Critical Issues of ERP Systems: A
Practitioner’s Perspective
By
Chuck C. H. Law
Department of Information Management,
Chaoyang University of Technology
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Table of Content
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Objectives
Literature Review
Frequently Encountered Problems
Case Study: Tradeco
Professional Practice
Conclusion
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Introduction
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Objectives:
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What are the critical issues related to ERP system
adoption and management?
What are the problems encountered in ERP adoption in
the business world?
What are considered sound professional practice in
addressing these problems ?
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Literature Review –
Critical Issues – Academic Perspective
Study
Findings
Bingi et al. (1999)
* Identified 10 critical issues for ERP implementation, including BPR, and
senior management support.
Hong and Kim
(2002)
* Relationship between organizational fit of ERP and ERP success
(supported)
* Moderating effects of ERP adaptation and process adaptation (supported)
Yang et al. (2000)
* Relationship between the extent of business process redesign and ERP
benefits. (not supported)
Gattiker and
Goodhue (2002)
* Positive relationship between ERP adoption and process changes
(supported).
* Relationship between process changes and the organizational impact of
ERP (not supported).
Kumar et al. (2002)
* 14% of respondents regarded ERP-business process fit as important.
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Literature Review –
Critical Issues – Academic Perspective
Study
Findings
Hitt, Wu, and Zhou
(2002)
* Relationship between ERP adoption and firm performance (supported)
* The impact of ERP varies with the level of implementation.
Shang and
Seddon (2002)
* Qualitative study
* Reviewed 233 cases of ERP adoption to identify tangible and intangible
benefits of ERP systems.
* Interviewed managers of 34 organizations.
Murphy and Simon
(2002)
* Case study on intangible benefits of ERP adoption, and showed how such
benefits were considered in project evaluation.
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Literature Review –
Critical Issues – Academic Perspective
Study
Findings
Ein-Dor and Segev
(1978)
* seniority of IT leader, management support, & organizational structure
Davenport (1998)
* management support, steering committee chaired by senior business
executives
Li and Ye (1999)
* Reporting distance between CEO and CIO
Grover et al.
(1995)
* management support critical for BPR
Sumner (2000)
* management support
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A Summary of Critical Issues
• impact of ERP, intangible & tangible benefits, justification
• business process improvement / re-engineering
• business process – ERP fit
• process adaptation versus ERP adaptation
• senior management support of IT & BPI projects
• reporting relationship between CEO/CIO, & organizational
structure
• strategic intent
• process re-engineering approach
• revolutionary versus evolutionary
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Practical Problems
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Justification of investment
Management support
User involvement
Business process-ERP fit
Business process re-engineering
Cultural Issues, for instance,
 Data ownership
 Territorialism
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Practical Problems
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Organizational issues, for instance,
 Organizational structure
 Seniority of IT leader / reporting relationship
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Case Study - Tradeco
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A Hong Kong-listed firm
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Established by Hong Kong/Singaporean families in mid-1960’s
Listed in late 1990’s
American conglomerate acquired 60% of ownership in 2000.
Attempted to replace legacy system by ERP
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Case Study – Tradeco
Problems/Mistakes
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Lack of Management Support
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Package evaluation and selection was poorly executed.
Managing director ignored recommendation of MIS Manager and
selected an ERP package (X) which did not fit business practice
and process
Steering Committee was not attended by MD and other directors
MD carried no leadership role in the project.
Lack of User Involvement/support
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Participation in analysis/design sessions is low
Divisions and teams were represented only by junior staff (such as
sales assistants and secretaries)
Resistance to BPR
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Case Study – Tradeco
Problems/Mistakes
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Lack of fit between Tradeco and ERP Package Selected
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Actual costing not supported by ERP package
Business process not re-engineered to fit ERP, but instead the ERP
was customized
Cultural-organizational factors
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Territorialism
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fierce competition among teams
Data ownership
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Each team and staff (including senior management) believe that they
owned the data resulted from business transactions.
Such concept precluded any co-operation and information sharing
along ERP processes – an obstacle to BPR.
Misuse of ERP security features.
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Case Study – Tradeco
Problems/Mistakes
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Cultural-organizational factors (cont’d)
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Consultant Management
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Company and MIS have no exposure to ERP adoption.
Mistakes in recruiting qualified consultants
Mistakes in managing consultants’ activities and time.
Skills and Training
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Poorly defined and managed training plan
MIS and users were offered only standard training courses, which
did not cover Tradeco’s processes.
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Case Study – Tradeco
Problems/Mistakes
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Methodology & QA
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Milestones, deliverables, and responsibilities not clearly defined
and enforced.
Control measures were not enforced at milestones such as review
of specification, testing …
GAP analysis not conducted
BPR not conducted
Lacks overall strategy and planning from selection to
implementation
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Professional Practice
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Cultural-Organizational Factors
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Senior management support/leadership
Steering committee chaired by CEO, and attended by senior staff
Promote and manage project as a company initiative, but not an
IT/MIS project
IT leadership must be positioned high in the committee and in the
organization structure
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Professional Practice
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ERP-Business Process Fit and Process Management
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Gap analysis
Business process re-engineering
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Always strive to improve and simplify process
Process-oriented approach, rather than function-oriented approach
Responsibilities of process owners
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Professional Practice
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Methodology and QA
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well defined project plan
Milestones, deliverables, and responsibilities specified.
Gap analysis – fit between ERP and process
Business process re-engineering
Project organization structure must be defined and members
empowered.
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Professional Practice
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Human Resources & Consultants Management
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Must staff project team with internal skills in
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Must screen consultants carefully
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project management
systems/process analysis
ERP skills
(do not rely totally on consultants)
Review resume and references
Must clearly define tasks and deliverables assigned to consultants
Time report approval – consultant time must be reviewed
according to estimates
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Professional Practice
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Training Management
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Needs a long-term perspective in training beyond the project
development period
Appropriate training should be offered to various categories of
stakeholders in the project
Training must address company’s business processes
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Vendor’s standard training courses were insufficient/inadequate
Joint efforts between vendor & users in training development
Train the trainer approach
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Conclusion
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ERP is challenging to most organizations
Critical issues/factors must be managed properly
to achieve satisfactory outcomes.
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Thank you!
Any Question ?
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