TABLE OF CONTENTS
Page
Title page i
Declaration ii
Approval iii
Dedication iv
Acknowledgement v
List of Tables x
List of Figures xi
List of Appendices xii
Abstract xiii
Chapter 1: Introduction
1.1 Background of the Study – – – – 1
1.2 Statement of the Research Problem – – 5
1.3 Objectives of the Study – – – – – 8
1.4 Research Questions – – – – 9
1.5 Research Hypotheses – 9
1.6 Significance of the Study – – – 10
1.7 Scope of the Study – – – 10
1.8 Limitations of the Study – – 11
1.9 Definitions of Terms – – – – – – 12
1.10 Profiles of the Studied Commercial Banks – – – 13
References – – – – – 20
Chapter 2: Review of Related Literature
Introduction – – – – – 22
2.1 The Conceptual Framework of ERP systems- 22
2.2 ERP Systems Modules – – – 27
2.3 Evolution of Enterprise Resource Planning 28
2.4 Theoretical Framework – – – 30
2.5 Organizational Performance: Trends and Framework – 42
2.6 ERP Systems and Organizational Performance Measure- 50
2.7 Empirical Review of ERP systems Implementation and
Organizational Performance – – – – – 54
2.8 Selection Criteria for an ERP Systems – 60
2.9 ERP Systems Implementation – 62
2.10 Key Resources Across Functional Areas- – – – 69
2.11 What Makes an Enterprise Resources Valuable – 73
2.12 Framework for IT and ERP Investment – 74
2.13 Impact of ERP Systems on Organizational Performance – 77
2.14 Overview of the Nigerian Banking Industry – 80
2.15 Nigerian Banking Industry and Information Technology 82
2.16 Drawbacks of the ERP Systems – – 84
2.17 ERP: Managing the Paradigm Shift for Success 88
2.18 Summary of the Review of the related Literature – – 94 References – – – – – – 96
Chapter 3: Research Methodology
Introduction – – – – – 107
3.1 Research Design – – – – 107
3.2 Sources of Data – – – 107
3.3 Population of the Study – – – 108
3.4 The Sampling Technique – – 108
3.5 Description of the Research Instrument – 109
3.6 Reliability of Research Instrument – 110
3.7 Validity of Measurement – – 110
3.8 Data Analysis Techniques – – – 111
References – – – – – 113
Chapter 4: Data Presentation and Analysis
Introduction – – – – – 114
4.1 Data Analysis – – – – – 114
4.2 Reliability Analysis- – – 116
4.3 Analysis of ERP Systems General Concept Questions – 117
4.4 Analysis Using Z-Test – – 122
4.5 Cross Tabulated Analysis – – – – – 126
4.6 Testing the Research Hypotheses – – 127
4.7 Categorization of the Responses of the Studied Banks on
the Research Objectives – – – 134
4.8 Discussion of the Research Findings – – – 136
4.9 Management Implications of Relevant Findings – 146
4.10 Research Model on the Impact of ERP Systems on Bank performance – 148
References – – – – – – – 151
Chapter 5: Summary of Major Findings, Conclusion and Recommendations
5.1 Summary of Major Findings – – – – – 154
5.2 Conclusion – – – – – – 155
5.3 Recommendations – – – – – 155
5.4 Contribution to Knowledge – – – – 157
5.5 Suggestions for Further Research – – – – 160
References – – – — – – 161
Bibliography – – – – – – 165
Appendices – – – – – – – 178
List of Tables
2.1 Information Systems Functional Scorecard – – 51
2.2 Unified CSFs for ERP Implementation – – 66
2.3 An Explanation of IT and ERP Investment Types – 76
2.4 Impact /Benefits of ERP Systems – – 80
4.1 Analysis of the Response Rates of Questionnaires Administered – 115
4.2-4.3 Demographic Characteristics of the Respondents – 116
4.4 The Reliability Analysis Related to the Five Objectives – 117
4.5-4.18 Tables on the Analysis of Questionnaires on ERP Systems – 118
4.19 Categorization of the Responses of the Studied Banks on the
Research Objectives – – – – – – 135
List of figures
2.1 ERP Systems’ Modules – – – – 26
2.2 Overview of Information Processing Theory – 31
2.3 Model of the Effect of Interdependence on Plants Running ERP
System – – – – – – – – 33
2.4 Schematic Diagram of ERP Systems Performance Framework – 35
2.5 Keegan Performance Measurement Matrix – 47
2.6 Fitzgerald Results and Determinants Performance Framework – 48
2.7 Brown’s Input-Process-Output-Outcome Framework – 49
2.8 The Conceptual Model of ERP Systems and Organizational
Performance – – – – – – – 52
2.9 Framework for IT and ERP Investments — – 75
2.10 Drawbacks of ERP Systems – – – – 86
2.11 ERP Paradigm Shift Model-Hierarchy of Purpose 89
2.12 ERP Paradigm Shift Model-Impact Roles – – – 91
2.13 ERP Paradigm Shift-Model Continuous Changes 92
2.14 ERP Paradigm Shift-Model (Full Paradigm Shift Model)- 93
4.1 Model
on the Impact of ERP Systems on Bank Performance – 150
List of Appendices
Appendix I: The Questionnaire – – – – 178
Appendix II: The Milestones of Commercial Banking in Nigeria – 186
ABSTRACT
This study seeks
to evaluate the effect of enterprise resource planning (ERP) systems on the
performance of commercial banks in South-west Nigeria. The study objectives are
to evaluate the impact of ERP systems on the performance of commercial banks in
southwest Nigeria; determine the impact of the type of ERP systems on the
productivity of commercial banks; ascertain the impact of ERP systems adoption
on customer satisfaction in commercial banks; ascertain the effect of ERP
systems adoption on employees satisfaction in commercial banks; and evaluate
the impact of ERP systems adoption on the overall efficiency of commercial
banks under study. A combination of sample survey and oral interview were used
to collect data on several aspects of performance from five selected commercial
banks in South-west Nigeria. A total population of 750 respondents from the
