International Journal of Emerging Trends & Technology in Computer Science (IJETTCS)

Web Site: www.ijettcs.org Email: editor@ijettcs.org, editorijettcs@gmail.com

Volume 1, Issue 2, July August 2012 ISSN 2278-6856

ERP Software Implementation in Indian Small

and Medium Enterprises
Dr.M.P.Thapliyal1, Pooja Vashishta2
1
Associate Professor, Department of Computer Science & Engineering
HNB Garhwal University, Srinagar(Garhwal), Uttarakhand
2
Research Scholar, Pacific University, Udaipur (Rajasthan), India

integrate data and processes from all areas of the

Abstract: ERP (Enterprise Resource Planning) is a way to
integrate the data and processes of an organization into one
single system. Its main goal is to integrate data and processes
from all areas of the organization and unify it, to provide
ease of access and an efficient work flow. ERP Systems
usually accomplish this through one single database that
employs multiple software modules. In India, SMEs are the
backbone of the economy and are today faced with global
competition. Therefore, it becomes imperative to look for
means of responding to the dynamic markets. ERP systems
have become the most common IT strategy for most large
companies. Present research argues that ERP
implementation in Indian SMEs should extend its scope
beyond the configuration to the strategic, managerial,
technical and organizational issues by considering critical
success factors for successful ERP implementation at Indian
SMEs that may put Indian SMEs on the competitive position.
In this paper, we have examined ERP in India.
Keywords: SME.
1. INTRODUCTION
ERP (Enterprise Resource Planning) is an outcome of
Information Technology and is a way to integrate the data
and processes of an organization into one single system,
using sub-systems that include hardware, software and a
unified database in order to achieve integration, to store
the data for various functions found throughout the
organization. The term ERP used to refer about how
large organizations of the industrial type planned to use
organizational wide resources. Today ERP is used in
almost any type of organization it doesn't matter whether
it is large, small or what industry it falls in. How do we
know what software system can be considered ERP? First,
it must provide an organization with functionality for at
least two systems or more. However, many of today's
ERP systems can cover more than just two functions and
integrate them into one unified Data Base. Human
Resources, Supply Chain Management, Customer
Relations Management, Financial, Manufacturing
functions and Warehouse Management functions can be
found on modern companies under one umbrella - the
ERP system.
The Key to ERP is integration. Its main goal is to
Volume 1, Issue 2 July-August 2012
organization and unify it, to provide ease of access and an
efficient work flow. ERP Systems usually accomplish this
through one single database that employs multiple
software modules. The ideal configuration is then to have
one ERP system for an entire organization, but
organizations that are very large have been known to
create an ERP system and then add external interfaces for
other stand alone systems considered more powerful or
able to fulfill the organization's needs in a better way.
Recently the ERP vendors have developed and customized
the ERP software for the use of all types of industries.
This has created a great demand on the use of ERP
among business entities to integrate and maximize their
resources. The growing demand for ERP applications
among business firms has several reasons-
Competitive pressures to become a low cost producer.
To increase the revenue growth.
Ability to compete globally.
Maximizing the resources and the desire to re-engineer
the business to respond to market challenges (Gattiker
and Goodhue, 2005).
2. LITERATURE REVIEW
This area has been subjected to a significant amount of
prior research. Several approaches have been taken.
Slevin & Pinto (1987) originally proposed ten CSFs for
project management. Their work was built upon by
Holland & Light (1999). They partitioned the
implementation process into strategic and tactical
subgroups, adding factors specific to software projects.
