Resource Planning systems are integrated and complex systems for businesses and
most operate them successfully. Enterprise Resource Planning (ERP) is a
software solution that integrates business functions and data into a single
system to be shared within a company. While ERP originated from manufacturing
and production planning systems used in the manufacturing industry, ERP
expanded its scope in the 1990’s to other corporate functions such as human
resources, finance and production planning. Swartz, D., & Orgill, K.
(2001). Higher education ERP: Lessons learned. Educause Quarterly, 24(2), 20-27.
A significant number of organizations have adopted ERP over the last two decades,
and the revenue of the ERP market has grown from $17.2 billion in 1998 to $39.7
billion in 2011 Dover, C. (2012). Worldwide enterprise resource management applications
2012–2016 forecast and 2011 vendor shares . (MARKET ANALYSIS No. 238476,
such as Hershey, Whirlpool and Samsonite that suffered tremendous disasters do
acknowledge that the systems are able to handle the job. The systems are able
to function as required however, companies run into costly and sometimes fatal
difficulties with the implementation and subsequent maintenance of these system
packages. According to The Gartner Group, 70 percent of all ERP projects fail
to be fully implemented, even after three years Gillooly, C. (1998),
“Disillusionment”, Information Week, 16 February, pp. 46-56. There is no single
factor responsible for a failed implementation, and no individual reason to be
credited for a successful implementation.
According to the Journal Success and failure factors of adopting SAP
501 Business Process Management Journal Vol. 11 No. 5, 2005 pp. 501-516 published
by Emerald Group Publishing Limited. There
are generally two levels of failure that is, complete and partial failures. In
a complete failure, the project either was completely compromised before
implementation or it failed to the extent that the company suffered major long-term
financial damage. The partial
failure implementations are often those that resulted in non-stop adjustment to
business processes, resulting in disruptions in the 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 minimal downtime,
adjustments or alignment issues problems.
Studies reveal that ERP
implementation is a highly complex process and concludes that further research
is needed to investigate issues which influence the success and failure of ERP
implementation. However it should be taken to note that the factors which
affect ERP implementation differ from region to region and company to company.
Europe and North America represent
the largest portion of ERP market because these regions have infrastructures
which effectively facilitate the integration of business processes and
Information Technology. These countries also are the ones that have
multinational entities. Dillard, J. F., & Yuthas, K. (2006). Enterprise
resource planning systems and communicative action. Critical Perspectives on
Accounting, 17(2), 202-223 stated that most multinational firms are using ERP
and that more small and midsize companies have begun to adopt ERP. Their rapid
economic growth further drives the need for new technology. The Unites States
Of America is the primary target for ERP vendors and represents 66 percent of
revenues for the major vendors such as SAP and PeopleSoft. Government policies
and deregulation by the government fuel technology development.
Europe is the second largest
target ERP sales market (at 22 percent). Many big ERP vendors started their
business from Europe; e.g. SAG AG, Baan, JBA International and Intentia.
Historically, strong manufacturing industry is an underlying reason for so many
ERP vendors in Europe. There are several reasons for Europe’s ERP market.
First, economically advanced countries have a solid industrial and
manufacturing base. Second, there is a strong national information
infrastructure. Third, the multiple-language and multi-currency requirements
make the ERP software attractive. Fourth, quality employees are available to
implement advanced technologies. Europeans designed the first integrated ERP
system SAP in Germany, 1972, whereas, organizations in North America seem to
have richer experience in this kind of software and have used integrated
software solutions for decades.
Japan is one of the most
technologically advanced countries in the world, however their situation is
unique. Japan’s geographic/regional location and IT culture constrain ERP usage
because Japanese organizations emphasize employee loyalty and provide all means
to retain employees, they build systems in-house or customize existing
software. Companies in developed countries are more likely to succeed in the
ERP imlementation. Also organizations are developing a strong process
management orientation (Davenport, 1994). BPR is practiced frequently in North
American and European countries.
Much of the research that has been
carried out in the developed countries has provided evidence that the failure
of ERP implementations is not mainly caused by the ERP software itself, but
rather by a high degree of complexity from the massive changes ERP systems
cause in organizations (Scott, J. E., & Vessey, I. (2000). Implementing
enterprise resource planning systems: The role of learning from failure.
