Factors That Impact Implementation Of Erp Systems

Published Date: 02 Nov 2017

Introduction

Many Definitions of Enterprise Resource Planning (ERP) systems have been presented in various literatures in the ERP system research field in regards to what they are. This review provides an authoritative definition of ERP systems that incorporates the common elements of the literature. A comparison of the literature is provided which outlines the similarities and differences in the literature reviewed. This review then identifies factors that have the potential to positively and negatively impact the implementation of ERP systems by reviewing various literatures on the implementation of ERP systems, to group the research and present 6 factors that affect implementation which emerge repeatedly throughout the literature. These factors are categorised and put in a table to able to distinguish between the factors.

Definition of ERP Systems

Enterprise Resource Planning (ERP) systems are business management systems that are made up of many modules or software applications which in other terms are capabilities that can be provided to the organisation such as Customer Relationship Management (CRM). ERP systems can be purchased as a complete package solution from a vendor; the other option is the organisation can purchase the software modules individually also from a vendor. Generally, when selecting individual modules the organisation will select the modules that align with its specific business needs. For example, one module will focus on one business process such as accounting, which is one of the typical functions supported by ERP systems. When more modules or a complete solution is purchased, the integration of the modules allows the organisation to effectively manage its business operations. Table 1 shows the different modules of an ERP system.

Table 1 ERP Modules

Modules

Enterprise Resource Planning (ERP)

Customer Relationship Management (CRM)

Asset Management

Financial Management

Supplier Relationship Management (SRM)

Business Collaboration

Inventory Management

Order Processing

Data Warehouse

Knowledge Warehouse

Business Information Warehouse

Business Intelligence

Analytics and Reporting

Data Mining

E-Commerce

Sales Management

Field Service Management

Retail Management

Facilities Management

Maintenance Management

Warehouse Management

Logistics Management

Distribution Management

Project Management

Human Resource Management

The whole idea of ERP is business reengineering. This is re structuring the organisations business processes so they are integrated while implementing best practices, to replace diverse functional systems into a single integrated system that serves as a central repository for all information that can be shared across the organisation by the different functional areas and to aide management in decision making.

ERP systems are being considered the standard technology on which many organisations are operating their business because they have become one of today’s most widespread IT solutions. When an organisation decides to adopt this solution, successful implementation will be critical in order to create value for customers, while remaining profitable and reducing costs.

This definition of ERP systems was formulated from the analysis and compilation of Schlichter and Kraemmergaard (2010), McGaughey and Gunasekaran (2007), and Al-Mashari (2003). The common variables were extracted to bring together and show the relationship between the literatures. These journal articles were used because they provide authoritative and relevant definitions of ERP systems.

The main point that these journal articles emphasise in their definitions is integration, the idea of bringing the organisations business processes together and ultimately being the driver of effective business reengineering and management. The literature reviewed agrees that this is one of the most important attributes of ERP systems and one of the main reasons for its implementation in organisations.

Although the definitions presented in Schlichter and Kraemmergaard (2010), McGaughey and Gunasekaran (2007), and Al-Mashari (2003) are defining the same concept and agree on certain ideas, they have differences between them. The main difference between the literatures is the year of publication, which has perhaps influenced the way ERP systems have been defined as Schlichter and Kraemmergaard (2010) finds that there are not many journal publications about ERP systems before 2000, therefore it can be concluded that publications about ERP systems only emerged in 2000 and onwards, suggesting that over time authors concur on what an ERP system is and how to define it. For example, Schlichter and Kraemmergaard (2010) and McGaughey and Gunasekaran (2007) appear to give more precise definitions of ERP systems compared to Al-Mashari (2003). ERP systems are defined as business management systems in Schlichter and Kraemmergaard (2010) and information systems in McGaughey and Gunasekaran (2007), whereas in Al-Mashari (2003) there is no definitive term used, instead it is referred to as an IT solution. The term business management system or information system seems more appropriate because it actually describes what ERP systems are and what they do, they are systems which integrate business processes to deliver information and improve business management. The term IT solution is more likely to be interpreted as a solution for an IT problem rather than a business problem which is the important thing to distinguish.