The application and modification of existing project
management techniques to ERP was also addressed by
Weston (2001), who also considered the issues
surrounding the development stages that the project
passes through, associated metrics, and the software used
in ERP implementations. These issues have been further
investigated by other researchers. Notably Ahituv et. al.,
(2002) who investigated systems development
methodologies for ERP systems, while Huang et al.,
focused upon the need for organizations to create a
repository of implementation best practice to ensure
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 International Journal of Emerging Trends & Technology in Computer Science (IJETTCS)
Web Site: www.ijettcs.org Email: editor@ijettcs.org, editorijettcs@gmail.com
Volume 1, Issue 2, July August 2012
consistency across ERP implement (Huang,2004). Zviron
et al., considered the issues surrounding the measurement
of user satisfaction and perceived usefulness in the ERP
context (Zviran, 2005). While Sumner (1999) considered
implementation issues through series of ERP case studies
resulting in a set of guidelines designed to promote
success in large software project implementations. Nah,
Lau and Kuang (2001) undertook a literature search of
ERP implementations and identified eleven CSFs and
considered their relationship to Markus and Tanis's
process-orientated ERP Life cycle model (200). Bajwa
and Garcia (2004) developed an integrative framework
for the assimilation of ERP systems, extending the
literature in the area of critical extemal antecedents, while
Gulledge and Sommer (2004) examined the issues
surrounding scoping business processes when splitting
SAP instances. Parr and Shanks (2003) built on their
earlier research into CSFs, identifying ten enabling
factors, then using further case research to construct a
project phase model for ERP implementation. Meanwhile
an influential study by Somers and Nelson (2001) also the
literature for CSFs and took Cooper and Zmud's six
stages IT implementation process model (1990) as a basis
for ranking and categorize them by stage. The Somers-
Nelson CSF classification was extended by Akkermans
and van Helden who, through the application of a
longitudinal case study, showed that inter-dependencies
both indirect and direct exist within the success factors
and importantly that 'they all influenced each other in the
same direction i.e., all positive or negative, leading to a
self perpetuating or cycle of good or poor performance'
(2002). Research has also been undertaken on subsets of
CSFs classifications; for example, Sarker and Lee (2003)
examined three major social enablers in ERP
implementations, while Gefen (2004) considered the issue
of trust between vendors and clients within ERP
implementations and Luo and Strong proposed a
framework for evaluating implementation choices
pertaining to the customization of an ERP ( Luo, 2004).
3. CHALLENGES IN ERP IMPLEMENTATION
A lot of firms in the developing countries face numerous
challenges in implementing technologies such as
Enterprise Resource Planning (ERP) systems, including a
lack of human and financial resources to support such
initiatives (Wright et al., 2002). Furthermore, the
governments commitment to the development of
technology infrastructure can also be seen from the Indian
Industrial Master Plan from 2006-2020, coinciding with
the countrys vision for 2020. For example, the
government has implemented numerous policies and
strategies under this plan which was formulated to
enhance the growth of the industries through the entire
value chain and to encourage cluster based industrial
development. However various studies have revealed that
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ISSN 2278-6856
not all ERP implementations are successful in improving
the productivity and competencies of a company.
According to Gattiker and Goodhue (2005), ERP
implementation failure rate is from 40%, yet companies
try to implement these systems because they are
absolutely essential to responsive planning and
communication. The competitive pressure unleashed by
the process of globalization is driving implementation of
ERP projects in increasingly large numbers, so a
methodological framework for dealing with complex
problem of evaluating ERP projects is required. It has
been found that, unique risks in ERP implementation
arises due to tightly linked interdependencies of business
processes, relational databases, and process reengineering
(Wright and Wright, 2002). According to Gordon (2006),
three main factors that can be held responsible for failure
of ERP system are-
poor planning or poor management
change in business goals during project
lack of business management support.
In another study, it has been found that companies spent
large money in developing ERP systems that are not
utilized. From a software perspective ERP systems is
complete. But from the business perspective it is found
that software and business processes need to be aligned,
which involves a mixture of business process design and
software configurations (Mabert et., 2003). So a purely
technical approach to ERP system design is insufficient.
According to Gordon (2006), a careful use of
communication and change management procedures is
required to handle the often business process
reengineering impact of ERP systems which can alleviate
some of the problems, but a more fundamental issue of
concern is the cost feasibility of system integration,
training and user licenses, system utilization, etc. need to
be checked. A design interface with a process plan is an
essential part of the system integration process in ERP.
4. OBJECTIVE OF STUDY
The primary objective of this research is to examine the
critical success factors of ERP implementation to
minimize the ERP implementation failure rate among the
local companies. The research was focused in different
sectors of the economy. Apart from that the study also
aimed to identify the ERP usage contribution to the
business performance of the organizations. ERP
implementations completed between 1995 and 1998 in
India can give a sense of specific hurdles that companies
may encounter in ERP deployment. Several companies
were surveyed, and numerous ERP professionals were
interviewed in order to assess the state of ERP in India.
