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International Transactions in Applied Sciences

July-September 2011, Volume 4, No. 2, pp. 271-280


ISSN-(Printing) 0974-7273, (Online) 0975-3761
AACS. (www.aacsjournals.com) All right reserved.

Critical Success Factors in ERP Implementation in India

Ashok Kumar1, Padmveer Malik2


1Associate

Professor, GRD Institute of Management & Technology, Dehradun


2Associate

Professor, MIT, Muzaffarnagar

ABSTARCT
ERP is one the latest technologies that many organizations have undertaken.
Enterprise Resource Planning (ERP) systems are software packages composed of
several modules, such as human resources, sales, finance and production,
providing cross-organizational integration of transaction-based data management
throughout imbedded business processes support. These software packages can
be customized up to a certain limit to the specific needs of each organization. ERP
was characterized as the most important development in the corporate use of
technology in the 1990s. Unfortunately, many ERP projects have not been
effective enough and hence have been unable to achieve all the results envisaged.
As the cost of an ERP implementation project is very high, it is critical for an
organization to make the project a success and start obtaining benefits out of it as
fast as possible. Enterprise resource planning (ERP) systems are highly complex
information systems. The implementation of these systems is a difficult and high
cost proposition that places tremendous demands on corporate time and
resources. Many ERP implementations have been classified as failures because
they did not achieve predetermined corporate goals.
Keywords: ERP, Merits, Demerits, Success factors.

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1. INTRODUCTION
Enterprise resource planning (ERP) systems are widely implemented as the backbone of many
manufacturing and service firms. They are designed to address the problem of information
fragmentation or islands of information in business organizations (Muscatello, Small, & Chen,
2003). A typical ERP system integrates all of a companys functions by allowing the modules to
share and transfer information freely (Hicks & Stecke, 1995; Chen, 2001). In addition, all
information is centralized in a single relational database accessible by all modules, eliminating the
need for multiple entries of the same data. Customers and suppliers with network security
clearance are allowed to access certain types of information by way of an external communication
interface. ERP systems offer tremendous opportunities to more consistently provide information
to organizations in a standardized, centralized, and cost efficient manner (Olson, Chae, & Sheu,
2005). Many industry reports extol the virtues of
ERP and its multiple benefits for those firms that ERP stands for Enterprise Resource Planning.
ERP is a way to integrate the data and processes of an organization into one single system.
Usually ERP systems will have many components including hardware and software, in order to
achieve integration, most ERP systems use a unified database to store data for various functions
found throughout the organization. Enterprise resource planning (ERP) is a company-wide
computer software system used to manage and coordinate all the resources, information, and
functions of a business from shared data stores. The term ERP originally referred to how a large
organization planned to use organizational wide resources. In the past, ERP systems were used in
larger more industrial types of companies. However, the use of ERP has changed and is extremely
comprehensive, today the term can refer to any type of company, no matter what industry it falls
in. In fact, ERP systems are used in almost any type of organization - large or small.
In order for a software system to be considered ERP, it must provide an organization with
functionality for two or more systems. While some ERP packages exist that only cover two
functions for an organization (QuickBooks: Payroll & Accounting), most ERP systems cover
several functions. Today's ERP systems can cover a wide range of functions and integrate them
into one unified database. For instance, functions such as Human Resources, Supply Chain
Management, Customer Relations Management, Financials, Manufacturing functions and
Warehouse Management functions were all once stand alone software applications, usually

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Ashok Kumar, Padmveer Malik

housed with their own database and network, today, they can all fit under one umbrella - the ERP
system.

RESEARCH METHOD
This study is a review of literature on ERP. We decided to focus our study on articles that discuss
the ERP implementation and particularly the critical success factors. All the articles that we
selected are published in peer-reviewed and prestige journals. There are two up-to-date books
used in this study. All the articled surveyed were extracted from different business and
information systems databases such as ABI Inform, Emerald, ScienceDirect and ACM Digital
Library. We used the terms ERP, Enterprise Resource Planning, ERP success factors. We limited
the search date to be between (2000 and 2007) in order to get relatively new articles. To better
analyze the articles, we divided them into three categories based on the main topic they
discussed. The three categories are: ERP overview, ERP benefits and drawbacks, ERP success
factors.

SUCCESS AND FAILURE IN ERP IMPLEMENTATIONS


Nowadays, in the rising ERP research area, the definition and dimension of ERP implementation
success is a thorny issue. Markus and Tanis (2000) state that success means different things
depending on who defines it. Thus, for instance, project managers and implementation
consultants, "often define success in terms of completing the project on time and within budget.
But people whose job is to adopt ERP systems and use them to achieve business results tend to
emphasize having a smooth transition to stable operations with the new system, achieving
intended business improvements like inventory reductions, and gaining improved decision
support capabilities" (Markus and Tanis 2000,P2). This relative point of view for success can also
be applied to failure, and people will also qualify an implementation as a failure according to
their goals.

