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ERP systems transition in small manufacturing companies: the tale of two

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Article in International Journal of Business Information Systems · January 2022

DOI: 10.1504/IJBIS.2022.124932

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Int. J. Business Information Systems, Vol. 40, No. 4, 2022 441

ERP systems transition in small manufacturing

companies: the tale of two countries

Mohammad Daneshvar Kakhki*

Business Information Systems Department,
Haworth College of Business,
Western Michigan University,
1903 W Michigan Ave., Kalamazoo, MI 49008, USA
Email: mohammad.daneshvarkakhki@wmich.edu
*Corresponding author

Vidyaranya B. Gargeya
Department of Information Systems and Supply Chain Management,
Joseph M. Bryan School of Business and Economics,
479, Bryan Building The University of North Carolina at Greensboro,
Greensboro, NC 27412 USA
Email: vbgargey@uncg.edu

Reza Mousavi
Business Information Systems Department,
Haworth College of Business,
Western Michigan University,
1903 W Michigan Ave., Kalamazoo, MI 49008, USA
Email: reza.mousavi@wmich.edu

Abstract: An increasing number of small and medium-sized enterprises

(SMEs) are modernising their legacy systems by replacing them with enterprise
resource planning (ERP) solutions. This transition process is challenging and
prone to failure. SMEs, especially those in developing countries are more likely
to suffer from these challenges due to their limited access to financial and
human resources. Therefore, this paper investigates the ERP transition process
in SMEs of developed and developing countries to address challenges and
success factors. This paper uses two case studies to gain a deep understanding
of ERP transition. The research shows that the fit between ERP and business
processes plays a critical role in the success of the transition project. Also,
SMEs in developing countries, compared to developed countries, face more
challenges in the transition process due to a lower level of prior experience and
limited availability of ERP systems and consultants.
Keywords: ERP transition; small and medium-sized enterprises; SMEs; ERP
implementation; ERP retirement; developed countries; developing countries.
Reference to this paper should be made as follows: Kakhki, M.D.,
Gargeya, V.B. and Mousavi, R. (2022) ‘ERP systems transition in small
manufacturing companies: the tale of two countries’, Int. J. Business
Information Systems, Vol. 40, No. 4, pp.441–463.

Copyright © 2022 Inderscience Enterprises Ltd.

442 M.D. Kakhki et al.

Biographical notes: Mohammad Daneshvar Kakhki is an Associate Professor

of Information Systems at the Western Michigan University. His research is on
the business value of information systems for supply chains. He also studies
information systems strategies for complex and dynamic organisations. He has
published in Information & Management, Communications of the Association
for Information Systems, International Journal of Production Research,
Journal of Electronic Commerce Research, and International Journal of
Business Analytics. He has nine years of professional experience, where he
practiced many positions, mainly in IT, logistics, and SCM in various
industries.

Vidyaranya B. Gargeya is a Professor in the Department of Information

Systems and Supply Chain Management in Joseph M. Bryan School of
Business and Economics at The University of North Carolina at Greensboro.
He has published articles in journals such as Journal of Operations
Management, International Journal of Production Research, Omega,
International Journal of Quality and Reliability Management, Case Research
Journal, Technovation, Transportation Research Part E, Business Process
Management Journal, The Journal of the Textile Institute, Clothing and
Textiles Research Journal, and Decision Support Systems. He co-authored a
book titled Customer Relationship Management: A Global Perspective. He
has received, for his contributions to teaching, numerous awards including
The University of North Carolina Board of Governors Award for Excellence in
Teaching, in 2008, UNCG Alumni Teaching Excellence Award, in 2006, and
the Wick Skinner Award for Teaching Innovation from the Production and
Operations Management Society, in 2003.

Reza Mousavi is an Assistant Professor of Computer Information Systems at

the Western Michigan University, USA. He obtained his PhD in Business
Computer Information Systems from the University of North Texas, USA. He
also received a degree of MBA from the Sharif University of Technology,
Iran and Bachelor of Computer Sciences from University of Isfahan, Iran. His
research interests are social media, e-commerce, information assurance and
social media analytics. His work has appeared in Decision Support Systems
journal and Journal of Computer Information Systems as well as International
Conference on Information Systems and Americas Conference on Information
Systems.

1 Introduction

Enterprise resource planning (ERP) systems link enterprise solutions to reduce the
fragmentation of data across different business departments and link islands of
information within the organisation (Kakhki and Gargeya, 2019). Due to the important
role that ERP systems play in business, there is considerable attention given to the topic
in academic and practitioner journals (Haddara and Zach, 2011; Huang and Yasuda,
2016; Ranjan et al., 2016). However, and despite the vast body of research on ERP, the
literature needs further development. The focus of the prior body of research has mainly
been on large companies in developed countries, and there are limited published works
related to small and medium-sized enterprises (SMEs), especially SMEs in developing
countries (Haddara and Zach, 2011; Muscatello et al., 2003). Furthermore, the body of
literature is more focused on the implementation quality of ERP systems (Kurnia et al.,
 ERP systems transition in small manufacturing companies 443