The results indicate that Indian companies are moving
forward with ERP implementation primarily in response
to thrusts from parent collaborators, to revamp in order to
meet increased load, or to reduce lead times and inventory
levels, and improve customer satisfaction. Resistance to
change was a major hurdle faced during many ERP
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 International Journal of Emerging Trends & Technology in Computer Science (IJETTCS)
Web Site: www.ijettcs.org Email: editor@ijettcs.org, editorijettcs@gmail.com
Volume 1, Issue 2, July August 2012
implementations. Additionally, the duplication required
in the initial stage, and the intense pressure exerted on
manpower proved to be problematic, as did the level of
customization necessitated by disparities between
company requirements and solutions offered by ERP
software. This problem is diminishing due to advances in
the software facility models. Cost overruns also proved to
be a pervasive problem with ERP implementations. To
avoid this problem, top management must develop the
necessary commitment to ERP, and all employees should
be prepared for the change before the ERP
implementation process is started. This model should
help to eliminate needless project time and cost
ballooning.
5. ERP IN INDIA
Some of the first Indian companies to have adopted ERP
practices are HLL, ONGC, ESSAR, Godrej Soaps,
Cadburys, BASF, Telco, Maruti Udyog Ltd., Century
Rayon, Citibank, ACC, ANZ Grindlays, German
Remedies, Blue Star, Mahindra & Mahindra, Rallis India,
Sony India Pvt. Ltd., Ceat Ltd., Indal, Ford Motors,
Kirloskar, Knoll Pharmaceuticals, and Glaxo. First tier
companies (those with a turnover greater than Rs.10
billion) implement ERP to increase internal efficiency
and external competitiveness. Once ERP is established at
this level, these large companies begin to desire similarly
increased efficiency from their suppliers. Hence, second
tier companies are pressured to implement ERP, and a
trickle-down effect ensues. Powered by the axiom that a
chain is only as strong as its weakest link, Indian industry
quickly has recognized that in order to work at maximum
efficiency, ERP must be implemented at all levels.
Initially, the majority of ERP solutions have been
marketed to companies with greater than Rs. 2 billion,
and generally, according to industry reports, the total cost
of deploying ERP has ranged between 1 and 2 percent of
companies' gross sales. Lower cost solutions are available
for comparatively smaller sized companies. Though the
market seems to be very encouraging for ERP
implementation, the time-frame for deployment may be
an issue. However, since many companies that have not
yet implemented ERP are leaders in their markets, it
reasonably can be assumed that they will go for it within
next five years. In fact, the ERP market should grow at a
rate somewhere near the industrial growth rate. Some
industry categories, such as Automotive, Steel, Consumer
Durables, Engineering, and Textiles have shown a very
high ERP penetration. This means that these categories
represent the greatest potential markets in next two years
- other industries will follow.
6. ERP IN THE SERVICE SECTOR
Transportation, medical care, hospitality, courier service,
telecommunication, banking and financial services, and
entertainment represent the major components of India's
service sector, and on probing into the various needs of
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these groups, it becomes apparent that the courier,
transportation, and entertainment industries do not have
specific current needs for ERP. Banking and
telecommunication each have very specialized
requirements that the manufacturing-inclined software
solutions on the market would not effectively address.
The same holds true for the medical care and hospitality
industries. The service sector has the potential to become
an important ERP market within a few years. At this time
ERP implementation in the services sector is very limited
- only a few hospitals and banks have done small-scale
experiments. New software and processes will need to be
developed to meet the specific demands of the service
industries, so ERP players should begin now to prepare
themselves for the tremendous potential of this future
market.
7. SMES AND ERP
While many new SMEs start each year, nearly 50% cease
to exist in the first 3 years of business itself. Though it is
assumed that all SMEs desire growth, only 40% survive
beyond 10 years. Majority of the firms do not think of
long-term business strategy but focus only on survival.