five selected commercial banks was considered manageable and therefore
constitutes the sample size of this study. The data collected was analyzed
using simple percentages and relative frequencies while the hypotheses
formulated were tested using Z-test statistics and Test of Population
Proportion at 5% level of significance. The findings from data analyzed
indicates that ERP systems adoption have significant impact on the performance
of the studied commercial banks; the type of ERP systems adopted also have
significant impact on the productivity of commercial banks; ERP systems
adoption have significant impact on customer satisfaction through efficient
service delivery; ERP systems adoption have significant impact on employees’
satisfaction through participative management and continuous training; ERP
systems adoption have significant impact on the overall efficiency of the
commercial banks under study. The study however revealed that commercial banks
adopting ERP systems should know that it is a continuous process that is
embodied in a rapidly changing information technology world, hence they must be
abreast of the latest development in the industry or they will face the risk of
losing out in today’s competitive and turbulent operating environment. The
study also recommends that ERP systems is an important strategic tools for
surviving in today’s highly competitive operating environment, hence any commercial
bank (irrespective of size) that must compete favourably and surpass its rivals
must adopt ERP systems as an essential infrastructure. Also, commercial banks
adopting ERP system must at the outset select the ERP systems modules that fit
the business practices and processes of their banks, a strategic fit analysis of
operational requirements and ERP systems features with the involvement of
technical staff and key users is a necessity in this regard. Besides, commercial
banks implementing ERP systems must identify the relevant critical success
factors that must be in place for the successful ERP systems implementation in
order to realize its full benefits. The findings of this study can contribute
to improved decision making and commercial banks’ efficiency especially in the
aspect of setting ERP systems performance standards at the time of acquisition
and implementation.
CHAPTER ONE
INTRODUCTION
Background of the Study
The most significant development of the millennium which has substantially influenced business operations globally is the emergence of the information age. Taking advantage of rapid technological progress and financial market development, a number of innovative products have been developed in recent years. As we live in a world that is driven by information and Information Technology (IT), IT is changing every aspect of human endeavour including business and organization. The business environment is equally changing dramatically, and in order to stay competitive in the market, organization must improve their business practices and procedures by upgrading their capability to generate and communicate accurate and timely information toward the realization of stated objectives (O’Bren, 2008).
A tidal wave of IT-enabled initiative known as Enterprise Resource Planning (ERP) systems has elevated the importance of investing strategically in IT (Ross and Beath 2002:51). An ERP system is a packaged software system that enables an organization to manage the use of resources (materials, human resources and finances) by providing a total, integrated solution to its information processing needs (Nah et al 2003:20). ERP system is a business management system that comprises integrated sets of comprehensive software which can be used, when successfully implemented to manage and integrate all the business functions within an organization (Shehab et al 2004:372). Though ERP systems evolved in the early 1990s from Manufacturing Resource Planning (MRP II) Systems but while MRP II which focused on manufacturing, ERP systems serve other businesses and services by integrating all data relating to production, materials, marketing, accounting, finance, human resources, etc. allowing organizations to price product/services, produce financial statements and manage human, materials and financial resources effectively. ERP system is now considered to be the price of entry for running a business; hence, many of the world’s leading organizations consider ERP system as essential IT infrastructure for surviving in today’s competitive and turbulent operating environment (Cook, 1996:12).
Despite the fact that the idea of commercial banking activities in Nigeria started in 1891 when the first foreign commercial bank known as the British Bank for West Africa (BBWA) which later metamorphosed to the present First Bank Nigeria Plc was established, informal ERP systems and other means of managing organizational resources had earlier be in place. Notable among them are material requirements planning (MRP), Manufacturing resource planning (MRP II). It was however, in the late 1990s that the formal ERP systems as a specific form of information technology were applied to commercial banking activities in Nigeria. Since its adoption, the application of ERP systems concept, techniques, policies and implementation strategies to banking services has become a subject of fundamental importance and concerns to all banks and indeed a prerequisite for local and global competitiveness.
