Abstract:

Information technologies and information systems play an increasingly

important role in gaining and sustaining competitive edge for enterprises. A
large quantity of Chinese enterprises endeavored to establish or upgrade
their information systems. However, the failure rate of such projects
remains high in China. There have been a large number of analyses of
critical factors of information system projects in the literature, and this
paper attempts to categorize the critical failure factors mentioned in the
literature and to do a questionnaire survey accordingly. The survey is
conducted in Zhejiang Province of China, to understand which failure
factors are perceived as the most influential by the respondents.

Published in: Proceedings of ICSSSM '05. 2005 International Conference

on Services Systems and Services Management, 2005.
Date of Conference: 13-15 June 2005
Date Added to IEEE Xplore: 29 August 2005
Print ISBN:0-7803-8971-9
ISSN Information:
INSPEC Accession Number: 8573199
DOI: 10.1109/ICSSSM.2005.1500108
Publisher: IEEE
Conference Location: Chongquing, China

SECTION I.

INTRODUCTION
Information system is a suite of software modules that intends to integrate
different functional departments in an organization. It aims to improve the
cooperation between the departments from planning, manufacturing to
customer service, and finally to achieve the business goals. The market of
various corporate information systems has grown tremendously since
1990's. Its penetration to the market sectors ranges from multi-national
corporations (MNCs) to small and medium sized enterprises (SMEs), from
private sectors to public orzanizations.

However, the implementation process of information systems is not only

complex, but also organizationally disruptive and resource intensive [1].
Many implementation projects achieve only partial success and the failure
rate remains high [2]. The causes of failure are multi-faceted which can be
attributed to inadequate planning at both business and project levels,
incompetent project management, minimum support from the corporate
management, and etc. The complexity in undertaking corporate
information system implementation has attracted much attention both
from academic researchers and industrial practitioners.

In this paper, the author attempted to discover the underlying critical

failure factors of corporate information system projects. A questionnaire
survey of Chinese firms was conducted and analyzed.

SECTION II.

LITERATURE REVIEW

Information systems are complicated in nature, and numerous papers have

been published to discuss a variety of issues involved with information
systems. From the viewpoint of project management, the failure or success
of an information system (IS) is determined by the implementation
process, rather than by its combination of software modules. Thus, it is
meaningful to analyze the process of information system projects instead of
the systems per se.

Kirchmer [3] defined the implementation as “the process necessary to

adopt, install and effectively utilize the system in the business environment
of a user organization”. From the vendors/consultant's point of view, the
implementation is often used as a term to describe a well-defined project
spanning from the choice of the systems through the configuration and the
training until going live. However, to a user organization, the concept is
more than this Implementation means a continuous life cycle where the
organizational process supported by the corporate information systems is
gradually aligned with the business objectives [4].

Implementation success deals with the issues of how to succeed through an

information system implementation. It covers aspects such as
success/failure factors and risk management. For example, Brown and
Vessey [5] conducted a research to identify the variables that appeared to
be critical to successful implementation. Southwick and Sawyer [6]
reviewed the usage of critical social theory in information system research
and developed a critique through comparison of existing usage of theory
with authors' empirical research. Dong [7] proposed a conceptual model
that explored the impacts of top management on enterprise systems
implementation effectiveness. Kawalek and Wood-Harper [8] examined the
issue of user participation through a case study in a multinational project of
enterprise system implementation.

In the literature, a large amount papers are concerned with enterprise.

resource planning (ERP) systems since ERP systems play a critical role in
modern enterprises. For example, Bingi et at. discussed the critical issues
affecting an ERP implementation process [9]. Bunker [10] analyzed the
ERP contextual issues that need to be addressed to facilitate successful
transfer of the system to different organizational contexts. Sarker and Lee
[11] used a case study to test the roles of three key social enablers in ERP
implementation: strong and committed leadership, open and honest
communication and a balanced and empowered implementation team.
Stewart et al described a research program being undertaken to identify the
variables that inhibited an ERP implementation [12]. Kumar et at
investigated the critical management issues in ERP implementation
projects, such as the selection of ERP vendor, project manager,
implementation partners, and constitution of project team and training
[13].

For all these papers concerned with information systems, it is critical as

how to identify one information system as a success or failure. It can be
summarized from the literature that there are normally two varied view on
information system failures. First, the total failure refers to an initiative
never implemented or in which a new system is implemented but
immediately abandoned. Such an outcome can be defined relatively
objectively, A second possible outcome is the partial failure of an initiative
in which major goals are unattained or in which there are significant
undesirable outcomes. In some cases, where only a sub-set of
initially-stated objectives have been achieved, the notion of partial failure
may be relatively straightforward. Another relatively clear type of partial
failure that particularly seems to affect developing countries is the
sustainability failure of an information system that succeeds initially but
then fails after a year or so. Yet other partial failures may be more difficult
to identify because identification grapples with the subjectivity of failure.

