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Critical success factors in ERP implementation: A review

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Abstract

ERP systems have become vital strategic tools in today’s competitive business environment. This ongoing research study presents a review of recent research work in ERP systems. It attempts to identify the main benefits of ERP systems, the drawbacks and the critical success factors for implementation discussed in the relevant literature. The findings revealed that despite some organizations have faced challenges undertaking ERP implementations, many others have enjoyed the benefits that the systems have brought to the organizations. ERP system facilitates the smooth flow of common functional information and practices across the entire organization. In addition, it improves the performance of the supply chain and reduces the cycle times. However, without top management support, having appropriate business plan and vision, re-engineering business process, effective project management, user involvement and education and training, organizations can not embrace the full benefits of such complex system and the risk of failure might be at high level.
European and Mediterranean Conference on Information Systems 2008 (
EMCIS2008
)
May 25-26 2008, Al Bustan Rotana Hotel, Dubai
Al-Fawaz at al. 1
CRITICAL SUCCESS FACTORS IN ERP IMPLEMENTATION:
A REVIEW
Khaled Al-Fawaz, Information Systems Evaluation and Integration Group (ISEing)
Brunel Business School, Brunel University, UK.
khaled.al-fawaz@brunel.ac.uk
Zahran Al-Salti, Information Systems Evaluation and Integration Group (ISEing)
Brunel Business School, Brunel University, UK.
zahran.al-salti@brunel.ac.uk
Tillal Eldabi, Information Systems Evaluation and Integration Group (ISEing)
Brunel Business School, Brunel University, UK.
tillal.eldabi@brunel.ac.uk
Abstract
ERP systems have become vital strategic tools in today’s competitive business environment. This ongoing
research study presents a review of recent research work in ERP systems. It attempts to identify the main
benefits of ERP systems, the drawbacks and the critical success factors for implementation discussed in
the relevant literature. The findings revealed that despite some organizations have faced challenges
undertaking ERP implementations, many others have enjoyed the benefits that the systems have brought
to the organizations. ERP system facilitates the smooth flow of common functional information and
practices across the entire organization. In addition, it improves the performance of the supply chain and
reduces the cycle times. However, without top management support, having appropriate business plan
and vision, re-engineering business process, effective project management, user involvement and
education and training, organizations can not embrace the full benefits of such complex system and the
risk of failure might be at high level.
Keywords: ERP, Benefits, Drawbacks, Success factors
1. INTRODUCTION
Understanding the critical success factors in implementing Enterprise Resource Planning (ERP)
systems has been a challenging process for many organizations worldwide. An ERP system
enables an organization to integrate all the primary business process in order to enhance
efficiency and maintain a competitive position. However, without successful implementation of
the system, the projected benefits of improved productivity and competitive advantage would not
be forthcoming.
In its basic definition, ERP is an enterprise-wide information system that integrates and controls
all the business processes in the entire organization. According to Nah and Lau (2001) ERP is “a
packaged business software system that enables a company to manage the efficient and effective
Critical success factors in ERP implementation: A review
European and Mediterranean Conference on Information Systems 2008 (
EMCIS2008
)
May 25-26 2008, Al Bustan Rotana Hotel, Dubai
Al-Fawaz at al. 2
use of resources (materials, human resources, finance, etc.) by providing a total, integrated
solution for the organization’s information-processing needs”. This software facilitates, if well-
implemented, the integration of all the functional information flows across the organization into
a single package with a common database. Therefore, it allows easy and immediate access to
information regarding inventory, product or customer data, and prior history information
(Shehab et al., 2004).
ERP initially covered all routine transactions within an organization only. However, it was later
expanded to cover external customers and suppliers (Turban et al., 2006). Nah and Lau (2001)
stated that most ERP systems now have the functionality and the capability to facilitate the flow
of information across all business processes internally and externally. Furthermore, ERP systems
have the capability to “reach beyond their own corporate walls to better connect with suppliers,
distributors and customers to engage in e-business”.
