Enterprise Resource Planning Software Decisions"

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