Critical Success and Failure Factors of ERP Implementations: A Market Perspective

Critical Success and Failure Factors of ERP Implementations

By- Pijush Gupta (www.pigtale.co.in)

1 Copyright: Pijush Gupta | www.pigtale.co.in

Critical Success and Failure Factors of ERP Implementations: A Market Perspective

Table of Contents

1. Abstract ................................................................................................................................................. 3 2. Introduction ........................................................................................................................................... 4 3. Literature Review .................................................................................................................................. 6 3.1 The Implementation Methodology ................................................................................................. 9 3.2. Making the Process Successful.................................................................................................... 10 3.3. Implementation Review ............................................................................................................... 10 3.4. Executing Implementation Activities .......................................................................................... 11 3.5. ERP implementation strategies .................................................................................................... 12 3.6. Knowledge formulation phase ..................................................................................................... 12 3.7. Strategy implementation phase .................................................................................................... 13 3.8. Status evaluation phase ................................................................................................................ 13 3.9. Reasons for Failure ...................................................................................................................... 13 4. Market Trends ..................................................................................................................................... 17 4.1. Report Findings and Analysis...................................................................................................... 17 5. Market Study & Analysis .................................................................................................................... 22 5.1. ERP Implementation.................................................................................................................... 22 5.2. Critical Success Factors ............................................................................................................... 23 5.3. Research Framework ................................................................................................................... 23 5.4. ERP Implementation Success (1η): Dependent Variable ............................................................ 24 5.5. CSF’s & Organizational Culture: Independent Variables ........................................................... 26 5.6. Research Methodology ................................................................................................................ 30 5.7. Questionnaire Development ........................................................................................................ 30 5.8. Partial Least Squares ................................................................................................................... 31 5.9. ERP Implementation Success Index (ERP-ISI)........................................................................... 32 5.10. Results and Discussion .............................................................................................................. 33 5.11. Research Constraints ................................................................................................................. 35 6. Recommendation ................................................................................................................................. 37 6.1. Change Management Program .................................................................................................... 37 6.2. Secure Management Support and Commitment .......................................................................... 38 6.3. Picking the Implementation Team Wisely .................................................................................. 38 7. Conclusion ........................................................................................................................................... 40 8. References ........................................................................................................................................... 42 9. Appendix ............................................................................................................................................. 46 9.1. Questionnaire ............................................................................................................................... 46

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1. Abstract
Every year, according to the Project Management Institute (PMI), nearly 70-80% of all Enterprise Resource Planning implementation projects fail, go over-budget or go live past the original deadline (A. Roman, 2005). There are various reasons attributed to the success or failure of ERP Implementations. One of the reasons is resistance to change and top management comes across a feeling of apprehension from potential users who have certain reservations for the new application. The fundamental causes of failure are of a wide-range and are often discovered late in the process, if they are discovered at all. Highly skilled and experienced implementation consultants are the better choice because they have the capacity to provide an unbiased analysis that gives consideration to the big picture. Having a clear view with wider aspects is important to successful implementation. Using a method of survey through questionnaire, a study was conducted to find out the factors that really matter when it comes to successful ERP implementations. Varying results were drawn from the survey. It showed various reasons that ultimately result in the success or failure of an ERP implementation and showed that these factors were manageable. This paper attempts to find the real answer to problems being faced in ERP implementations and what really makes an ERP implementation successful.

Critical Success and Failure Factors of ERP Implementations: A Market Perspective 2. Introduction
Failure has been common among ERP implementations are not new to the business world. The business world has seen ERP implementations fail in big companies like Hershey and the result of it being lawsuits against ERP software vendors (Kimberling, 2006).

So, how can we increase the possibility of an ERP implementation being successful and realize its benefits? The success or failure of ERP implementations is assumed to be the fault of the software a company purchases, but in reality, 95% of a project's success or failure depends on the company implementing the software rather that the software vendor. (Kimberling, 2006). It is not always that the ERP package vendor or the consulting company is to be blamed for the ERP implementation failure. If the organization implementing the ERP fails to document their business requirements properly then the entire implementation project may fail.

Market analysis reports show that the high percentage of ERP implementation failures are due to many reasons and are sometimes discovered very late during the implementation phase. ERP implementations require highly skilled consultants who have worked on a number of projects and are familiar with mapping of various business processes or an organization to the ERP package. The key is to understand the big picture and align the ERP implementation to the vision, goals and objectives of the organization. Every ERP implementation project should ideally have some consultants with prior experience.

ERP has become the latest buzzword in the IT industry and almost every company is trying to follow the trend but not without reason. An ERP package can be of great benefit in implemented properly (Henderson, 2007). Earlier, organizations used to have heterogeneous legacy systems that were complex and difficult to incorporate but with ERP all the business functions and processes can be integrated to function in sync. But companies need to understand and accept the fact that ERP does not work miracles by taking away all the defects in business processes. If companies continue to follow their old business processes post implementation, then they are bound to 4 Copyright: Pijush Gupta | www.pigtale.co.in

Critical Success and Failure Factors of ERP Implementations: A Market Perspective
fail. ERP is all about re-engineering the business processes and mapping them to the ERP application to streamline the operations (Gould, 2007).

Some organizations have issues and apprehensions about end-of-living their legacy application which is understandable. It should be understood that it is not easy for the employees of an organization to suddenly adapt to a new application. This might prove to be a disaster for organizations as legacy systems have critical data. Hence, it is the responsibility of the ERP vendor or the consultants to build confidence in the staff to using ERP applications.

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Critical Success and Failure Factors of ERP Implementations: A Market Perspective 3. Literature Review
The Enterprise Resource Planning (ERP) system is a unified set of programs and applications that provides support for core organizational activities such as supply chain, operations, manufacturing, distribution, finance and accounting, sales and marketing and human resources (Prasad Bingi, 1999). In a nutshell, an ERP system helps the different corporate functions of the organization share data and knowledge, reduce costs and improve management of business processes. An ERP application streamlines the entire business flow of an organization so that it is automated and there is less scope for human error. Business functions like inventory management, order management, MRP, finance, supply chain management, customer relationship management and human resources among others are taken care of by the ERP system.

What we need to understand here is that Enterprise Resource Planning (ERP) is not software. Improper terminologies such as enterprise-wide transaction processing software systems are being labeled as ERP.Software Packages such as these help in efficient resource planning and cannot be completely depended upon for accuracy. These packages not only contain resource planning but also contain other business processes. As a matter of fact, they do not come as a complete package which helps in streamlining its operations entirety unlike ERP packages. Therefore, we need to coin another acronym that does refer to software: ES. This stands for Enterprise System or Enterprise Software. In the book “Mission Critical” (Davenport, 2000) author Thomas H. Davenport describes enterprise systems as “packages of computer applications that support many, even most, aspects of a company’s information needs.” This is more relevant to today’s business scenario. Another distinctive feature is that: Not all ERP business functions are contained in the typical Enterprise Software (ES) Suite. ERP packages address the entire range of business processes that are required for operating an organization. Figure 1.1 represents this in totality:

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Critical Success and Failure Factors of ERP Implementations: A Market Perspective

Figure 1.1- ERP Business Functions (Davenport, 2000) As the above figure graphically shows, the typical Enterprise System contains software support and components for business processes that are not a part of ERP. There are three areas on the above diagram. The circular figure to the right shows the operations that are not a part of ERP; the circular figure to the left is not part of the Enterprise System and supports ERP functions; the intersecting area between the two refers to those ERP functions typically supported by Enterprise Software. The above diagram therefore shows that Enterprise Systems do not cover all the areas that ERP takes care of and hence one should not get confused with the terminologies.

