PROBLEMS AND PROSPECTS OF ENTERPRISE

RESOURCE PLANNING [ERP] APPLICATIONS

WITH SPECIAL REFERENCE TO
MANUFACTURING & SERVICE SECTORS IN
TAMIL NADU

A SYNOPSIS

Submitted by

RAVEENDRAN N

in partial fulfilment of the requirements for the degree of

DOCTOR OF PHILOSOPHY

FACULTY OF MANAGEMENT SCIENCES

ANNA UNIVERSITY
CHENNAI 600 025

SEPTEMBER 2015
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1. INTRODUCTION

Companies seek to implement the appropriate solutions as the

enablers of executing their business strategies. Organizations, even the Small
and Medium enterprises are looking for suitable solutions to address both
business growth and cost containment. Among the expected solutions,
Enterprise Resource Planning [ERP] is the most sought one.

ERP is a software solution under a common software platform that

addresses the enterprise needs, covering the business processes of all the
functions and to meet the goals with tight integration.

ERP establishes a platform to collect, store, manage and interpret

data from many business activities and supports to view the core business
processes, in real-time & in an integrated manner. ERP also facilitates
information flow between all business functions, and fulfills the requirements
of all internal & external stakeholders including suppliers, customers etc.

2. STATEMENT OF THE PROBLEM

The ERP adoption is getting high prominence and more & more
companies are joining the band-wagon. But, in India only 60% of the ERP
implementations were succeeded (Panorama Consulting Survey, 2013 Report
(1)
). Out of the ERP implemented companies, only 25% of the cases claimed
having achieved more than 50% of the expected benefits. Around 50% of
projects were completed with project cost over-runs and around 60% with
project schedule over-runs. About 30% of the companies were not satisfied
with their implementation vendors.

ERP success rates are not encouraging, even though many scientific
researches have been done on ERP. This is because, the suggestions and
recommendations derived from the ERP researches were not incorporated
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during ERP implementations. Most of the research studies focus only on the
macro level critical success/failure factors and with limited sample in certain
industry. There are lot of factors which attribute to the failures or
partial/delayed ERP implementations - The level of training provided during
implementation, involvement of the concerned stake-holders including the
Management during implementation & their satisfaction levels,
problems/barriers faced during implementation etc., were not focused &
analyzed properly.

In order to investigate this, the following research questions were

derived:

• Which critical factors were affecting the ERP

implementations?

• What were the reasons behind the ERP non-adoption by

certain companies and what would make them to pursue ERP
adoption?

• To what extent were the respondents satisfied with the ERP

after implementation?

• What were the problems faced during implementation

including the ones related to ERP implementation vendors?

• What were the suggestions given by the ERP implemented

organizations for further improvisation?

3. RESEARCH GAP

Most of the ERP studies focus on the critical success/failure factors

in ERP. Very few studies discuss the benefits of ERP in a broader manner.
But the developing country like India especially in Tamil Nadu the ERP
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adoption, implementation, success and failure factors are analyzed in a very

smaller level only. This research analyzed the ERP in depth based on various
parameters – factors which influenced to go for ERP, reasons for having
selected the ERP product, involvement of the stakeholders during the project,
level of training provided, duration of implementation, problems/barriers
encountered, benefits being reaped, current satisfaction level of the key
stakeholders, the level of optimism among the ERP implemented companies
and inputs for the ERP aspirants to pay attention-to while venturing into ERP
adoption. This gives the comprehensive idea about the ERP and pave way for
further improvisation of the ERP implementation approaches in all levels of
the organization and also for enhancing the success rates.

4. RESEARCH OBJECTIVES

Following are the specific objectives of the study.

• To examine the ERP awareness among the Small & medium

companies in Tamil Nadu.

• To explore the reasons for having opted for ERP and the
benefits reaped.

• To examine the level of involvement of the concerned

executives during product selection & implementation

• To identify the problems faced by the selected units during all

the phases of ERP implementation process.

• To develop a suitable model for the effective implementation

of ERP.

• To analyze the factors that influenced to implement ERP in

the selected companies
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5. REVIEW OF LITERATURE

Helene Eskilsson et al (2003), in his study examines the similarity

between theory and practice concerning effects of ERP system
implementation. They selected seven ERP (SAP/R3) implemented companies
& the outcome of ERP investment have been interviewed and the results were
compared.