Benefits of ERP
Several research studies have identified various important benefits the ERP systems bring to
organizations. OLeary (2000) stated that an ERP system integrates the majority of the business
processes and allows access to the data in real time. Furthermore, ERP improves the performance
level of a supply chain by helping to reduce cycle times (Gardiner et al., 2002). There are also
some intangible benefits that an organization may enjoy by implementing an ERP system
including, better customer satisfaction, improved vendor performance, increased flexibility,

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reduced quality costs, improved resource utility, improved information accuracy and improved
decision-making capability (Siriginidi, 2000).

Drawbacks of ERP
Despite the potential benefits discussed above, however, ERP systems also have a number of
drawbacks. For example, most ERP systems tend to be large, complicated, and expensive (Mabert
et al., 2001). Moreover, ERP implementation requires an enormous time commitment from an
organizations information technology department or outside professionals. In addition, because
ERP systems affected most major departments in a company, they tended to create changes in
many business processes. According to Shang and Seddon (2002) putting ERP in place requires
new procedures, employee training, and both managerial and technical support.

Critical Success Factors in ERP implementation


Table1 presents the main factors revealed from the literature review and that are found to be vital
for successful ERP implementation:
Critical Success Factor
Top management support
Business plan and vision
Re-engineering business process
Effective project management
and project champion
Teamwork and composition
ERP system selection
User involvement
Education and training

References
Al-Mashari et al. (2003); (Umble et al., 2003); Zhang et al.
(2002)
Loh and Koh (2004); Schwalbe, (2000); Somers and Nelson
(2004); Nah (2003)
Davison (2002); Hammer and Champy (2001); Somers and
Nelson (2004); Nah (2003); Murray and Coffin (2001)
Zhang et al.,( 2002); Somers and Nelson (2004); Remus
(2006); Loh and Koh, (2004)
Loh and Koh (2004); Al-Mashari et al., (2006); Remus (2006);
Nah (2003); Rosario (2000)
Wei and Wang (2004); Shehab et al., (2004); Everdingen et al.
(2000); Sprott (2000)
Esteves et al., (2003); Zhang el at (2002)
(Woo 2007); Nah et al., (2003); Zhang et al. (2002)

Teamwork and Composition


The ERP team should involve of the best people in the organization (Loh and Koh 2004). AlMashari et al., (2006) the success of projects is related to the knowledge, skills, abilities, and
experiences of the project manager as well as the selection of the right team members. Also, team

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should not only be technologically competent but also understand the company and its business
requirements (Remus 2006).
An ERP project involves all of the functional departments in an enterprise. It demands the effort
and cooperation of technical and business experts as well as end-users (Loh and Koh 2004). Both
business experts and technical knowledge are important for success (Nah 2003). The sharing of
information between the implementation partners is essential and requires partnership trust (Loh
and Koh 2004). Moreover, the team should be familiar with the business functions and products
so that they know what needs to be improved to the current system (Rosario 2000).

ERP System Selection


The selection of a suitable ERP system is a challenging and time-consuming process. Wei and
Wang (2004) stated that there is no one single ERP package that could provide all the
functionalities required for the business. There are various ERP packages in the market with
similar functionality but different designs including, SAP, Oracle, JD Edwards and Baan (Shehab
et al., 2004). Therefore, an organization must select an appropriate vendor that able to provide a
flexible ERP system. Various authors identified important criteria that need to be taken into
account when selecting a new ERP system. For example, a study by Everdingen et al. (2000)
stressed that the ERP system selected has to closely fit with most of the current business
procedures. Additionally, the system has to be flexible, user-friendly and easy to implement.
Another similar research study by Sprott (2000) reported that applicability, integration,
adaptability and upgradeability are essential factors that have to be considered in ERP adoption.
CSFs in ERP Implementation in India
A critical success factor is something that the organization must do well to succeed. In terms of
information system projects, a critical success factor is what a system must do to accomplish what
it was designed to do. The proposed methodology of studying CSFs behind ERP implementations
is very similar to the approach used in a variety of studies in Information Technology (IT)
implementation research. Some of these proposed factors are the one that have been found to be
significant in other IT implementations.
Many ERP research studies have determined several critical success factors in ERP
implementations. These studies, however, discussed the success factors from different prospective
and in different contexts. I arrange these factors in an organized and adequate set in order to have
a better understanding and a clearer picture of the factors that are considered to be vital for

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276

successful ERP implementation. I generalize 7 CSFs into 3 categories: strategic factors, tactical
factors, and operational factors.
Strategic factors
Top management support: earlier studies (Sumner (1999), Mabert et al (2001)) have shown that
the ERP implementation was in general a top-down decision, and the success of such an
implementation depended on the alignment of the ERP adoption with strategic business goals.

Tactical factors
Effective project management: in order to successfully accomplish the decision to implement an
ERP system, the effective project management comes into play to plan, coordinate and control
such an intricate project re-engineering business processes: it is very important to consider the
extent to which the company needs to re-engineer its current business processes in order to be
compatible with the ERP software.
Suitability of software and hardware: management must make a careful choice of an ERP package
that best matches the legacy systems, e.g. the hardware platform, databases and operating
systems.