Information Systems Frontiers, 2(2), 213-232;
Helo, P., Anussornnitisarn, P., & Phusavat, K. (2008). Expectation
and reality in ERP implementation: Consultant and solution provider
perspective. Industrial Management & Data Systems, 108(8), 1045-1059,
Maditinos, D., Chatzoudes, D., & Tsairidis, C. (2012). Factors affecting
ERP system implementation.effectiveness. Journal of Enterprise Information
Management, 25(1), 60-78.). The failures can be explained by the fact that ERP
implementation is forcing companies to follow the principle of ‘best practices’
in most successful organizations and form appropriate reference models. (Zornada
& Velkavrh, 2005) According to Helo et al., (2008), “Unlike other
information systems, the major problems of ERP implementation are not
technologically related issues such as technological complexity, compatibility,
standardization, etc. but mostly about organization and human related issues like
resistance to change, organizational culture, incompatible business processes,
project mismanagement, top management commitment, etc.
are expected to help organisations
meet their strategic objectives of
development, and sustain their visibility within the global
market (Mhlanga et al., 2012).
ERP in developing countries
The Asia-Pacific ERP market accounts
for 9 percent of revenues, and Latin America for 3 percent.
Economic expansion, especially in
Asian countries, is the major reason. Second, fierce competition and
pressures from Western
corporations force firms in developing countries to vigorously pursue
technology. However, ERP is in its
early stages in developing countries. Inadequate IT infrastructure,
policies, small size of companies,
lack of IT/ERP experience, and low IT maturity seriously affect the adoption
decision. China, India, and Brazil
are selected as representative countries for ERP discussion.
China has achieved impressive
economic growth in recent years. It is undergoing a technological change with
huge IT investments in both public
and private sectors. However, there are only a handful of companies using
ERP systems.International vendors
play a primary role. There are a few local software packages that are low cost
primarily accounting and financial
applications. For example, Yongyous software is widely utilized, but it
focuses on accounting functions
and is not a real ERP system. There are no local professional ERP vendors.
Major international vendors have
opened their business in major cities. Some vendors access the market via
their delegated international
companies such as IBM, Compaq, Andersen, and Price Waterhouse Coopers.
Infrastructure is a major problem.
Telecommunications, though significant improvements have been made in
recent years, is good only in
major cities. The telephone density, although increasing, is still quite low
1996). Internet service is
expensive, not to mention ISDN, ATM, T1, T3 and other broadband services. The
government is finding it necessary
to allow competition and profit making organizations (even foreign
companies) to raise the telephone
density to its target of eight per 100 by year 2000.
Low IT maturity of China’s
industries is also a major problem. Low IT maturity manifests into several
symptoms. Enterprises lack a
long-term MIS strategy, and IS departments/staff (if they exist) lack project
experience. Often, companies have
limited process management knowledge, and BPR is seldom conducted.
Chinese management style, informal
planning and process modeling, highly interdependent social and
organizational relationships, and
attitudes towards organizational change all limit process innovation efforts
(Martinsons, 1998). Most companies
have limited knowledge of international business practice. Language is
also an important concern.
Mandarin is the official language and spoken by most Chinese, whereas English
used by MNCs. The language causes
communication barriers between Chinese users and international ERP
vendors. Furthermore, high
economic growth built on a weak base has lead to diverse business practices and
cross industry enterprise
Owing to these reasons, major ERP
customers in China are limited to global MNC corporations. Some large
state-owned organizations are
potential ERP users but they are haunted by high costs. Small and middle-sized
enterprises are virtually excluded
out of this market.
India has also achieved
significant economic growth in recent years. Its IT industry growth is quite
India is the largest developing
country base for global software outsourcing (Heeks, 1996). Moreover, global
software outsourcing continues to
grow rapidly, with over US$3.00 billion in contracts from developing
countries in 2000 (and expected to
be $15 billion by 2003). India also owns the best software engineers in the
world. Because English is the
official business language, its IT staff can communicate effectively with
counterparts in the world.
However, IT diffusion and
implementation lags far behind, and ERP growth in India has been quite slow
in recent years (Erry, 1998).
While the country boasts of decades of manufacturing, availability of skilled
workers, English as the business
language, and the first MRP-II/ERP systems introduced over a decade ago, yet
the ERP penetration is estimated
at a piddling 6 percent. Even this rate was achieved after a 75 percent growth
in the last two years. According
to one estimate, this market was expected to be only around US$10 million by
year 2000 (Erry, 1998).
The low ERP penetration is due to
several reasons. The first reason is that the infrastructure is far below any
organizational requirements. The
country’s telephone density is quite low with 0.6 phones per 100 in 1990
(Dutta 1996), although it has
increased some since then. The telecom industry is still a monopoly of the
government. In 1997, Asia Pacific
Telecommunication Indicators pointed out that India would need to invest
$14.43 billion over three years to
achieve a telephone density of 2.34 per 100.
The second reason, both for India
and China, is that organizations lack a culture that regards computers as a
pervasive way of doing business.