According to Jacobs & Weston Jr (2007), a key to ERP is the way

in which users can adopt the application so it is essentially easy to use. ERP
systems can decrease cycle time, improve financial management, prompt
information distribution, lay the foundation for e-commerce and make tacit
knowledge explicit, provided they are properly executed in a business
organization.

Joseph DeFee (2011) – He provides information about ERP and

examines how business process modeling and simulation is used to support
ERP and Commercial-off-the-Shelf (COTS) projects. It needs a powerful
potential to support the Program Managers in the choice and implementation
of ERP/COTS and also to sustain the functional community to address the
concerns of the final end-users and owners of the system.

Ayman & Kamaljheet (2014) the study examines how user training
and education, apparent benefits for users influence the acceptance of ERP
systems within the organizations. This study was carried out in Saudi Arabian
exchange. The results suggested that the employees consider it valuable to
have proper training & education program for the employees and the benefits
involved with the ERP systems should be shared as well, to motivate
employees for acceptance of the ERP systems.
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6. RESEARCH METHODOLOGY

6.1 Study Area

This study was carried out in Tamil Nadu - 130058 Sq.km, the
eleventh largest state in India with 32 districts, located in the southern part of
India. The sample areas for the study have been selected by multi stage
sampling technique. Tamil Nadu state was divided into five divisions like
northern, southern, western, eastern and central. From Northern side Chennai
was selected, Southern - Madurai, Western - Coimbatore, Eastern -
Thanjavur, and from Central - Trichy, were selected.

6.2 Sample Size and Sampling Procedures

In the second step, Non probability sampling method is adopted

since the sampling area and sample size are large and limited to the targeted
group i.e., small & medium industries/institutions. Hence, purposive quota
sampling method was followed to select the respondents. 50 companies were
selected from each districts. From the Tamil Nadu industry portal, the number
of companies list was derived. Out of 250 companies ear-marked, companies
which were located in the metropolitan cities were selected as sample. Finally
210 companies were selected [Chennai-71, Thanjavur-23, Trichy-31,
Coimbatore-56 and Madurai-29] as 40 companies were not interested to
participate in this survey.

6.3 Research Design

In addition to reviewing studies which already exists, exploratory,

descriptive and quantitative research designs were employed. In descriptive
research survey, the data were collected by both questionnaire method and
also by scheduling method i.e by interviews.
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6.4 Sources of data

Majority of this research work is based on the primary data

collected from various companies such as public, private sectors, institutions,
partnership and others. Secondary data also used for this study such as
company reports, articles from internal/external sources such as journals,
internet etc.

6.5 Research Instrument

Research instrument development was introduced by focus group

discussion as described in the research design. Thus, based on the synthesis of
focus group discussion, information required for the study objectives were
identified and accordingly, the structured questionnaire was developed.
Before commencing the major survey, the instrument was first subjected to a
small-scale pilot study of 25 respondents. This helped to establish the
appropriateness to respondents of questions, content, wording, sequence,
format, and layout.

6.6 Tools for Analysis

In the outset of the data analysis part, the data were subjected to
frequency analysis to determine the nature/type/size of the company, IT setup,
software installed in the companies whereby frequency tables and descriptive
statistics for each question were produced. Thereafter, varieties of specific
analysis tools (listed hereunder] were employed depending on the nature of
data being analysed, types of measurement scales used and research
objectives set to be attained.

6.6.1 SWOT Analysis

SWOT [Strengths, Weaknesses, Opportunities and Threats]

Analysis is instrumental in strategy formulation and selection. It is considered
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as a strong tool to evaluate subjective element of concern. The tool guides

successful evaluation of the ERP challenges which is built on domain
strengths, identify their weaknesses as well as to protect against internal
weaknesses and external threats.

6.6.2 Pearson Chi-square

This test has been used with nominal data mostly related to training
given to the executives and their satisfaction level. Next, the involvement
shown by the executives and their satisfaction level were analysed using the
chi-square.

6.6.3 Factor Analysis

Scale reliability test were used to compress the number of variables

before taken into factor analysis. 50 variables on the questions about the
‘problems faced by the respondents’ based on product, people, cost, project
schedule and general barriers were subjected to Factor Analysis so as to get
fewer operational variables that could be used to identify more influencing
variables which need to be solved.

6.6.4 Multivariate Analysis of Variance (MANOVA)

MANOVA was used to analyse the benefits of ERP adoption that

include the factors associated with cost, time, technical, efficiency, manpower
& general benefits. Due to the number of dependent variables, this analysis
was used to know the significance of variables.