As we have a clear understanding of the difference between ES and ERP, it is necessary to further understand what ERP is all about. Enterprise Resource Planning (ERP)—and its predecessor, Manufacturing Resource Planning—are helping transform our business landscape in way that’s helping organizations manage their business processes better. Enterprise Resource Planning (ERP) as the name suggests, is a system that encompasses the basic processes existing in an organization. It started with the need to capture the processes in an organization and map it into the system for smoother transaction and it eliminates the hassles and the chances of error drastically comes down. 7 Copyright: Pijush Gupta | www.pigtale.co.in

Critical Success and Failure Factors of ERP Implementations: A Market Perspective

ERP packages generally include functions like:

Finance which in turn can capture modules like General Ledger, Accounts Payable, Accounts Receivables, Cash Management etc

Manufacturing which captures transaction in Bills of Material, Scheduling, Cost Management etc

Supply Chain Management (SCM) which captures transaction happening in Inventory, Order Management, Purchasing etc

Human Resources (HRMS) having modules like Payroll, Training and other HR related modules.

Customer Relationship Management (CRM) which can again be categorized into three sections:

• • •

Marketing Sales Service having modules like Contracts, Call Center modules.

Enterprise Resource Planning packages have a database which contains the data for all the modules. The modules within the package are closely integrated with each other. All the modules are inter-linked with eachother.Therefore; any transaction happening in one of the modules takes help of other modules, processes them and gives the desired output. So considering an example, if we need to ship across an item to the customer and generate an invoice to bill the customer, the process adopted would look as mentioned below.

The items are procured in the inventory using Supply Chain modules like purchasing and routing it to the correct sub-inventory through Inventory and then ship the item to the customer using Order Management and finally bill the customer by generating an invoice using Finance modules. It the customer expects more service on a particular item, the Customer Relationship Management modules comes into involvement. So, being closely integrated, the information passed in one of the modules gets shared across various modules for smooth transaction for effectively handling the complex business requirements which varies across the industry.

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Critical Success and Failure Factors of ERP Implementations: A Market Perspective
Organizations should ensure that current processes are in place and that they capture all the functions in a detailed manner in order to make sure that ERP package can handle the transactions effectively. If required, the current processes can be reengineered which can then be mapped into the ERP package. In case of an existing legacy system, it is important to understand the functions of the system clearly before mapping it in the ERP package .ERP packages can be customized and integrated with other modules if is beyond standard functionality of the package.

Not only is ERP benefiting manufacturing companies but also changing the way service oriented companies are managed. ERP provides organizations with the ability to forecast demand and supply and reach out to its customers. It is providing a high level of business intelligence so that business functions like manufacturing, SCM, finance, human resources and CRM to name a few function efficiently.

3.1 The Implementation Methodology ERP implementations are usually set to be in the process of implementation once the package has been bought but in reality, it starts with the crutial steps that an organization takes before buying the ERP package. Primarily, the end users must be open to change and be willing to shift from a manual to an automatic system. Essentially, the business processes of an organization needs to be reviewed at every step for successful ERP implementation. Given the fact that ERP handles complex business processes, it goes without saying that ERP implementations should be handled with utmost caution. In a typical implementation scenario, the following multi-stage strategy is employed (Kimberling, 2006):

• • • • • • •

Business requirement planning Hardware acquisition Design Analysis Business process analysis Setup and Build Data conversion and migration from legacy systems Business Simulation 9 Copyright: Pijush Gupta | www.pigtale.co.in

Critical Success and Failure Factors of ERP Implementations: A Market Perspective
• • • • Pilot test User acceptance testing Rollout Go live

3.2. Making the Process Successful As mentioned earlier, reviewing is the best possible way to minimize the failure rate of ERP implementations. A check at each phase is necessary from the very beginning of the implementation cycle.ERP implementation process is prone to being unsuccessful if not reviewed at each stage. This failure can occur due to a number of reasons but one of the common reasons of occurrence is when organizations do not do their research and often look for the shortest possible path. To minimize the chances of failure, it is important to have highly skilled and experienced project managers and consultants on staff. This is the reason why organizations prefer to take services from experiences consultants who have previous implementation experience. To diversify the risk, organizations should not leave the decision of package selection only to the vendor who might be more interested in getting paid. The organization’s IT staff should ask proper questions and spend time with the vendor and the consulting company to do a fit-gap analysis and then only select an ERP package.

3.3. Implementation Review The most important thing that an ERP implementation brings about in an organization is change and this change could be in the way the business functions or in the way the company performs. Needless to say, no standard ERP package could cater to the business requirements of an organization fully. So it is imperative that either the business process has to be changed or the application package has to be tweaked.

Successful implementations employ a combination of both but ensure that a lot of package customization isn’t done since it is costs a lot of money. Ideally, the business processes should be aligned to meet the requirements of the ERP package. The ERP applications needs to b changed only when a particular organizational process cannot 10 Copyright: Pijush Gupta | www.pigtale.co.in

Critical Success and Failure Factors of ERP Implementations: A Market Perspective
be changed. These are the processes that give organizations its edge in the market. For example, an FMCG company has a credit related business process that is so good that its distributors and dealers have a lot of confidence on it which gives them an edge over its competitors. If this credit related business process cannot be mapped to any existing ERP package in the market it is recommended not to change the business process. This would affect the performance of the company. This is when customizations come into picture and it makes absolute sense of going for tweaking the application package to fit to the business process.

3.4. Executing Implementation Activities Eventhough the odds are always stacked against it, ERP implementations can still succeed by following the steps that have been used for many a successful implementation projects. These include:

• • • • • •

Proper 'As-Is' and 'To-Be' analysis Effective business process analysis Effective change management Careful package selection Fit- Gap analysis Minimal package customizations

Many ERP systems fail inspite of their immense benefits (Roth. A, 1999). Experts feel that the end user resistance is the major cause of these failures and that successful and effective ERP implementation entails consideration of an organization's core competencies (Zairi, 2000). One of these is effective change management but sometimes this too doesn’t ensure success due to resistance (Edgewater Technology, 2006).

Another school of thought stresses that despite the introduction of new products and processes introduced each year, companies could still achieve success by implementation of effective strategies and techniques. Formulating these strategies 11 Copyright: Pijush Gupta | www.pigtale.co.in

Critical Success and Failure Factors of ERP Implementations: A Market Perspective
and techniques is the responsibility of all the concerned parties.

3.5. ERP implementation strategies A number of strategies can be applied to implementing ERP successfully and according to research, various implementation strategies fall into one of the following categories: technical, organizational and people.