In the above definition, the term business management system is used to describe what an ERP system is because seems like the most up to date term because it is drawn from the most recent journal article of the three reviewed. Also, the words ‘business management’ depicts the desired outcome of ERP system implementation, which is being able to manage the business better.

Factors That Impact Implementation of

ERP Systems

ERP system implementation is a process of great complexity, which may appear to consist only of installing and configuring the software solution (Soja, 2006; Anderson et al. 2011). However, It is evident in Woo (2007), Ravnikar (2010), Venugopal and Rao (2011), Momoh, Roy, and Shehab (2010), Anderson et al. (2011), Soja (2006), and Upadhyay, Jahanyan, and Dan (2011) that organisations that are implementing ERP systems need to be aware of the factors that can positively and negatively impact its implementation. It is shown in the literature that the presence of certain factors can positively impact implementation, while their absence can negatively impact implementation. This understanding is critical because Woo (2007), Ravnikar (2010), Venugopal and Rao (2011), Maditinos, Chatzoudes, and Tsairidis (2012), Momoh, Roy, and Shehab (2010), Anderson et al. (2011), Soja (2006), and Upadhyay, Jahanyan, and Dan (2011) agree on the high failure rate of ERP Projects. It can be drawn from Ravnikar (2010), and Momoh, Roy, and Shehab (2010) that it is estimated that approximately 90 % of ERP system implementations fail, which can be blamed on a lack of understanding of how an ERP system should be implemented and the factors that affect its implementation.

Apart from Soja (2006), none of the other journal articles discuss the definition of successful implementation and how to measure it. Failing to understand how to measure successful implementation can result in the organisation thinking that they have successfully completed the project because the implementation time and budget was satisfied (Soja 2006), when actually it has not been successful and this may be evident in post-implementation issues, such as the users not accepting the ERP system. Therefore, it can be said that it is important for the organisation to have a checklist or a set of criteria to use as measures to be able to judge implementation success.

An example of measures of implementation success is demonstrated in Soja (2006). The measures defined include:

The actual scope compared to the planned scope;

The actual duration of implementation compared to the estimated duration;

The actual budget compared to the planned budget;

The user’s acceptance level; and

The achievement of project goals.

The factors that contribute to successful implementation and those that negatively impact it can be categorised into two categories, Positive Factors and Negative Factors. This seems like the most logical way to categorise the factors because it provides an obvious distinction. The factors that can be in both categories have not been discussed individually; rather they have been discussed under one category from different perspectives. For example if the presence of a factor has a positive impact on implementation and its absence has a negative effect, it will be under the Positive Factor’s category and the findings about the absence of it will be discussed under that same category. Doing it this way avoids the use of complex categories.

The factors discussed below are the common factors demonstrated in Momoh, Roy, and Shehab (2010), Woo (2007), Upadhyay, Jahanyan, and Dan (2011), Venugopal and Rao (2011), Soja (2006), and Ravnikar (2010) affecting implementation that have been drawn to bring the research together to provide a better discussion because the collection of the research has the ability to show the agreement between the literature of the most important factors affecting implementation.

Managerial Factors

This category incorporates the factors associated with management that impact the implementation of ERP systems. The literature Momoh, Roy, and Shehab (2010), Woo (2007), Upadhyay, Jahanyan, and Dan (2011), Venugopal and Rao (2011), Soja (2006), and Ravnikar (2010) agree that the most important Managerial factors that affect implementation are Top Management Support, Change Management, and Project Management.

Top Management Support

It is evident in Momoh, Roy, and Shehab (2010), Woo (2007), Upadhyay, Jahanyan, and Dan (2011), Venugopal and Rao (2011), Soja (2006), and Ravnikar (2010) that the most important Critical Success Factor (CSF) for the successful implementation of ERP systems is Top Management Support.

Top management can be described as the executives of the organisation. Top management can consist of the Chief Executive Officer (CEO), Chief Financial Officer (CFO), and the Steering Committee which is evident in Venugopal and Rao (2011).

The literature Momoh, Roy, and Shehab (2010), Woo (2007), Upadhyay, Jahanyan, and Dan (2011), Venugopal and Rao (2011), Soja (2006), and Ravnikar (2010) finds that a lack of commitment and support by Top Management has a negative impact on the implementation of ERP systems.