6.6.5 Multiple Regression Model

The factors which influence the respondents to undergo ERP

adoption was analysed using multiple regression. Twelve factors were
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analysed to find out the variable which influences more and this analysis was
used to create a statistical model for ERP adoption.

6.6.6 Correlation Analysis

The relationship between the two variables i-e., ERP adoption and
availability of separate IT department in the organization were analysed using
the correlation analysis.

6.6.7 Software Used

SPSS 17 version (Statistical Package for the Social Sciences) is

used in this study to analyse the data using the statistical tools such as plots,
frequencies, chi-square, mean, multivariate statistical procedures like analysis
of variance (MANOVA) and factor analysis.

6.7 Limitations & scope for further study

It is relevant to bring out the major limitations of this study, so that

the conclusions & their implications can be interpreted suitably and future
research efforts can be directed towards bridging the gaps triggered by the
limitations.

i. Due to vast population of large number of industries and time

constraints, only limited samples of 210 companies were
selected and data were collected. Periodic sampling would
benefit an effective research.

ii. This is the empirical study which attempted to address the

issues of ERP, benefits, satisfaction levels of ERP adaption
etc., in the selected regions of Tamil Nadu only. Future studies
can extend the study & analysis in other districts of Tamil
Nadu as well.
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iii. The scope of this study has been limited to the companies
which are willing to participate in this survey. Due to
company policy issues, many industries were not participated
in this study. Hence in future, research should enable the
inputs/suggestions gathered from companies from the wide
sample area which already underwent ERP adoption
successfully.

7. FINDINGS

Majority of the respondent companies were Private Ltd, many

organizations have different operating locations; Most of the companies
which underwent ERP adoption had the annual turnover of more than Rs.25
crores. In both ERP adopted and non-adopted companies, the Head of the
departments were participated in the survey, hence the collected data were
accurate and appropriate. Most of the respondents have computers, internet
facility, server, software applications and separate IT department.

7.1 Problems Faced by the Respondents - Factor Analysis

While adopting the ERP software so many problems were

encountered by the respondent companies which were listed under the
categories such as problems related to ERP product, people, cost, time,
technical issues and general problems. From the above said factors, there
were 50 problems identified by the respondents which were taken as
independent variables. To reduce the number of independent variables for
statistical analysis purpose the factor analysis was applied in this study. The
Rotated Component Matrix helps to reduce the number factors on which the
variables under study have high loadings that is >.05. Using Rotated Matrix,
36 variables were found out, which were loaded under 12 factors.
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7.2 Factors Influencing the ERP Adoption – Multiple Regression

Analysis

ERP adoption in the organizations is influenced by the number of

factors and in this study 12 factors were listed out. These factors were
analyzed using Multiple Regression model. The variables which have positive
impact on ERP adoptions were Process Improvement, Changing statutory,
replace legacy system, Regulatory compliance, Better Management Tool, Fast
Growth, Benefit for external stakeholders, Best Practice, Control Business
Operations. Out of these 8 variables “Better Management Tool” plays a major
role on ERP adoption.

7.3 Benefits of ERP – Multivariate Analysis

The benefits of ERP were grouped as Cost related, Time related,

Technical related, Efficiency related, Manpower related and General. The
multivariate analysis of Cost Related Benefits with six variables attract high
level of agreement in the total sample. Hence from the above findings, it is
vivid that there is a significant association between the ERP adoption and the
cost related benefits.

7.4 IT Department Vs Non-Adoption of ERP – Correlation

Analysis

The correlation analysis is done to know the association between

the availability of separate IT departments in the organization and adoption of
ERP. Maximum of the organization with IT department adopts the ERP. Most
of the organizations which doesn’t have the facility of IT department don’t
undergo ERP adoption. In non-ERP adopted companies only 25 have separate
IT department facility. It is statistically proven that there is strong association
between the ERP non-adoption and availability of IT department in the
organization.
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7.5 Chi-Square Analysis

Pearson’s Chi-square test was conducted to test the significant

association between satisfaction level of respondents and training &
involvement of employees at different level in the organization. Out of 127
respondents 70% of the employees expressed their satisfaction and 18% of
them were not satisfied. Among the 127 respondents, 105 were involved with
enthusiasm and 22 doesn’t show that much involvement. The respondents
who adopted ERP with involvement were satisfied up to 67%, whereas 12%
were not satisfied.