Today, many public and private organizations worldwide are implementing ERP systems in
place of the functional legacy systems that are not anymore well-compatible with modern
business environment. However, according to Kroenke (2008), the process of moving from
functional applications to an ERP system is difficult and challenging. Additionally, the switch to
ERP system is expensive and it requires development of new procedures, training and converting
data (Zhang et al., 2005).
2. RESEARCH AIM
Many ERP research studies have determined several critical success factors in ERP
implementations (see table 1). These studies, however, discussed the success factors from
different prospective and in different contexts.
The aim of this study is twofold: to identify the most cited ERP critical success factors in the
literature and to arrange these scattered factors in an organized and adequate set in order to have
a better understanding and a clearer picture of the factors that are considered to be vital for a
successful ERP implementation.
3. METHODOLOGY
This study is a review of literature on ERP. We decided to focus our study on articles that
discuss the ERP implementation and particularly the critical success factors. All the articles that
we selected are published in peer-reviewed and prestige journals. There are two up-to-date books
used in this study. All the articled surveyed were extracted from different business and
information systems databases such as ABI Inform, Emerald, ScienceDirect and ACM Digital
Library. We used the terms ERP, Enterprise Resource Planning, ERP success factors. We
limited the search date to be between (2000 and 2007) in order to get relatively new articles. To
better analyze the articles, we divided them into three categories based on the main topic they
discussed. The three categories are: ERP overview, ERP benefits and drawbacks, ERP success
factors.
Critical success factors in ERP implementation: A review
European and Mediterranean Conference on Information Systems 2008 (
EMCIS2008
)
May 25-26 2008, Al Bustan Rotana Hotel, Dubai
Al-Fawaz at al. 3
4. FINDINGS
The next three sub-sections discuss the main findings revealed from the reviewed articles.
Firstly, the benefits of ERP are presented. Then, the challenges of ERP implementation are
identified. The third section outlines and discusses the key factors that contribute to ERP success.
4.1 Benefits of ERP
Several research studies have identified various important benefits the ERP systems bring to
organizations. O’Leary (2000) stated that an ERP system integrates the majority of the business
processes and allows access to the data in real time. Furthermore, ERP improves the performance
level of a supply chain by helping to reduce cycle times (Gardiner et al., 2002). There are also
some intangible benefits that an organization may enjoy by implementing an ERP system
including, better customer satisfaction, improved vendor performance, increased flexibility,
reduced quality costs, improved resource utility, improved information accuracy and improved
decision-making capability (Siriginidi, 2000).
4.2 Drawbacks of ERP
Despite the potential benefits discussed above, however, ERP systems also have a number of
drawbacks. For example, most ERP systems tend to be large, complicated, and expensive
(Mabert et al., 2001). Moreover, ERP implementation requires an enormous time commitment
from an organization’s information technology department or outside professionals. In addition,
because ERP systems affected most major departments in a company, they tended to create
changes in many business processes. According to Shang and Seddon (2002) putting ERP in
place requires new procedures, employee training, and both managerial and technical support.
4.3 Critical Success Factors in ERP implementation
Table1 presents the main factors revealed from the literature review and that are found to be vital for
successful ERP implementation:
Critical Success Factor References
Top management support Al-Mashari et al. (2003); (Umble et al., 2003); Zhang
et al. (2002)
Business plan and vision Loh and Koh (2004); Schwalbe, (2000); Somers and
Nelson (2004); Nah (2003)
Re-engineering business process Davison (2002); Hammer and Champy (2001); Somers
and Nelson (2004); Nah (2003); Murray and Coffin
(2001)
Effective project management
and project champion Zhang et al.,( 2002); Somers and Nelson (2004);
Remus (2006); Loh and Koh, (2004)
Teamwork and composition Loh and Koh (2004); Al-Mashari et al., (2006); Remus
(2006); Nah (2003); Rosario (2000)
ERP system selection Wei and Wang (2004); Shehab et al., (2004);
Everdingen et al. (2000); Sprott (2000)
User involvement Esteves et al., (2003); Zhang el at (2002)
Education and training (Woo 2007); Nah et al., (2003); Zhang et al. (2002)
Table 1. Critical success factors in ERP implementation
Critical success factors in ERP implementation: A review
European and Mediterranean Conference on Information Systems 2008 (
EMCIS2008
)
May 25-26 2008, Al Bustan Rotana Hotel, Dubai
Al-Fawaz at al. 4
4.3.1 Top Management Support
Top management support has been identified as the most important success factor in ERP system
implementation projects. According to Zhang et al. (2002) top management support in ERP
implementation has two main aspects: providing leadership and providing the necessary
resources. Additionally, the roles of top management in ERP implementation comprise
developing an understanding of the capabilities and limitations, establishing reasonable
objectives for ERP system, exhibiting commitment, and communicating the corporate strategy to
all employees (Umble et al., 2003).