The problem with Top Management is that it seems to start off as a positive factor, because at the initial stage they allocate the required resources, formed the project team, appointed the consultants and purchased the ERP system (Woo 2007). It is demonstrated in Woo (2007), that once these tasks have been completed, Top Management stops their involvement which can become a negative factor impacting implementation because one of their main roles is to emphasise the importance of the ERP system to encourage user acceptance (Venugopal and Rao 2011), and if they are absent during the implementation process, the users may see the project as unimportant.

Woo (2007) finds that the situation described above where Top Management stops their involvement is common in most Chinese organisations, as they regard ERP system implementation as a technological change rather than a business change, and therefore view IT staff as the people who should complete the project. From the analysis of Momoh, Roy, and Shehab (2010), Upadhyay, Jahanyan, and Dan (2011), Venugopal and Rao (2011), Soja (2006), and Ravnikar (2010), it can be concluded that Chinese organisations may not be the only culprit of passing the responsibility to the IT department, as the literature suggests that other cultures are known for doing this too.

Change Management

Change management is another important factor that is agreed upon by Momoh, Roy, and Shehab (2010), Woo (2007), Upadhyay, Jahanyan, and Dan (2011), Venugopal and Rao (2011), Soja (2006), and Ravnikar (2010) that affects implementation both negatively and positively with its presence and absence.

Change management can described from a review of the definitions in Momoh, Roy, and Shehab (2010), Woo (2007), Upadhyay, Jahanyan, and Dan (2011), Venugopal and Rao (2011), Soja (2006), and Ravnikar (2010) as a method for identifying and managing changes to business processes throughout the implementation of an ERP system through benefits realisation and the training of users to adjust to the new way of working. It can be drawn from the literature that the goal of change management is to overcome user resistance and help them accept the business change.

It can be conclude from Momoh, Roy, and Shehab (2010), Woo (2007), Upadhyay, Jahanyan, and Dan (2011), Venugopal and Rao (2011), Soja (2006), and Ravnikar (2010) that when there is a lack of Change Management it will have a negative effect on ERP system implementation because there would be minimal or no communication with the users about the reassuring benefits of the change, and the failure to recognise the impact that the change would have on the organisation.

Effectively managing change starts off with the organisation identifying the factors that cause the users to resist change; followed by the determination of how the users will react to change suggests Momoh, Roy, and Shehab (2010).

Effective Project Management

The research in Momoh, Roy, and Shehab (2010), Woo (2007), Upadhyay, Jahanyan, and Dan (2011), Venugopal and Rao (2011), Soja (2006), and Ravnikar (2010) identifies Project Management as an important factor that impacts ERP system implementation. However, it has been changed to Effective Project Management because Project Management cannot be absent in an IT project, it can however be poorly executed, therefore the use of the word effective has made the categorisation of the factor more specific.

Effective Project Management requires an effective Project Manager who is competent to oversee the project to ensure that it runs smoothly. Momoh, Roy, and Shehab (2010), Woo (2007), Upadhyay, Jahanyan, and Dan (2011), Venugopal and Rao (2011), Soja (2006), and Ravnikar (2010) explain that the one of the main tasks the Project Manager will do is ensure that the scope of the project is defined clearly, to avoid scope creep which can negatively impact the implementation of ERP systems.

Technical Factors

This category incorporates the factors associated with the technical aspects that impact ERP system implementation. The literature Momoh, Roy, and Shehab (2010), Woo (2007), Upadhyay, Jahanyan, and Dan (2011), Venugopal and Rao (2011), Soja (2006), and Ravnikar (2010) agree that the most important Technical factors that affect implementation are Project Team Competence, Customisation, and User Training.

Project Team Competence

Project Team Competence is an important factor impacting implementation that is associated with the Technical side of implementation, finds Momoh, Roy, and Shehab (2010), Woo (2007), Upadhyay, Jahanyan, and Dan (2011), Venugopal and Rao (2011), Soja (2006), and Ravnikar (2010).