Though it is a hard task to define information system failure. many

researchers attempted to give a rational definition. For example, Lyytinen
and Hirschheim define four major notions or categories of IS failures as
follows [14]:

1. Correspondence Failure; When the systems design objectives are not

met, the information system is considered a failure. It is generally
believed that design goals and requirements can be specified clearly
in advance, and that their achievements can be accurately measured.
Performance measures mainly based on cost-benefit analysis are
employed for managerial control over the systems implementation.
 However, correspondence failure tends not to recognize that users
may not necessarily accept systems that meet design objectives and
specifications.
2. Process Failure: A process failure occurs when an IS cannot be
developed within an allocated budget, and/or time schedule. There
are two likely outcomes of process failure. Firstly, an outright failure
occurs when no workable system can be produced. Secondly, a more
common outcome is when an information system is developed with
massive overspending in both cost and time, thus negating the global
benefits of the system. This is a project level failure attributed to
unsatisfactory project management performance.
3. Interaction Failure: The level of end-user usage of the information
system is suggested as a surrogate in IS performance measurement.
Some related measures of IS usage include user attitudes and user
satisfaction, the amount of data transferred or the frequency of use.
However, heavy usage does not necessarily mean high user
satisfaction and improved task performance, and there is little
empirical evidence supporting such a claim. Heavy systems usage
might be a result of legal compulsion, persuasion, or that there are
simply no other alternatives besides using the system.
4. Expectation Failure: The notion of expectation failure views IS failure
as the inability of a system to meet its stakeholders' requirements,
expectations, or values. Failure, therefore, does not only involve the
system's inability to meet design (technical) specifications”
Expectation failure is, perceived as the difference between the actual
and desired situation for the members of a particular stakeholder
group. Unlike the other three notions, IS failure is considered
holistically in this case, as the views of different stakeholders are
taken into account.

Flowers [15] defines an information system as a failure if any of these

following situations occurs: (1) when the system as a whole does not
operate as expected and its overall performance is sub-optimal; (2) if, on
implementation, it does not perform as originally intended or if it is so
user-hostile that it is rejected by users and underutilized; (3) if, the cost of
the development exceeds any benefits the system may bring throughout its
useful life; or (4) due to problems with the complexity of the system, or the
management of the project, the information system development is
abandoned before it is completed.

SECTION III.

THE QUESTIONNAIRE SURVEY

A survey is conducted in Zhejiang, a coastal and prosperous province of

China, in order to understand which failure factors are perceived as the
most influential by the respondents. Most respondents are chief
information officers or information system project managers at local firms.
Each respondent completes the survey according to her or his own
experience in failed information system projects.

In this survey, a “failed project” refers to an information system project that

demonstrates one or more of the following characteristics:

1. It has overrun planned project schedule by 30% or more;

2. It has overrun planned project budget by 30% or more;
3. It has been cancelled or deferred due to its inability to demonstrate or
deliver the planned benefits;
4. It faces extreme criticism and rejections from the user community for
its inability to meet their needs;
5. Though still in operation, the corporate management has considered
it a “failure” due to its inability to demonstrate or deliver the planned
benefits.

Flowers [15] used large systems failure cases to illustrate the performance
of software system projects as a function of managing a range of critical
failure factors (CFFs) as in: organizational, financial, technical, human, and
political factors, and the interaction among these factors. The failure factors
can be broadly grouped in the organizational and managerial contexts and
the actual conduct of an IS development project. Possible failure factors in
the organizational and managerial contexts include hostile company
culture, improper reporting structure, political pressures, vested interests,
influences, and inappropriate, level of management commitment. Key
influencing factors in the conduct of project itself include pre-occupation
with technology in project planning, technology focus over human
relations, complexity under-estimated, poor stakeholder management. poor
consultation design by committee, technical fix for a management problem,
poor competence of project management and project team, and poor
selection decisions.

In 1997, a survey questionnaire focusing on IT project management issues

was sent to Canada's leading 1,450 public and private sector organizations.
KPMG's 1997 Survey of Unsuccessful Information Technology Projects
revealed that the three most common reasons for project failure are [16]:
(1) Poor project planning. Specifically, inadequate risk management and a
weak project plan. Risk management becomes more important as the
organization gets bigger, so larger organizations need to pay more attention
to this area. (2) A weak business case. The need for the system should be
justified in ways that relate directly to the organization's business needs. (3)
Lack of top management involvement and support. This often dooms the
project to failure before it starts. Securing buy-in from the top, often by a
strong business case backed up with a realistic project plan, is an essential
step.

