Purpose – Enterprise resource planning

Purpose – Enterprise resource planning (ERP) systems are software packages that allow companies to have more real time visibility and control over their operations. This paper aims to investigate and analyze common circumstances that occur within most ERP projects, and determines the areas that are key to success versus those that contribute to failure. Design/methodology/approach – The study is based on a content analysis of published articles reporting SAP implementations in 44 companies. Findings – Identi?

es six common factors that are indicative of successful or non-successful SAP implementations. It has been found that the lack of appropriate culture and organizational (internal) readiness as the most important factor contributing to failure of SAP implementations in 15 companies. The presence of project management approaches and appropriate culture and organizational (internal) readiness are the most important factors contributing to the success of SAP implementations in 29 organizations. Research limitations/implications – The data analyzed is from secondary sources published in the press.

Secondary reporting could increase objectivity; however, the weakness is that not all the factors might have been reported. Originality/value – Identi? es factors critical to the success of SAP implementation Keywords Manufacturing resource planning, Critical success factors Paper type Research paper Introduction Enterprise-wide resource planning (ERP) system software packages are highly integrated, complex systems for businesses, and thousands of businesses are running them successfully worldwide (Koch, 1996).

Even companies such as Hershey, JoAnn stores, Whirlpool and Samsonite that have suffered through classic disasters, acknowledge the software packages are able to handle the job. The systems are capable of functioning as advertised; however, companies run into costly and sometimes fatal dif? culties with the implementation and subsequent maintenance of these packages. According to The Gartner Group, 70 percent of all ERP projects fail to be fully implemented, even after three years (Gillooly, 1998).

Typically, there is no single culprit responsible for a “failed implementation”, and no individual reason to be credited for a successful one. Even the de? nitions of failure and success are gray areas, lending to interpretation. There are generally two levels of failure: complete failures and partial Business Process Management Journal Vol. 11 No. 5, 2005 pp. 501-516 q Emerald Group Publishing Limited 1463-7154 DOI 10. 1108/14637150510619858 BPMJ 11,5 502 failures. In a complete failure, the project either was scuttled before implementation or failed so miserably that the company suffered signi?

cant long-term ? nancial damage. Those implementations considered partial failures often resulted in tenuous adjustment processes for the company; creating some form of disruption in daily operations. In the same vein, an ERP success can be a complete success – one in which everything goes off without a hitch, or one in which there are few alignment problems, resulting in minor inconvenience or downtime. Frequently, these situational circumstances that have to be ironed out in the weeks and months after the “go-live” date are not severe enough to disrupt the daily operations.

There are dozens of vendors of ERP systems. However, the top ? ve ERP system vendors are SAP, Peoplesoft, Oracle, J. D. Edwards, and Baan. SAP has been recognized as the leader with more than 50 percent of the market (Burns, 1999; Mabert et al. , 2000; Stratman and Roth, 2002; Vaughan, 1996). Hence, the current study has focused on SAP implementations as a leading example of ERP system implementation. One of SAP’s major strengths includes the extensive capability of the software’s functionality. Perhaps two of its shortcomings are the complexity of the system and the resulting implementation.

It is widely used in industries such as chemicals and pharmaceuticals (process industries), and also in oil and gas industries. By making a huge and ongoing investment in research and development, SAP continues to strive for increased dominance of the ERP market. Accordingly, developments are underway to gain strength in many other sectors of the economy. There are over 20,000 customers running the SAP software systems today; this equates to 20,000 “successful” implementations. Some of these were originally failures, requiring iterative attempts at making the software work as designed.

In order to determine factors that will indicate early on whether a project will be successful, or doomed to potential failure, 44 companies that implemented SAP were reviewed. These companies vary in size, industry and scope of implementation. The research methodology employed for the analyses was that of content analysis, which examines the content within published articles, and processes the information contained within them through qualitative processes. The companies analyzed implemented SAP between 1995 and 2000. The next section provides a review of the literature on the implementation of ERP systems.

The third section of paper describes the research methodology adopted for this paper. The fourth section elaborates on the ? ndings and describes the factors that play a role in success or failure of SAP implementation. The last section draws some conclusions. Enterprise resource planning systems An effective business strategy centers on an aggressive, ef? cient use of information technology; for this reason the ERP systems have emerged as the core of successful information management, and the enterprise backbone of the organization (Nash, 2000a, b).

A successful ERP system will streamline processes within a company and improve its overall effectiveness, while providing a means to externally enhance competitive performance, increase responsiveness to customers, and support strategic initiatives (Sandoe et al. , 2001). The bene? ts of ERP systems, once the pains of implementation are over, appeal to companies. There are many factors to be considered in making the decision of whether to implement an SAP system or not. The technical aspect is not the only factor that needs

to be considered; unfortunately many companies have not seen this until it was too late. The ? nancial commitment is substantial; therefore, chief executive of? cers and senior executive teams must be deeply involved. Simply put, ERP is not intended for every business. When considering the decision to invest in an ERP system, a business case must be developed to provide an understanding of ERP, and to formally assess the bene? ts that the company – as an individual entity apart from its competitors – can expect to achieve. The analysis must consider not only the obvious cost/bene?

t analysis, but also the non-? nancial factors. Non-? nancial bene? ts include information visibility and ? exibility (Sandoe et al. , 2001). A more complete listing of tangible and intangible bene? ts is provided in Table I. ERP implementation costs are incurred in three areas: software, hardware, and personnel. The personnel (or the human resources) cost is by far the largest and most expensive, but at the same time has been the area given the least amount of consideration. The software and hardware costs are often easily quanti? able; however, the “human” cost is not (Davenport, 2000).

There have been a few papers recently published on the factors contributing to ERP implementation. Dong (2001) proposed a conceptual model exploring the impact of top management on enterprise systems (ES) implementation. Aladwani (2001) described an integrated, process-oriented approach for facing the complex social problem of workers’ resistance to ERP systems. Huang and Palvia (2001) proposed ten factors (at the national/environmental and organizational level) concerning ERP implementation by making a comparison of advanced and developing countries.

The national/environmental factors identi? ed by them are economy and economic growth, infrastructure, regional environment, government regulations, and manufacturing strengths. They also noted that information technology maturity, computer culture, business size, business process re-engineering experience, and management commitment are the organizational level factors. Huang and Palvia (2001) did not categorize the factors into those that contribute to success and those that contribute to failure.