They think of change only when the business begins to
fail as a result of not keeping track of the changing
market scenario. The firms who survive and grow are the
ones who have the ability to take risks and respond to the
changing circumstances (Levy et al, 2006). An ERP
system would allow SMEs to integrate their business
functions. SMEs would be able to increase their efficiency
and productivity by implementing a suitable ERP system.
Over the next five years, the ERP market in India is
expected to reach Rs. 1,550 crore ($341 million),
according to International Data Corporation (IDC), a
market research and analysis firm. Of this, the SME
potential in India for the enterprise class is projected to be
Rs. 728 crore ($160 million) 47% of the overall market
(Munjal, 2006). ERP vendors like SAP, Oracle,
Microsoft, QAD etc. are all trying to increase their
customer base in the SME segment and have products
specifically designed to cater to the needs of SMEs.
Though SMEs are risk averse, they are keen on adopting
ERP systems for several reasons. Some of them are:
Pressure from larger counterparts: Due to globalization,
SMEs today operate in a wider arena. Majority of them
have MNCs as their clients. These MNCs require SMEs
to implement the same ERP system as them to allow for
tighter integration in their supply chain, which permits
them to design and plan the production and delivery so as
to reduce the turnaround time.
Peer pressure: Several SMEs are adopting ERP systems
as their peers have done so.
To gain competitive advantage and respond quickly to
the dynamic market scenario.
E-commerce benefits: This benefit will accrue from the
close integration between large enterprises and SMEs.
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 International Journal of Emerging Trends & Technology in Computer Science (IJETTCS)
Web Site: www.ijettcs.org Email: editor@ijettcs.org, editorijettcs@gmail.com
Volume 1, Issue 2, July August 2012
Cheaper and faster Internet: Easier access to Internet
reduces the costs further.
Cheaper hardware and software: With the advances in
technology, the costs of both hardware in the form of
servers, cables, switches etc. and software like databases
have come down.
8. CRITICAL SUCCESS FACTORS FOR ERP
ADOPTION
Nah et al. (2006) investigated critical success factors for
ERP implementation by conducting a literature review.
They found that key organizational issues were teamwork,
change, management, top management support, plan and
vision, business process management and development,
project management, monitoring, effective
communication, software development and testing, the
role of the project champion and appropriate business and
IT legacy systems. Their study shows that the complex
organizational change issues must be comprehensively
addressed and that they cannot be overcome by using
technical solutions alone. Similarly, Huang et al. (2003)
suggest that in addition to developing the technical
aspects of ERP, more effort is required in understanding
the more complex organizational issues involved.
Although the ERP systems have been progressively
developed over at least a decade, the continual pace of
change in organizations and their environments has
resulted in complex technical organizational, cultural and
political issues that have made the integration process a
very challenging task (Huang et al., 2003). In response to
ERP systems implementation issues, there are some
academic journals which have revealed specific metrics
for ERP implementation success. Somers and Nelson
(2004) are well-known as one of the top 'guru' of ERP
implementation who came up with the unified critical
success factor model for the industries in United States .
Their research work has received high number of citation
in the literature and can be validated from the social
science citation index (SSCI) platform. Apart from that,
from research perspective, usage of a validated study that
has been published by Somers and Nelson has been used
to form the structure of this study. The idea is to test the
model/factors proposed by these authors and see if it is
applicable in the context of a developing country i.e.
India.
6. IMPACT OF THE PROPOSED RESEARCH
WORK ON ACADEMICS / INDUSTRY
The results of this study will have important practical
and research implications. The key findings of this study
would be of value to the management of the Indian small
and medium enterprises (SMEs) firms when taking
decisions regarding the adoption of ERP. Moreover, it
provides information systems researchers and ERP
consultants with better understanding about the adoption
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of ERP systems in the context of developing countries
such as India to ensure successful implementation of
ERP. It, however, should be acknowledged that since this
research emerges from an in-depth single-case study, the
ability to generalize the findings is limited. The findings
of the study are expected to be more transferable within
the context of Indian SMEs in general. Furthermore it
will also provide a benchmark to further enhance the
research scope of Indian ERP implementation among
academicians and researchers.
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Volume 1, Issue 2, July August 2012
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