There are more discussions on possible critical factors in the literature. This
paper attempts to categorize the critical failure factors mentioned in the
current literature and to do a questionnaire survey accordingly. Many
failure cases indicate that technological factors are not the only key factors
in information system projects, organizational and managerial factors play
no less or more important roles in the project's success. Therefore, the
questionnaire tries to cover all categories of influencing factors. Based on
our literature review and classification, the questionnaire used in our
survey attempts to cover the following topics:
1) Align the system implementation with business
plan

A business plan can outline the proposed strategic benefits, resources.

costs, risks and timeline. Business objectives should be clarified so they are
specific and operational and to indicate the general directions of the
implementation projects.

2) Project plan/schedule

Project plan and schedule as regarded as the detailed specifications of the

individual action steps required for accomplishing the project's goals. The
information system implementation strategy/approach should also be
decided during the planning phase.

3) Top management commitment and support

Top management commitment in project is the willingness to provide the

necessary resources and authority to ensure project successes. It must be
extended to the full implementation process. The roles of top management
in information system implementations include developing an
understanding of the capabilities and limitations of the system and with
strong commitment to a successful system implementation. A steering
committee consisting of senior management from different departments is
usually established to enable top management to directly monitor the
implementation process.

4) Business process reengineering

One of the problems associated with the implementation is the
incompatibility of the features with the organization's business processes.
To achieve the greatest benefits provided processes, it is inevitable that
business processes are molded to fit the new system. Although the
supplementary redesign of business processes promises the high ROI
(return on investment), it also increases the level of complexity, risks and
cost.

5) Vendor/consultant experience and skills

Many organizations use consultants to facilitate the implementation

process. Consultants and vendors have the experience in specific industries
and the comprehensive domain knowledge about certain application
modules, and they are able to determine which suite will work best for a
given company.

6) Retain experienced IT/IS professionals

Retaining team members with knowledge of the business processes and

understanding of IT/IS is critical to the organization throughout the
system's life cycle.

7) User training and participant

Management information systems are complex systems and demand

rigorous training. Training should address all aspects of the system and be
based on knowledge transfer whenever consultants. are involved. Although
many companies use consultants to help during the implementation
process, it is important that knowledge is transferred from the consultant to
internal employees.
Totally, 200 questionnaires are delivered to a variety of information project
managers and participants. 126 questionnaires are returned and 87 among
them are valid. The low rate of return and validation partially is due to the
length and the technological complication of the questionnaire.

SECTION IV.

THE ANALYSIS

The failure factors are categorized into nine categories, as listed in Table I.
Each category has five to nine failure factors. An acronym is used to denote
a category in the following text.

Table I presents the relative mean scores under the nine different
categories of failure factors. It is noticed that corporate culture and
corporate management have the highest scores, which are indicative of
their relative significance in the state-of-the-art of IS projects in Zhejiang
Province.

Table I. Ranking of Failure Factor Categories

Table II. Categories and Top Failure Factors
Though Zhejiang ranks high in provincial GDP values and is also a top
region for foreign trade in China, its economy is dominated by
private-owned companies, and most private-owned companies are small
and middle enterprises (SMEs). The companies covered in the survey is
consistent with this situation. Most SMEs in Zhejiang have a life shorter
than 15 years, and their corporate culture and corporate management are
not mature yet. Therefore, it is not surprising that most respondents deem
corporate culture and corporate management as the most influential
categories as for information system failures. For each category, the top
failure factor within that category is listed in Table II.

Besides, the category of IT professionals also ranks high in Table I. This is

an interesting discovery. Yet at a further thought, it accords with the
situation of higher education in Zhejiang Province. Many statistics revealed
that Zhejiang has a poor higher education rate lower than average rate of
China. This could be the reason why many managers ranked IT
professionals as a key category of failure factors.

The top ten individual critical failure factors are listed in Table III. It is
noticed that none is pure technical problems in top five CFFs, and there is
only one technical factor (no. 7) in top ten CFFs.

Table III. Critical Failure Factors

A more close analysis reveals that weak definition of requirements and
scope is the top one critical failure factor, reactiveness in problem solving
and lack of business process reengineering are the number two and number
three factors. And among the top nine critical failure factors, five factors
belong to categories of corporate culture or corporate management. This is
consistent with the analysis of average scores of failure factor categories.

Though Zhejiang is a fast developing province, the survey indicates

managerial issues still play critical factors in the implementation of
information systems in Chinese enterprises. Closer attentions to these
critical factors and gradual maturity of management shall help to reduce
the overwhelming failure rate of information system projects.

SECTION V.

CONCLUSIONS

Corporate information systems are believed to be helpful to establish firms'

competence. However, the failure rate of such information systems remains
high in China. A survey was done in Zhejiang Province to understand the
critical failure factors, and the results are compared with another
Singaporean survey. The comparison and analysis show that at the current
stage Chinese managers pay much attention to managerial issues in
implementing information systems due to immature corporate culture and
management.