Introduction
Technology has been a substantial inclusion in the world of business organizations. Speed and quality in production have attained a new level with companies cutting down on their costs of production. Furthermore, the increase in complexity and diversity of challenges that face business organizations has led to the need for better ways of confrontation. Business organizations, therefore, need to identify technological advantages that would place them at an advantage in the mounting competition. Equally, organizational management has experienced a substantial facelift after the advent of Enterprise Resource Planning (ERP). This technological front leap has enabled organizations to easily harmonize all their activities within a single system. However, not all the organizations that implemented this approach managed to witness positive returns. The main arguments in this paper include factors to consider before implementing ERP systems, factors that determine failure and success during ERP implementation within a given organization, and finally, the challenges of implementing this strategy. The conclusion will offer an alternative approach to ERP.
Jayaraman and Bhatti (2007, p. 1) define ERP as an “information system which attempts to integrate all departments and functions across a company onto a single computer system.” On their part, Motwani, Subramanian, and Gopalakrishna (2005) identify ERP as systems designed with the integral objective of harmonizing and optimizing the processes of a business organization across the entirety of the firm. The definitions point toward the fact that an ERP system integrates all systems and functions of an organization. The systems range from human resources, production, sales, accounting, etc. The system facilitates the integration of all these into one central database.
ERPs are important tools in the facilitation of information flow between the management team and the client base. A client-server network that allows the management to capture important data that facilitates decision-making and strategy formulation enables this.
This system of operation also assists the organizations to compete favorably in the challenging economic market. Whereas, organizations initially considered price and quality as the main tools of competition, Yusuf, Gunasekaran, and Abthorpe (2004) argue that this approach no longer functions in the present market. Flexibility and responsiveness to market demands are fundamentals that an organization must address for any substantial success. It has therefore been the role of information technology to facilitate this. Equally, Manufacturing Resource Planning (MRPII) and enterprise resource planning (ERP) have acquired a place in the market. Given such an important role, it is arguable that the introduction of ERP within business organizations is one of the greatest uses of information technology within the last few decades. However, several questions need answers. To facilitate the comprehension of this topic, questions such as “Do all institutions that try to employ this strategy succeed” and “What are the factors that lead to their failure” become inevitable. The subsequent parts will try to answer these questions before embarking on providing a solution to this problem.
ERP in the Current Market
Enterprise resource Planning has gained a larger market of late. Though it experienced a bumpy start because of the presence of various drawbacks in the initial attempts like faulty systems and inadequate number of skilled personnel, the number of organizations resorting to this system is increasing steadily. According to Bingi, Sharma, and Godla (1999), the demand for this system of management was to increase greatly. Although the market, at the time when they were writing was $15 billion, estimations pointed out that the size would increase to $50 billion in a span of only five years. Furthermore, the vendors of the systems also pointed out a large profit resulting from an increase in demand for the product. In addition, their predictions were to increase because of the number of firms with the likelihood to demand the services in the near future.
The values above show that ERPs are million-dollar ventures that could implicate greatly to the company resorting to installing them should anything go wrong. Implementation of ERP is not only expensive in terms of the purchase of the relevant software, but also the changes necessary to use this service. In fact, Bingi and colleagues (1999) posit that once implemented, there is no possibility of going back. Because of this, the implementation of ERP has led several companies into serious financial implications and bankruptcy. A good example of organizations that have suffered the brunt for unsuccessful implementation of ERP is Unisource Worldwide. This company wrote off $168 that was attributed to the implementation of ERP to all its branches nationwide by SAP. On its part, FoxMeyer a drug company worth $5 billion declared bankruptcy after its unsuccessful attempt to implement ERP. It resorted to using SAP for its misfortunes. The reason for the lawsuit was that SAP contributed greatly to the financial turbulence that they faced. Dell Computer Company also experienced complications related to the implementation of ERP programs. They had to terminate the program despite the publicity given to it (Al-Mashari, Al-Mudimigh & Zairi 2003, p. 356; Blick et al. 2000, p. 340).
The above examples point out that the implementation of ERPs can be a dangerous venture if it turns out to be unsuccessful. This can lead a company into losing millions of dollars. However, this does not mean that no company has succeeded to implement this program. What most of these examples of failure have failed to understand is the fact that ERP implementation needs more than physical resources to succeed. Bingi et al. (1999) purport that this process involves carefully laid strategic thinking that involves planning and negotiations with the different departments and divisions of the given organization. It involves a prior knowledge of certain issues before any endeavor of implementation.
