Proceedings of 7th Annual American Business Research Conference

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Proceedings of 7th Annual American Business Research Conference
23 - 24 July 2015, Sheraton LaGuardia East Hotel, New York, USA, ISBN: 978-1-922069-79-5
Strategic Planning for Successful ERP Implementation
Abdelmageed Elsadek Abdelrazek
Since early 1990s, many firms around the world have shifted their information technology (IT) strategy
from developing information systems in-house to purchasing application software such as enterprise
resource planning (ERP) systems. IT managers responsible for managing their organization’s ERP
implementation view their ERP systems as their organizations’ most strategic computing platform. This is
because ERP implementations are usually large, complex projects, involving large groups of people and
other resources, working together under considerable time pressure and facing many unforeseen
developments. In order for an organization to compete in this rapidly expanding and integrated
marketplace, ERP systems must be employed to ensure access to an efficient, effective, and highly
reliable information infrastructure. Despite the benefits that can be achieved from a successful ERP
system implementation, there is evidence of high failure in ERP implementation projects. Identifying
project success and failure factors and their consequences as early as possible can provide valuable
clues to help project managers improve their chances of success. This research concentrates on the
most frequently mentioned ERP implementation success factors that have been discussed on the
literature. Also, It introduces a detailed adoption concerns showing surveys that declare the most stated
motives and challenges that should be considered when an organization planning for ERP adoption. to
better manage the risks associated with ERP adoption, enterprises should follow the mentioned
methodology to gain a clear idea of the impact and effects it may face on their IT services and
organizational culture and structure.
1. Introduction
Sensible use of technology can give organizations a competitive advantage. This may be especially
true for enterprise resource planning systems that are capable of transforming organizational
processes through integration and automation, stated by Markus, and Tanis (2000). ERP systems
often provide firms a positive return, Hayes, Hunton, and Reck (2001), but that is not always the case.
ERP systems are costly and have often resulted in inconsistent economic returns. According to Ivo
De Loo (2011), One reason ERP may fail to meet expectations is poor implementation. A second
reason is that an ERP system is a poor fit for a particular firm and perhaps should not have been
adopted, publication of Hong, and Kim (2002). Motivated by this second reason, coupled with the
frequent failures of ERP systems, the author explores the ERP adoption decision process. This idea
could suggest that the effects of institutional pressures on ERP adoption decisions are moderated by
the level of ambiguity surrounding the costs versus benefits of adopting an ERP system.
Enterprise resource planning (ERP) systems, when successfully implemented, links all functions of an
organization including order management, manufacturing, human resources, financial systems, and
distribution with external suppliers and customers into
a tight integrated system with shared data and visibility, stated by Chen (2001). The primary motive
for ERP implementation is the potential for enhancing the firm's competitiveness. ERP systems
provide significant benefits, and companies adopted them with the goal of replacing inefficient standalone legacy systems, increasing communications between business functions, increasing
information processing efficiencies, improving customer relations, and improving overall decision
making, Cereola (2011). However, Risks are part and package of ERP project., Nonetheless a
_____________________________________________________________________
Assoc. Prof. Abdelmageed Elsadek Abdelrazek, MIS dept., Email: [email protected], College of Business
Administration (CBA), University of Business and Technology (UBT), Jeddah, Saudi Arabia
Proceedings of 7th Annual American Business Research Conference
23 - 24 July 2015, Sheraton LaGuardia East Hotel, New York, USA, ISBN: 978-1-922069-79-5
planned and systematically adopted risk management procedure throughout the implementation
project reduces the possibility of risks. The risks are higher for SMEs as the cost overruns during
implementation may put financial strain on the firm and thus largely impact firm performance Cereola
(2011). In addition, SMEs have less of a chance of recovering from a failed ERP implementation
attempt than large enterprises.