2019; Vargas and Comuzzi, 2019) and factors that affect SMEs to switch to a different
ERP solution (Huang, 2018). Little attention has been given to the retirement of old ERP
systems and the transition process to new ERP systems (Haddara and Zach, 2011). To
address these gaps, this research discusses the transition process from old ERP systems to
new ERP systems in SMEs.
Implementation of ERP systems in SMEs is an important research topic for
two reasons. First, SMEs play a critical role in the economy and ERP systems are
enablers of performance of SMEs. SMEs contribute to economic development through
innovation, development of entrepreneurship, and enhancement of technological
infrastructure (Kongolo, 2010; Wynarczyk et al., 2013). It is estimated that SMEs
account for 52% of the private sector value-added globally (ACCA, 2010). ERP systems
play an important role in the value-adding activities of SMEs (Hsu, 2013; Hustad et al.,
2019; Jain, 2016), and ERP upgrade projects have a huge impact on the success of SMEs
(Barth and Koch, 2019).
Second, and despite the importance of ERP systems for SMEs, ERP implementation
projects are challenging. Implementation of ERP systems in SMEs faces different types
of challenges compared to larger firms (Harris, 2017). Prior research shows that human
and financial resources play an important role in the successful implementation of ERP
systems (Gupta et al., 2018). However, SMEs do not have all the required resources,
competencies, and skills for implementing initiatives related to information technology
(IT) (Nair and Chellasamy, 2017; Snider et al., 2009). Also, SMEs are more susceptible
to volatile changes in the economy, unlike large firms. This susceptibility results in
constantly changing goals, business processes, and operations (Nicholas et al., 2011),
which may lead to a misfit between ERP and organisational needs (van Beijsterveld and
van Groenendaal, 2016).
The fact that SMEs play a crucial role in the economy (Kongolo, 2010) and ERP’s are
important for the performance of SMEs (Cotteleer and Bendoly, 2006), justifies the
importance of research on ERP systems in SMEs. Despite the importance, two gaps are
emerging in the literature due to recent changes in the business environment.
The first gap is related to the literature on the retirement of legacy systems and their
replacement with ERP systems. In the initial years of the existence of ERP systems that is
in the 1990s, implementation of ERP systems started within large firms as smaller
organisations could not bear the considerable cost of implementation (Snider et al.,
2009). Therefore, early research on ERP systems and firms was focused on large
companies (Ali and Miller, 2017). In the following years, ERP developers and
consultants focused on the demand of SMEs and developed specific products for this
market (Muscatello et al., 2003). As such, the beginning of the 21 century is marked with
an increase in the implementation of ERP systems by SMEs. Many of these implemented
ERP systems, however, are becoming incompetent or ineffective due to the new
technological advances and the changing business environment. Therefore, SMEs will
witness an increasing trend towards the replacement of current ERP systems in the
coming years (Gartner, 2015). The literature supports the early wave of ERP
implementation in SMEs by addressing ERP selection, implementation, use and
maintenance and evolution (e.g., Ahmad and Cuenca, 2013; Leyh, 2016). However,
despite the trend in business, there is no published paper on the retirement of ERP
systems in SMEs and the transition to new ERP systems (Haddara and Zach, 2011;
Huang and Yasuda, 2016).
444 M.D. Kakhki et al.

The second gap is related to the literature on the impact that different business
environments have on ERP implementation in SMEs. While the main market for
enterprise solutions in SMEs is in developed countries, developing countries will
experience a considerable rate of growth in the enterprise solution expenditure in the next
few years (Gartner, 2013, 2015). However, implementation of ERP systems in SMEs of
developing countries is prone to a higher rate of failure (Gartner, 2013) due to economic,
cultural, and infrastructural issues, as well as constant environmental fluctuations (Huang
and Yasuda, 2016; Moohebat et al., 2010). Besides the issues and challenges, ERP
implementation in developing countries is different because of the profound impact of
national value and corporate culture (Albar and Hoque, 2017). Despite the difference
between ERP implementation in developed and developing countries (Alhirz and Sajeev,
2015; Moohebat et al., 2010; Ruivo et al., 2016), the literature survey conducted
by the authors shows that there is a gap in comparative studies focused on the
two environments. There are a limited number of studies on the implementation of ERP
systems in developing countries (e.g., Moohebat et al., 2010) and there are even fewer in
the context of SMEs in developing countries. Also, the literature survey shows that there
is limited research on the transition process in the ERP life cycle in SMEs (Barth and
Koch, 2019; Mohammed and Burhanuddin, 2018).
To address the two gaps, the authors analyse the retirement of legacy systems and
selection and implementation of new ERP systems in SMEs of developed and developing
countries through analysing and reporting on two case studies about ERP retirement and
implementation in small manufacturing companies, one in the USA and one in Iran. Both
companies replaced their old ERP with new ERP systems. These two case studies provide
an insight into some aspects of the ERP life cycle in SMEs. Since developed and
developing countries are normally identified based on the level of human capital
development and industrialisation (United Nations, 2015), studying the two SMEs
enables understating of the impact of environmental factors in the ERP transition process.

2 Background

While there are published studies on the ‘selection’ and ‘implementation’ stages of life
cycles in SMEs of developed and developing countries (discussed in the following
sections), the authors did not find published research related to the retirement of ERP
systems in SMEs. The ERP life cycle starts with the selection of ERP systems and
continues with the acquisition, implementation, use and maintenance, and finally,
retirement (Haddara and Zach, 2011; Law et al., 2010). Accordingly, scholarly works
could be categorised based on their focus on time intervals in the ERP life cycle
including adoption decision, acquisition, implementation, use and maintenance, evolution
and retirement.
The literature that we analysed is focused on one or a combination of different stages
in the ERP life cycle. For instance, and in the implementation stage, several studies
investigated the critical success factors of ERP implementations in SMEs and large
enterprises (LEs) (e.g., Nagpal et al., 2018; Sweis et al., 2018). Also, some authors
focused on the effect of regional and environmental factors on ERP implementation
(Chatzoglou et al., 2016; Kiran and Reddy, 2019), and some scholars studied the ERP
implementation in the context of a specific region or country. The majority of such
 ERP systems transition in small manufacturing companies 445