Implementation of ERP
The main role of ERP is ensuring that there is adequate communication between the different departments and sections of the organization. For instance, a good implementation of ERP must include a well-established link between the manufacturing section, the management team, and the financial department, the system of distribution, the external sources of distribution and all the customers. A well-implemented system leads to reduced inventory. In addition, it cuts down on the working capital of the organization and offers the decision-makers (management) adequate information on what their customers and clients need. The following are the factors to consider before deciding to implement ERPs (Bacon, 1993, p. 245; Davenport, 1998, p. 121).
Self-assessment is the first factor to consider before implementing these systems. Whereas, the role of ERPs is managing the resources of the organization, it is at the same time the role of the organization to manage the system (Esteeves & Pastor, n.d., p. 40). An organization must ensure that it has done a self-assessment to determine whether it is capable to maintain this system or not. It must understand the positives of ERPs before it implements them. By understanding the benefits, it can assess its ability to make use of this system to the fullest. After assessing the benefits, the organization must ensure that it harmonizes its operations so that they are compatible with the centralized system. According to Yusuf et al. (2004), most companies that have failed to understand to the fullest the benefits of ERP and those that failed to harmonize their operations ended up failures in this endeavor. This happened because of conflicting objectives and agendas from the different departments. With such an environment of parallel and conflicting objectives, ERPs cannot be successful.
Planning is especially critical in the implementation and acquisition of a favorite ERP system within an organization because it helps the implementers to ensure that the goals for the acquisition are in harmony with the organization’s needs. It is only through thorough planning that the operations of the organization the encompass all the branches are well within a reasonable range of the IT capability of the organization. Planning also includes coming together of the management and the IT teams so that the management can identify the organizational needs, which will therefore mark the IT teams’ tasks. Through planning, the IT team ensures that it comes up with supporting technologies that meet the management’s specifications (Jayaraman & Bhatti, 2007, p. 3; Soh et al, 2000, p. 50).
Within planning, it is important that the organization looks for adequate information concerning the vendors of the ERP and the system itself. It is necessary that there is adequate research on all these and the implementation team has adequate information. Accurate and reliable information about these two is necessary for any success story. Presentations and market analysis should define the main methods of information collection. Other methods include questionnaires and the use of consultants. After the team understands the company’s needs and requirements, it will there identify the relevant ERP package that will be appropriate for these needs.
Second, the management must show total commitment. Bingi et al. (1999) point out clearly that management commitment is an imperative for any success in the implementation of any IT venture. This includes the implementation of ERP. Without the management’s commitment, it becomes impossible for the organization to undergo self-evaluation. The questions relevant for self-evaluation can only be answered by the management as opposed to any other department that of the organization. For instance, failure becomes inevitable whenever the management bestows the role of ERP implementation to the IT department. With the decisions relevant for the implementation of this program, the management must take part because the IT department may fail to harmonize the operations of the organization hence allowing conflicts that lead to the failure of ERP system.
Whereas ERP is about technology, this does not act as the bedrock of the system. ERP is a process that involves people. Implementation of this system leads to changes within the whole organization. The changes include altering the departments that used to work independently to operate within a system that is very dependent on one with the other. It, therefore, is the role of the management to captain the changes characterizing ERP implementation. In addition, the management should ensure that they monitor the process and identifying whether it is becoming negative or positive. Finally, ERP is a million-dollar venture. This means that an organization has to incur heavy financial obligations to ensure the system’s success. This heavy funding can only be successful if the management commits itself completely to the program (Bingi et al. 1999; Gable, 1998, p. 55).
In most cases, the company needs are very diverse therefore pose a challenge for the developers of the ERP. It is almost impossible to find one application that happens to meet all the company’s needs. It is important that the team involved in the implementation of the ERP ensure that it comes up with diverse applications that later merge so that the different needs of the organization are addressed. Considering this, the integration of the different applications becomes an integral part of ERP implementation. The company intending to implement an ERP program must therefore find ways through which all these different patchworks can merge to form one very solid form of ERP. In addition, the team must also understand how the technical challenges of the integrated products. This includes the linking mechanism of the integrated programs even after upgrading the application.