Enterprise resource planning systems constitute the basic information systems software in the
modern environment as well as the typical model of computing in an organization. These systems
offer a way to efficiently plan and manage the resources of an entire company through the integration
of its information and information-based processes across functional area as well as beyond the
organizational boundaries, Buonanno et al., (2005) and Laukkanen et al., (2007). The benefits of
adopting an ERP include for example; cost reduction, better customer service, improved productivity,
better quality, enhanced resource management, better planning and decision making and
organization empowerment. The organizations which have successfully implemented the ERP
systems are winning the benefits of having integrating working environment, standardized process
and operational benefits to the organization.
This research concentrates on the most frequently mentioned ERP implementation success factors
that have been discussed on the literature. Also, It introduces a detailed adoption concerns showing
surveys that declare the most stated motives and challenges that should be considered when an
organization planning for ERP adoption. to better manage the risks associated with ERP adoption,
enterprises should follow the mentioned methodology to gain a clear idea of the impact and effects it
may face on their IT services and organizational culture and structure.
Thus, the paper is organized in sections as follows: The second section cover ERP evolution and
growth. Section three and four cover the most stated motives and challenges of ERP adoption
process. In section five, an implementation methodology consists of six stages is introduced to
ensure risk free implementation activities. Section six lists the most mentioned critical success factors
to follow for the implementation process. Some notes is stated about the adoption in developing
countries is mentioned in section seven and ending with the conclusion.
2. ERP Evolution and Growth
In 1960s Enterprise Resource Planning (ERP) has been developed for inventory management
systems and then evolved to Materials Requirements Planning (MRP) in the 1970s and
Manufacturing Resource Planning (MRPII) in the 1980s. In 1990s, Gartner Group, a famous US
based consultancy firm, re-christened MRPII as ERP, publication of Nah et al., (2001). The initial
meaning of ERP indicated integrated software applications that govern different departmental
functions such as finance and human resource. Today, the term ERP implies widespread integrated
information systems applicable to any organization regardless of size and geographic locations, as of
Huang et al., (2003).
The first generation ERP system (introduced by vendors such as SAP and Baan) was used by large
manufacturing companies such as Boeing, Mercedes-Benz and BMW, Van Everdingen, and Van
Hillegersberg (2000), Kumar and Hillegersberg (2000). Over time, various other industries such as
retail, wholesale and service also began using ERP system. In recent years, ERP II – a second
generation system with additional features such as supply chain management and customer
Proceedings of 7th Annual American Business Research Conference
23 - 24 July 2015, Sheraton LaGuardia East Hotel, New York, USA, ISBN: 978-1-922069-79-5
relationship management was introduced in the market. The improved ERP system integrates back
and front end office operations seamlessly, Beath (2000). The primary backbone of ERP system is
information technology (IT) which helps in the integration of numerous applications and processes
owned by different departments in a firm. It is not just about enabling efficient communication
between networks and protocols but is also about integration of different business processes,
company policies and organizational structures.
Since mid 1990s, the number of ERP using firms has been growing significantly. Verma (2007)
reported that ERP system has become a part and parcel of firms with over $1 billion annual turnover
in the year 1998. Six years later, Markus et al. (2000) highlighted that nearly 70% of Fortune 1000
firms are users of ERP system. Apart from penetration quantum, reports are also abundant with
success stories from ERP vendors‘ perspective, although most of them seem to be estimation figure
per se.
The massive investment and growth figures depict business organizations preference for ERP
system. Such importance is further exacerbated by claims made by leading ERP vendors such as
SAP AG and Oracle, on the benefits provided by their ERP architecture to business performance. For
example, Oracle claimed that their E-business Suite assist customers to make effective informed
decisions by improving their business operations and reducing operation expenditures while SAP AG
promises ‗faster return on investment‘ via their SAP ERP solution.
The growth in ERP users across the globe implies successful adoption to the system. The literature
however has showed evidence of ERP system adoption failures, regardless of whether in developed
or developing countries. In lieu of the failure cases, empirical and non-empirical studies have shown
various critical success factors that can assist in avoiding adoption failure.