studies are focused on developed countries (e.g., Zach et al., 2014) and a handful of them
pertained to developing countries (e.g., Ahmed et al., 2017; Tobie et al., 2016).
Although to the best of our knowledge, no studies investigated ERP transitions in
SMEs, some studies addressed the timing and reasons for ERP retirement in SMEs and
LEs (e.g., Haddara and Zach, 2011; Harris, 2017). A small number of recent studies
focused on the ERP life cycle in SMEs (Tomar, 2017). The findings of these studies
provide a guide for SMEs to make the right decision to switch to another ERP at the right
time. However, the factors that affect the process and success of this transition are
uncovered.
The process of ERP selection in SMEs plays a critical role in the success of ERP
throughout its life cycles (Kamhawi and Gunasekaran, 2009; Ramayah et al., 2007; Roy
and Sangle, 2017). The goal of ERP selection is to overcome competition pressure,
simplify business processes, increase process integration, enhance operations, reduce
costs, eliminate data redundancy, and improve internal and external communication
(Buonanno et al., 2005; Laukkanen et al., 2005). To achieve these goals, SMEs consider
different criteria for selecting ERPs including ease of implementation, usefulness,
functionality, cost, implementation timeline, data security risks and vendor qualifications
(Argyropoulou et al., 2008; Czekster et al., 2019; Faasen et al., 2013). There are other
factors in ERP selection decision including customers’ recommendation, trust in the ERP
vendor, enforcement from larger partners in the supply chain, and overall user experience
(Faasen et al., 2013; Laukkanen et al., 2005; Sukumaran, 2016). Also, the direct
involvement of the entrepreneur is an important factor in ERP selection in SMEs
(Morabito et al., 2005). ERP selection in SMEs has many similarities with larger
companies. However, there are slight differences in the goals and ranking of selection
factors. For instance, the interests of the owner of SMEs play a critical role in ERP
selection (Morabito et al., 2005). Also, the role of ERP systems in competitive advantage
and facilitation of e-commerce is of lower importance for SMEs compared to larger
companies (Laukkanen et al., 2005). Despite the contingency element of ERP selection
and the important role that environmental factors play in ERP selection (Chen et al.,
2009), the literature does not address the differences in ERP selection related to
developed and developing countries.
The implementation stage of the ERP life cycle is the most complicated part for
organisations and demands careful attention in attaining success and avoiding failure.
The implementation stage starts with the identification of project goals and the
communication of these goals to the organisation (Chien et al., 2007). Clear vision and
management knowledge about long-term outcomes of the ERP implementation impacts
the success of the project, and ERP consultants can help organisations to adjust their
respective visions and expectations (Adam and O’Doherty, 2000; Hawari and Heeks,
2010). It is important for SMEs to note that ERP packages do not support all the
processes and functions that they (SMEs) currently have, and there might be a need for
add-ons to ERP packages to provide the required support (Griffiths et al., 2013). Quality
of the ERP systems and qualifications of ERP vendors are critical for the success of ERP
implementation (Upadhyay et al., 2011). Moreover, a successful implementation process
requires external consultants who have contextual knowledge from the nature of the
specific business (Koh et al., 2009; Newman and Zhao, 2008; Snider et al., 2009).
Furthermore, the ERP implementation project outcome is highly dependent on the
participation and support of a limited group of knowledgeable employees who are fairly
446 M.D. Kakhki et al.

familiar with products, processes, customers and suppliers (Samuel and Kumar, 2014).
Also, organisational readiness is required for the implementation project, and it is
important to keep the required organisational change at a manageable level (Federici,
2009; Snider et al., 2009). Besides all these success factors, trained employees are
required for the fruitful implementation of ERP systems (Koh et al., 2009). Senior-level
executives need to be knowledgeable about the ERP system and have to have a
commitment and provide support throughout the implementation process (Kale et al.,
2010; Newman and Zhao, 2008; Snider et al., 2009).
There are differences between ERP implementations in SMEs and larger companies
as discussed in the literature. The majority of success factors in SMEs, including
management support and user involvement, are similar to larger companies. However,
there are critical factors that form the difference. For instance, SMEs lack the required
organisational knowledge for ERP implementation. Therefore, they rely on consultants
for the implementation process (Doom et al., 2010). Moreover, SMEs lack the required
human resources for ERP implementation and maintenance processes (Gupta et al.,
2018). Therefore, SMEs are looking for alternative flexible ERP systems that can support
their operation (Moeuf et al., 2018). Since these differences exist, a side-by-side
comparison of the two environments is necessary. Therefore, and despite the fact that the
literature has studies on ERP implementation in developed (e.g., Doom et al., 2010;
Griffiths et al., 2013; Zach et al., 2014) and developing countries (e.g., Hawari and
Heeks, 2010; Samuel and Kumar, 2014), an exploratory focus on the differences between
the two business environments is warranted.

3 Research methodology

Based on the literature analysis discussed earlier, the authors argue that the transition
process for ERP systems in SMEs of developed and developing countries is not explored
enough. Therefore, an inductive study on the topic is intuitive. The inductive study can
provide a deep understanding of the topic and set the base for future theoretical studies.
In the inductive approach, researchers start the research by collecting data and try to build
a theory base (Saunders et al., 2009). The inductive research incorporates qualitative
approaches for improved comprehension of the phenomenon of interest in its real-world
context (Amaratunga et al., 2002). In the inductive approach, researchers interpret case
studies and narratives to find patterns and construct theories (Denzin and Lincoln, 2011;
Hatch, 2002).
Besides the above arguments, the selection of the interpretive approach for this study
is justifiable from the emergent perspective. The ERP transition has a complicated nature
and could be studied from an emergent perspective. Markus and Robey (1988, p.6)
discuss that the emergent perspective has three main concepts including the “role of the
computing infrastructure, the interplay of conflicting objectives and preferences, and the
operation of non-rational objectives and choice processes.” The variability of application
in different organisational settings, the hardship of predicting the outcome of ERP
transition, and the impact of ERP systems on an organisation at the micro and macro
level (Muscatello et al., 2003) justify that studying the ERP systems in organisations lies
in the category of emergent perspective. Gallivan and Srite (2005, p.323) discuss that
“researchers who ascribe to the emergent perspective often employ longitudinal studies
 ERP systems transition in small manufacturing companies 447

and researchers usually adopt an interpretive epistemology … and intensive research

methods.”
As such, the authors adopt a longitudinal study that is based on an inductive
approach. Accordingly, the existing research focuses on case studies to identify major
factors that impact the transition process from old legacy systems to new ERP in SMEs,
specifically in developed and developing countries.