Finally, literature points out that prior to the implementation, it is imperative that the organization selects a very skilled and knowledgeable team whose role will be ensuring that the most appropriate ERP system is achieved. This team therefore calls for a mixture of IT specialists who would work together with the people expecting the services of the system. With a combination of the two, the users will identify their needs before making them known to the developers who will ensure that they develop a system that encompasses all the needs.
ERP Implementation Strategy
ERP implementation is one of the most challenging parts of a business organization. This calls for proper strategizing before the process (Willcocks & Sykes, 2000, p. 23; Chen, 2007, p. 45). Therefore, this part of the paper will try to identify the strategies employed by organizations to come up with a successful ERP implementation. First, organizational strategies are those that require the strategic restructuring of the organizational operations and structures. As mentioned earlier, for a successful implementation of ERPs, there have to be changed within the organization to facilitate the operations of the ERP. Therefore, implementation of change strategies is a prerequisite. The teams responsible for the ERP implementation must ensure that they have strategies that will enable them develop appropriate changes, their deployment mechanisms and finally ensure a sustainable management of the changes.
ERP works hand-in-hand with the structure of the firm. In fact, the role of ERP defines greatly the company’s structure. In addition, ERP also works hand-in-hand with the company’s resources starting with physical to human resources. This means that the implementation of these systems brings in a new approach to the firm. It will subject the firm to new ways through which organizational resources and structures will have to adhere. This determines the second organizational strategy. The implementers of the system must ensure that they come up with a strategy that will ensure that the required changes in the organization structure and resource maintenance are compatible with the new system (Aladwani, 2001, p. 267). The organizational changes include also the strategies to address the managerial restructuring that will be compatible top the new rules (Genoulaz & Grabot, 2005, p. 546).
In most cases, technical changes include the changes that reflect the ERP programs themselves. They involve the technicalities involved in the installation of the ERP system. In addition, its complexity in terms of use and installation is a technical problem that needs technical strategies. For a proper operation and maintenance efficacy, there has to be knowledge of the system by the people working within the organization. This means that in-house technical expertise is necessary for any success in ERP. Therefore, there has to be a strategy that will ensure that there is adequate in-house expertise for proper operation and maintenance. Finally, there have to be technical strategies to address the issue of time and cost related to this implementation (Wilcocks & Sykes, 2000, p. 153). The organization must factor in the time necessary to change their operations from the traditional operations to the use of ERPs. The organization must also ensure that the implementation cost is well within the company’s limits and capabilities. Finally, the people strategies involve the company’s preparations on how the staff and the management will alter their attitudes towards the incoming changes. To facilitate the comprehension of strategies in ERP, these sections will examine some of the strategies before finally assisting in the development of a good strategy that would be favorable for a successful ERP implementation (Hirt & Swanson, 1999, p. 335).
Marketing Strategy
This form of strategizing has, as its main objective, to ensure that the organization remains afloat. This is a strategy is aiming at the customer and the consumers of the organization’s goods or services. Ultimately, this strategy aims at ensuring long-term survival of the organization. Aladwani (2001, p. 267) identifies three major steps to attain a favorable market-oriented strategy. To begin with, the organization must have identified its principal objectives and come up with strategies to meet these developed strategies. This is achieved through a thorough market analysis by putting into consideration each customer’s needs and wants and hence identifying the potential market. By identifying the segments and needs of the customers, it becomes easier to develop a strategy that puts the needs for each segment into consideration during strategy formulation. Differentiation, cost leadership and focus are the main branches used in the formulation of strategies in terms of market orientation. These strategies put into consideration, quality, brand awareness, labor reduction, and government initiatives including subsidies. By putting all these into consideration and coming up with good strategies, the second phase comes in. This involves implementation of these strategies. This bestows upon the management the role of ensuring total adherence to the formulated strategies. Finally, the management must ensure that it puts up evaluation measures that will check if the strategies are meeting the expected challenges (Daneva & Wieringa, n.d.).