3. ERP Adoption Motives
An enterprise‘s motivation to adopt ERP systems can surfaced up due to a number of reasons. As
indicated by Shang and Seddon (2000), they linked ERP adoption with the gained benefits out of the
implementation. They classified ERP benefits into five groups as follows: Operational group, relating
to cost reduction, cycle time reduction, productivity improvement, quality improvement, and customer
services improvement. Managerial group, relating to better resource management, improved
decision making and planning, and performance improvement. Strategic group, concerning
supporting business growth, supporting business alliance, building business innovations, building cost
leadership, generating product differentiation, and building external linkages. IT infrastructure group,
involving building business flexibility, IT cost reduction, and increased IT infrastructure capability.
Organizational group, relating to supporting organizational changes, facilitating business learning,
empowering, and building common visions.
While Oliver, Whymark, and Romm's stated that the prime motive to adopt ERP systems is to
increase organizational performance by process improvement or business process reengineering
(BPR) as well as seeking standardization or increasing flexibility. Another motive is to have better
decision making in the enterprise by having increased transparency, better information-flow and
reliable data. In addition, many organizations want to adopt ERP systems to modernize and
rationalize their IT infrastructure and to get rid of legacy systems in order to simplify the maintenance.
The integration is another prime motive for ERP adoption. It includes the integration of data for better
decision making and integration of the systems with the purpose of having a common platform.
Proceedings of 7th Annual American Business Research Conference
23 - 24 July 2015, Sheraton LaGuardia East Hotel, New York, USA, ISBN: 978-1-922069-79-5
Furthermore, there is a range of business-oriented rationales for ERP adoption such as increased
customer satisfaction, shorter cycle times, currency conversion/globalization, reduce costs and
competitive rationale.
By looking at Figure 1, that shows the result of surveys that have done in 2014 for manufacturing
organizations, it could be realized that the most highest reasons for ERP implementation are: to
better integrate systems across multiple locations (22.3%), to standardize global business operations
(21.9%), to replace old ERP or legacy system (17.9%), and to make employee jobs better (11.2%).
The Aberdeen Group found the following quantifiable benefits from best-in-class ERP
implementations: 22% reduction in operating costs,20% reduction in administrative costs, and 17%
inventory reductions (for manufacturing and distributing),19% improvements in complete and on-time
delivery,17% improvements in schedule compliance (for manufacturing and distributing).
Figure 1. Reasons for ERP Implementation
Proceedings of 7th Annual American Business Research Conference
23 - 24 July 2015, Sheraton LaGuardia East Hotel, New York, USA, ISBN: 978-1-922069-79-5
Figure 2. ERP Benefits
Also, as indicated from Figure 2 the most stated benefits on the mentioned survey are: information
availability 33.3%, increased interaction across the enterprise 23.1%, and customer interaction
12.8%.
4. ERP Adoption Challenges
Many changes that come about due to an ERP implementation will substantially affect employees.
Success depends on how effectively you understand and manage the impacts of these changes.
Many challenges could surfaced up during the implementation process that should be cleared and
managed to assure the success of the implementation. Next we stated some of these challenges that
must be addressed by the project management:
First, it is very important that the implementation is done in stages. "Planning is absolutely necessary
if you want your ERP project to succeed, you simply can‘t wing ERP, stated by Erik Kaas. If you don‘t
do proper planning it will lead to confusion and chaos down the road because the organization might
not fully understand their current processes and how to evolve them to maximize business benefits
and efficiencies.