Al-Mashari et al. (2003) argued that top management support does not end with initiation and
facilitation, but must extend to the full implementation of an ERP system. Furthermore, top
management support should provide direction to the implementation teams and monitor the
progress of the project.
4.3.2 Business Plan and Vision
A clear business plan and vision is needed to guide the project throughout the ERP life cycle
(Loh and Koh, 2004). Project management identifies three competing and interrelated goals
namely; scope, time, and cost goals (Schwalbe, 2000).The primary stage of any project should
begin with a conceptualization of the goals and possible ways to achieve these goals.
Additionally, goals should be explained so they are specific and operational, and to indicate the
general directions of the project (Somers and Nelson 2004).
Nah (2003) stated that one of the biggest problems ERP project leaders face comes not from the
implementation itself, but from expectations of board members, senior staff, and other key
stakeholders. It is important to set the goals of the project before even seeking top management
support. Many ERP implementations have failed as a result of lacking clear plans (Somers and
Nelson 2004).
4.3.3 Re-engineering Business Process
Hammer and Champy (2001) defined Business process re-engineering (BPR) as “the
fundamental rethinking and radical redesign of business processes to achieve dramatic
improvements in critical, contemporary measures of performance, such as cost, quality, service
and speed”. Somers and Nelson (2004) stated that BPR plays a significant role in the early
stages of implementation. Furthermore, it is important in the acceptance stage and tends to be
less important when the technology becomes routine.
Nah (2003) noted that reengineering should continue with new ideas and updates to take full
advantage of the ERP system when the system is in use. Organizations should be willing to
change their businesses to fit the software in order to reduce the degree of customizations
(Murray and Coffin, 2001). Many organizations have made unnecessary, complex
customizations to ERP software because the people making the changes do not fully understand
the organization’s business practices (Nah 2003). According to Somers and Nelson (2004) the
Critical success factors in ERP implementation: A review
European and Mediterranean Conference on Information Systems 2008 (
EMCIS2008
)
May 25-26 2008, Al Bustan Rotana Hotel, Dubai
Al-Fawaz at al. 5
new business model and reengineering that drives technology choice is an enabling factor that
can give to ERP success. Furthermore, Davison (2002) argued that ERP implementation often
requires changes in job descriptions and essential skills.
4.3.4 Project Management and Project Champion
ERP systems implementation is a set of complex activities thus organizations should have an
effective project management strategy to control the implementation process (Zhang et al.,
2002). Project management activities span from the first stage of the ERP life cycle to closing it.
Project planning and control is a function of the project’s characteristics such as project size,
experiences with the technology, and project structure (Somers and Nelson, 2004).
Remus (2006) noted that project champion is one of the most important factors in the
implementation of ERP systems. Project champions should own the role of change champion for
the life of the project and understand the technology as well as the business and organizational
context. Furthermore, project champion must attempt to manage resistance towards positive
change in the old system (Loh and Koh, 2004).
4.3.5 Teamwork and Composition
The ERP team should involve of the best people in the organization (Loh and Koh 2004). Al-
Mashari et al., (2006) the success of projects is related to the knowledge, skills, abilities, and
experiences of the project manager as well as the selection of the right team members. Also,
team should not only be technologically competent but also understand the company and its
business requirements (Remus 2006).