Organizational strategies for successful ERP implementations include process development and deployment, effective change and project management,

communication and information system integration needs (Sarker, 2000). Technical strategies for successful ERP implementations include technical aspects, complexity, adequate in-house IT capabilities and time, effort and cost of the implementation (Pastor, 2001). People strategies are for bringing the employees together and taking them into confidence by showing them the big picture of benefits of a successful ERP implementation. This would minimize the employee’s resistance to change from an old and familiar system to a new unfamiliar system.

3.6. Knowledge formulation phase Effective change management starts with identifying and understanding the needs and concerns of the end users {Vaughan, 2001). The analysis should consist of (Vaughan, 2001):

• • •

Who are the entities resisting the change? What are the needs of these entities? What expectations do they have in terms of the software package?

The answers to the above questions would set the expectations right and would help in determining the sources of the end user's resistance to the ERP system. According to Hultman (Aladwani, 2001), the user’s beliefs, expectations and values indicates some of the prime reasons for their resistance. 12 Copyright: Pijush Gupta | www.pigtale.co.in

Critical Success and Failure Factors of ERP Implementations: A Market Perspective

Some user's fear that their jobs may be threatened or their computer illiteracy may affect their productivity. Others feel that the some organizational values may pose a threat by the introduction of the ERP package. These reasons could be used for effective implementation of the ERP package. This view of employees is valid in most cases as organizational values do get altered during the process of ERP implementation (Group, 2003).

3.7. Strategy implementation phase The results from the previous phase may help the steering committee to develop strategies and plans to minimize the resistance of the users to the ERP system so that their apprehensions are put to rest (Vaughan, 2001). This is an important phase as the apprehensions of the end users have to be put to rest before proceeding any further. The steering committee should do constant monitoring of their strategies and if needed rethink about them.

3.8. Status evaluation phase The top management should have an effective system in place that would monitor the change management phase till its logical end. It is important that the management is effective in putting the fears of the end users to rest by taking stock of the situation through constant feedback. Often, the fears of the employees are justified and they are right. If their fears are justified, then it should also be taken into consideration. Overlooking the justified fears is a big mistake during change management process (Tucci, 2005). Due importance should be given to the feedback mechanism in terms of its effectiveness and timeliness. This is important as the apprehensions of the users should be laid to rest by constantly evaluating the implementation process.

3.9. Reasons for Failure Organizations can have a number of reasons for failing an ERP implementation. The 13 Copyright: Pijush Gupta | www.pigtale.co.in

Critical Success and Failure Factors of ERP Implementations: A Market Perspective
tendency of the management to delegate the task of ERP implementation to lower management levels often results in a disaster as the lower management are not in constant touch with the critical events and they lack understanding of the detailed scope of the ERP project.

According to various surveys and reports, about 60% of ERP implementation failures are due to improper functional requirements. Business requirement definition is the one of the most important steps for effective ERP implementation. The second being improper package selection.

Poor package selection is considered to be a part of improper business requirement definitions. This usually occurs when the application engineers who are in charge of selecting the appropriate package do not check if it suits their business requirements.

Another reason for failure is the fact that consultants try and implement a package because they are familiar with a package they had used in their earlier company and therefore implement the same without considering the business requirements of the current company. They usually consider one package to fit in familiar situations and this can lead to an implementation failure.

The third reason is proper resource allocation to the ERP implementation project. Some companies allocate minimal staff for the project and save money by over burdening the staff. This is another reason for ERP implementation failures (Fornadel, 2007).

The unrealistic expectations and Return On Investment (ROI) too leads to ERP implementation {Toni M. Somers, 2004). ERP package vendors are known to set unrealistic expectations and ROI which don't take into account the costs of consulting, training, testing, data conversion and migration, documentation and staffing. When this happens, a company doesn't stand a chance of achieving the ROI it anticipated in the first place.

Inadequate training and education too plays a significant role in the success or failure 14 Copyright: Pijush Gupta | www.pigtale.co.in

Critical Success and Failure Factors of ERP Implementations: A Market Perspective
of ERP implementation (J. Esteves, 2001). ERP application training is very crucial as all the users need to understand the functionality of the application and the business processes which affect the organization (Liang Zhang, 2003) (Moon, 2007).

Sometimes companies skip important implementation steps like documentation, redefining and integrating processes before the final go live which too is damaging for the success of the ERP implementation {Kumar K, Hillegersberg, 2000).

If an organization wants all its business procedures to be integrated into common single solution based application, its business procedures need to been standardized, and if it already has legacy applications (stand alone systems) which require heavy and seamless interfaces between ERP and the existing systems, then it should try to minimize them. Organizations should always stick to the vendor’s recommendations and the functionality provided by them and take their consultation before customizing the functionality.

There is always a chance for gap between the “AS IS” and “TO BE” key business requirements and the same will be achieved through the seeded configurations, work around and customizations during the implementation process.

The business process owners have to be involved in every step of the implementation from process finalization, willingness to migrate to new ERP systems and procedures to testing the new ERP application functionality and also be involved in migrating the existing data from legacy application into a new ERP system.

One of the major step before an organization goes for ERP implementation is to have a budget approval. Middle management spend days defining the selection process plan and the approvals from the top management. It should develop key performance indicators to measure the successful implementation. There should be set time lines and targets for these key performance indicators and should be reviewed after postimplementation and only then can it realize the success of the ERP implementation and healthy ROI.

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Critical Success and Failure Factors of ERP Implementations: A Market Perspective
Though the ERP system may have been implemented and the system is in working condition, failure may occur when the Power user / End user groups are not comfortable in migrating form the existing system and not willing to integrate with the alien system. Post ERP implementation requires change in people and the systems. Organizations have to invest time and money on end user training, change management, etc.

Failures happen when there is an error in selecting the right ERP package for the right industry. While in the implementation process heavy customized ERP packages may have huge maintenance (support to the ERP package application, upgradation, process fine tune, or some times a new implementation for new processes), as the support from the vendor is usually minimal. It is recommended to keep the customizations to a minimal.

Another reason for failure is when the management is not involved or has not been involved in the decision making process or the management is not interested in the change of existing procedures, which may or may not be the industry's best practices.

A survey could be undertaken to find out the reasons for success or failure of an ERP implementation. The approach could be to use either a large sample size or a small one. According to Thorn, a survey of a large sample size requires a lot of time and effort. A large survey also requires a lot of attention as to follow ups on nonrespondents and also less accurate than a smaller but responsive sample (Thorn, 2001).An understanding of this literature along with constraints made it possible to analyze a small sample size.