To do a proper planning, organizations should conduct an internal audit of all of their processes and
policies before choosing an ERP system. In addition, putting together an ERP evaluation team
composed of stakeholders from across the business. Moreover, if you feel you do not have the inhouse capability to properly evaluate ERP systems, consider hiring an experienced third-party,
vendor-neutral consultant, who has experience implementing ERP solutions at companies in your
industry. Second, proper training is very essential during and after implementation. The staff should
be comfortable in using the application or else, it will backfire, with redundant work and functional
inefficiencies. A lack of proper training is one of the most common reasons that ERP projects fail, and
it can also result in employees resenting the new system because they don't understand it. Without
knowing features, companies miss opportunities to automate business processes, complete functions
faster, and meet business objectives. In addition, upgrades, enhancements, and maintenance are
more
Proceedings of 7th Annual American Business Research Conference
23 - 24 July 2015, Sheraton LaGuardia East Hotel, New York, USA, ISBN: 978-1-922069-79-5
Figure 3. Six phases ERP Implementation Methodology
Strategic Enterprise Architecture
- Implementation Motives
- Critical Evaluation of Internal / External Aspects
Proceedings of 7th Annual American Business Research Conference
23 - 24 July 2015, Sheraton LaGuardia East Hotel, New York, USA, ISBN: 978-1-922069-79-5
Project Management & Best Practice
Define
 Outline Implementation Strategy
 Define Project Objective
 Establish Project Team & Define Project Scope
 Business Requirement Definition
 Conceptual Design & Infrastructure Analysis
 Define Test Strategy & Quality Process
Plan
 Define Business Process
 Prepare Detail Design
 Establish Technical Infrastructure
 Finalize GAP Analysis & Project Scope
 Project Team Familiarization & Training
 Finalize Test Plans & Quality Process Results
Build
 Module Build & Baseline Configuration
 Configuration Training
 System & End User Documentation
 Develop RICEF Objects
 Establish System Security & End User Privileges
 Quality Review & Corrective Actions
Deploy
 Integration & System Testing
 Load & Stress Testing
 End User Training
 User Acceptance Testing
 Cut-over Plan & Production Migration Plan
 Quality Review & Corrective Actions
Operate
 Cut-over Operation
 Production Migration
 System Readiness Audit & Go Live
 Establish Change Control Process
 Validate Production Entries
 Quality Review & Corrective Actions
Support & Optimize
 Post Production Support Process
 New System Adoption & Learning
 System Monitoring & Fine Turning
 End User Handholding
 Recommend
 Business Process Optimization
 Validate Project Scorecard
Steering Committee Reviews
Proceedings of 7th Annual American Business Research Conference
23 - 24 July 2015, Sheraton LaGuardia East Hotel, New York, USA, ISBN: 978-1-922069-79-5
Proceedings of 7th Annual American Business Research Conference
23 - 24 July 2015, Sheraton LaGuardia East Hotel, New York, USA, ISBN: 978-1-922069-79-5
costly, and less likely to succeed. All of that is because there isn‘t proper training. The organization
have to make sure employees have a chance to become comfortable with the new system before it
goes live will do wonders for your chances at ERP success. In addition, the organization should
create a master list with all the features, tracking usage, and periodically reviewing the list to
determine which features are being used and which are the most helpful. Third, lack of proper
analysis of requirements. It will lead to non-availability of certain essential functionalities. This might
affect the operations in the long run and reduce productivity and profitability. Fourth, lack of support
from Senior Management will lead to unnecessary frustrations in work place. Also, it will cause delay
in operations and ineffective decisions. Hence, it is essential to ensure that the Senior Management
supports the transformation.
Fifth, compatibility Issues with ERP Modules leads to issues in integration of modules. Companies
associate different vendors to implement different ERP modules, based on their competency. It is
very essential that there is a way to handle compatibility issues. Also, the organization should
decommission legacy applications. Sixth, cost overheads will result, if requirements are not properly
discussed and decided during the planning phase. Therefore, as we discussed in the planning phase
a detailed plan with a complete breakdown of requirements should be worked out before execution. In
addition, the organization should have a maintenance strategy. Because if they don‘t have it then they
are not taking full advantage of their ERP investment and their maintenance dollar. By not applying
maintenance, their systems will quickly become obsolete (from a technical perspective) as will their
business processes. Moreover, it is very important to the keep the kernel up-to-date with the right
legal changes applied to prevent potential problems. Finally, investment in infrastructure is very
essential. ERP applications modules will require good processing speed and adequate storage. Not
allocating suitable budget for infrastructure will result in reduced application speed and other software
issues.
