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Why Selecting an Open Source ERP Over Proprietary ERP? a Focus on Smes and Suppliers Perspective

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Why Selecting an Open Source ERP Over Proprietary ERP? a Focus on Smes and Suppliers Perspective J Ö N K Ö P I N G I NTERNATIONAL B U S I N E S S S CHOOL JÖNKÖPING UNIVERSITY Why Selecting an Open Source ERP over Proprietary ERP? A focus on SMEs and Suppliers perspective Paper: Master Thesis in Informatics (JM2D) Author: Nasimul Huq Syed Mushtaq Ali Shah Tutor: Daniela Mihailescu Jönköping June , 2010 i Acknowledgment All glory is to Al-mighty ALLAH, who gave us the patience, courage and ability to complete the thesis in time. We would like to acknowledge our supervisor Daniela Mihailescu for her kind and sincere co-operation in providing us guidance, suggestions, feedback and opinions for the completion of this thesis. We are also thankful to Associate Professor Jörgen Lindh for his sincere guidance and for providing us valuable feedback. In addition we would like to thank our fellow students for their valuable comments and feedback during the process and our family members; especially to our parents who encourage us always. Nasimul Huq Syed Mushtaq Ali Shah Jönköping, June, 2010 ii Master Thesis in Informatics Title: Why Selecting an Open Source ERP over Proprietary ERP? (A focus on SMEs) Authors: Nasimul Huq, Syed Mushtaq Ali Shah Tutor: Daniela Mihailescu Date: June, 2010 Key terms: ERP, Open Source, Open Source ERP, SMEs. Abstract Introduction: Open Source ERP is considered as a viable alternative of proprietary ERP paradigm. Open Source ERP is getting more and more acceptance among Small and Medium Sized Enterprises (SMEs) recently. Majority of Proprietary ERP vendors are changing their strategy nowadays and extend their focus on SMEs, even though SMEs are not that interested in Proprietary ERP systems. The factors that may motivate SMEs to select an Open Source ERP over proprietary ERP are not identified empirically in previous researches. Few researches raised the issue of cost and thus proposed that Open Source ERP is appropriate for SMEs. The other factors than cost involved in the selection process are yet to investigate empirically. Purpose: The overall purpose of this thesis work is to contribute in knowledge domain of Open Source ERP. Open Source ERP is an emergent area but it has the potential to attract many organizations to implement this kind of ERP Systems. The issue under investigation throughout this research will be the selection process of Open Source ERP in Small and Medium Sized Enterprises (SMEs). The focus will be to identify mutually most important factors, from the perspective of SMEs and Suppliers that may motivate the Small and Medium Sized Enterprises (SMEs) to select OS ERP. Method: Data obtained from the respondents is quantified in the research. Information gathered from the SMEs who have implemented Open Source ERP and from the Suppliers through web based survey. Two separate questionnaires comprised of various questions related to different factors in selecting of Open Source ERP solutions were made and sent to both SMEs and Suppliers of Open Source ERP. Opinion from an Open Source ERP expert is obtained regarding different factors motivate SMEs to select Open Source ERP. The results obtained from respondents through empirical findings were analyzed thereafter. Conclusions: SMEs were investigated regarding the importance of various rationales when they were selecting Open Source ERP solutions. The degree of importance of various factors in selection process might be diverse from organization to organization. It might be dependent on the size, geographical location of the organization or many other issues. Despite all this, there might be some common factors that may be always considered as foremost factors which influence SMEs to select an Open Source ERP over proprietary ERP. iii Table of Contents 1 Introduction.................................................................................. 1 1.1 Background ............................................................................................ 1 1.2 Problem Discussion ................................................................................ 2 1.3 Purpose .................................................................................................. 4 1.4 Research Question ................................................................................. 4 1.5 Interested Parties ................................................................................... 4 1.6 Delimitations ........................................................................................... 4 1.7 Outline of the thesis ................................................................................ 5 2 Frame of Reference ..................................................................... 7 2.1 The concept of Enterprise Resource Planning (ERP)............................. 7 2.2 The concept of Open Source Software ................................................... 8 2.3 Open Source ERP Systems ................................................................... 9 2.4 Factors that motivate SMEs to select an Open Source ERP ................ 11 2.4.1 Factors that are critical for successful ERP Implementation ................ 11 2.4.2 Factors related to organizational size ................................................... 13 2.4.3 Factors related to Openness of the ERP System ................................. 15 2.5 Concluding Framework ......................................................................... 18 3 Method ........................................................................................ 20 3.1 Research philosophy ............................................................................ 20 3.2 Research Approach .............................................................................. 21 3.3 Research Methods ............................................................................... 21 3.4 Research Strategy ................................................................................ 22 3.5 Data Collection ..................................................................................... 23 3.6 Sampling .............................................................................................. 24 3.7 Analysis of Data.................................................................................... 26 3.8 Credibility of Data ................................................................................. 27 3.8.1 Reliability .............................................................................................. 27 3.8.2 Validity .................................................................................................. 28 3.8.3 Triangulation ......................................................................................... 28 4 Empirical Findings .................................................................... 30 4.1 Results ................................................................................................. 30 4.2 Users (SMEs) Perspective ................................................................... 30 4.2.1 Ranking of the factors that motivate SMEs to select OS ERP solutions 32 4.2.2 Additional Opinion of the SMEs ............................................................ 34 4.3 Suppliers (vendors/consultants) Perspective ........................................ 34 4.3.1 Ranking of the factors that Suppliers (vendors/consultants) think motivated their customers......................................................................... 36 4.3.2 Upgrades of the Solutions and Reliance on the community ................. 38 4.3.3 Suppliers (vendors/consultants) Opinion about ‘Supplier Support’ and their Most important features or services ..................................... 38 4.3.4 Additional opinions of Suppliers (vendors/consultants) ........................ 39 4.4 Open Source ERP expert’s perspective ............................................... 40 iv 5 Analysis ...................................................................................... 42 5.1 Analytical Discussion ............................................................................ 42 5.2 Most important factors that motivate the SMEs to select Open Source ERP Over the Proprietary ERP ............................................................. 50 6 Conclusion ................................................................................. 52 6.1 Emergent results from the study ........................................................... 53 6.2 Further Studies ..................................................................................... 53 References ...................................................................................... 54 7 Appendix .................................................................................... 59 7.1 Appendix A- Questionnaires ................................................................. 59 7.2 APPENDIX B ........................................................................................... 76 7.3 Appendix C- Letter to Respondents...................................................... 77 v Tables 1 Table 1.1: EU official definition of SME……………………………...................05 2 Table 2.1: OS ERP selection criteria adopted from Johansson and Sudzina (2009)..................................................................…………………………….......15 3 Table 2.2: Summarize the result of the literature review : factors that influence SMEs to select an Open Source ERP …..….........................................................17 4 Table 3.1: Different types of triangulation.............................................................28
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