An ERP project involves all of the functional departments in an enterprise. It demands the effort
and cooperation of technical and business experts as well as end-users (Loh and Koh 2004). Both
business experts and technical knowledge are important for success (Nah 2003). The sharing of
information between the implementation partners is essential and requires partnership trust (Loh
and Koh 2004). Moreover, the team should be familiar with the business functions and products
so that they know what needs to be improved to the current system (Rosario 2000).
4.3.6 ERP System Selection
The selection of a suitable ERP system is a challenging and time-consuming process. Wei and
Wang (2004) stated that there is no one single ERP package that could provide all the
functionalities required for the business. There are various ERP packages in the market with similar
functionality but different designs including, SAP, Oracle, JD Edwards and Baan (Shehab et al.,
2004). Therefore, an organization must select an appropriate vendor that able to provide a
flexible ERP system. Various authors identified important criteria that need to be taken into
account when selecting a new ERP system. For example, a study by Everdingen et al. (2000)
stressed that the ERP system selected has to closely fit with most of the current business
procedures. Additionally, the system has to be flexible, user-friendly and easy to implement.
Another similar research study by Sprott (2000) reported that applicability, integration,
adaptability and upgradeability are essential factors that have to be considered in ERP adoption.
Critical success factors in ERP implementation: A review
European and Mediterranean Conference on Information Systems 2008 (
EMCIS2008
)
May 25-26 2008, Al Bustan Rotana Hotel, Dubai
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4.3.7 User Involvement
User involvement is one of the most cited critical success factors in ERP implementation
projects. User involvement increase user satisfaction and acceptance by developing realistic
expectations about system capabilities (Esteves et al., 2003). User involvement is essential
because it improves perceived control through participating the whole project plan. According to
Zhang el at (2002) there are two areas for user involvement when the company decides to
implement an ERP system: user involvement in the stage of definition of the organization’s ERP
system needs, and user participates in the implementation of ERP systems.
4.3.8 Education and Training
Educating and training users to use ERP is important because ERP is not easy to use even with
good IT skills (Woo 2007). Nah et al., (2003) argued that sufficient training can assist increase
success for ERP systems. However, lack of training may lead to failure. According to Zhang et
al. (2002) the main reason for education and training is to increase the expertise and knowledge
level of the users within the company.
5 LIMITATION OF THE RESEARCH
At present, we do not claim that a comprehensive review has been conducted to identify the
benefits, the drawbacks and the main critical factors for ERP implementation. However, despite
the need for more rigorous analytical methods, this study helped us at this stage to evaluate the
related ERP literature and gain theoretical background on the subject which shall prepare us for a
large-scale empirical study in the future.
6 CONCLUSION AND LESSONS LEARNED
To adapt to today’s challenging and competitive business environment, organizations are
implementing ERP systems to achieve a capability to plan and integrate enterprise-wide
resources in order to shorten lead times, and to be more responsive to customer demands.
This paper attempts to review the ERP literature and identify the benefits, drawbacks and the
critical success factor in ERP implementation. While this paper does not produce generalizable
results, it provides insights for IS practitioners who may consider implementing ERP in their
organizations. The paper identifies the most cited success factors in the literature and illustrates
their significant importance in ERP implementation.
Most of the articles stressed that each organization must assess itself, to see if it is ready for ERP.
Many organizations that attempt to implement ERP systems run into difficulty because such
organizations may not be ready for integration and the various departments within it have their
own agendas and objectives that conflict with each other.
Critical success factors in ERP implementation: A review
European and Mediterranean Conference on Information Systems 2008 (
EMCIS2008
)
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Despite the fact that ERP integrates and optimises the flow of information across the entire
organization’s supply chain, the implementation of such software packages can be costly, and may
even require reengineering the entire business operations. Combinations of factors have to be
considered when undertaking an ERP implementation including: top management support, business
plan and vision, Re-engineering business process, effective project management and project
champion, careful package selection process, teamwork and composition, user involvement and
education and training.