Operational factors:
Education and training: when the ERP system is up and running it is very important that the
users be capable to use it, hence they should be aware of the ERP logic and concepts and should
be familiar with the system s features. User involvement: participating in the system
development and implementation, the users go through a transition period that gives them time
to better understand the project s consequences. Teamwork and Composition: ERP team work
and composition is important throughout the ERP implementation project. An ERP project
involves all of the functional departments and demands the effort and cooperation of technical
and business experts as well as end-users.

Teamwork and composition


The ERP team should involve of the best people in the organization (Loh and Koh, 2004). The
success of projects is related to the knowledge, skills, abilities, and experiences of the project
manager as well as the selection of the right team members (Al-Mashari et al., 2006). Also, team
should not only be technologically competent but also understand the company and its business
requirements (Remus, 2006).

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An ERP project involves all of the functional departments in an enterprise. It demands the effort
and cooperation of technical and business experts as well as end-users (Loh and Koh, 2004). Both
business experts and technical knowledge are important for success (Nah, 2003). The sharing of
information between the implementation partners is essential and requires partnership trust (Loh
and Koh, 2004). Moreover, the team should be familiar with the business functions and products
so that they know what needs to be improved to the current system (Rosario, 2000).
Hypothesis 1: Strong ERP Teamwork and composition has a positive impact on ERP
implementation in India.

User Involvement
User involvement is one of the most cited critical success factors in ERP implementation projects.
User involvement increase user satisfaction and acceptance by developing realistic expectations
about system capabilities (Esteves et al., 2003). User involvement is essential because it improves
perceived control through participating the whole project plan. According to Zhang el at (2002)
there are two areas for user involvement when the company decides to implement an ERP
system: user involvement in the stage of definition of the organizations ERP system needs, and
user participates in the implementation of ERP systems.

Top Management support


Top management support has been identified as the most important success factor in ERP system
implementation projects. According to Zhang et al. (2002), top management support in ERP
implementation has two main aspects: providing leadership and providing the necessary
resources. Reimers (2002) found that, managers in traditional Chinese companies do not trust the
system in terms of data quality and also in terms of appropriateness of suggested decisions. The
managers prefer to make the decisions according to their intuition and experience.
Hypothesis 2: Chinese traditional management style has a negative impact on ERP
implementation.

Business process re-engineering


Hammer and Champy (2001) defined Business process re-engineering (BPR) 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. Somers
and Nelson (2004) stated that BPR plays a significant role in the early stages of implementation.
Aligning the business process to the software implementation is critical (Holland et al., 1999).

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Organizations should be willing to change their businesses to fit the software in order to reduce
the degree of customizations (Murray and Coffin, 2001).

Education and training


User training should be emphasized, with heavy investment in training and re-skilling of
developers in software design and methodology (Summer, 1999). However, education and
training are frequently underestimated and are given less time due to schedule pressures, and less
understanding of cross-functional business process is often reported.
Educating and training users to use ERP is important because ERP is not easy to use even with
good Information Technology skills (Woo, 2007). Nah et al., (2003) argued that sufficient training
can assist increase success for ERP systems. However, lack of training may lead to a failure.
Hypothesis 6: Sufficient education and training has positive impact on ERP implementation in
India.

Suitability of software and hardware


Due to the lack of professional expertise and experience on developing ERP systems in-house,
many companies prefer to buy off-the-shelf systems to shorten the ERP implementation cycle.
ERP packages provide generic off-the-shelf business and software solutions to customers. More or
less they cant fully meet the companys needs, especially when the business processes of the
company are unique.
Hypothesis 7: Suitability of software and hardware has a positive impact on ERP implementation
success.

CONCLUSION
To adapt to todays challenging and competitive business environment, organizations are
implementing ERP systems to achieve a capability to plan and integrate enterprise-wide resources
in order to shorten lead times, and to be more responsive to customer demands.
This paper attempts to review the ERP literature and identify the benefits, the global market,
Chinese market, organizational culture and the critical success factor in ERP implementation. The
paper aims to improve understanding critical factors that affect ERP implementation success in
China and that are most important for companies and identifies the most cited success factors in
the literature and illustrates their significant importance in ERP implementation.

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Most of the articles stressed that each organization must assess itself, to see if it is ready for ERP.
Many organizations that attempt to implement ERP systems run into difficulty because such
organizations may not be ready for integration and the various departments within it have their
own agendas and objectives that conflict with each other.
Despite the fact that ERP integrates and optimizes the flow of information across the entire
organizations supply chain, the implementation of such software packages can be costly, and
may even require reengineering the entire business operations. Combinations of factors have to
be considered when undertaking an ERP implementation including: top management support,
Re-engineering business process, effective project management, suitability of software and
hardware, teamwork and composition, user involvement and education and training.

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