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Critical Success and Failure Factors of ERP Implementations: A Market Perspective 4. Market Trends
According to the Market Analytix Enterprise Resource Planning, 2004-2009 report, ERP market revenues increased 14% in 2004 which was very impressive. The report goes on to reveal that nearly one-third of the growth in the overall ERP market was due to fluctuations in forex exchange rates (Reilly, 2005). The ERP market in 2004 showed good growth as the IT spending of companies improved and the market was also affected by consolidation, as well as ERP vendors acquiring other businesses to broaden their portfolios and service offerings. ERP vendors are now taking the inorganic growth path so that they save on the research and development for creating new solutions. And they are doing this by acquiring other product companies. The report revealed that while many ERP product vendors struggled in 2004, SAP increased its overall revenues by 17% and license revenues by 20% and that too without any acquisitions. Needless to mention, SAP’s ERP market share increased to more than 40%. Oracle in the meanwhile nearly doubled the size of its e-Business Application business through the acquisition of PeopleSoft and the recent Siebel (Reilly, 2005). 4.1. Report Findings and Analysis The report goes on to forecast solid revenue and growth rates for the top ERP players through 2009. The chart below lists out the top 10 ERP vendors based on their revenues (Reilly, 2005):

Top 10 ERP Vendors 17 Copyright: Pijush Gupta | www.pigtale.co.in

Critical Success and Failure Factors of ERP Implementations: A Market Perspective

The report revealed several trends that affected the ERP market in 2004, including: Acquisitions are the order of the day with Oracle’s purchase of PeopleSoft, JD Edwards, Retek and Siebel and other vendors being active in the mergers and acquisition space. This move has suddenly opened up the market. The major focus of ERP applications companies continue to be midrange and SMB markets as this is important for foray into important markets like India, China, Eastern Europe and Latin America. According to the CIO, magazine executive resistance to change is the biggest barrier to successful ERP implementation as shown in the figure below:

ERP Failure Factors (Thornton, 2007) 18 Copyright: Pijush Gupta | www.pigtale.co.in

Critical Success and Failure Factors of ERP Implementations: A Market Perspective
A couple of years back, during 2007/08, post- "go live" ERP organizations mainly focused on total cost of ownership, value of delivery, ease of use and continuous business improvement. ERP vendors used to offer post-implementation or support services to ERP customers. But during 2007-2010, ERP vendors will redouble their efforts to penetrate the mid market and SMB market, thereby, competing with each other and a shrinking set of small ERP vendors.

A market study based on responses from across the IT industry (94 firms) was conducted by the META group. This study revealed that less than 30% of the top management has the requisite knowledge about ERP implementation. The study also found that the readiness index for ERP implementation was 63% for the IT staff while it was 9% for the end users (see figure below) (Doane, 2004).

ERP Readiness Matrix (Doane, 2004)

In this same study, META Group asked 152 respondents to list the key mistakes made in the course of the project and who they blamed for those mistakes (see figure below) (Doane, 2004).

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Critical Success and Failure Factors of ERP Implementations: A Market Perspective

ERP Failure Reasons (Doane, 2004) The 3 mistakes listed below are direct results of the previously discussed erroneous presumptions:

• Measurement of benefits not quantifiable (40.8%) • Insufficient knowledge transfer (38.8%) • Disbanding of the implementation team post go live (36.2%) The following key elements of ERP implementation success must be addressed before undertaking the actual ERP implementation (Doane, 2004):

• Long-term business and IT alignment should be in place • Senior management must take more interest and should become more enlightened regarding the whole of an ERP endeavor

While senior management commitment to an ERP endeavor must include both sufficient funding and executive sponsorship, it is imperative that such sponsorship be more enlightened about ERP issues before the implementation commences to ensure that important business issues do not become lost in the fog of an IT shuffle. Unless and until the top management and the steering committee believe that the ERP implementation can be a success, the initiative should not be taken. If the senior management themselves are unconvinced about the success of the initiative, then they would not be able to convince the other employees who would ultimately be the end users of the ERP application.

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Critical Success and Failure Factors of ERP Implementations: A Market Perspective
The ERP market is now witnessing a change recently as acquisitions are the order of the day. Oracle is on a merger and acquisition spree and so are other companies. They already have acquired other ERP practices like J D Edwards, PeopleSoft, Siebel and Retek. This trend would see the merging of some of the best packages into one single package which would cater to every section of the market (Doane, 2004).It is quite possible that the near future might see only Oracle and SAP competing with each other.

When an ERP vendor takes over a best-of-breed provider, it usually integrates functionality from the acquisition's product into its own software over an extended period and its customers reap the benefits of that improvement. However, when one large enterprise software provider purchases another, end users of the acquired company's product may face considerable disruption and expense, even if that product continues to be marketed. They may need to move to a more advanced technology platform, upgrading their hardware, software and operating systems along the way. But in the long run, they may stand to gain because the new product would comprise of all the best applications from the acquired companies.

The ERP package is an important step in implementation as this would determine the fitment between the organization's business processes and the ERP package. Organizations should do through due diligence before the package selection. This could include evaluation is credit reports and meetings with ERP consultants. Organizations should even consult with other organizations who have already implemented the ERP package to get an understanding of the benefits.

Many observers believe that the ERP software market's rapid consolidation will continue for the next few years. In business, as in life, there are no guarantees that change will be for the better. But CFO’s can plan to meet it head-on.

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Critical Success and Failure Factors of ERP Implementations: A Market Perspective 5. Market Study & Analysis
Enterprise Resource Planning (ERP) systems have always been highly complex information systems. ERP implementation is a very difficult and expensive project an organization can ever take. It was reported that 75% of the ERP projects are classified as failures (Aiman-Smith, 1999). A market survey and research based on the inputs from ERP implementation consultants from various IT companies was undertaken to analyze the causes for these failures. This research has explanatory and predictive orientations. The first step is to evaluate and explain the impact of a set of interrelated Critical Success Factors (CSF’s) on the success or failure of an ERP implementation. The second step involved prediction of the ERP implementation success rate or index by using the American Customer Satisfaction Index.

Based on the above, a conceptual model has been developed and analyzed for gauging the ERP implementation success. Collected data are analyzed using Partial Least Squares (PLS) technique of PLS-Graph. Finally, results and discussions are presented.

ERP systems are integrated, enterprise wide systems, which automate core organizational activities such as forecasting, operations, manufacturing, human resource, finance and supply chain management (Prasad Bingi, 1999).

Implementation of an ERP system in an organization leads to benefits that ultimately translate into reduction in cycle time, reduced operational costs and increased efficiency (Liang Zhang, 2003). However, it was reported that three quarters of the ERP projects are considered failures and many ERP projects ended catastrophically.

5.1. ERP Implementation Shanks and Parr (G.Shanks, 2000) defined ERP implementation as "the process of developing the initial business case and planning the project, configuring and implementing the packaged software and subsequent improvements to business processes". It is important to note that ERP implementation is very different from the implementation steps and phases of other information system applications.

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Critical Success and Failure Factors of ERP Implementations: A Market Perspective
One of the main differences between ERP and other application implementations lies in the emphasis on the business process of an organization in the former (Rockart, 1979). This makes ERP implementation all the more difficult and time consuming.