Project Team Competence can be defined as the ability of the project team in terms of their qualifications, skill level or experience to undertake the implementation of the ERP system. Having a competent project team is of great importance. An example of criteria developed from analysing Woo (2007) that could be used to create a competent Project Team is shown below. Team members should have the following attributes:

Technological competency;

Understanding of the organisation and the business processes being affected ;

Credibility: they should be the best in the organisation; and

Ability to be cross-functional

Where this can be a negative impact is when Top management fail to use a ‘checklist’ like the above one to judge if the team members are competent. The literature Momoh, Roy, and Shehab (2010), Woo (2007), Upadhyay, Jahanyan, and Dan (2011), Venugopal and Rao (2011), Soja (2006), and Ravnikar (2010) finds that Top management often fail to assign the right people when creating a project team because of a lack of understanding of its importance. The point discussed earlier about Top Management viewing IT staff as the suitable people to implement an IT-based project is revisited. Woo (2007) suggests from its findings that it is common for Top Management to assign mainly IT specialists to complete the project. The findings also indicate that although IT staff are competent in the technological aspects of the implementation of the ERP system, they may lack the expertise in the organisations business processes which is why including cross-functional members from different areas of the business can be considered very important.

Customisation

Customisation can be described as the modifications made to the ERP software in order to fit the specific business processes according to Momoh, Roy, and Shehab (2010), Upadhyay, Jahanyan, and Dan (2011), Venugopal and Rao (2011), Soja (2006), and Ravnikar (2010).

The research demonstrates that customisation can have a positive impact on implementation if it is minimal and a negative impact on implementation if it is excessive. Momoh, Roy, and Shehab (2010) find that excessive customisation of ERP systems negatively impact implementation because the software is being modified which can be costly, or the business processes are being restructured to fit the ERP software which can be time consuming.

It can be drawn from the literature that in order to turn customisation into a positive factor, the scope must not be changed and no additions must be made during the implementation phase, as these changes will require constant adjustments in order to adapt to the modifications made.

User Training

User Training refers to the process of providing knowledge to management and staff of how the ERP systems works, enabling a better understanding of how their jobs are related other functional areas within the organisation (Upadhyay, Jahanyan, and Dan 2011). Momoh, Roy, and Shehab (2010), Upadhyay, Jahanyan, and Dan (2011), Venugopal and Rao (2011), Soja (2006), and Ravnikar (2010) agree that training tends to inadequate or ignored all together, which could arise from the perspective that the users are competent enough to learn the system on their own. Another reason that is agreed upon by Momoh, Roy, and Shehab (2010), Upadhyay, Jahanyan, and Dan (2011), Venugopal and Rao (2011), Soja (2006), and Ravnikar (2010), is that training is seen by Top Management as an additional cost to the already incurred cost of the ERP system, rather than an essential cost. This could be because of the hidden cost of training. Momoh, Roy, and Shehab (2010) find that training is the most underrated hidden cost. Making the vendor responsible for training could provide a solution this finding. The research acknowledge that the vendor should train the users on the newly implemented system, because the cost of training can be included in the in the price of the ERP system and negotiated so that it doesn’t seem like an additional cost which could change Top Management’s perspective to view training as essential to implementation success.

Table of Factors

Conclusion

This paper provides a critical review of the existing literature in the ERP system research field. It has answered the questions based on what the research has presented. ERP systems have been defined in deferent ways. The paper looks at the definitions of ERP systems presented in the literature and develops a definition based on the common elements and relationships drawn from the different works. It is evident that the implementation process is complex. To show how the complexity of this process may be reduced and the chance of successful implementation possibly increased, factors that have a positive and negative effect on implementation have been presented from the analysis of various qualitative and quantitative literature to compile a set of common factors impacting ERP system implementation that the research agree is important to the success of implementation. These factors are categorised as Managerial and Technical factors which include:

Managerial:

Top Management Support;

Change Management; and

Effective Project Management.

Technical:

Project Competence;

Customisation; and

User Training

The categorisation of these factors allows them to be easily distinguished as they relate to different areas of the business which can be used as a framework by others researching implementation of ERP systems to identify the important factors affecting the implementation of ERP systems.