Also another study performed by Kamhawi (2008) in Bahrain, where he made a list of 18 possible
challenges. The top ten out of eighteen barriers of ERP adoption are as follows. (1) Large capital
investments required for ERP systems; (2) Requires too much training for employees; (3) Other
important priorities for now; (4) No need now for the drastic change that ERP systems require; (5) We
lack the experience needed to develop and support ERP systems; (6) It would be difficult to integrate
ERP system with our existing systems; (7) Too risky projects; (8) Lack of project management
experiences; (9) Difficult for our organization to learn how to operate this new system; (10) Lack of
resources.
5. ERP Implementation Methodology
Today‘s fast changing global scenario demands faster flow of information. Due to increasing business
complexity and market demands, enterprises need to adopt newer technologies and latest enterprise
packages.
Before beginning any ERP project, it‘s critical to ensure that the entire organization understands the
reasons and strategy behind the move. If decision makers do not clearly support the need for change,
your budget and resource planning may be negatively affected. If project members and end users
Proceedings of 7th Annual American Business Research Conference
23 - 24 July 2015, Sheraton LaGuardia East Hotel, New York, USA, ISBN: 978-1-922069-79-5
don‘t understand the objectives, confusion can prevail over purpose and commitment, increasing
resistance to change and reducing the chance of success.
In this paper, an implementation methodology that is consists of six stages is introduced. These
stages ensure the successful implementation of the ERP system.
Figure 3 presents a methodology for ERP implementation that consists of six-phases each of which
representing a distinct milestone in the ERP adoption. It is crucial that management conduct a review
at the end of each stage to make sure everyone agrees on its outcome before moving on to the next
stage. These phases are preceded by a critical look at a company‘s strategic enterprise architecture
and surrounded by project management & best practice and steering committee reviews. The
strategic enterprise architecture analyzes the driving motive for implementing an ERP system while
project management and steering committee seek to integrate the human resource dimension and
coordinate daily operations with the new business process design taking into account the processes
best practice, respectively. The first phase is the define phase in which project scope and objectives
are determined, implementation and test strategies are defined, project team and infrastructure
analysis are established. In second phase, plan, system specification is prepared and finalized. In
this phase, the detailed process design and technical infrastructure are set, GAP analysis is defined,
and business processes and test plan are defined by F. C. Weston (2001). The third phase, build, is
concerned with establishing system security, configuration training, developing reports, interfaces,
conversion, and forms. Fourth phase, deploy, concentrating on all types of system testing under full
data load and extreme situations, educational training is undertaken to understand how data flow
through the system and how the system is operated at each point in the supply chain, and production
migration plan. In the fifth phase, operate, conversion strategy is followed to replace the old scattered
systems with the new integrated ERP system to go live. The final phase is named as support and
optimize phase during which the post implementation support plan is established, system monitoring
and fine tuning activities are achieved, and business processes are optimized.
6. Critical Success Factors For ERP Implementation
After reviewing so many successful ERP implementations in the literature, it has been shown that
leadership and top management commitment are the most critical factors in organizations embarking
on ERP implementation. In this case, a smooth change management and system rollout is ensured.
This commitment will encourage setting the right mission and objectives as well as increase the
creativity of the employees.
For an enterprise to gain future competitive strategy it needs to implement the ERP system
successfully. To do so and also get the most benefits out of ERP adoption, it should pay a great
attention to the most cited success factors.
Implementing an ERP system is not an inexpensive or risk-free venture. In fact, 65% of executives
believe that ERP systems have at least a moderate chance of hurting their businesses because of the
potential for implementation problems. It is therefore worthwhile to examine the factors that, to a great
extent, determine whether the implementation will be successful.
Numerous authors have identified a variety of factors that can be considered to be critical to the
success of an ERP implementation. The most prominent of these are described below:
6.1 Commitment by top management
Proceedings of 7th Annual American Business Research Conference
23 - 24 July 2015, Sheraton LaGuardia East Hotel, New York, USA, ISBN: 978-1-922069-79-5
Top management commitment and support is very important in ensuring that ERP projects come to
success, as they set up the strategic directions of the implementation process as well as supporting
and monitoring the implementation process. This support might include providing strategic direction
by being actively involved in various high-level cross-functional implementation teams.