5.2. Critical Success Factors Critical Success Factors (CSF’s) approach was first used by Rockhart (1979) (Bancroft, 1996) in the IS area. The CSF’s were earlier used to measure success of project management initiatives, manufacturing, and business process re-engineering. But now they are being applied to ERP implementations as well (Rockart, 1979), (Bancroft, 1996). In the context of ERP implementation, CSF’s are defined as "factors needed to ensure a successful ERP project" (Rockart, 1979). There has been extensive research to identify the factors that allow top management to successfully implement ERP. Some of the critical factors are same as other IT initiatives like end user's and top management's support. But some of the critical factors are exclusive for high level initiatives like ERP implementation in which BPR (Bancroft, 1996) is one of the most important factor. Studies have shown that the factor study approach has it’s own limitations and this view was supported by Pare and Elam (Elam, 1997). They observed that these studies have limited scope as they evaluate only a part of the problem and that it has limited capability of evaluating the ERP implementation dynamics.

According to Pare and Elam, researchers have: "…built models that identify a limited set of critical factors affecting IT implementation success, but [researchers] know very little about how and why the factors included in these models interact and work together to produce success or failure. As a result, [management information systems] researchers lack a full understanding of the IT implementation process that is necessary to guide practitioners to attain positive outcomes"(Elam, 1997,pg.543).

5.3. Research Framework The proposed model describes ERP implementation success as function of interrelated CSF’s and organizational culture. The model was formulated in two steps where: 23 Copyright: Pijush Gupta | www.pigtale.co.in

Critical Success and Failure Factors of ERP Implementations: A Market Perspective

• Literature relevant to IS implementation, ERP implementation, project management and Business Process re-engineering was reviewed to extract a long list of all the critical factors affecting implementation success.

• This list was synthesized and operationalized through a series of interviews with key persons (i.e. project managers, consultants and vendor representatives) involved in ERP implementations

5.4. ERP Implementation Success (1η): Dependent Variable ERP success is a multidimensional, dynamic and relative concept. Until now there is no one generic definition for ERP success, however there are some attempts to define success in ERP literature. Based on their observations of enterprise systems projects, Tanis and Markus {M. Lynne Markus, 2000) argued that there are three main categories of success metrics:

(1) Project Metrics: The project metrics measures the performance of the ES of an organization in relation to functional scope, cost and project schedule. (2) Early Operational Metrics: This is a measure of the performance of business operations from the time the ERP becomes live to the time normal operation commences. This early operational metrics gives an idea as to how smooth the operation would work out in future. (3) Longer Term Business Results: This is the measure of the organization's performance after the early operation. This measure takes into consideration the long term business goals like ROI for measuring the implementation success.

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Critical Success and Failure Factors of ERP Implementations: A Market Perspective

Independent Variable Flowchart (Kyung-Kwon, Hong, 2001)
The most famous framework to define implementation success was developed by DeLone and McLean's (McLean, W. H. D. E. R. (1992)), (Sarker, 2000). The authors found that there is no ‘one measure’ for an information system success and thus they identified six different factors: system quality, information quality, use, user satisfaction, individual impact and organizational impact. Based on both the studies, a framework is developed to address different dimensions at different points of time (early operational metrics and long term business results). Table (1) presents the proposed success dimensions and measures.

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Critical Success and Failure Factors of ERP Implementations: A Market Perspective
5.5. CSF’s & Organizational Culture: Independent Variables 1. Fitment of Business process with ERP Package (2η)

Hong and Kim (Kyung-Kwon ,Hong , 2001) found that the organizational fit of ERP system in terms of business processes and practices is very important for ERP implementation success. Organizational fit of ERP package is defined as "congruence between the original artifact of ERP and its organizational context"{M. Lynne Markus, 2000). It has always been seen that the ERP packages are developed with the industry best practices in mind and they have their own definition of best business practices. Additionally, every organization has its own set of best practices that is a part of their organizational culture. Therefore, it requires extreme care while selecting an ERP package. The closer the gap between an organization's business process and the ERP package, the higher the success rate of the ERP implementation. In real world situation, it is impossible to get a perfect fit between the business processes and the ERP package. There would always be a trade-off between using the aligning the business process of an organization to the ERP package and customizing the package. According to expert ERP consultants, it is not recommended to customize the ERP package too much as the organization would lose out on taking advantage of utilizing the application to its fullest. The organization should undertake business process reengineering for mapping them to the ERP application. For this, the mapping between the organization's business processes and the ERP application should fit into one of the multidimensional variable of the following Critical Success Factors (CSF’s):

i. Prudent ERP package selection: ERP packages have a set of standard functionality for standard business processes. As already mentioned, ERP vendors have their own definition of best practices which may or may not match with the organization implementing it. So the packages have to be studied first before going ahead with the implementation. ii. Business Process Re-engineering: BPR is the “fundamental rethinking and the radical redesign of an organizations' business processes to achieve exceptional improvements in the measures of performance such as cost, quality, service and speed of delivery“(Champy, 2001). Since ERP vendors 26 Copyright: Pijush Gupta | www.pigtale.co.in

Critical Success and Failure Factors of ERP Implementations: A Market Perspective
have their own definition of best practices which reflect in the ERP packages, organizations have to re-engineer their business processes so that the mapping is perfect (Champy, 2001), (Henri Barki, 2005 ). iii. Customizations: The ERP packages incorporate the best practices and hence they should be used as much as possible with minimal customization. Organizations should align their processes to fit with the ERP package and refrain from additional customizations as they increase the costs.

If an organization after careful study of various ERP application, selects one, then it has to undertake minimal customization. This could mean that the organization has to undergo extensive business process re-engineering. This leads to the following hypotheses:

L1: Fitment of the Business process of an organization to the ERP package has a positive impact on overall ERP implementation success.

2. Involvement and training of End Users (3η) An important cause for ERP implementation failure is that the users either are not involved during the business requirements planning or they are not trained enough to use the system after the implementation. Either way, it translates into user resistance which is very detrimental for the organization as it ultimately leads to failure. End user's involvement is required in the definition and the implementation phase and is very critical (Liang Zhang, 2003).

Failure of an ERP implementation is a surety if the entire process is not supported by the end users. The organization implementing the ERP package should always take the end users into confidence before even thinking of implementing the application. These are the people who would ultimately use the system to streamline the business process of the organization and it is imperative that they are involved in the implementation from start till the end. During the definition phase of the implementation, the end users are needed to customize the product according to the needs and the business processes of the organization. If the involvement is high 27 Copyright: Pijush Gupta | www.pigtale.co.in

Critical Success and Failure Factors of ERP Implementations: A Market Perspective
during the initial phases, then it translates into high acceptability after the go live. End user training has a positive impact on the outcome of ERP implementation as they are the final users of the system (Kimberling, 2006). The hypothesis is:

L2: Involvement and training of end users have a positive impact on ERP implementation success.

3. Commitment of the organization from all quarters (1ξ)

ERP systems after successful implementation affect all the stakeholders and are instrumental in integrating the information as well as the business processes within an organization. Hence it is required that the implementation gets support from all quarters and functional units of the organization (Chee-Chuong Sum, 1997). Company wide support is the key to a successful ERP implementation. The hypothesis is:

L3: Support from every functional units of a company has a positive impact on ERP implementation success.