The commercial banking industry in Nigeria has also witnessed tremendous changes (since its inception in 1891 till date) as a result of various government interventions through various reforms linked with effective management of resources and compliance with global best practices. The quest for survival, global relevance, maintenance of existing market share and sustainable development has made exploitation of the many advantages of information and communication technology (ICT) through the adoption of ERP systems imperative in the industry (Agboola and Salawu, 2008:1-15).
The global success of Enterprise Resource Planning (ERP) systems has not only attracted the interest of researchers from the IT discipline, but from all major disciplines in business research including management and accounting. The emergence of ERP systems has moved the topic “Computerized business information systems” increasingly from IT domain to the business domain; from systems design and programming to business configuration, process mapping and re-engineering. ERP impose their logic on organizations and force employee to think in terms of integrated processes and to change the way they do accounting, management, production planning and control. All these changes brought about by ERP systems made them very attractive research object of many business disciplines, and management is by nature the one from which we expect an answer to the question which ultimately counts in business: Are those systems worth the investment? (Wieder et al 2006:15).
Hossain et al (2002:232), observe that ERP systems affect organizations and are implemented mostly to enhance organizational effectiveness. The main purpose for deploying ERP systems is to improve control over organizational processes (Hanseth, et al 2001:35). ERP systems are information systems packages that are configurable and integrate information and information-based processes within and across functional areas in organization (Gattiker and Goodhue, 2004:438). ERP systems automate and structure an organization’s business process by furnishing reference models and process templates across the enterprise (Allen et al 2002:232). ERP systems are implementations of standard software modules for core business processes and are usually combined with specially tailored customization to provide competitive differentiation. The goal of ERP systems is to provide integration and functionality across multi-functional and frequently multi-national organizations. Implementing ERP system involves a change management initiative, which includes a review of processes across the organization, and entails more than just installing stand-alone pre-written software (Skok and Legge, 2001:194). The change management initiative almost certainly requires some form of business process re-engineering.
With respect to the banking sector, the utilization of ERP system as a specific information technology application has increased attention from key players (bankers, customers, policy makers) in the financial services industry. This is partly due to the rapid and significant growth in electronic commerce and the notion that electronic banking and payments such as on-line, real time, automated teller machine, mobile and internet banking etc will likely advance more in tandem with electronic commerce. Besides, industry analysis outlining the potential impact of electronic banking on costs, savings, revenue growth and increased customer convenience have also generated considerable interest and speculation about the impact of ERP systems as a specific ICT application on the banking industry.
Allen et al (2002:234) observe that ERP systems improved decision making speed, enhanced control of operations and costs, reduced costs, and boosted enterprise wide information dissemination. However, the complexity of ERP systems implementations; the drastic organizational, cultural, and human changes; the typical high customization expenses; and implementation problems all contribute to new customers’ reconsidering their ERP systems implementation plans. Hossain et al (2002:232) observe that ERP systems implementations are likely to be the largest change project in cost and time that most organizations have taken on in their history. However, inconclusive findings have been reported on the effect and benefit of ERP systems implementations. It is on this premise that various researchers such as Wilson (1993:102), Furst et al (2000:58) and others have been engaged in unending discourse on the positive pay-offs emanating from the utilization of specified information technology in various enterprises. Such academic debates have resulted in the birth of IT productivity paradox which is concerned with appraising the impact of IT on operational efficiency and the productivity of organizations. Gattiker and Goodhue (2000:438) observe that ERP systems offer an extra-ordinary level of business integration and related benefits, however, most IT managers identified ERP systems as the most difficult systems to implement. According to Hossain et al (2002:233), ERP systems are usually modular in design, utilize a centralized common database management system and have integrated modules so that data flows seamlessly to users through standard interfaces. They further noted that ERP systems are flexible and present best business practices, and require tailoring and configuration set-up for various business functions. In addition, ERP systems operate in real time, provide online, batch processing capabilities and are increasingly internet-enabled, which are the hallmark of today’s banking operations.
Robinson and Wilson (2001:28) observe that ERP systems aim at providing a business advantage by facilitating the management of all organization’s activities as a whole in addition to replacing legacy systems and resolving inconsistencies and interfacing problems among individual information systems. ERP is turning into the business backbone for organizations (such as banking industry) that perform online business transactions. Both practitioners and researchers have indicated that in order to survive in the emerging electronic-based economy, organizations should adopt ERP systems and use them strategically. Willcocks and Sykes (2000:39) opine that an ERP is competitively and technically necessary for many organizations. However, there is contradictory evidence in justifying an ERP economically and there is difficulty in rationalizing the associated costs and implementation complexity for achieving lasting business advantage.
Even though ERP systems have been used by many organizations for over a decade, there remains dearth of research on the impact of ERP on organizational performance especially in developing economy like Nigeria. Since researches indicate that ERP systems significantly affect various types of organizations, this study however seeks to measure the impact of ERP systems on the performance of selected commercial banks in Southwestern Nigeria.
- Statement of the Research Problem
