SaaS ERP adoption intent: Explaining the South African SME perspective

19
Dr. Lisa Seymour University of Cape Town Prof. Dr. Joachim Schuler Pforzheim University, Germany Julian Faasen University of Cape Town SaaS ERP adoption intent: the South African SME perspective

description

Julian Faasen, Lisa Seymour, Joachim Schuler, SaaS ERP adoption intent: Explaining the South African SME perspective

Transcript of SaaS ERP adoption intent: Explaining the South African SME perspective

Page 1: SaaS ERP adoption intent: Explaining the South African SME perspective

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

Page 2: SaaS ERP adoption intent: Explaining the South African SME perspective
Page 3: SaaS ERP adoption intent: Explaining the South African SME perspective

3

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).

Page 4: SaaS ERP adoption intent: Explaining the South African SME perspective

4

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

Page 5: SaaS ERP adoption intent: Explaining the South African SME perspective

5

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

Page 6: SaaS ERP adoption intent: Explaining the South African SME perspective

6

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]

Page 7: SaaS ERP adoption intent: Explaining the South African SME perspective

7

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

Page 8: SaaS ERP adoption intent: Explaining the South African SME perspective

8

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

Page 9: SaaS ERP adoption intent: Explaining the South African SME perspective

9

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)

Page 10: SaaS ERP adoption intent: Explaining the South African SME perspective

10

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)

Page 11: SaaS ERP adoption intent: Explaining the South African SME perspective

11

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).

Page 12: SaaS ERP adoption intent: Explaining the South African SME perspective

12

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).

Page 13: SaaS ERP adoption intent: Explaining the South African SME perspective

13

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)

Page 14: SaaS ERP adoption intent: Explaining the South African SME perspective

14

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)

Page 15: SaaS ERP adoption intent: Explaining the South African SME perspective

15

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).

Page 16: SaaS ERP adoption intent: Explaining the South African SME perspective

16

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)

Page 17: SaaS ERP adoption intent: Explaining the South African SME perspective

17

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

+

+

--

-

-

-

-

Page 18: SaaS ERP adoption intent: Explaining the South African SME perspective

18

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

Page 19: SaaS ERP adoption intent: Explaining the South African SME perspective

19

Thank you!

Questions?