3.1 Data collection

This paper is developed based on two cases, one in the USA (developed country) and one
in Iran (developing country) to investigate the transition of ERP in SMEs. There are
different definitions for SMEs across the world. In the USA, SMEs are defined as
companies with less than 500 employees (Hammer, 2010). This number is 100 for Iran
(definition of the Central Bank of Iran). Despite the different definitions, both selected
companies are small manufacturing firms with similar business processes, ownership, and
size, which make them comparable. This similarity facilitates the comparison of
important factors in both countries. Two other important criteria in case selection are the
availability of the data and the researcher’s ability to access the cases (Yin, 1994).
The authors had access to both cases based on their individual relationships with the
senior-level managers in both companies. To enhance our understanding from the
transition process in the selected cases, different data collection methods including
document analysis, observation, and interviews (structured and unstructured) were
employed (Denzin and Lincoln, 2011). Furthermore, the authors conducted face-to-face
and Skype interviews. Also, available related documents including catalogues, technical
specifications, the minutes of meetings, and project charters were collected and reviewed
by researchers.
Table 1 Meetings and observation sessions for both companies

Job position Case Total time (minutes) Description

IT director USA 90 Two formal meetings
Chief executive officer (CFO) USA 90 Two formal meetings
Project consultants USA 60 Formal meeting
Chief executive officer (CEO) USA 900 minutes (nearly Informal interviews with
Chief financial officer (CFO) two full days of employees from different units.
observation during Also, observation of
IT director training sessions project-related meetings. CEO,
Project consultants and planning CFO, IT director and project
meetings) consultant were present
Sales manager throughout all meetings. The
Operations manager rest of the employees were
Users present in meetings partially.
Planning manager Iran 140 Skype interview
CEO Iran 25 Skype interview
Production manager Iran 70 Skype interview
Sales manager Iran 50 Skype interview
Financial manager Iran - Open-ended questionnaire
(e-mail)
448 M.D. Kakhki et al.

Two of the authors participated in meetings, training sessions and workshops related to
pre-implementation, implementation, and post-implementation in developing the case for
the US manufacturer. The authors spent more than 120 hours within that facility
observing and interviewing. The observation started in May 2015 (pre-implementation
meeting) and continued through to February 2016 (post-implementation meeting).
Regarding the Iranian company, the authors had six online meetings and one e-mail
interview. The interviews started in December 2016 and continued till January 2017. One
of the authors whose native language is Persian conducted the interviews. Also, access to
all the minutes of the ERP related meetings was granted to the authors. Also, the authors
had the opportunity to go through some of the catalogues, training documents, and
specification documents for the old ERP system of the company as well as the new ERP
system. For all the meetings and observations, conversations were audio-recorded and
notes were taken. Researchers documented the proceedings within 24 hours after each
meeting. The list of meetings and observation sessions for each company is provided in
Table 1.

3.2 Data analysis

The authors created a list of coding categories based on different dimensions of ERP
systems in the literature and coded the interview text. For the meetings with
two interviewers present, the coding was reviewed by the second author to make sure that
both agreed on the issue. The authors coded all interviews and observation reports
following Landis and Koch (1977) to ensure reliable interpretation. This research
employed trustworthiness criteria, namely dependability and triangulation developed by
Morrow (2005) to ensure that the developed knowledge is rigorous. To achieve the
desired rigor, this research collected data from different players in the transition process
by employing different data collection methods.

4 Case settings and empirical data

This paper goes through each case starting with a brief introduction of the company and
continues by reporting the systems before and after the ERP implementation and during
the transition process. The names of the companies, individuals, and the ERP packages
are changed to maintain the privacy, and the revealed information is distorted vigilantly
to ensure that it will not affect the presentation and findings.

4.1 US company, STEELCO

STEELCO (pseudonym) is a family-owned and managed small manufacturing firm in the
south-eastern US with more than a hundred years of experience in the machine tool
industry. STEELCO provides after-sales service and in upgrading the machines that are
already working in the industry. The company is also active in design, engineering, and
contract manufacturing based on its customer needs and works with a variety of different
industries. All the departments and manufacturing facilities and all the 27 employees are
at a single location.
 ERP systems transition in small manufacturing companies 449

4.1.1 Pre-implementation
STEELCO implemented its first ERP (STERP1) system in 1990. The dynamic nature of
its business triggered the constant change in the implemented ERP system. With the
customised changes in the ERP undertaken by the firm in the 1990s and 2000s, the
vendor did not provide further support for the upgrade of the STERP1. Also, the cost of
support for the ERP system increased. In addition, the old system was reliant on a
mainframe system with a high maintenance cost and low performance. Further, the IT
director who applied all the customisation to STERP1 was about to retire, and the
company worried about the future of the system. Therefore, STEELCO purchased a new
ERP system (STERP2). Since the entire STERP2 package was beyond the budget,
STEELCO started with an abridged version of the software and applied it to one line of
its business. The company soon realised that the system is not a good fit for their entire
business. Thus, the firm had to continue with both STERP1 and STERP2 running
simultaneously.
The cost of parallel operation for both systems as well as the poor operational
performance resulted from the fragmented data, forced STEELCO to search for a new
ERP. The company started evaluating different ERP vendors and purchased a new ERP
(STERP3) after the vendor demonstrated that the system is suitable for all the business
requirements of STEELCO. Following the ERP selection, the IT director and the chief
financial officer (CFO) were appointed as project team members for the transition
process. Also, the external consultancy team, with several years of experience with
STERP3, worked directly with this team.

