Factors Influencing Selection and Effective Implementation of ERP Systems in Medium Sized Organizations in Developing Countries
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Factors Influencing Selection and Effective Implementation of ERP Systems in Medium Sized Organizations in Developing Countries Samudaya Nanayakkara [email protected] Prasad Perera [email protected] and Asoka Perera [email protected] University of Moratuwa, Sri Lanka Abstract: Information Technology (IT) This researchis mainly based on and Information Systems (ISs) compose a qualitative research methodology. critical role in today’s business Primary data were collected from medium environment. Enterprise Resource sized industry and their Information Planning (ERP) systems are the most Technology (IT) experts though interviews. cutting-edge IS in present business The objective of using the qualitative environment. By bringing a company’s research was to find out common and different functions together into one large main barriers and their effect to integrated system, an ERP system creates implementation and adaptation of ERPs. a plethora of opportunities for growth and Furthermore, secondary data such as increased productivity. Medium sized Literature was also contributory to the enterprises in the developed world are main outcome and results. well ahead in their usage of ERP systems. Influencing factors that analysis research However, the available studies pertaining results reveal new way of rationale for to the use of ERP systems in developing selecting and implementation of ERP countries reveal that, the medium scaled systems in medium sized companies in businesses in Sri Lanka are far behind in developing countries. Results in summary; adaptation of ERP systems. Literature higher influencing factors in selecting reveals that there are many significant process are Vendor/Software Reputation, contributing factors that effect selecting Alignment with Business Function, Cost and implementation of ERP systems in and C-level Officers' countenance. And as medium sized organizations in developing this research identifies important factors countries. influencing success of implementation and 7 Factors Influencing Selection and Effective Implementation of ERP Systems in Medium Sized Organizations in Developing Countries adaptation of ERPs are Alignment with understanding about the benefits of an ERP Business Function, Support and Training, system to such organizations [1]. Usability and User friendliness, Two main motivations impact to the Implementation Team, Vendor-Employee improvement in IT usage in the globe, in the Interaction and C-level Officers' last two decades, especially effecting to the countenance. In other words this research developing countries. Cost of Information shows that not only a single IT domain’s and Communications Technology (ICT) factors can influence in success of ERP became more and more inexpensive and selection and implementation but also and affordable to many industries [2]. Open it is essential to manage modern processes Source paradigm became more popular and with interdisciplinary comprehension. more advance enough to offset Proprietary Software [3]. Keywords: Information Technology, The paper begins by briefly discussing Enterprise Resource Planning, Medium ERP and medium sized organizations in the Scale Business, Influencing Factors developing countries. It then introduces the research context and methodology. After I. INTRODUCTION briefly outlining the research approach, the Most of the manufacturing oriented findings on how factors influence success of organizations in the globe especially in the ERP is discussed. Based on the data analysis, developed countries have moved on with this qualitative research determined what are implementing ERP systems, and some of the factors influencing selection and them are gaining gigantic benefits. The ERP effective implementation of ERP systems in systems are typically the largest, most medium sized organizations in developing complex, very expensive and most countries. challenging Information Systems (IS) II. ERP SYSTEMS implemented by firms, representing a significant departure from the individual and ERP evolved from the concept of MRP departmental ISs prevalent in the past. ERP and MRP II systems since the end of 1980. systems are most popular in Energy, The term ERP was invented in the 1990s by Materials, Capital Goods, Automobiles and the Gartner Group. Built on the technological Components, Consumer Durables and basis of MRP and MRP II, ERP systems with Apparel, Consumer Services, Transportation, the ability to create enterprise-wide cross- Retailing, Food, Beverage and Tobacco, functional business processes and provides Technology Hardware and Equipment, real-time accessibility, visibility and Finance, Utilities and many more industries. consistency