4. Senior Management Support & Involvement (3ξ)

It has been noticed that majority of ERP implementations fail, cancelled or delayed when the top management delegates project management and status evaluation of the project to the technical team members who don't have the requisite expertise in terms of clear organizational vision and objectives (Chee-Chuong Sum, 1997). Management’s support is paramount as it assures monetary and staffing resources which are very important for any ERP implementation to go on smoothly. ERP implementations bring about a cultural change in the organization and top managers are needed to oversee that the change is aligned to the goals and objectives of the organization. Hence their involvement in every stage of the ERP implementation is required (Pollyanne S.Frantz, 2002). Thus, we get the following hypothesis:

L4: Senior management support and involvement has a positive impact on ERP 28 Copyright: Pijush Gupta | www.pigtale.co.in

Critical Success and Failure Factors of ERP Implementations: A Market Perspective
implementation success

5. Project Management Effectiveness (4η)

ERP implementations are never short term initiatives. It comprises of long drawn events of business processes re-engineering involving all the business units and their staff. The complexity of the ERP implementations is increased by the involvement of many factors like human resources, hardware, software, finances (Vital Roy, 2006). Project management skills are a must for managing the hugely complex set up as the system and the process have to be aligned towards the success of the ERP implementation. The advantage of employing efficient project management is that the implementation becomes process driven and that it sets a realistic time frame. The implementation is assured of success only if the project management teams who are the stakeholders in the organizational wellbeing are involved for constant progress monitoring. Thus, we get the following hypothesis:

L5: Measure of project management effectiveness has a positive impact on ERP implementation success.

6. Support from External Sources (2ξ)

ERP implementations are not only about just installing the software and customizing it but also about business process mapping, technical support, maintenance and end user training. All these cannot be done by the ERP vendor or organization single handedly and hence the need for support from external sources. Organizations also make use of external consultants who facilitate the implementation process as they have in depth understanding of the product and can map the business process to the application package. These consultants are highly skilled and experts in their field and organizations should use them optimally for the best outcome as they bring with them a process oriented approach for ERP implementations. Organizations would learn to use the consultants effectively and at the same time, try to keep the fees to a minimum. Thus we get the hypothesis: 29 Copyright: Pijush Gupta | www.pigtale.co.in

Critical Success and Failure Factors of ERP Implementations: A Market Perspective

L6: Support from external sources has a positive impact on ERP implementation success.

5.6. Research Methodology To test the proposed research model, empirically, a cross sectional survey was conducted. Survey is one of the most prevalent research methodology used in information system (IS) research (Alain Pinsonneault, 1992), (Douglas R.Vogel, 1984). The benefit of using surveys is that the researcher can easily cover large populations quickly at a relatively low cost. Before conducting the survey, one should choose the appropriate methodology taking into consideration the constraints, design issues, sources of data and collection methodologies. Care should be taken to keep the error to a minimum. The surveyed sample included some ERP adopters and implementers. The respondents included IT managers, project managers and system administrators as they are identified as the most appropriate informants for this study. 5 ERP consultants were administered the questionnaire (see appendix) personally (face to face) and 3 were interviewed over the telephone.

5.7. Questionnaire Development Special emphasis was given for this measurement development to obtain a reliable and valid scale. Utmost care was taken to develop a professional looking questionnaire that was well-crafted, which evoked honest answers from the respondents. The adopted process was similar to that proposed by Churchill and used by T. S Bhatti (Bhatti, 2005) as follows:

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Critical Success and Failure Factors of ERP Implementations: A Market Perspective

Churchill’s Questionnaire development Strategy 5.8. Partial Least Squares Partial Least Squares (PLS) latent path modeling technique is used to model causal links and test hypothesized relationships. PLS is a non-parametric estimation procedure (Wold, 1982). The core of the concept of PLS is an iterative combination of components which are analyzed. In this analysis the measures are related to the constructs. Subsequently the structural model of the above constructs is captured using a path analysis. A detailed description of the PLS model is provided by Wold (Wold, 1982) and Lohmöller (Lohmöller, 1989). The main advantage of PLS over other structural models such as LISREL is that it can be used for smaller sample sizes (Chin, 2000). Since our sample size is small so PLS fits better and the analysis is more accurate than using LISREL. Also, the predictive orientation on PLS is better than other structural equation modeling tools and hence our choice.

Developing the best fit PLS model is equivalent to reaching the best fit measurement and structural models. PLS graph (version 3.0) was used to estimate loading and paths coefficients (Chin, 1997). In evaluating the measurement model, item loadings of 0.7 or higher are considered acceptable. All items show very acceptable reliability except that for two items with loadings approximately 0.65. During the evaluation, it was found that the loading for some instrument items were below 0.7 which is common 31 Copyright: Pijush Gupta | www.pigtale.co.in

Critical Success and Failure Factors of ERP Implementations: A Market Perspective
according to Hulland (Hulland, 1999). This is common when either new items or newly developed scales or measures are employed. The examination of the factor or cross loadings assured the discriminant validity (Chin, 2000), (Hulland, 1999).

The measures should not load higher on another construct than the one it is intended to measure. Internal consistency of constructs was assured by calculating the two measures composite reliability and the Average Extracted Variance (AVE). Composite scale reliability ranged from 0.86 and 0.97 exceeding the cutoff value of 0.7 suggested by Nunally and Bernstein {Nunnally J.C, 1994). AVE ranged between 0.59 and 0.91exceeding the 0.5 threshold. The structural model is evaluated by testing the significance of the path coefficients (Bouchaib Bahli, 2005). Some paths turned up to be insignificant at 95% confidence level. The final form of the structural model is specified in terms of PLS equations as follows:

PLS Equation (Chin, 1997) 5.9. ERP Implementation Success Index (ERP-ISI) There are various methods of estimating the ERP implementation success index. Some models estimate it by considering the variance of failure and some use the variance of success. We have used the latter approach. The general form of the ERPISI is proposed as follows (Bouchaib Bahli, 2005):

General ERP ISI Formula (Bouchaib Bahli, 2005) 32 Copyright: Pijush Gupta | www.pigtale.co.in

Critical Success and Failure Factors of ERP Implementations: A Market Perspective

According to the above equation of ERP Implementation Success Index depends on factors like expected value of Success (E [.]), maximum value of success (min [.]) and the maximum value of success (max [.]) The following equation shows the calculation method of Min and Max values of ERP implementation.

Max/Min. Formula (Bouchaib Bahli, 2005)

Following is the explanation for the above equation: w j’ : Weightage for the variable K: Number of measurement variables

The variables are calculated from the results of the survey and are used for calculating the Min and Max values and subsequently the ERP Implementation Success Index. The equation helps us in calculating the success index and also the reasons for failure and success.

5.10. Results and Discussion Our results demonstrate that ERP implementation success is a function of a set of interrelated Critical Success Factors (CSF’s) and organizational culture. While CSF’s positively reinforce implementation success, organizational culture hinders its progress. Most of the research hypotheses are supported by the returned empirical data. According to the study conducted, it was found that if the CSF's are taken care of, then it ultimately leads to a successful ERP implementation. But on the other hand, if the organizational culture is not aligned properly, then it could lead to a failed implementation.