4.1.2 Implementation and ‘go live’

Once STEELCO finalised its decision for the transition to STERP3, the company planned
to go through the ‘big bang’ strategy for the ‘go live’ process. To facilitate the transition,
the IT manager developed a ‘sandbox’ environment to run the new system with real data
for training purposes. The company purchased a data conversion application provided by
the ERP vendor to convert the data from old systems to STERP3. Due to the huge
volume of data in the old systems and considering the hardship of converting the
fragmented data, at the beginning of the project, only limited data lines (recent years)
were imported to STERP3. Later, the rest of the data were converted into the new system.
The project consultants had several training sessions for employees and made them
familiar with the new system.

4.1.3 Post-implementation
The company had several post-implementation meetings with the users and consultants to
analyse the situation and plan. During the observation in this stage, the authors noticed
that all employees were working with the system and had mastered their respective tasks.
Also, based on the consultants’ comments, the implementation project in STEELCO is
more progressive compared to other companies with which the consultants had worked in
the past.
450 M.D. Kakhki et al.

4.2 Iranian company, COOLCO

COOLCO is a small manufacturer of industrial coolers and refrigerators with
73 employees and 50 years of activity that is managed by the second generation of the
owner’s family. COOLCO main lines of business are manufacturing of industrial
equipment, installation and after-sales services, and contract manufacturing. The firm
is composed of three major operational units including design and R&D, sales and
marketing, and production and operations. Each of these operational units is managed by
one of the owners. The company did not have an IT department and related personnel and
outsourced its IT requirements.

4.2.1 Pre-implementation
COOLCO started using ERP systems by the implementation of an enterprise package,
COERP1 that included finance, human capital, and production and operations modules.
The package was initially developed for answering the financial needs of the
organisation. Then, two modules were added to the package. The production and
operation modules were not designed for the make-to-order process, and the company
was not successful in adopting the system for its production planning and control.
Therefore, its planning department developed software for production planning and
control using Microsoft Access. Also, the sales department implemented a customer
relationship management (CRM) package to manage customer interaction and internal
workflow. Also, COOLCO purchased a time clock and used related software for tracking
the entrance and exit of employees. The communication between COERP1 and the
external timesheet systems was performed manually.
In 2008, the employee who developed the Microsoft Access system left the company.
A year later, the vendor of the CRM system went bankrupt and stopped its support
services. The discussed information systems in the company were not connected, and the
operations were fragmented into several different information silos. In 2012, the planning
manager at COOLCO started searching for available options for ERP and convinced top
managers to purchase a new ERP system. COOLCO came across a few local and global
vendors. Considering the specific situation of the country dealing with the sanctions from
the United Nations’ (UN), purchasing from international vendors was removed from the
list of available decisions, and COOLCO focused on available options from internal
vendors. After several meetings with vendors, the planning manager decided to use
COERP2, which had demonstrated the capability of handling the required operations at
COOLCO.
The managers/owners decided to go through the transition process and use COERP2.
The company had to keep the CRM workflow module to manage its sales operation but
decided to move the entire customer operations into the new ERP system. A project
team composed of planning manager (appointed as project manager), sales manager, and
financial manager started working on the transition process. None of the team members
had a degree or experience in IT-related degrees. The vendor worked closely with the
team as an implementation consultant.
 ERP systems transition in small manufacturing companies 451

4.2.2 Implementation and ‘go live’

COOLCO decided to use parallel adoption for COERP2 and ‘phased rollout’ for the rest
of the systems. For training the employees, a copy of COERP2 with sample data was
installed on a server. Extensive training sessions were held for the project team members.
During these sessions, the project team realised that the use of real data could improve
the training experience outcome. Therefore, the consultants started the data conversion
process. The integration and loading of the data into the system became an extremely
complicated task and took an entire month. The poor quality of data and lack of
standardisation in the prior databases resulted in heavy manual data cleansing. The final
converted data included five years of operational data.
The consultants had limited experience in ERP implementation. Therefore, answering
the questions from employees about how to use the system was delayed in many cases.
Often, there was a need for repeated training sessions and many small changes were
made in business processes so that COERP2 fit business processes.
Table 2 ERP systems and SMEs, summary of case studies

Phase/factors The Iranian case study (COOLCO) The US case study (STEELCO)
Selection and acquisition
Project goal • Limited change in business processes • No change in business processes
• Support for the Persian language • Within budget limit
• Support production planning and
MRP for made to order
Important • Limited available vendors • Long-term evaluation and analysis
factors
• No real test based on the company’s • Previous experience and
data familiarity with ERP interface and
environment
• Selection based on vendor’s
presentation
• The vendor is a small company with a
risk of going out of business and
discontinued support
• The limited experience of
vendor/consultants
• Dedicated ERP vendor who looks
forward to penetrating the market by
improving its ERP
Results Questionable success: Success:
• The ERP forced some processes to • Clear definition of goals
change
• Successful vendor selection
• COERP3 supports the Persian
language
• The ERP supports processes as it was
intended
452 M.D. Kakhki et al.

