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ERP Implementation: Critical Success Factors

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Question:

Do some research on ERP implementation. Identify other factors which may account for the success of ERP implementation?
 
 

Answer:

Introduction

ERP or Enterprise Resource Planning software are getting used in almost all enterprises around the world. Those have become useful because that helps the businesses to tie their business process around information technology application. They get an integrated business process that is faster and have lesser degree of redundancy.

But implementation of ERP is a critical project. There are lots of CSF or Critical Success Factor running behind the ERP implementation projects. These success factors play pivotal roles behind the success or failure of some project. But studies have shown that controlling the critical success factors may drop down the success curve initially but it may rise again. However, there is no one rules for deciding the changes in the CSF for any ERP implementation project. Still there are some CSFs that are very common and inherent to either the organization or the ERP projects. (Akkermans & Helden, 2002)

In previous works, some works have identified some shallow clichés behind successful ERP implementation, in reality there are many more CSFs than these clichés.

In this report we will find stronger CSFs that can decide success or failure of an ERP implementation.

ERP

ERP is not just and information systems, it is a process of integrating different business processes across an organization. The business processes may range from SCM or Supply Chain Management, Procurement, HRM or Human Resource Management, Sales, CRM or Customer Relationship Management to business intelligence and analytics, accounts, finance etc. All these business processes are tied by a centralized information system and database. Thus the integration among those processes are improved. The data is stored and retrieved from one place, so there is reduced redundancy, there are almost no or very little compatibility issues among data evolving from different business processes.

An ERP system has various modules for different business processes. These modules are closely coupled. This coupling enhances the integration.

Organization can have various benefits from a successful ERP implementation. For example, it may require lesser effort, more sales, better management, better decision making activities and generation of more revenue. On the contrary, failure of ERP implementation will cost significantly and there will be significant loss of cost and effort from this failure.

 

ERP implementation: Critical Success Factors

Studies on the social enablers in ERP implementation has pointed out the following factors as ‘key factors’ behind the success or failure of ERP implementations.

  • Commitment and strong leadership of the top level management in the ERP implementation project.
  • An honest, clear and open communication plan across the organization.
  • There should be a stronger, focused and balanced team.

However, more studies on the CSFs of ERP implementation reveals there are more stringent CSFs than these ‘key factors’. Those CSFs are,

Business plan and Revisions

ERP implementation are closely connected to the requirement of the business processes. Thus business plans are needed to be understood very clearly before implementing an ERP for the business. There are various kind of issues related to this CSF at the very first place.

In many cases, it have been seen that the businesses don’t evaluate and review the business requirements and selects some ERP system prototype. Now, every business have some uniqueness in their business processes, there may be similarity of business processes of two organization. But the requirements from the ERP implementation may not be the same. Vendors generally offer some prototype and that is very generic in nature. The prototype is customized around the business requirements. (Nah & Delgado., 2006)

 

Business process Reengineering and Customization

An ERP implementation can be either in house or some vendor and consultancy is hired for the same. In case of in house solution, it is built for the organization only and there is almost no scope of customization as it is built from scratch. But this is a very costly solution and not used very much in reality.

For the customized ERP solutions, there are two options. Either he ERP will be customized around the business processes or the business processes will be reengineered around the ERP solution. Each of these approaches have their own set of advantages and challenges. The bottom line is, heavy customization is not good for any option. Heavy customization of the ERP solution may create issues with internal module structure of the ERP solution. In that case, the integration and coupling among the modules may breakdown. As a result, the ERP system may not work properly. On the other hand, business processes includes, systems and people. It is more about the organization. There are another set of critical factors and challenges for business process reengineering and this is more complex than customization of an ERP solution. Here are also huge risks of ERP implementation failure. (Moohebat & Asemi, 2010)

Better Project management

Project management is important for any project. There should be participation from all levels of management, developer and other stakeholders. The project plan should consider different aspects related to the project. There should be proper risk management and if necessary then there should be proper change control management. Without these factors of project management, there may be risks of various kinds that can creep into the project anytime, there may be resistance and challenges in the ERP implementation etc.

Legacy information systems

Few information technology were introduced in almost all businesses. Then there were separate information systems for different business processes. These legacy information systems have compatibility issues, integration problems etc. And this is the area, where ERP is the game changer. But it is difficult for ERP implementation to work properly, if there are too many legacy systems with different working processes, different data format etc. For example, it is easier to work with legacy system of the same vendor rather than different vendors. (Moohebat & Asemi, 2010)

 

Project management Team and communication

Project management depends on the qualities of the project management team, their roles and responsibilities, abilities, skills, expertise etc. also there should be enough communication among the team members, and otherwise the project will not run properly in spite of having skilled and experienced member.

ERPs software development, testing etc.

The development, testing and implementation phase of ERP implementation is very important. The testing process before implementation should check and validate the solution. It should also verify whether all business requirements have been full filled or not.

Post implementation monitoring

Post implementation phase of ERP is also changing. There are chances that bugs will be identified more during this phase as users will tend to use the system more and more. But studies shows that, users take time to get accustomed with the system and after some time of the implementation, the actual post implementation issues start to come up. So, monitoring and troubleshooting is very much necessary during this phase.

These issues are more important than the ‘key factors’ as these covers up wider domain of CSFs rerated to ERP implementation. The consideration of these CSFs covers up the ‘key factors’ also. The aim is to consider as much CSF as possible and fine tuning those towards success. (Ram, et al., 2013)

 

Conclusion

In this report, there is a discussion on critical success factors for ERP implementation. The report extends the results from another study on the related topic, social enablers of ERP implementation success or failure. This report shows, beyond the social enablers there are several other critical success factors for an ERP implementation and the impact of these CSFs can change the whole scenario from failure to success.

 

References

Akkermans, H. & Helden, K. v., 2002. Vicious and virtuous cycles in ERP implementation: a case study of interrelations between critical success factors. European Journal of Information Systems, Volume 11, p. 35–46.

Harwood, S., 2003. ERP: The Implementation Cycle. s.l.:Butterworth-Heinemann.

Moohebat, M. & Asemi, A., 2010. A comparative study of critical success factors (CSFs) in implementation of ERP in developed and developing countries., s.l.: s.n.

Musaji, Y., 2005. ERP Postimplementation Problems. s.l.:Information Systems Audit and Control Association.

Nah, F.-H. & Delgado., S., 2006. Critical success factors for enterprise resource planning implementation and upgrade. Journal of Computer Information Systems, 46(5), p. 99.

Ram, J., Corkindale, D. & Wu, M.-L., 2013. Implementation critical success factors (CSFs) for ERP: Do they contribute to implementation success and post-implementation performance?.. International Journal of Production Economics, 144(1), pp. 157-174.

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