Indian state excise authorities refuse to accept excise returns in a format
than manual registers. India’s PC
penetration is only at 0.7 per 1,000 (Erry, 1998). IT maturity is quite low
among local firms. Although the
economy has been opened up, foreign investors face daunting procedures
forgovernmental approvals. Local corporations lack stiff competition; thus
there is little stimulus to adopt
The third has to do with common
perceptions about ERP. The common belief is ERP systems are only for larger
companies because of the high
costs of acquisition, implementation and maintenance. As a result, service and
support are rudimentary. Most
organizations are first-time users and perceive a lack of expertise.
some companies did not have a very
successful experience with ERP and do not see many benefits.
Characteristics of ERP
implementation in developing countries
Several factors from the framework
were significant in ERP implementation in developing countries. Among
current economic status and economic growth, infrastructure, and government
regulations fundamentally impact
on IT adoption and ERP penetration. In infrastructure such as transportation,
telecommunications, Internet and
intranet, mobile telecommunications, and public database systems, developing
countries obviously have a poor
record and suffer from the consequences. ERP is not a stand-alone system and
has to work in an integrated
environment to gain maximum value. However, infrastructure alone cannot boost
ERP adoption: other factors such
as governmental policy encouraging foreign investment and fair competition
are also essential.
From an organizational and
internal perspective, low IT maturity, small firm size, and lack of process
management and BPR experience
hamper ERP adoption. Enterprises commonly lack MIS long-term strategy
and project experience. As a
result, most customers of IT applications are not domestic companies, but
subsidiaries of MNCs. In
developing countries, SMEs play a major role in the national economy.
affordability and availability are
major concerns. Firms also lack process management orientation and BPR
experience. Unlike past computer
systems, ERP systems are off-the-shelf and impose their own logic on the
company, often forcing companies
to change the way they do business. While promising, the actual experience
of using IT to redesign business
processes is limited in developing countries.
According to Seyed
M.S. Hosseini (2012) Successful implementation of
ERP requires the change in staff behavior, processes, departments and organizations. This was their conclusion drawn from a research
that was carried out in India.
The African continent is endowed
with a specific context of poor economic capacities, limited infrastructure, limited
human skills, and a particular culture of resistance to technological
advancement (Al-Debei and Al-Lozi, 2012). Given the complexities and risks
related to ERP systems (Mukwasi and Seymour, 2015), implementing them within
the African context might enhance the difficulties of the implementation. These
difficulties raise the problem of defining an efficient way to implement ERP systems
within the African context. Pouransafar, M., Cheperli, M. and Tabrizi, M.R.F.
2013, Failure Factors of ERP stated that 70 percent of all ERP projects fail to
be fully implemented even after three years. Ahanyan, S., Azar, A. and Fard, H.
D. 2012. Utilising multi-aspectual understanding as a framework for ERP success
evaluation: A case study, Journal of Enterprise Information Management, 25(5),
pp 479-504 added that the management team has to concentrate not only on
economic and formative objectives but also on the other aspectual objectives
which are more qualitative and intangible for the success of ERP implementation.
Projects in an Iranian Context,
IOSR Journal of Business and Management (IOSRJBM), 9(4), pp 83-87.
Enterprise Resource Planning
Systems are the tools that at assist companies in developing and maintaining a
competitive edge in this paradigm of global integration. However, the absence
of Enterprise Resource Planning systems is a determining factor for most organizations
to compete globally (Bhagwat & Sharma, 2007). As such, large multinational
companies have increasingly invested in ERP systems to address the information
requirements needed to be competitive in an increasingly globalized environment
(Madapusi & D’Souza, 2012). ERP Systems were ranked the third (3rd) most
important information technology (IT) application in the 2009 and 2010 Society
for Information Management (SIM) membership survey, moving from the 14th
position in 2008 (Luftman & Zadeh, 2011). This development was due to cost
reductions associated with ERP systems through automation, given that business
productivity and cost reduction were the biggest management concerns (Koh,
Gunasekaran & Cooper, 2009; Luftman & Zadeh, 2011; Madapusi &
D’Souza, 2012). ERP systems can potentially impact costs by reducing inventory
levels, decreasing lead times, increasing productivity, facilitating corporate
communication, improving information and decision making capabilities, and
improving customer service Furthermore, intra firm ERP systems enable firms to
standardize, integrate, and streamline their data and process flows (Koh,
Gunasekaran & Cooper, 2009; Madapusi & D’Souza, 2012)
There is a high emphasis placed on
ERP systems as a means to increase business productivity and reduce costs in
order to be more competitive in a global business environment (Luftman &
Davenport, T.H. (1998),
“Putting the enterprise into the enterprise system”, Harvard Business
Review, JulyAugust, pp. 121-31.