Table 2 ERP systems and SMEs, summary of case studies (continued)

Phase/factors The Iranian case study (COOLCO) The US case study (STEELCO)
Implementation
Project goal • Within project scope • Meet project plan (cost, time,
scope)
• Support for business processes
• Convert all the data to the new
system
• Maintain data quality
• Convert the entire database
Important • Highly experienced vendor • Limited experience of vendors
factors
• Highly experienced consultants • Limited internal IT capabilities
• Employees’ resistance defeated • The hardship of data conversion
management support (lack of business knowledge of the
consultants and IT expertise of the
• Project manager with required
firm)
authorities
• Poor assembly of the project team
• Use of commercially available data
conversion tool • The poor design and
documentation of legacy systems
• IT director with a good knowledge of
made data conversion hard
previous ERP systems, business
processes and new ERP systems • Limited training documents
• Direct participation of top • Poor management support and
managers/owners lack of participation and
involvement of top management
Results Success: Failure:
• The project finished on time and • The project time, cost, and
budget limits resource baselines were not met
• The implementation covers the • The entire database was not
intended business processes converted
Retirement
Project goal • Reduce costs • Stop using the old legacy systems
• Improve business continuity • Enhance business continuity
Important • Cost of hardware • No support from the vendor side
factors
• Discontinued support for current • The exit of employees developed
systems shadow systems
• Retirement of employee • Fragmented databases
• Fragmented databases • Inability to expand
• Poor functionality
Results Success: Failure:
• The legacy systems are in ‘view only’ • The old legacy systems are still in
mode and will phase out based in a use in ‘view only’ mode,
timely schedule especially for data that is older
than five years
 ERP systems transition in small manufacturing companies 453

4.2.3 Post-implementation
The implementation project came to an end in 2014. Many of the initial goals of the
project were not met. For example, just a small part of the data was converted and
imported to the new system. Many pieces of customer data, product data, and old
orders were eliminated. In early 2015, the company had post-implementation meetings
discussing the issues in their system. The project team had to continue working on
resolving data quality. Also, some employees failed to use the system appropriately,
which caused new issues related to data quality. Therefore, training sessions with each
user were planned. As of the time of documenting the case, the system is being used
and answers the needs of COOLCO, but as the project manager mentioned, “the
implementation process was a nightmare, and we were criticized by owners for poor
planning and long implementation period.” A summary of the two cases is provided in
Table 2.

5 Research synthesis: findings from analyses of cases

This paper followed the steps in the inductive analysis to analyse the collected data
(Hatch, 2002). The authors went through the transcripts and reports and identified salient
areas with a code. Then, the authors reviewed the data and the codes and searched for
themes and patterns. Several themes emerged as the authors reviewed the transcripts and
field notes including ‘use and maintenance challenges’, ‘prior knowledge and ability to
support’, ‘fit between ERP and operations’, and ‘leaders’ behaviour’. The first and
second themes specify differences between developed and developing countries as well
as SMEs and larger firms. The third theme is focused on the context of SMEs and
differentiates the transition in SMEs from larger companies. In this section, the first
three themes are discussed. The ‘leaders’ behaviour’ theme is already discussed
extensively in the literature (Doom et al., 2010; Gargeya and Brady, 2005; Kale et al.,
2010; Snider et al., 2009). Since the findings are similar to the existing literature, this
paper does not present them.

5.1 Use and maintenance challenges

The use and maintenance of old ERP systems in STEELCO and COOLCO faced high
costs and low reliability. While maintaining old server equipment was very expensive for
both companies, the reliability of the hardware was low, and the performance of the old
servers was not satisfactory for companies’ needs.
Besides the high cost of hardware, both companies customised their ERP systems so
much that they were not able to use available update services provided by vendors. Also,
both companies created bridges to transfer data between different platforms to be able to
use shadow systems and different enterprise systems simultaneously. Any update in
one system needed a significant effort for the realignment of other systems to ensure that
various systems work synchronously. However, such realignment was impossible for
both companies considering their lack of proper IT capabilities. Adding the turnover of
employees responsible for IT systems, poor documentation of prior customisation and
changes in the systems, and discontinued external support for some of the enterprise
systems to the challenges, both companies decided to work with their systems without
454 M.D. Kakhki et al.

receiving any update from vendors. A combination of outdated enterprise systems and
incompetent hardware lead to a high perceived risk of systems operability. Subsequently,
both companies were worried about the potential collapse of their outdated systems and
the potential impact on their business continuity. Such ‘use and maintenance challenges’
are underlying factors that impacted the transition decisions. Therefore, the authors
propose that:
Proposition 1: Threat of use and maintenance challenges to business continuity is a major
driver for the transition from old ERP systems to new ERP systems.
Both ERP vendors who provided STERP1 and STERP2 for the case of STEELCO are
still in the market and provide updates and aftersales services for their products. Besides,
both vendors are well-known and have a reputation for numerous successful deployment
projects. The large customer base creates a profitable market for them to continue their
customer support. However, in the case of COOLCO, one of the local enterprise systems
vendors went out of the market, without any third-party company continuing their
support services. Lack of support in crucial cases was a significant threat to the future of
the systems in use in COOLCO, and a major factor affecting COOLCO’s transition
decision. Therefore, the second is:
Proposition 2: Discontinued vendor services in developing countries have a higher
impact on the use and maintenance challenges of ERP systems and positively impacts on
ERP transition decisions.
The literature on IT adoption factors discuss ‘achieving strategic edge’ and ‘imitating the
behaviour of other companies’ as a major factor in the adoption process. In the case of
ERP transition, the behaviour of none of the two companies could be explained by
institutional theory. In interviews and observations, the authors did not find any evidence
that the companies are imitating other successful companies’ behaviour in the transition
process. Moreover, the primary intention of the transition was discussed to ensure the
continuity of the operation of the companies. Neither of the top managers considered
the ERP systems to add to companies’ capabilities for achieving a competitive edge.
Therefore, the authors propose that SMEs are different from large companies in their
ERP adoption:
Proposition 3: The main driver for SMEs in adopting ERP systems is an enhancement of
operational performance, and unlike larger firms, SMEs do not consider ERP systems as
a resource for competitive advantage.