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Critical success factors in ERP implementation: A review
... Top Management Support (Rahayul & Dillak, 2018;Kausar & Budi, 2020;Malik & Khan, 2020;Al-Fawaz, et al., 2008;Juniawan et al., 2022;Wicaksono et al., 2022) Effective Project Management (Rahayul & Dillak, 2018;Al-Fawaz et al., 2008;Kronbichler et al., 2009) Business process Reengineering (Rahayul & Dillak, 2018;Malik & Khan, 2020;Al-Fawaz et al., 2008;Aini et al., 2020) Hardware and Software Selection (Rahayul & Dillak, 2018;Kausar & Budi, 2020) Education and Training (Rahayul & Dillak, 2018;Al-Fawaz et al., 2008;Wicaksono et al., 2022) Organizational Culture (Kausar & Budi, 2020;Malik & Khan, 2020) Implementation Process (Kausar & Budi, 2020) ERP Implementation Team Characteristics (Kausar & Budi, 2020) Project Team Competence (Juniawan et al., 2022;Nagpal et al., 2017) Clear Goals and Objectives (Juniawan et al., 2022;Wicaksono et al., 2022) Team Composition (Juniawan et al., 2022;Kronbichler, 2009) Organizational Change Management (Malik & Khan, 2020;Juniawan et al., 2022;Wicaksono et al., 2022) The Effectiveness of Project Leader (Juniawan et al., 2022) Cooperation between Team Members (Juniawan et al., 2022) End-User Involvement (Al-Fawaz et al., 2008;Juniawan et al., 2022;Wicaksono et al., 2022;Kronbichler et al., 2009) Testing and Start-up of the System (Juniawan et al., 2022) Organizational Impact (Aini et al., 2020) Information Quality (Aini et al., 2020) Individual Impact (Aini et al., 2020) Workgroup Impact (Aini et al., 2020) Vendor and Consultant Quality (Malik & Khan, 2020;Aini et al., 2020;Kronbichler, 2009) System Quality (Aini et al., 2020) ERP Fit (Kausar & Budi, 2020;Al-Fawaz et al., 2008;Juniawan et al., 2022;Aini et al., 2020;Wicaksono et al., 2022) Previous studies are detailed in Table 2, which is supported by confirmation from the case organization's primary ERP implementation project team. The subsequent list comprises 15 critical success factors that must be considered when implementing ERP at PT XYZ, a social insurance company. ...
... Top Management Support (Rahayul & Dillak, 2018;Kausar & Budi, 2020;Malik & Khan, 2020;Al-Fawaz, et al., 2008;Juniawan et al., 2022;Wicaksono et al., 2022) Effective Project Management (Rahayul & Dillak, 2018;Al-Fawaz et al., 2008;Kronbichler et al., 2009) Business process Reengineering (Rahayul & Dillak, 2018;Malik & Khan, 2020;Al-Fawaz et al., 2008;Aini et al., 2020) Hardware and Software Selection (Rahayul & Dillak, 2018;Kausar & Budi, 2020) Education and Training (Rahayul & Dillak, 2018;Al-Fawaz et al., 2008;Wicaksono et al., 2022) Organizational Culture (Kausar & Budi, 2020;Malik & Khan, 2020) Implementation Process (Kausar & Budi, 2020) ERP Implementation Team Characteristics (Kausar & Budi, 2020) Project Team Competence (Juniawan et al., 2022;Nagpal et al., 2017) Clear Goals and Objectives (Juniawan et al., 2022;Wicaksono et al., 2022) Team Composition (Juniawan et al., 2022;Kronbichler, 2009) Organizational Change Management (Malik & Khan, 2020;Juniawan et al., 2022;Wicaksono et al., 2022) The Effectiveness of Project Leader (Juniawan et al., 2022) Cooperation between Team Members (Juniawan et al., 2022) End-User Involvement (Al-Fawaz et al., 2008;Juniawan et al., 2022;Wicaksono et al., 2022;Kronbichler et al., 2009) Testing and Start-up of the System (Juniawan et al., 2022) Organizational Impact (Aini et al., 2020) Information Quality (Aini et al., 2020) Individual Impact (Aini et al., 2020) Workgroup Impact (Aini et al., 2020) Vendor and Consultant Quality (Malik & Khan, 2020;Aini et al., 2020;Kronbichler, 2009) System Quality (Aini et al., 2020) ERP Fit (Kausar & Budi, 2020;Al-Fawaz et al., 2008;Juniawan et al., 2022;Aini et al., 2020;Wicaksono et al., 2022) Previous studies are detailed in Table 2, which is supported by confirmation from the case organization's primary ERP implementation project team. The subsequent list comprises 15 critical success factors that must be considered when implementing ERP at PT XYZ, a social insurance company. ...