7.6 SWOT Analysis

The SWOT Analysis is the business tool used to highlight the

various factors affecting on ERP product adoption and implementation. The
strength of ERP is the factors which influence the respondents to choose the
product, weakness were the factors which prevent the ERP adoption,
Opportunities were the factors which influence the respondents to undergo
ERP in future and the Threats are the factors which need to be concentrated
and improved to enhance the success rates of ERP adaption.

8. CHAPTER SCHEME

Chapter 1 deals with the introduction about ERP, need of the

study, statement of problem and scope of the study. It also details about
research Objectives/gap, hypotheses of the study and about the methodology
adopted for the research.

Chapter 2 deals with the review of the related literature.

Chapter 3 discusses about the overview of ERP in a detailed

manner.
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Chapter 4 presents the data analysis & inferences using various

statistical tools.

Chapter 5 sums-up the findings, and also gives some

recommendations & suggestions for improving the existing system of ERP
adoption in Tamil Nadu.

Chapter 6 gives up the summary of the thesis and conclusion of

this study.

9. CONCLUSION

It is obvious that ERP is beneficial & imperative for all type of

organizations, in-spite of the problems/barriers which are surfacing-out during
adoption. Empirical evidence recommends that the organizations have tended
to think more about the business requirement, reliability of the module
framework and the cost of implementation during adoption. This study
provides the correlation between various factors which attribute the course &
effectiveness of ERP adoption. It also aims to provide the areas to be taken
care by the ERP aspirants with high attention towards adopting the ERP by
overcoming the barriers and for achieving the expected benefits.
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REFERENCES

1. Ayman Bazhair & Kamaljeet Sandhu, 2014, ‘Factor Performance for

ERP Systems Acceptance a Descriptive Statistical Analysis from Saudi
Arabia Companies’, International Journal of Managerial Studies and
Research (IJMSR) ISSN 2349-0330 (Print) & ISSN 2349-0349
(Online) vol. 2, no. 9, pp. 14-22.

2. Helene Eskilsson, Chritina Nystrom & Maria Windler 2003, ‘ERP

System Effects- A Comparison of Theory and Practice’, School of
Economics & Commercial Law, Goteborg University.

3. Jacobs, FR & Weston, Jr FC 2007, ‘Enterprise resource planning

(ERP) – a brief history’, Journal of Operations Management, vol. 25,
no. 2, pp.357-363.

4. Joseph M. DeFee, 2011, ‘Business Performance Modeling for ERP

Projects’, BPTrends.

5. Kothari, CR 2004, ‘Research Methodology Methods & Techniques’,

Second Edition, New Delhi: New Age International publisher.

6. Panorama Consulting Group [http://Panorama-Consulting.com/

resource-center/2013-erp-report/] – ‘2013 ERP Report’, 2013
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LIST OF PUBLICATIONS

National Publications

1. Raveendran, N 2010, ‘The role of Project Management in

implementing Enterprise Resource Planning [ERP] projects
effectively’, Coimbatore Institute of Information Technology,
ISBN:978-1-4507-2041-0, June.

2. Raveendran, N 2011, ‘Managing the Enterprise Resource Planning

[ERP] projects – Avoid facing the silver bullets’, Excel India
Publishers, ISBN: 93-80697-12-0, pp.373-377, September.

3. Raveendran, N 2011, ‘Challenges being faced by the Small &

Medium Enterprises [SMEs] during the implementation of Enterprise
Resource Planning [ERP]’, Research in Management: A contemporary
Approach, ISBN:978-81-9104-720-2, pp.106-109, February.

4. Raveendran, N 2011, ‘Enterprise Resource Planning [ERP] – An

important enabler for Strategic Management’, RVS Journal of
Management, ISSN:0975-3435, pp.101-105, July.

International Journal

5. Raveendran, N & Somu, A 2012, ‘A Study on the Barriers Affecting

the Successful Implementation of ERP [Enterprise Resource Planning]
Applications’, European Journal of Social Sciences, ISSN:1450-2267,
Vol. 34 No 3, pp.530-540, October.

Paper Presentations

6. Raveendran, N 2009, ‘Global Recession and the Impact in Asian

Countries – The steps being taken to face the challenges by the
Industries in the respective functional areas’, International Seminar on
Recent trends in Global business order – Impact in Asia, Vivekananda
Institute of Information & management Studies, Tiruchengode, 30th
and 31st Jan 2009

7. Raveendran, N 2010, ‘Enterprise Resource Planning [ERP], an

important enabler for Supply Chain Management [SCM]’, 5th
International Conference on Logistics & Supply Chain Management
[ILSCM], PSG Institute of Management, Coimbatore, 3rd - 5th August
2010