Implementation of an ERP system entails transforming the company to a higher level of performance,
and transform it into a more efficient and effective organization through a streamlined business
process. Identification of these critical factors permits managers to obtain a better understanding of
issues surrounding ERP implementation.
6.2 Business process reengineering
Another important factor that is critical for the success of ERP implementation is the Business
Process Reengineering. It is defined by Yakovlev (2002) as the fundamental rethinking and radical
redesign of business processes to achieve dramatic improvements in critical, contemporary
measures of performance, such as cost, quality, service and speed. Organizations should be willing
to change their businesses to fit the ERP software in order to minimize the customization activities,
Zhang et al., (2003); Shehab et al., (2004); McAdam and Galloway (2005). This fact requires
examination of many business processes, which believed to be one of the important and beneficial
results of the implementation of ERP system. It should be noted that there is no single ERP solution
that can prove to be a panacea and fulfill all the business requirements. Integrating differing software
packages from various vendors always poses a challenge to the organization and requires a good
business process engineering.
6.3 Minimal customization
It should be noted that ERP systems are theoretically based on industry best practices, and their
makers intend that organizations deploy them as is, as stated by Kraemmerand, P.; et al. (2003) and
Vipola, Inka Heidi (2008). In spite of the fact that ERP vendors do offer customers configuration
options that let organizations incorporate their own business rules, according to Thomas H.
Davenport (2002) - for example it can select the type of inventory accounting (FIFO or LIFO) to use;
whether to recognize revenue by geographical unit, product line, or distribution channel; and whether
to pay for shipping costs on customer returns, there still often feature gaps remain even after
configuration is complete.
ERP customers have several options to reconcile feature gaps, each with their own pros/cons.
Technical solutions include rewriting part of the delivered software, writing a homegrown module to
work within the ERP system, or interfacing to an external system. These three options constitute
varying degrees of system customization—with the first being the most invasive and costly to
maintain, stated by Fryling, Meg (2010). Alternatively, there are non-technical options such as
changing business practices or organizational policies to better match the delivered ERP feature set.
6.4 Excellent project management
Successful ERP implementation requires that the organization engage in excellent project
management. This includes a clear definition of objectives, development of both a work plan and a
resource plan, and careful tracking of project progress. The project plan should establish aggressive,
but achievable, schedules that instill and maintain a sense of urgency. A clear definition of project
objectives and a clear plan will help the organization avoid the all-too-common ‗‗scope creep‘‘ which
can strain the ERP budget, jeopardize project progress, and complicate the implementation. The
project scope must be clearly defined at the outset of the project and should identify the modules
selected for implementation as well as the affected business processes. If management decides to
implement a standardized ERP package without major modifications, this will minimize the need to
Proceedings of 7th Annual American Business Research Conference
23 - 24 July 2015, Sheraton LaGuardia East Hotel, New York, USA, ISBN: 978-1-922069-79-5
customize the basic ERP code. This, in turn, will reduce project complexity and help keep the
implementation on schedule.
6.5 Organizational change management
The existing organizational structure and processes found in most companies are not compatible with
the structure, tools, and types of information provided by ERP systems. Even the most flexible ERP
system imposes its own logic on a company's strategy, organization, and culture. Thus, implementing
an ERP system may force the reengineering of key business processes and/or developing new
business processes to support the organizations goals. And redesigned processes require
corresponding realignment in organizational control to sustain the effectiveness of the reengineering
efforts. This realignment typically impacts most functional areas and many social systems within the
organization.
The resulting changes may significantly affect organizational structures, policies, processes, and
employees. Unfortunately, many chief executives view ERP as simply a software system and the
implementation of ERP as primarily a technological challenge. They do not understand that ERP may
fundamentally change the way in which the organization operates. This is one of the problematic
issues facing current ERP systems. The ultimate goal should be to improve the business––not to
implement software. The implementation should be business driven and directed by business
requirements and not the IT department.
Clearly, ERP implementations may trigger profound changes in corporate culture. If people are not
properly prepared for the imminent changes, then denial, resistance, and chaos will be predictable
consequences of the changes created by the implementation.
