Success Factors for Enterprise resource Planning (ERP)

Abstract

Enterprise resource planning (ERP) is a business process management software that allows an organization to use a system of integrated applications to manage the business and automate core functions of the company, this relates to technology, services and human resources. Implementing this type of system is a complex and costly project, therefore research and extensive planning is required prior to commencement. ERP projects report a high failure rate and can impact the running of core business functions. This report highlights the key factors that are critical to the success of an ERP project. I identified the CSFs from examining eight articles, I chose papers based the number of citations and the year published. Once I had selected the articles I used a matrix grid to establish which CSFs were common to all and which occurred most frequently.

Introduction

Critical Success Factors (CSF) can be defined as for any business, the limited number of areas in which results, if they are satisfactory, will ensure successful competitive performance for the organisation. They are the few key areas where ‘things must go right’ for the business to flourish (Rockart, 1979, p. 85). There are a number of factors that are directly linked to the success of an ERP project which I identified from the eight articles. Each article had their own assumptions and highlighted various pitfalls for ERP projects. The five main CSF’s, common across all articles are; Project Management, Communication, Planning, Training and Education, and Business Remodelling. From examining the articles, it became apparent that the CSFs are linked, the likelihood of a successful project is dependant on all CSFs being coordinated and working efficiently.

Each article discussed the five main CSFs which are highlighted above. It was interesting to see a trend develop between each of these CSFs and how they can be an umbrella term for other CSFs to fall under. It is clear from the extensive research conducted, that when devising an ERP project, each of the CSFs must be achieved. The focus cannot be excelling in one or two CSF areas, each one is critical and will affect the project outcome if they are not achieved. This observation and link highlights the challenge of implementing such a project, it is complex and has variety of elements that are critical to its success.

Project Management

Project management is consistently highlighted as one of the key factors to success in the implementation process of an ERP project. Project Management activities should span the life of the project from initiation to its completion.  Due to the complex nature of ERP projects, efficient and clinical Project Management is required to coordinate all parties involved in the process. Change within an organisation is generally met with resistance so a strong PM must lead the project team towards a common goal. Change management was another CSF identified from my research, a project management task is implementing change. Adapting to change is an integral part of a company’s success and growth. The inability to adapt to change of new processes is one of the most common causes of project failure therefore PM is critical to enable the successful implementation of an ERP project.

Successful PM is regarded as having a two-dimensional effect of transforming resources into outputs and helping to achieve project benefits for example cost reductions, performance improvements and produce the results desired by stakeholders. (Zhai et al., 2009, p. 100). Certain project management activities for ERP implementation include; monitoring the project to ensure it does not over flow the defined scope, define requirements for project manager position and ensure that the material, human and financial resources are available. Effective use of PM techniques and practices will ensure the ERP project is successful by adhering to project scope and forecasting the use of resources for the duration of the project.

Training and Education

User involvement and participation is frequently cited as one of the most critical factors in the success of an ERP project. It is important to put the time, money and resources into ensuring everyone within the company is educated on the new ERP system, people who will be using the system must be taught how to implement and operate it. The end-users must be trained and educated about the various processes involved throughout the project.  A good training and education plan can help the users employ the system to its full potential. The knowledge and understanding from training will result in user confidence with the new system and improves human-system interaction. Future problems and project failure is less likely to occur with adequate training, from how to perform daily tasks to mission critical tasks.

An example of lack of training resulting in ERP project failure was back in 2013 when Avon’s $125 million SAP enterprise resource planning project failed after four years of work, development and employee testing. The new system had provided extra work for its sales representatives as opposed to easing their workload. Employees were not trained or transitioned to the new software therefore the project failed.

End-User involvement from start to finish ensures user requirements are better respected and understood thus the end process will be of better quality, the best system in the world will be useless if the employees don’t know how to use it.

Planning

Planning and goal setting is a crucial for the success of implementing an ERP project. The initial stage of any project should set out the goals and objectives to be achieved in order to coordinate the team, establish the direction of the project and to see if the plan is feasible. This critical requirement was discussed in depth in two of the articles, each stating that by making a clear plan the organisation can ensure the new system will reflect their overall long term vision.

By creating a plan, the most important aspects of the project are established and made a priority. Once the core functions have been identified, the necessary resources can be allocated to ensure they are achieved. Every ERP project has key functionality to be achieved in order for it to be a success, establishing these requirements at the initial stages of the project is a CSF.

Goals should be revaluated throughout the project lifecycle; this incorporates other CSF’s such as monitoring progress. Issues can be identified with this approach and will reduce the likelihood of a costly failure.

Open Communication

The need for effective communication is permanent and affects all the critical factors studied above. Ineffective and poor communication is cited as one of the top causes of ERP failure in all my chosen articles. It is key in linking the other CSFs identified and enables them to be achieved. Expectations at every level need to be communicated. Management of communication, education and expectations are critical throughout the organization (Wee, 2000).

Effective communication must take place internally and externally. For the successful implementation of ERP systems, internal communication across the various functions and levels of a company is needed. Three of the articles identified  third parties and outsiders with the knowledge and expertise to implement a successful ERP may be brought in to assist with the integration of the new system. In this instance clear and direct communication must be established.

Business Process Re-engineering (BPR)

BPR is a management strategy which each article stated as a CSF for all organisation types albeit an SME or MNC. Organisations perform BPR to restructure processes to eliminate inefficient and non-value adding operations and to align their ongoing business activities with industry best practices (Shang and Seddon, 2007).

In the more recent articles of my choosing, the importance of addressing this process prior to project commencement was greatly emphasized. The rationale for this is that if a company fails to define business process improvements before their ERP implementation they are more likely to simply automate their existing broken process. In this instance, project teams will focus will take the easiest path not necessarily making the changes for the ERP project a success and beneficial for the business i.e. simply configuring software to fit existing processes.

Conclusion

From my chosen eight articles, a theme regarding the CSFs to ERP project implementation became apparent. In order for the project to be successful the organisation must look to have effective project management, communication, Planning, Training and Education, and business process remodelling. These factors are linked, the practice of one influences the ability to implement the other. My reading of the combined eight articles and the conclusions drawn from them, gave me broader understanding of ERP implementation and the challenges associated with it.  The diversity of the various authors approach provided me with many different lenses, giving me a breadth of understanding regarding the CSFs for ERP implementation.

References/Articles

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