May 01, 2013

ERP: The necessary evil

When reading relevant literature on ERP implementation and its Critical Success Factors, one gets the impression that ERP is very rigid, complex and risky. In fact, reading case studies of ERP implementation projects that have failed and forced large organisations to file for bankruptcy is like being told stories of people who have died as a result of ignoring their doctors’ instructions when taking medications. Just like one is required to follow the doctor’s prescriptions fully in order to get rid of a life-threatening disease, the ERP implementing company is required to pay attention to key Critical Success Factors for the project to be successful and lead to process performance improvement. These Critical Success Factors include senior management involvement, Business Process Re-engineering, Training and Education, IT infrastructure, proper package selection, Project Management and Management of Change.

Due to the severity of the consequences of poor ERP project implementation organisations must always avoid the temptation to succumb to peer-pressure and hasty decisions. Kick-starting the ERP implementation process should only take place when the most important Critical Success Factors are readily available and the environment made conducive enough to handle the complexities and massive changes that are associated with ERP introduction and operation. Failure to pay attention to these rules serves to invite the Evil side of ERP which often represents disaster!

Source: Basu, R., Upadhyay, P., Das, M. & Dan, P. (2012), “An approach to identify issues affecting ERP implementation in Indian SMEs”, Journal of Industrial Engineering and Management, 5(1):133-154.

- 5 comments by 4 or more people Not publicly viewable

  1. That’s true. Failures on ERP implementation were not because of the ERP software were coded incorrectly, rather companies failed to match the true need of the organization.That’s same as your point of view that hasty decison always ruin the implementation of ERP. Implementing an ERP system is not a matter of changing software systems, rather it is a matter of re-positioning the company and transforming the business practices. An organization goes through a major transformation, and the management of this change must be carefully planned and meticulously implemented. In my opinion, the top management must not only fund the project but also take an active role in leading the change. A review of successful ERP implementations has shown that the key to a smooth roll-out is the effective change management from top. Intervention from management is often necessary to resolve conflicts and bring everybody to the same thinking, and to build cooperation among the diverse groups in the organization, often times across the national borders. Top management needs to constantly monitor the progress of the project and provide direction to the implementation teams. The success of an ERP implementation completely hinges on the strong, sustained commitment of top management.

    03 May 2013, 16:39

  2. I agree with your advice on careful considerations preceding the implementation of any ERP system. However, to fully understand ERP implementation and also to enhance rate of implementation success, one must also consider and try to avoid the critical factors of failure (CFF) of ERPI.
    It would also be interesting to note that the equations:
    1. successful ERP implementation = raise in organisation performance; and
    2. unsuccessful ERP implementation = drop in organisation performance
    These two phenomenon are not absolute. This is similar to project management where successful projects (completed within budget, within deadline and to customer expectations) may not always promote organisation wellbeing. Although correlations can be found between ERP implementation and organisational performance, but there are many variables that may affect post implementation ERP that should also be considered beforehand which should include the wider picture of ERP such as actual needs, business environment etc… and must not focus solely on the implementation stages.

    These are only my thoughts, and I do welcome corrections if anyone finds this to be incorrect.

    04 May 2013, 16:19

  3. Kwamina Ekremet

    I will not gainsay the benefits of the ERP solution in a business. I side with you and especially Davenport (1998) when he says that “enthusiasm should not blind senior management about the possible pitfalls of ERP systems ”. It is therefore exigent for senior management to weigh the pros and cons of their decision against the needs the ERP solution will provide the business. This may be achieved through what Davenport (1998) calls “reconciling the technological imperatives to the enterprise system”.

    I beg to differ from your purporting that businesses should avoid the “temptation to succumb to peer-pressure and hasty decisions”. Ehie & Madsen (2005) research findings indicate that “competitive pressure (in your case peer pressure) is highly significant and related to perceived performance of the ERP solution” in businesses. This presupposes that at times to be competitive and be able to play on the same and level field with competitive indeed ERP solution will be a necessary evil for the business!

    05 May 2013, 17:12

  4. Zain Tariq

    I agree and acknowledge that concurrent literatures and explanatory researches has highlighted fear regarding the ERP implementation process rather that its potential. Many literatures provide the fundamental and theoretical approach for implementing ERP. Most companies perform and operate by their own methods, hence making the implementation process and the failures of ERP unique to specific companies. It is not practical generalising failures in an environment where processes, ways of conducting business, critical success factors are emerging either because of new technology, regulations or competition. Possibly top-level managements, academics and practitioners take the precaution of ‘better being safe then sorry’. I agree that the investment in terms of both finance and time is substantial; the stakes are too high for any kind of failures for organisations operating in competitive environments. Nonetheless the possibilities of other companies failing to implement ERP should not discourage anyone for, firstly implementing ERP and eventually utilising the full potential of ERP systems.

    05 May 2013, 17:18

  5. Kai Wu

    I totally agree with your idea that organizations and ERP (service) providers should pay more attention on these Critical Success Factors. But in reality, it is always easier said than done. The organization and service parties always have different views on these Critical Success Factors, they definitely have different standard to define “enough”. Nowadays, with fierce global competition and rapid changing environment, organizations can hardly wait everything is ready then start to adopt ERP, especially for SMEs. Therefore, study on “what are the effective ways for cooperation between organizations and service parties in ERP implementation projects, how to adopt ERP in an insufficient resource environment” would be also meaningful.

    05 May 2013, 22:49

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