Change Strategy
Another approach to ERP strategy formulation involves the use of change strategy. This strategy is also very important because ERP is a form of organizational endeavor that relies on changes. Whereas the workers would be used to a given way of operations, the inclusion of ERP brings in a very new way. The management has to be ready for changes in structure and roles (Scheer & Haberman, 2000, p. 46). Although the managers would be used to a given way of financial and information processing, the inclusion of ERPs in the organization would bring in a very new way of reporting and information communication. In addition, the staff also needs training on how to adapt to the changes characteristic of ERP implementation. Among the changes is organizational culture that presumes a new turn with the implementation of the systems. As a result, strategies to address these changes are necessary to ensure success. Of the greatest importance is the fact that ERPs met with much resistance from both the staff and the management. It is therefore important that the implementation team identify strategies that will be able to address the resistance. This is essential because implementation of ERP requires total commitment from the management. It is therefore important that the team tackle the resistance from the management through good strategies to tackle change (Sarker & Sarker, 2000, p. 167; Zahedi, 1987, p. 56).
Comparison
Considering the mentioned strategies, it is clear that they both need a profound analysis before implementation. Whereas the market-oriented implementation calls for an analysis of the market and consumer characteristics, the change strategy calls for a deep analysis of the company’s operations, starting from the management to staff. In market-based ERP strategy, it is important that the organization carry out an analysis of its clientele, understand its market segments, the potential markets, the unique characteristics of each segment and the challenges, and the strategies that would assist the company stays afloat for a longest possible duration. On the other hand, the change strategy calls for an understanding of the internal characteristics of the organization. It calls for an analysis of what the workers find comfortable, what they believe is uncomfortable, what they would love to have for the future and such things. All these help to develop a more worker-oriented ERP system that will be easily acceptable and hence face less resistance during implementation (Sumner, 1999, 67; Wee, 2000, p. 53).
On the other hand, there are glaring differences between the two strategies involved in ERP implementation. Most of all are the aspect of focus. Whereas the market strategy puts more emphasis on the market aspects of the organization, the change strategy emphasizes the internal characteristics. It is therefore important to note that market strategy puts consideration on the distribution channels, the characteristics of the clientele and the competition from other service and product providers. Most of these emphasize the aspects outside the organization. Contrarily, the change strategy accentuates the internal aspects of the organization. It puts most emphasis on the organizational culture, and operational methods, the organization structure, the reporting methods et cetera in consideration before coming up with a well-developed strategy to account for all this (Porter, 1985, p. 56; Sheth, 1981, p. 278).
Why ERP Implementations Fail
In most cases, many organizations have experienced financial turmoil after a failed attempt to implement ERP. Some have looked for various reasons to explain their misfortunes but others have resorted to suing the service providers for giving them low-quality products. However, the truth is that most instances of failure do not occur from the service providers or the technical aspects of the ERP systems. Usually the organizational fault leads to a flop in the implementation (Aladwani, 1999, p. 45; Parr, 2000, p. 38).
One of the identified causes of failure in these implementations is improper implementation caused by inadequate financing. Companies that tend to tighten their financial pockets during implementation processes also tend to end up with unsuccessful implementation. When the service provider prescribes a given form of ERP, he will have determined that is the most appropriate standard for the company. When the company fails to go for that standard because of financial constraints forcing the provider to resort to a lower quality substitute, the implementation is likely to fail. This means that the organization should ensure that its top management commits to the program. This is especially true given the fact that it is from this level that financial decisions develop (Monk & Wagner, 2006: Monk & Wagner, 2009).
Second, failure to adhere to the changes formulated after the implementation can lead to failure of the ERP system. After the service provider and the implementation team have come up with certain changes, some organizations tend to expect the ERP ROI to take effect immediately. However, this fails to be so. Consequently, they resort to discarding the changes and arguing that ERP is no longer helpful, as it seemed. This determines one of the reasons for failure. The best approach to ERP implementation involves strict adherence to the implemented changes. If an organization fails to adhere to the specified changes, failure is imminent (Guiltinan & Paul, 1988, p. 53; Markus, 2000, p. 63).
Putting the above factors that determine failure of an ERP program can help one come up with a strategy that can guarantee success. This good strategy puts into consideration all the mentioned factors with the aim of sealing the loopholes (Markus, 1983, p. 45). Considering the arguments above, one of the reasons implementations fail is inadequate financing. Management’s decisions can be detrimental to the implementation of ERP. This is attributed to the reason most of the scholars in this field accentuate commitment from the management. Without adequate financing, an ERP implementation cannot be successful. It therefore calls for the management to ensure that it offers full financial support. In addition, ERP dictates changes in the normal working culture. If the workers become stiff on the changes, the system cannot work. It is a prerequisite that the implementation team enacts strategies to tackle and sustain the changes.