5.2 The prior knowledge and ability to support

STEELCO and COOLCO wanted to implement a standard package without
customisations to prevent future upgrade conflicts. Also, both companies wanted to avoid
business process re-engineering. The CFO of STEELCO said that “we have mature
business processes and our employees are used to them … it is hard to change the way
we are working now.” Also, COOLCO’s project manager mentioned that “we have to
change eventually … but we can’t afford to do two transitions at the same time.”
Therefore, both companies were looking for minimal changes in their day-to-day
businesses. In both cases, vendors convinced companies that their ERP systems could
support their businesses with minimal changes.
 ERP systems transition in small manufacturing companies 455

The prior knowledge of both organisations helped them to identify their needs, keep
their expectations realistic, and select ERP systems accordingly. Although STEELCO
was able to find the right ERP systems that fit its needs, COOLCO faced challenges
in finding a suitable system. There were plenty of experienced ERP vendors and
implementation consultants for STEELCO, but COOLCO had limited options for
ERP systems supporting the Persian language. Also, lack of experience in ERP
implementation created another barrier for COOLCO in its search for finding a good
consultant. The project manager of COOLCO said that “there are several vendors who
claim to have the appropriate ERP systems. However, many of them have products that
are not fully developed and have glitches … the problem is that we are not sure if they
are going to survive in the market and provide their support service in the future.”
The prior knowledge of employees facilitated the training sessions. STEELCO’s
project consultants noted that familiarity with the ERP concept facilitated the training
process in STEELCO. Despite this facilitation, there were instances where familiarity
worked against the transition process. Since the employees had a long experience of
working with other systems, as STEELCO’s project manager said, the major challenge
for migration became ‘fighting the muscle memory’ to make the users work with the new
ERP system. Employees had concerns regarding the ability of the new system to support
their respective job functions. In the case of the US firm, the project team and consultants
were able to address all the concerns by demonstrating how STERP3 can deliver the
functionality that is demanded. However, COOLCO had a hard time in the transition of
its data into the new system and failed to demonstrate the applicability of the system for
the user’s day-to-day operations based on real case examples.
Both companies provided their users with extensive training. STEELCO’s project
team trained employees in two steps, namely a general introduction session and a
specialised training session. Also, during the first week after the ‘go live’ date, the project
team and consultants were available to resolve the issues and answer the questions and
provide the employees with additional training. COOLCO provided extensive training
for its users in several steps. Because of the lower experience and knowledge of the
consultants and technical difficulties in data conversion, the training took longer than
what was initially planned by the company.
In summary, the ‘prior knowledge and ability to support’ plays a critical role in
transition projects, which leads to three propositions:
Proposition 4: ERP knowledge of the project manager and the consultant increases the
effectiveness of the transition process.
Proposition 5: The general industry-wide ERP knowledge in developed countries makes
the transition process easier compared to developing countries.
Proposition 6: Change management in ERP implementation in developing countries is
more challenging due to the lack of experience of project consultants.
The fourth proposition is already discussed and supported in the existing literature related
to developed countries (Adam and O’Doherty, 2000; Kohli and Jaworski, 1990; Snider
et al., 2009) and developing countries (Newman and Zhao, 2008). The fifth and sixth
propositions are novel. The reader should notice that these propositions are specific to the
context of this study. Specifically, the sixth proposition, which stems from the case of
Iran, might be impacted by the long-term international sanctions against the country.
456 M.D. Kakhki et al.

Therefore, and as explained in the limitations of this research, further scrutiny should be
done before generalising these propositions.

5.3 Fit between ERP and operations

LEs seek to renovate their business by adopting ERP systems to support their business
strategies and gain competitive advantage (Motwani et al., 2008). But both studied cases
indicated that their fundamental reason for ERP transition projects was the improvement
of operational performance. As the two companies did not want to change their business
and its direction, they selected and adopted ERP systems that fit their business with
minimal alterations.
The prior experience of both firms in ERP systems implementation forced them to
change their business processes dramatically. Also, both companies could not upgrade
their ERP systems to newer versions because of the radical changes they made in their
respective systems and the potential conflict between the updates and their revised
systems. Top management executives at both companies indicated that in new
implementation projects, they did not want any change in the source code to prevent
potential future inconsistencies. Also, senior-level managers of both companies indicated
that they wanted minimal change in their business processes.
In both companies, the project manager had the responsibility to find an ERP package
that fit the operations. STEELCO’s project manager, based on his previous experience
with an ERP vendor, worked with that vendor and purchased STERP3 that demonstrated
its capability using STEELCO’s sample data. The project manager’s previous experience
with ERP systems, as well as his detailed knowledge about operations in STEELCO,
enabled him to find a product that fit the operations. The project manager of COOLCO
was from the planning department and familiar with business processes. He examined
several alternatives and purchased COERP2 after he tested a demonstration version of it
and ensured that COERP2 fit the business requirements of COOLCO.
Within the implementation process, both project managers demonstrated the
application of the new system to users. STEELCO demonstrated the process with the
actual data and showed the applicability of STERP3 for handling the firm’s operations.
Also, the project manager developed reports similar to reports in STERP1 and STERP2
using the Crystal Report platform and made them available to users. Availability of the
familiar reports and demonstration with real data made it easier for the users to embrace
the new unknown environment at STEELCO. COOLCO started the training sessions
without the real data for the company. Thus, it resulted in confusion among users about
the application of the system in their day-to-day operations. The project team postponed
training sessions so that they could prepare COERP2 with real data. The training
sessions, which were initially planned for two weeks, took two months. Also, the lack of
experience at the part of consultants resulted in longer than planned training sessions.
Both companies faced concerns about the fit between the new systems and the
business processes. Some of the departments in STEELCO, including sales, accounting,
and services and customised remanufacturing, faced almost no change in the short run.
The interface of the STERP3 for the processes in these departments is different from
STERP1, but processes are similar. The contract manufacturing department had to
change some of its business processes, which created implementation challenges for the
project team. The project team members decided to adjust internal processes to keep the
STERP3 untouched. In the training sessions and after the ‘go live’ date, the raised
 ERP systems transition in small manufacturing companies 457

