Critical Success Factors For ERP Implementation: The Case .

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International Arab Journal of e-Technology, Vol. 4, No. 1, January 20151Critical Success Factors for ERP Implementation:The Case of JordanEmad Abu-Shanab1, Rasha Abu-Shehab2, Mousa Khairallah31,2Yarmouk University, 3Almajdouie Group, Dammam, Saudi Arabia.Abstract: ERP systems are complex systems that face high probability of failure. Implementing such systems need carefulplanning and guarding against factors for failure. This study tried to explore the major key success factors (KSFs) that willturn the implementation process to a success. The study utilized 60 responses from managers and executives of local Jordaniancompanies in a pursuit for the highest KSFs in the Jordanian environment. Results are reported with conclusions and futurework at the end of this paper.Keywords: Enterprise Resource Planning, ERP, Success, Failure, KSF, empirical study, Jordan.1. IntroductioneTReceived March 1, 2013; Accepted September 5, 2013IAJLeon proclaimed that “ERP isn’t going to take over theworld because it already has”, and this was in the year2000, how about now [17]? During the past fewdecades, a high competitive business environment andthe extensive evolution in information systemtechnology have created a necessity for new systemsthat integrate all functions in and among organizations.Enterprise resource planning (ERP) systems, whichemerged in the late 1980s and early 1990s, is a singleapplication that can monitor all business functions.ERP system is an attractive solution especially forhuge companies to get rid of all problems, wheremanagers open a single application and easily find anyinformation among all business functions [19].ERP systems are too complicated to be assimilatedand controlled within an organizational context. Recentliterature reviews of this area emphasized theimportance of understanding the implementationprocess and also propose diverse typologies of futureresearch [25]. This study will try to explore howJordanian firms perceive the diverse benefits of ERPsystems. The following section will review theliterature, followed by the context of the study and thedata analysis, and finally end with the discussion andconclusion.communication” [23]. Also, Yazgan, Boran andGoztepe defined it as: “an integrated consulateenterprise wide information system that combines allnecessary business functions like production planning,purchase, inventory control, sales, finance and humanresource ” [32].Enterprise resource planning (ERP) is a system thatuses computer technology in order to link variousfunctions such as accounting, inventory control,finance, operations, supply chain, and human resourcesacross an entire company. It is important to recognizethe high cost of ERP implementation which requirescomplex processes and social interaction betweendepartments and organizations [29]. ERP system isconsidered as one of the most important developmentsin the information technology (IT) corporations sincethe 1990s till present [29]. From the previousdefinitions, ERP system is intended to facilitateinformation sharing, business planning and decisionmaking on an enterprise-wide basis, and it is also ableto share the data from these processes with othercorporate software systems.2. Literature Review2.1. ERP SystemIn simple terms “ERP systems are software packagesthat enable the integration of business processesthroughout an organization” [21, p. 294]. EnterpriseResource Planning (ERP) system is defined as “asingle software system allowing the completeintegration of information flow from all functionalareas in companies by means of a single database andaccessible through a unified interface and channel of2.2 ERP Implementation CostOrganizations must realize the high cost of ERPimplementation and assess if it is ready for such step[15]. ERP implementation requires a wide range ofknowledge and external expertise; without externalhelp it is really hard for any organization to be able toimplement ERP successfully [22]. In addition to thepreviously mentioned costs, ERP implementation cotsalso include training of staff and the customization ofthe system to fit with existing firm interfaces [2].In small to mid-sized companies, ERPimplementation budget approximately ranges from M2 to M4. On the other hand, for largeorganizations it can exceed M100. Furthermore, andafter the implementation of ERP systems, where some