However, if proper change management techniques are utilized, the company should be prepared to
embrace the opportunities provided by the new ERP system––and ERP will make available more
information and make attainable more improvements than at first seemed possible. The organization
must be flexible enough to take full advantage of these opportunities.
6.6 Clear strategic goals and expected benefits
ERP implementations require that key people throughout the organization create a clear, compelling
vision of how the company should operate in order to satisfy customers, empower employees, and
facilitate suppliers for the next three to five years. There must also be clear definitions of goal,
expectations, and deliverables. Finally, the organization must carefully define why the ERP system is
being implemented and what critical business needs the system will address.
6.7 A great implementation team
ERP implementation teams should be composed of top-notch people who are chosen for their skills,
past accomplishments, reputation, and flexibility. These people should be entrusted with critical
decision making responsibility. Management should constantly communicate with the team, but
should also enable empowered, rapid decision making.
The implementation team is important because it is responsible for creating the initial, detailed project
plan or overall schedule for the entire project, assigning responsibilities for various activities and
determining due dates. The team also makes sure that all necessary resources will be available as
needed.
6.8 Extensive education and training
Education/training is probably the most widely recognized critical success factor, because user
understanding and buy-in is essential. ERP implementation requires a critical mass of knowledge to
enable people to solve problems within the framework of the system. If the employees do not
understand how a system works, they will invent their own processes using those parts of the system
they are able to manipulate.
Proceedings of 7th Annual American Business Research Conference
23 - 24 July 2015, Sheraton LaGuardia East Hotel, New York, USA, ISBN: 978-1-922069-79-5
The full benefits of ERP cannot be realized until end users are using the new system properly. To
make end user training successful, the training should start early, preferably well before the
implementation begins. Executives often dramatically underestimate the level of education and
training necessary to implement an ERP system as well as the associated costs. Top management
must be fully committed to spend adequate money on education and end user training and
incorporate it as part of the ERP budget. It has been suggested that reserving 10–15% of the total
ERP implementation budget for training will give an organization an 80% chance of implementation
success.
All too often, employees are expected to be able to effectively use the new system based only on
education and training. Yet, much of the learning process comes from hands-on use under normal
operating conditions. Thus, (a designated individual preferably the project leader) should maintain
ongoing contact with all system users and monitor the use of, and problems with, the new system.
There is also a need for post-implementation training. Periodic meetings of system users can help
identify problems with the system and encourage the exchange of information gained through
experience and increasing familiarity with the system.
6.9 Effective Communication
This Factor describes exactly which piece of information needs to be communicated and what
vehicles, channels or methods project team members will use to carry out the necessary project
implementation, as of Yu, C.S (2005). According to McAdam and Galloway (2005), ERP
implementation is a long term endeavor, involves inevitable interaction between top management,
project group and vendors. That is why the communication factor is one of the most challenging and
difficult element in any ERP project. A communication plan has to be established to detail several
areas including the rationale for the ERP implementation, details of the business process
management change, demonstration of applicable software modules, briefings of change
management strategies and tactics and establishment of contact points. Communication has to cover
the scope, objectives, and tasks of an ERP implementation project. In a way to avoid the various
communication failures, an open information policy has to be maintained for the project. For example,
a good e-mailer system can help promote this policy, but serious problems need to be discussed by
telephone or, preferably, face to face.
6.10 Technological infrastructure
According to Somers, and Nelson (2004, 2001), It is clear that ERP implementation involves a
complex transition from legacy information systems and business processes to an integrated IT infrastructure and common business process throughout the organization. Hardware selection is driven by
the firm's choice of an ERP software package. The ERP software vendor generally certifies which
hardware and hardware configurations must be used to run the ERP system. This factor has been
considered critical by the practitioners and as well as by the researchers.
6.11 Data migration
Many companies tend to focus on software testing and configuration and put off dealing with data
migration until late in the implementation process. An attribute of successful ERP implementations is
that data migration is put into the project plan as early as possible. A company‘s data is one of its
primary assets and issues with migrating data between legacy systems and a new ERP system can
have a sizeable negative impact on business operations, especially those that are exposed late in the
process.
