Critical factors for ERP implementations has been saved
Critical factors for ERP implementations
Enterprise Resource Planning (ERP) systems are well organised systems which integrate an organisation’s business processes efficiently. This article discusses the key factors for successful implementation.
ERP systems organise business processes into different segments called “modules” which are then used to run the core areas of the business such as sales management, inventory, finance, etc. Their efficiency and respective use of a centralised database is what differentiates them from other solutions.
However, the substantially high implementation failure rate is to be taken into consideration as they may occur in 40% to 90% of projects. As a result of the increasing demand for these systems, the importance of reducing this failure rate is ever-growing as they require substantial investment which is a major obstacle for small and medium-sized enterprises (SMEs).
Critical success factors (CSFs)
CSFs serve as a form of guidance for all the stakeholders involved in the project. This is done by allowing stakeholders to understand the factors and their importance. There has been a substantial number of studies conducted on the factors contributing to the success of these projects. Additionally, due to the heavy overlap between CSFs and critical failure factors (CFFs), the following lists have been amended:
- ERP solution selection: It is crucial for the client to choose the right ERP system for his business. Consulting with an expert in this field to find the best solution is recommended. This eliminates the need for extensive customisation which often leads to the failure of such projects.
- Top management commitment: Top management commitment is an extremely important CSF. This refers to having committed and responsible management in the project from the client’s side to ensure employee commitment and clear communication throughout the implementation.
- Key user motivation: The users’ motivation to make use of the systems’ full potential is another factor which contributes to the success of the project. This motivation normally stems from good communications and the users experiencing first-hand the efficiency it brings to the enterprise. This sense of involvement will increase motivation and further assist in a successful implementation.
- Competitive pressure: The importance of competitive pressure is highlighted in many studies and it is the main reason as to why many opt for an ERP system. They seek to gain an edge over their competitors through the system’s ability to increase efficiency in the workplace whilst reducing costs.
- External consultancy: An external consultant should provide the appropriate guidance and assist in the selection of the right system. Organisations making use of external consultants, experience much higher success rates when it comes to implementing ERP systems.
Critical failure factors
The analysis of the critical failure factors of the ERP implementation process is vital because it is believed that knowing about potential future problems is the best way to mitigate them. These factors will better inform stakeholders to avoid similar scenarios, further reducing the ERP project failure rate. Even though there are a lack of studies regarding the CFFs of ERP projects, they should not be ignored and must be given more importance. The following list of CFFs has been determined.
- Inadequate knowledge: More often than not, businesses looking to upgrade or implement an ERP system themselves would not possess adequate ERP knowledge. This CFF may be avoided through the use of ERP consultation derived from an experienced consultant so that he may endow the client with the appropriate guidance.
- Insufficient user training: Insufficient end-user training may lead to serious consequences for organisations. The users of the system might have already been reluctant to the change, not providing them with the appropriate training will continue to demotivate users from accepting this change.
- Extensive degree of customisation: ERPs are not one-size-fits-all. The ability to add or remove modules from the system is crucial, however problems are bound to arise as soon as drastic changes are done. These changes normally lead to a number of inefficiencies, ultimately defeating its purpose.
- Reluctance to change: A common cause of ERP failures is the business’ reluctance to change the way they operate. For a successful implementation, all departments must believe in the benefits that will arise from such a system, so that it can be adopted and used to its full potential.
- Lack of business process reengineering: It is highly recommended for businesses undertaking such projects to conduct what is known as a ‘Business Process Reengineering’. This is done to determine whether the current internal systems and procedures are working in efficient manner.
The acknowledgment of these factors alone can aid in the reduction of the implementation failure rate of ERP systems. These will make stakeholders more aware of what they should be giving importance to throughout the duration of the project and ultimately allow them to reap the benefits of adopting such a system.