conflicts between the ERP and business processes were discussed, and new methods for
conducting business processes were identified.
The majority of departments in COOLCO were able to continue their operation with
COERP2 with minimal modifications. However, the design office and the planning and
control office were exceptions. The manager and employees in the design office found
that COERP2 required modification in current processes and was not eager to cooperate.
To facilitate the transition process, top management appointed the director of the design
office as a member of the project team. This appointment resolved the cooperation issue.
Also, the planning and control office had to modify its processes to be able to work with
COERP2. The director of this office was the project manager, so he ensured that the new
business processes were adopted in the operation of his office.
Following the discussion, there are two sets of propositions. First propositions are
related to misfits between ERP systems and business needs. The two propositions show
that while alignment of ERP systems with existing procedures play a critical role in the
success of ERP systems, firms should avoid heavy customisation of their ERP systems:
Proposition 7: Heavy customisation of ERP systems impacts the long-term ability of
SMEs to maintain their ERP systems.
Proposition 8: Compatibility between the operations of the new ERP systems and
previous systems reduces customisation and facilitates change management.
The second set of propositions is related to user acceptance and identifies that similarity
between interface and functionality of the new ERP systems and legacy systems is vital
for the success of the implementation process.
Proposition 9: Similarity between the interface of the new ERP systems and previous
systems improves user acceptance.
Proposition 10: Demonstration of the ERP systems with actual data in training sessions
improves user acceptance.
These four propositions are not discussed in the literature of ERP in SMEs. However,
there is a comprehensive body of publications on user behaviour and acceptance of IS
that generally support these hypotheses (Hasan et al., 2013).

6 Conclusions, contributions and limitations

There have been many companies that chosen to implement ERP systems since the 1990s
when ERP systems have come into existence. Now, nearly three decades later, many
companies need to upgrade their prior ERP systems. The early wave of ERP
implementation was followed by many reports on the failure of ERP implementation
projects. It is also possible to expect similar failures in the transition projects. Therefore,
it is vital to study ERP transition projects. This research is focused on SMEs rather than
large companies. There are many factors, including the lack of substantial financial
and human resources that differentiate the business environment in SMEs from large
companies. Despite the difference, the transition process in SMEs is rarely addressed in
the literature. Therefore, this paper contributes by focusing on ERP transition process in
SMEs to address the existing gap in the literature. In addition to the size of companies
458 M.D. Kakhki et al.

that impact ERP transition, various regional and environmental factors play a role in the
ERP transition process. So, another contribution of this paper is the study of ERP
transition projects in different business environments. This paper employs two case
studies, one in the USA as a developed country and one in Iran as a developing country to
analyse the impact of environmental factors on ERP transition projects. Here, we
summarise the key findings of our research, which shows how this research contributes to
the literature:
• Three important factors, namely the ‘use and maintenance challenges’, the ‘prior
knowledge and ability to support’, and the ‘fit between ERP and operations’ have an
impact on the effectiveness and efficiency of the ERP transition process.
• The ‘prior knowledge and ability to support’ factor seems to be a critical factor in
developing countries. The availability of skilled human resources to support
technical and operational steps in the transition process is crucial.
• Access to knowledgeable consultants who are familiar with the business processes of
the firm and ERP features facilitates the transition process.
• SMEs do not have enough resources to undertake different tasks at the same time;
therefore, the fit between ERP and operations plays a critical role in the success of
the transition process. Subsequently, the transition process should result in minimal
organisational change.
• The important factors that lead to the retirement of legacy systems are imposed risk
of business continuity, changing business requirements, rising costs of support due to
the shift in technology, inability of the vendor to provide support for customised
ERP systems, high cost of maintenance for required hardware, inability of the early
systems to support different business processes, and integration requirements among
different departments.
These findings are insightful for practitioners and inform them about important
environmental factors that they need to be aware of in an ERP transition project. The
current research holds some limitations. First, the nature of the research and the selected
methodology requires longitudinal investigation and data collection. Although the authors
had the opportunity to collect longitudinal data for the US company, the authors failed to
do so for the Iranian company. To ensure that this research was able to capture the
essence of the transition project, the authors analysed the available documents from
different stages of the transition project. The authors shared the results and discussed
them with interviewees to ensure that the right perception exists. The second limitation of
this research is the scope of the project, which includes two case studies. The limited
project scope might have resulted in missing factors that have an impact on the transition
project. While the findings of this research are still valid, future research can focus on
multiple cases across different countries and business environments. The third limitation
relates to the potential response bias in the data collection process. To minimise bias, the
authors compared their interviews with their observations and document analysis results
to eliminate biased responses. The fourth limitation is due to the explorative nature of this
research. The propositions that are developed based on qualitative data are limited to the
context of this research and are not generalisable. Further development of the literature
requires quantitative testing of the propositions. In the future, researchers can use
interpretive and positivist approaches to validate the propositions.
 ERP systems transition in small manufacturing companies 459

The fifth limitation is due to the selection of the Iranian case for the analysis. The
reader should notice that propositions developed based on the Iranian case might be
impacted by the specific economic climate of the country. The international sanctions
against Iran have restricted the global interactions of some of the Iranian business sectors.
This restricted interaction might have an impact on some of the propositions developed in
this paper. Therefore, future research can evaluate propositions in the context of other
developing countries. Finally, the sixth limitation is the focus of this research. Despite the
limited number of analysed cases, the authors had a broad focus on the entire transition
process in this study. While a more focused study could result in a better overall
understanding of a smaller aspect of the transition process, this paper chose to cover the
entire process. Since this study is among the first that covers the ERP transition process,
authors wanted to provide a broad overview to pave the path for future research. Future
studies should be more detailed and focused on specific aspects of ERP transition
projects.

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