It was inferred from the study that organizational fit to ERP package one of the most important determinant of ERP implementation success. Although Top management support was always the major success factor in the implementation of large 33 Copyright: Pijush Gupta | www.pigtale.co.in

Critical Success and Failure Factors of ERP Implementations: A Market Perspective
customized systems (Kaiser, 1987), the organizational fit to ERP has been superior in the implementation of packaged systems such as ERP. Unless and until an

organization realizes the fact that business process mapping is an important part of ERP implementation, it doesn't matter whether there is support of the senior management or an efficient ERP package is selected. The project is bound to fail.

The study shows that there is adequate support from the top management in terms of conveying the business goals and ensuring proper process goals to the ERP package. They are also instrumental in keeping tab on the project management process.

When it is clear that a particular IT project has the interest, the support and the commitment of the organization's senior management, everyone involved in the project will have a sharper focus. External support including vendor and consultants support do not show any effect on the implementation success.

This supports the findings of the conducted survey about the problems facing implementers. The problem with ERP package vendors is that they set expectations that cannot be fulfilled by the application. Another issue is the high consultation fees that burden the overall project expenditure. Sometimes the vendors or external consulting firms are slack in transferring the knowledge to the end users. This leads to a scenario where the ERP application is in place but there is no adequate knowledge of operating it.

Surprisingly, User's involvement and training are not found to have direct influence on the implementation success. The tentative explanation may be due to the centralized nature of some organizations which block the effective role of users in implementation. This may also reveal deficiency in the set of questions measuring this construct. Finally, empirical data revealed the negative impact of organizational culture on implementation success. Successful ERP implementation in enterprises faces major challenges such as centralized decision making, hierarchical structure, communication gaps, and access to top management and ill-defined documentation cycle.

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Critical Success and Failure Factors of ERP Implementations: A Market Perspective
5.11. Research Constraints Even though we have tried to be accurate in terms of data collection and their subsequent analysis, there were several constraints. It is important to remember that the survey results predicted here does not predict the future; the economy may improve even more, there might be a new ERP product launch or there might be more consolidation in terms of ERP product vendors. It is also possible that industry best practices might undergo a sea change and become standardized across a vertical.

This market survey takes into consideration a very small sample size. Surveying a sample instead of the entire population allows one to obtain valid information at a reasonable cost. However, care has been taken to get information that is statistically valid and reliable. But since the information is statistically valid and reliable, the results from the small sample size can be extrapolated.

This market survey could have taken other variables for consideration. These variables were not considered explicitly because they broadly fell into one or the other variable already considered in this research paper. They might be broadly categorized as following (Edgewater Technology, 2006):

1. The Right Core 2. Creating Buy-In 3. Setting the Target 4. The Proving Ground 5. Right Sizing 6. Common Pitfalls

However, due to the small sample size of the survey, there are some limitations in the generalization of the research results to a larger population. The ERP consultants are very busy individuals and it was very difficult to get appointments for conducting the interview and administering the questionnaire. The interviewees answered the questionnaire in their personal capacity and the views do not represent those of the companies. It is quite possible that the views of the individual may or may not match 35 Copyright: Pijush Gupta | www.pigtale.co.in

Critical Success and Failure Factors of ERP Implementations: A Market Perspective
with those of the organization. Further research is required to address the mentioned limitations. It is recommended to conduct in-depth case studies to gain more insights about ERP implementation. The combination of a detailed case study and a large survey would have been an ideal method for getting conclusive results. A more detailed research involving the top management can be done as these are people who have more clarity in terms of organizational needs, culture, vision, mission, goals and objectives. Another approach could be to get information from a cross-section of people ranging from the top management, IT staff, end users, ERP vendors and consulting companies. That would give a more detailed picture of the ERP implementation scenario. Moreover, other soft modeling techniques such as Neurofuzzy and Bayesian Belief Network (BBN) can be used to model causal relationships.

To survey a large sample size requires a lot of time and effort. A large survey also requires a lot of attention as to follow ups on non-respondents and also less accurate than a smaller but responsive sample (Thorn, 2001). Respondents of my survey were responsive and have therefore been considered to be statistically valid for my research.

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Critical Success and Failure Factors of ERP Implementations: A Market Perspective

6. Recommendation
At some point or other an organization contemplates on doing away with their heterogeneous legacy systems and implementing an ERP package. The options are many namely SAP, Oracle Applications or erstwhile PeopleSoft or JD Edwards. Successful ERP implementations not only demands the right package selection but also aligning the business processes. Some organizations undertake this initiative to streamline their operations while others to have effective business intelligence. But it has been found that there are 5 areas where ERP projects are most vulnerable. These are: • • • • • Understanding what integration means Managing communication Knowing the decision-making process Testing and managing infrastructure Living with the ERP

Whether it is ERP or any comparable initiative, if a company is taking on a highimpact implementation that could result in organizational shifts, there are many things to be remembered.

6.1. Change Management Program Path breaking initiatives like change in business processes of an organization due to an ERP implementation have widespread impact on the organization’s culture and hence it is imperative that effective change management should be in place to execute the implementation strategy. Change management is all about adapting to the changing business conditions, controlling the change in a systematic manner and effecting the change. Change management is a very critical initiative since it not only affects the organization, but the individual as well. Organizations are affected as the business processes are altered while an individual is affected because of the overall change in the organization's culture. Organizations should be prepared for issues such as these: 37 Copyright: Pijush Gupta | www.pigtale.co.in

Critical Success and Failure Factors of ERP Implementations: A Market Perspective
• • • Resistance Fear of Failure Non-Visionaries

The key to any change management program is communication, communication and communication! Management needs to communicate the importance of the project throughout the organization. Since the senior management has clarity on the vision and objectives of an organization, they are the best persons to communicate the same to the employees. Employees should always be kept in the loop for successful and smooth ERP implementation.

6.2. Secure Management Support and Commitment An important step in ERP implementation is to secure top management support and this demand the presence of a project champion who is well aware of the organizational goals and objectives. This consultant should have access to the top management and should be able to act as a passage between the end users and the management. The top management support and commitment can be secured by putting forth the long term benefits of the ERP implementation that would ease the realization of the goals and objectives of the organization. An effective strategy would be to identify the business processes that are aligned with the vision of the organization and then move forward to mapping these business processes to the ERP package. It is not always easy to change an organization’s business process which invariably changes the culture too, hence it is the responsibility of the senior management to initiate the process and take it forward.

6.3. Picking the Implementation Team Wisely Organizations have several options when it comes to choosing the implementation team. They could choose between internal staff, IT consulting entities or the software vendors themselves. Ideally, internal IT staff is suited to do the job as they know the business processes better than anyone else. But then there are issues of dedicated resource allocation limitation and the steep learning curve forces organizations to 38 Copyright: Pijush Gupta | www.pigtale.co.in

Critical Success and Failure Factors of ERP Implementations: A Market Perspective
employ consulting firms.

The consulting firms provide an unbiased solution for the organizations as they have great product knowledge. But the product knowledge too could be the cause of bias while recommending packages. There's a lot to be learned from past successes and failures that can make ERP successful. There are several key insights about implementing and integrating an ERP into the environment. To act on some of these insights, one has to be a development manager or a project leader, but any ERP team member can benefit from knowing the lessons of the past (Vessey, 1999).