... Top Management Support (Rahayul & Dillak, 2018;Kausar & Budi, 2020;Malik & Khan, 2020;Al-Fawaz, et al., 2008;Juniawan et al., 2022;Wicaksono et al., 2022) Effective Project Management (Rahayul & Dillak, 2018;Al-Fawaz et al., 2008;Kronbichler et al., 2009) Business process Reengineering (Rahayul & Dillak, 2018;Malik & Khan, 2020;Al-Fawaz et al., 2008;Aini et al., 2020) Hardware and Software Selection (Rahayul & Dillak, 2018;Kausar & Budi, 2020) Education and Training (Rahayul & Dillak, 2018;Al-Fawaz et al., 2008;Wicaksono et al., 2022) Organizational Culture (Kausar & Budi, 2020;Malik & Khan, 2020) Implementation Process (Kausar & Budi, 2020) ERP Implementation Team Characteristics (Kausar & Budi, 2020) Project Team Competence (Juniawan et al., 2022;Nagpal et al., 2017) Clear Goals and Objectives (Juniawan et al., 2022;Wicaksono et al., 2022) Team Composition (Juniawan et al., 2022;Kronbichler, 2009) Organizational Change Management (Malik & Khan, 2020;Juniawan et al., 2022;Wicaksono et al., 2022) The Effectiveness of Project Leader (Juniawan et al., 2022) Cooperation between Team Members (Juniawan et al., 2022) End-User Involvement (Al-Fawaz et al., 2008;Juniawan et al., 2022;Wicaksono et al., 2022;Kronbichler et al., 2009) Testing and Start-up of the System (Juniawan et al., 2022) Organizational Impact (Aini et al., 2020) Information Quality (Aini et al., 2020) Individual Impact (Aini et al., 2020) Workgroup Impact (Aini et al., 2020) Vendor and Consultant Quality (Malik & Khan, 2020;Aini et al., 2020;Kronbichler, 2009) System Quality (Aini et al., 2020) ERP Fit (Kausar & Budi, 2020;Al-Fawaz et al., 2008;Juniawan et al., 2022;Aini et al., 2020;Wicaksono et al., 2022) Previous studies are detailed in Table 2, which is supported by confirmation from the case organization's primary ERP implementation project team. The subsequent list comprises 15 critical success factors that must be considered when implementing ERP at PT XYZ, a social insurance company. ...
Article
Full-text available
Enterprise resource planning (ERP) implementations often encounter multifaceted challenges, leading to failures. Success relies on technical competence, management support, and user engagement. Unique organizational processes significantly influence outcomes. Failures can disrupt operations, highlighting the need to identify critical success factors (CSFs) for effective ERP implementation. This study employed analytic hierarchy process (AHP) methodology to analyze CSFs. Data collection involved surveys administered to a social insurance company's ERP project team in Indonesia. This study revealed 15 success factors, categorized into organization, process, and technology dimensions. Organization emerged as the most crucial, followed by technology and process. Among these, five CSFs stood out: project team competence, vendor and consultant quality, ERP fit, top management support, and hardware and software selection.
... [55][56][57] Recent Trends: Recent studies have focused on integrating sustainability metrics such as carbon footprint into ERP systems. [53,54,58] Common Methodologies ...
... [62] Opportunities: Properly integrated ERP systems can make carbon footprint management more efficient and contribute to achieving sustainability goals. [53,54] Real-Time Data: The Internet of Things (IoT) and other technologies can facilitate real-time data collection and integration, increasing the accuracy of carbon footprint assessments. ...
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Thesis
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organization resilience, erp implementation, succes factors
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