2International Arab Journal of e-Technology, Vol. 4, No. 1, January 2015Table 1. Costs of ERP Implementation Phases nUse andmaintenanceEvolutionRetirementTangible CostsIntangible CostsDecision making costsConsultancyHardwareSoftware licensingConsultancyTrainingHuman ionSystem adaptationCosts of systemfailureCosts of newapplicationsDecision making costsOpportunity costsCustomization, conversionand data analysis, Time(dedicated by staff)Business Process ReengineeringIndirect costs of systemfailureLost competitivenessOpportunity costsDecision making costs2.3. Critical success factors (CSFs)eTorganizations gain many benefits and achieve somecompetitive advantage, others encounter costly failures.Also, because success requires an adaptation andalignment between IT and organizational environment,the implementation should be “fit” among all thecontingent variables such as business processes, users’background, IT capabilities, and organizational culture[29].Many ERP projects failed because ERP software isnot properly implemented and caused seriousconsequences, high financial losses and many lead tobankruptcy. For instance, after two years of building itsERP system, Dell suffered a loss close to M200 [31].Also, Koh, Gunasekaran and Cooper reported that 40%of all ERP installations only achieve partialimplementation and nearly 20% are scrapped as totalfailures [14]. Despite of all the significant benefits ofERP, there is a high failure rate expected to reach 60%to 90% [16]. Previous studies indicated that ERPimplementation approximately requires between 1.56.0% of organization’s annual revenue [13]. Researchindicated that: in 2006 about 67% of companies spentmore than M1, and 13% of them spent more than M20 on ERP systems [23]. The same authorsproclaimed that such issue will have a compound effectsince ERP projects never stop; after finishing theimplementation, maintenance will start [23].During the ERP life cycle, the associated costs canbe categorized into the following: tangible costs andintangible costs. Tangible costs are easy to measure inmonetary terms, while intangible costs are difficult tomeasure in monetary terms. Table 1 illustrates thevarious types of costs as reported by the authors.Following an explanation of the ERP system lifecycle phases as described by Merkuryev and Habil [20]:The first phase is the adoption decision phase, inwhich the manager decides to adopt the new system orreject this idea depending on the need for the system.The acquisition phase is the selection of an ERPsystem that fits with the organizational needs; thisphase includes analyzing preliminary factors such asprice, and may require help from external consultants.The third phase is the implementation phase, wherecustomization is identified to fit the system withorganizational needs. The use and maintenance phaseis the fourth phase as the system should be maintainedto ensure the usability, functionality and adequacy.Fifth is the evolution phase: in this phase newcapabilities are integrated to ERP system to meetspecial requests and high level of customization;described as maturity phase because it provides andenhances the benefits of system. Finally, the retirementphase, it occurs when the system become unable tomeet organizational needs because of the manifestationof new substitute technologies that meets firms needs.IAJIn order to resolve this costly failure trap and maintaina success path in ERP implementation, many studiesidentified a set of critical success factors (CSFs) forERP implementation. CSFs include top managementsupport, vender’s support, consultant’s competence,users’ support, IT capability, and project managementleadership [29]. Similar to this study, Ustasüleymanand Percin concluded that project management,consultant planning activities and internal audit weresignificant in predicting the ERP implementationsuccess [21].On the other hand, successfulsystemimplementation needs explicit objectives as the firststep, the second condition is embedding organizationaland technology dimensions into information system,and finally, resolving practical problems in the road ofsuccessful implementation [7]. Another study bySomers and Nelson summed the challenges faced byfirms throughout the implementation and utilization ofERP systems in a list called critical success factors(CSFs) and concluded that the highest among the 22factors were: top management support, project teamcompetency and interdepartmental cooperation. On theother hand, the least among all was the use ofconsultants [26]. The authors concluded to the factorsthat facilitate the success of ERP implementation andemphasized the early and careful preparation of theprocess and also securing commitment and cooperationfrom everyone. Finally, vender-outsourcing decisionsneed to be managed carefully as the authorsrecommend that delegating responsibility at the start ofthe project might be suitable, but at later stages thedelegation of responsibilities should not be forwardedto venders.Similar to the previous study, Hasibuan and Dantesexplored 20 KSF of ERP implementation and relatedthem to the ERP implementation stages [9]; theimplementation stage and the most important KSFwere as follows: communication factors in the project

Critical Success Factors for ERP Implementation: The Case of Jordan2.4. Difficulties Facing of ERP AdoptionOur previous assertions indicated that ERP systemsface a high probability to fail, escalate, and exceed itsbudgeted resources [13, 14, 16, 23, and 31]. Beforestarting an ERP implementation process, organizationsshould prepare a feasibility study of ERP adoption.Many problems may be encountered during ERPrequirement elicitation phase such as: The problem ofdescribing the requirements; the developer tries todevelop the system according to users’ needs, whereusers fail to clearly identify what they want. This couldbe described as communication problem [11]. Suchphenomenon will result in users’ dis-satisfaction ofrejection of the system.Research indicated that ERP systems do not providethe expected satisfaction specially when implementingsystems like customer relationship management (CRM)and data warehousing [10]. The study concluded thathuman-related issues dominate the barriers to attainingthe expected benefits of the system. Also, changemanagement was a major cause of other issues thatprevented the realization of ERP benefits. Sammon andAdam [24] identified a set of ERP implementationproblem areas:eTpreparation stage, package selection in the technologyselection stage, change management in the projectformulation stage, and finally user training in theimplementation and development stage. Another studyin the public sector domain grouped KSF into similarones and according to the following typology:procurement procedure, government processesmanagement, project team competence, and projectmanagement process [33].Koh et al. studied the (CSFs) for ERPimplementation; the result included: user training andexternal consultancy as significant key factors forsuccessful ERP implementation [14]. Such resultindicates improper user training and ignores externalhelp that can lead to high failure rate. Users’involvement is also considered as an important factorfor achieving successful ERP system as it reduces thepotential of users’ resistance for change [16]. Otherissues that can inflect failure into the implementationprocess might be employee education and vendors’support [28].Ke and Wei concluded that organizational culture isone of the main important factors that influence ERPimplementation process; culture is highly dependent onleadership. Leadership means how to lead the wholeorganization [13]. Thereby, leadership plays a majorrole in defining organizational culture. ERP success isinfluenced by organizational culture; if organizationalculture motivates employees to improve their skills andsupports innovative ideas it will foster a successfuladoption of ERP system. On the other hand, if theadoption of any new information system or technology,not necessarily ERP, conflicts with organizationalculture, the result will be user resistance the change.The possible solution will be either modification thisnew system to correspond with existing culture orrejection this technology [13]. Lo, Tsai and Liconcluded that a good selection of the softwaresupplier will enhance the possibilities of successfulimplementation [18].From users’ perspectives, a study explored theinfluence of nine service-oriented related factors on thesuccess of ERP systems and concluded that the mostimportant three factors were: domain knowledge,communication, and attitude [6]. Such conclusionasserts the importance of technology adoption by usersfor the success of any new implemented system. Also,consultant participation inflected a positive influenceon ERP implementation satisfaction through usertraining and IT staff skills, where its effect was foundto be direct and indirect on satisfaction of users in anIranian related study [27]. More research isemphasizing the importance of human resource factorsmore than other factors related to planning,implementation and stabilization of system [12].3IAJ Failure in accepting the change: one of the mainpotential problems that is expected to appear duringERP implementation phase, which is called (TheChange problem). The fit: is another potential problem during theimplementation phase, which indicates the failure ofdefining clear project objectives. Such problem willminimize performance level.

successful implementation [7]. Another study by Somers and Nelson summed the challenges faced by firms throughout the implementation and utilization of ERP systems in a list called critical success factors (CSFs) and concluded that the highest among the 22 factors were: top management support, project team competency and interdepartmental cooperation. On the other hand, the least among all