across the organization. In late However service organizations yet to 1990, ERP vendors began adding more understand the full potential and the main modules and functions such as add-ons "to reason behind this is lack of knowledge and address business processes, such as financial International Journal of the Computer, the Internet and Management Vol.21 No.2 (May-August, 2013) pp 7-14 8 Samudaya Nanayakkara, Prasad Perera, and Asoka Perera transactions, the birth of the concept of" ERP available. Some of the leading Open Source II ". The evolution of the ERP reflects the ERP systems include Openbravo, ERP5, fact that many non-manufacturing sectors OpenERP, webERP, Dolibarr, Apache OFBiz, began to adopt ERP systems for the financial Opentaps, PostBooks Adempiere and business, accounting and others. The ERP Compiere [9], [10]. extensions include SCM, CRM, APS, and Table II [8] and Table III [8] demonstrate e-business functionalities [4]. average implementation cost (USD) and average implementation duration (months) by variance industries in 2010. III. FACTORS INFLUENCING SELECTION AND IMPLEMENTATION OF ERP SYSTEMS Choosing an ERP to use within an organization is a complex decision that has Fig. 1 Reasons for Implementing ERP [5] significant economic consequences, thus it Findings from a one recent market study requires a proper analysis. [11] defined shows that the global ERP software market fifteen criteria should be addressed in to grow at a CAGR (compound annual selection process under Technology-Related, growth rate) of 7.5% over the period 2011- User-Related and Vendor-Related categories. 2014 [6]. Figure 1 shows main reasons for Those important fifteen factors are implementing ERP and Table I shows Customization, Real Time Changes, average payback periods. Implementability, Maintenance, Flexibility, TABLE I User Friendliness, Cost, Systems AVERAGE PAYBACK PERIODS [7] Requirements, After Sales Support & Year Payback Duration Training, Internet Integration, Reporting & 2009 32 Months Analysis Features, Vendor Credentials, 2010 30 Months Integration with Other Software, Back-up 2011 28 Months System and Financing Options [11] . [12] 2012 25 Months explained twenty key success factors. Those Team Work, User Involvement, Use of Proprietary ERP systems such as SAP ERP, Oracle E-Business Suite, Microsoft Consultant, Clear Goal and Objective, Dynamics, Sage ERP, ProcessPro and IFS factors are Top Management Support, Project ERP hold largest market share in ERP Budget, Project Time, Organization Maturity domain [8]. However, within the last decade Level, Culture Readiness, ERP Open Source ERP applications are clearly Implementation Strategy, ERP growing and acquiring the ERP market. Implementation Methodology, Project Presently hundreds of Open Source ERPs are Management, Change Management, Risk 9 Factors Influencing Selection and Effective Implementation of ERP Systems in Medium Sized Organizations in Developing Countries Management, Business Process and have, in most cases, a medium to low Reengineering, Data analysis and migration, standard of living. There is a strong Communication, Training, Technology correlation between low income and high Infrastructure and Strong ERP product [12]. population growth and some key indicators of their relative sized (GDP valued by PPP, IV. MEDIUM SIZED ORGANIZATIONS total exports of goods and services, and IN THE DEVELOPING COUNTRIES population) [13], [14]. The country classification in the World There is no clear global definition for Economic Outlook divides the world into medium sized company or organization, two major groups, advanced economies however some key indicators are used to countries, and emerging and developing classify the category of the organization are economies countries also called a less- number of employees, investment, developed country (LDC). Developing investment in plant and machinery, staff countries are, in general, countries that have headcount, annual turnover and annual not achieved a significant degree of balance sheet [15]. For an example, in Sri industrialization relative to their populations, TABLE II AVERAGE IMPLEMENTATION COSTS BY INDUSTRY AND ANNUAL REVENUE (IN MILLIONS) TABLE III AVERAGE IMPLEMENTATION DURATION BY INDUSTRY AND REVENUE (IN MILLIONS) International Journal of the Computer, the Internet and Management Vol.21 No.2 (May-August, 2013) pp 7-14 10 Samudaya Nanayakkara, Prasad Perera, and Asoka Perera Lanka defines medium sized organizations as categories supported by SQR Nvivo 07 consisting of 30 - 149 numbers of employees software. [16]. Nevertheless, Micro-enterprise, Small VI. ANALYSIS enterprise, Medium enterprise and Large Analysis of interview transcripts consisted enterprise are commonly used organization of four phases. In the stage one, data were categories globally. organised by coding, and developing summaries of