This research focuses on ERP implementation. More specifically, we developed and empirically tested a model that investigates ERP implementation success as a function of interrelated CSF’s extracted from literature and organizational culture. The survey threw up some interesting results in terms of our understanding of the literature and organizational culture. This study therefore aims to depict the relationship among different CSF’s. The research could have been more detailed, if more CSF’s were taken into consideration. This research will thus add to the growing body of knowledge on ERP implementations, an explanatory study of ERP implementations.

On the practical side, this research improves understanding for organizations on how to implement large IS such as ERP within the challenging organizational culture. In essence, the paper recognizes critical issues that must be carefully considered to ensure a “happy ending” implementation. Moreover, it pays attention to hosting enterprises especially multinational corporations, vendors and consultants to carefully consider cultural issues when planning for ERP implementation. Finally, the study presents a self-assessment tool for ERP implementers. The proposed tool is targeted to serve those who passed or still in the implementation experience. The equation mentioned in the paper can be used by any organization to gauge the success rate of an ERP implementation. This would surely help them to change their business processes and take care of the organizational culture issues for smooth ERP implementation.

39 Copyright: Pijush Gupta | www.pigtale.co.in

Critical Success and Failure Factors of ERP Implementations: A Market Perspective 7. Conclusion
There is no set formula for ERP implementation success and the failure or success does not depend on a single factor. Each step of the ERP implementation has to be carefully monitored so that all the business processes are properly mapped to the ERP package. The steering committee should be watchful enough to ensure proper checks and balances. The top management should also ensure that the apprehensions and thereby the end user’s resistance to change is taken care of by showing them the bigger picture. This can be done by studying the potential causes of resistance and using proven and effective strategies for ERP implementation. The key here is to keep abreast of the entire change management process. At no point in the entire ERP implementation process should the top management loose track of the progress. This is important because ERP implementations are very prone to mishaps if not monitored by competent resources.

Enterprise Resource Planning applications are known to be tough to tame and there are numerous ways in which things can go wrong leading to total failure of the entire implementation. If the ERP package is implemented properly, then the company stands to benefit in the long run. These benefits could be in the form of operations efficiency, enhanced delivery and effective business intelligence (Rao, 2006). But the entire process of ERP implementation is resource intensive and process oriented and this is the reason why many ERP implementations fail and the success rate is low.

ERP and supply chain management are both interrelated and go hand in hand. For the well-prepared, new supply chain management systems based on ERP have become significant competitive differentiators (Donovan, 2005). Implementing ERP can become a thought altering experience for those involved. Following a proven and effective methodology will greatly increase an organization's likelihood of success the first time itself.

Apart from quick implementation time, operational benefits and ROI are key indicators of success. The new ERP system should start showing quantifiable benefits 40 Copyright: Pijush Gupta | www.pigtale.co.in

Critical Success and Failure Factors of ERP Implementations: A Market Perspective
immediately, ROI occurring within a year or so. Since the ERP package keeps track of all the business process at each and every stage across all business units, it would be easier for an organization to know if their customers are satisfied or not.

To sum up, the key to successful implementation of an enterprise software solution is to apply people, process and product initiatives within a structured methodology framework. The most difficult task in an ERP implementation is to bring all the above together and align them toward the goals of an organization. When people, processes and the product are aligned towards the organizational goals then the ERP implementations are bound to be a success thereby reaping benefits and rapid return on investments.

41 Copyright: Pijush Gupta | www.pigtale.co.in

Critical Success and Failure Factors of ERP Implementations: A Market Perspective 8. References
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Critical Success and Failure Factors of ERP Implementations: A Market Perspective
case of SAP R/3 Implementation', Electronic Journal on Information Systems in Developing Countries, 2, pp. 1-15. [Online]. Available at: http://www.ejisdc.org/ojs2/index.php/ejisdc/article/viewFile/9/9 (Accessed: 23/06/07).

45 Copyright: Pijush Gupta | www.pigtale.co.in

Critical Success and Failure Factors of ERP Implementations: A Market Perspective 9. Appendix
9.1. Questionnaire 1. What is your position in the company? 2. Sector that the company works for: Public/Private 3. Product type of company: Goods/Service 4. Annual Sales of company in 2009. 5. Number of employees 6. Decision making system in the company
• • • • Centralized decisions made at the corporate level Decentralized at the corporate level, centralized decisions made at the divisional level Decentralized at the corporate and divisional level, decisions made at lower operating levels Some decisions

7. Which organization structure exists in the company?
• Functional Structure (classical hierarchical structured organization having several levels arranged in a tree-like structure) • • Matrix Structure (Functional organization for increasing the efficiency interdepartmental business) Pure project structure (project manager maintains complete line authority over the entire project and associated resources) • Other

8. Which ERP software does the company use or implement? 9. How long does an implementation take? (in months) 10. Which was the implementation time that was planned before starting? (in months) 11. At what percent was the Data in the old system transferred to the new system? 12. During BPR, what percent of the work processes were redefined? 13. What percent of your ERP software were satisfied after implementation? 14. What percent of the ERP software was redesigned to be adopted to the company? 15. Evaluate these uses of ERP in terms of the importance. 5:very important,4:moderately important,3:little important,2:very little important,1:not important 46 Copyright: Pijush Gupta | www.pigtale.co.in

Critical Success and Failure Factors of ERP Implementations: A Market Perspective

4

3

2

1

5

Flexibility of the software in responding to the changes in the company’s processes or how adaptable is the ERP software in accommodating business process changes? *

Having the proper tools for the company does the ERP software functionality satisfy the company’s business processing requirements? *

Business process integration (i.e. common accessibility of data, report and performance measure) *

Standardization of the processes; what degree of business process standardization did you achieve? *

The "ease of use" of the ERP system modules *

The effectiveness and the completeness of reporting functionality within the system *

The ability to satisfy customer demand *

16. Evaluate these uses of ERP in terms of the degree of obtaining them after implementation. 5: totally, 4: partially, 3: little. 2:very little, 1:none
4 3 2 1

5

Flexibility of the software in responding to the changes in the company’s processes or how adaptable is the ERP software in accommodating

47 Copyright: Pijush Gupta | www.pigtale.co.in

Critical Success and Failure Factors of ERP Implementations: A Market Perspective
business process changes? *

Having the proper tools for the company does the ERP software functionality satisfy the company’s business processing requirements? *

What degree of business process integration has been achieved (i.e.common accesebility of data, report and performance measure)? *

Standardization of the processes; what degree of business process standardization did you achieve? *

Rate the "ease of use" of the ERP system modules *

Rate the effectiveness and the completeness of reporting functionality within the system *

Rate the ability to satisfy customer demand *

17. Total success of the ERP implementation. (5:very, 4:partially, 3:little, 2:very little, 1:not at all)

5 Rate the success of your ERP Implementation. *

4

3

2

1

48 Copyright: Pijush Gupta | www.pigtale.co.in

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