Properly Designed ERP Strategy
Considering the mentioned factors above, the most outstanding discovery is that management plays an important role in the success or failure of an ERP implementation endeavor. Notably, ERP is a venture whose fundamental characteristic is changed. From the beginning to the end of the program, change is inevitable. The changes involved in ERP implementation are not just in the staff but also all throughout the continuum of the organization processes starting with the management to the customers. This points out that finding a way of addressing changes within the system may increase greatly the chances of success. On the other hand, the organization cannot experience and sustain any changes without a committed involvement of the management (Schwartz, 1998, p. 45).
This strategy therefore underscores the importance of this assertion. It builds strongly on the fact that changes are the bedrock of ERP implementation and that the management reserves the right to facilitate these changes. Consequently, it lays emphasis on the roles of managers to facilitate success of ERP implementation.
This strategy offers a three-stage process that would assist the implementation team to come up with a solution to the problem of failure.
Phase I
This phase involves problem identification. It involves the use of clear methods of examination to identify the source of challenge e.g. resistance from management or lack of commitment. In this phase, the implementation team will ensure that it identifies the people in the management who seem skeptical about the process. It will also identify the reasons that make them assume this position. Finally, the team should identify the needs of these people. These findings are relevant for the development of phase two. This stage is also important because the beliefs, needs, and expectations of an individual could act as the source of his resistance to change (Kumar & Hillergersberg, 2000, p. 56). It is therefore a prerequisite that the implementation team understands these needs so that they devise strategies to improve chances of resistance and increase the chances of commitment.
Phase II
This stage involves implementing the strategy. Once the team has realized the needs, expectations, and attitudes of the managers and come up with strategies to overcome this, they have to put these strategies into action. The cognitive component of these managers will serve as the vantage point of the changing process. The implementers should devise ways with communication to ensure that the mindset of these people assumes a new perspective (Lee & Lee, 2000, p. 45). This can be achieved through the communicating the benefits of these programs not only to them as managers but also to their employees. Emphasis should not be laid on the components of the ERP program because this will not arouse their desire. The benefits are the most important part.
After achieving favor through attitude change, the immediate endeavor has to be ensuring that the change is sustainable. Although most of the managers may change their attitude toward ERPs, it is not necessary that they will sustain the changes. They could decide to quit believing in the ERP. It is therefore important that the implementers develop strategies to sustain the changes. This strategy proposes the use of periodic training of the management team concerning the cost-effective nature of the ERPs and periodic training of the technicians so that they acquire all the necessary technological skills to handle the changes in the business environment. This will enable them to meet the challenges and hence keep the ERP systems in place to counter the new challenges and hence show good results to managers.
Phase III
This is the final phase. It involves the use of evaluative measures to identify the change in attitude of the managers toward ERP. The implementation team can identify resistance and the commitment each manager gives to the implementation to make the evaluation (Robinson, 1999, p. 35; Rosario, 2000, p. 26). The degree of resistance or commitment can act as a determinant of the success of the program. On the other hand, the evaluation helps to identify the loopholes and hence develop the topic that will need emphasis in the next training. It also offers the team a chance to develop other strategies to cater to the loopholes.
With this program well implemented, there are high chances of success. With the management committed and ready to face and uphold the changes, it is easier for the staff to be ready to face the changes too. The same process will remain the tool for changing the staff’s resistance to changes. The strategy preferred the changes in the management first because their role in implementing changes is more dominant than the staff.
Conclusion
The arguments above are indicators that ERP is an essential part of business organizations. The financial implications involved in their installation and the predicted future demand of the program accentuate the importance of these systems. Unfortunately, not all the organizations that engage in its installation receive positive feedback. Most of them have experienced financial turmoil because of their unfruitful attempts. As a result, scholarship has shown that the process of implementing ERP needs special attention. For instance, the organization must do a thorough self-assessment before making well-strategized plans for the organization. Commitment of the managers is one of the factors that determine success. Second, adherence to the changes that come with ERP implementation is another factor that will determine success or failure. However, the most important aspect identified when implementing ERP is the aspect of change. If the implementation team manages the changes well, ERP can be a success. The implementation team must first start by changing the understanding and perception of the management who will later play the same role to the staff. The tool to use during perception change is communication. The implementation team must ensure that they communicate well so that they can change the attitude of the whole organization toward ERP.
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