Once the scope of the data to be migrated is determined, activities such as data scrubbing and
mapping can be performed independent of the larger implementation process. Similarly, work on
Proceedings of 7th Annual American Business Research Conference
23 - 24 July 2015, Sheraton LaGuardia East Hotel, New York, USA, ISBN: 978-1-922069-79-5
forms and reports can be conducted without relying on the rest of the implementation. It‘s also a good
idea to incorporate a data component into conference room pilots and testing processes, so that data
is tested within the software along with business processes.
Another important decision is how much historical data should be brought into the new system. Many
companies have a policy of saving everything rather than make decisions about what data should be
saved and what should be put in long-term storage. Some companies are required to retain data for
compliance with the Sarbanes-Oxley Act; others are concerned about threat of e-discovery and
consequent legal penalties. Nonetheless, all companies should establish a data retention and storage
strategy.
6.12 Data accuracy
Another important factor that is closely tied to data migration is data accuracy. Data accuracy is
absolutely required for an ERP system to function properly. Because of the integrated nature of ERP,
if someone enters the wrong data, the mistake can have a negative domino effect throughout the
entire enterprise. Therefore, educating users on the importance of data accuracy and correct data
entry procedures should be a top priority in an ERP implementation. ERP systems also require that
everyone in the organization must work within the system, not around it.
7. ERP Adoption in Developing Countries
Implementing an ERP system often constitutes a company‘s largest IS investment and in many cases
the largest corporate project, Summer (2000). This is more so in SMEs of developing countries where
many of the operational, control and managerial systems have yet to be automated and where legacy
systems are not as entrenched as in the businesses in the developed countries. It is then for this
reason that many researchers have concluded by stating that, in developing countries, ERP systems
are often implemented not to replace legacy systems but as part of an organization‘s effort to
modernize and differentiate itself, Reimers (2003).
ERP system adoption has been rather predominant in developed countries for many years. The past
few years however saw penetration of ERP system in firms in developing countries. There are a
growing number of literatures on ERP usage in developing countries lately.
Some studies examined the cultural differences between countries as the major driver for successful
ERP adoption. Literature on the ERP implementation comparison between developed and developing
countries indicates that developing countries are more focused towards building an integrated
knowledge management framework to ensure a sustainable and more culturally accepted information
system, according to Nah and Degaldo (2006). The same author has also indicated that the firms
from the developed countries are more focused towards project management issues and business
process management. In their study, Huang and Palvia (2001) reviewed ERP implementation
differences in developed and developing countries and concluded that economic status, government
regulations, low IT maturity, firm size and lack of business process management experience as the
major hindrance for firms in developing countries to reap the benefits from ERP investment. Karimi
(2008) has indicated that the firms in Bahrain were more concerned about sustaining the ERP
implementation through continuous training and exposure from the external consultants and vendors
to their employees. This will ensure their local expertise are equipped with the knowledge and
ultimately lowering the cost of maintaining the ERP system.
8. Conclusion
The implementation of ERP systems in organizations is an enormously complex undertaking. The
implementation process surely will affect nearly every and each aspect of the organizational
Proceedings of 7th Annual American Business Research Conference
23 - 24 July 2015, Sheraton LaGuardia East Hotel, New York, USA, ISBN: 978-1-922069-79-5
performance and functions. So, this high risk project needs to be managed and planned properly.
This research helps managers to better manage the risks associated with ERP adoption as it
identifies and gathers the needed information so that they can objectively evaluate whether or not
ERP solution helpful for their organization in a sense of providing some of the benefits and challenges
that are associated with adopting this solution. Also, a six phase implementation methodology for
ensuring a successful adoption is introduced in this paper. Moreover, organizations have to identify
the critical issues that affect the implementation process and know how to address them effectively to
ensure that the promised benefits can be realized and potential failures can be avoided. In this sense,
a comprehensive list of critical success factors that have been broadly mentioned and studied are
identified in this research.
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