Investigating Critical Success Factors in ERP Implementation Projects

Khodakaram Salimifard

Mehran Ebrahimi

Mohammad Ali Abbaszadeh

Department of Industrial Management Persian Gulf University Bushehr 75168-13798, Iran salimifard@pgu.ac.ir

Department of Industrial Management Persian Gulf University Bushehr 75168-13798, Iran imjebrahimi@yahoo.com

Department of Industrial Management Persian Gulf University Bushehr 75168-13798, Iran ma.abaszadeh@yahoo.com

Abstract-

it is claimed that ERP system can bring many

benefits to the organization, if it is implemented successfully. There are many ERP implementation projects fail to provide what they are claimed for. Therefore, it is very important to find the reasons may contribute to the failure of an ERP implementation project. By examining factors necessary for implementation of an ERP system, in this paper, a set of critical success factors for the project has been identified. An Interpretive Structural Modeling methodology is applied to determine underlying relations among the factors. The findings indicate that top management commitment, clear goals and objectives, important projects. and and technological influential infrastructure are the most factors in ERP implementation

Keywords-ERPj critical success /actorjISM

I.

INTRODUCTION

The complex nature of today's business environment has forced organizations to adopt solutions to improve operational efficiency and enhance core competencies. Enterprise resource planning (ERP) systems which evolved from material requirements planning (MRP) and manufacturing resource planning (MRPII) are advanced infonnation system packages that help organizations to integrate their different business functions [[1]]. An ERP system provides support for core organizational activities such as operations planning, logistics, sales and marketing, finance and accounting, customer relationship management and human resources. Successful implementation of an ERP system can bring many benefits to the organization. It helps different parts of the organization to share data and knowledge, reduce costs, and improve management of business processes [[2]]. ERP is able to provide significant improvements in efficiency, productivity and service quality as well as to more effective decision-making [[3]]. Davenport and Brooks [[4]] mentioned that reduction of cycle time, improvement in infonnation flow, rapid generation of fmancial infonnation, promotion of e-commerce, and assistance in development of new organizational strategies are common benefits of successful ERP implementation. Small and medium sized enterprises (SMEs) are of critical importance to many economies. Nowadays, an
978-1-4244-6932-1/10/$26.00 2010 IEEE

increasing number of SMEs are upgrading their existing systems to enterprise resource planning (ERP) systems. Successful ERP implementation enables SMEs to achieve dramatic gains in business perfonnance. However, the implementation of ERP in SMEs is often fraught with challenges and difficulties. It is considerably different than implementation of any traditional infonnation systems. Three main differences are discussed in [[5]]: The integrated nature of ERP applications causes dramatic changes on workflow, organizational structure, and on the way people do their jobs. ERP systems are not built but adopted; this involves a mix of business process re-engineering (BPR) and package customization. ERP implementation is not just a technical exercise but it is a socio-technical challenge as it poses new set of management procedures Therefore, many ERP implementation projects continue to fail. By examining critical success factors (CSFs) necessary for implementation of an ERP system, we can address the reasons for these failures. In tenns of an ERP implementation, the CSFs are those conditions that must be met in order for the implementation process to occur successfully [[6]]. This paper examines CSFs for the implementation of ERP systems in SMEs. Furthennore, the paper attempts to investigate the relationships between those CSFs identified. Thus, the main objectives of this paper are: To identify the CSFs necessary for ERP implementation in Iranian SMEs, To fmd out the relationships between CSFs, To propose a structural model of CSFs in ERP implementation, and To classify the identified CSFs into various categories. The reminder of the paper is organized as follows. Section 2 presents an extensive literature review on the topic. The Imperative Structural Modeling (ISM) methodology is introduced in Section 3. This section also represents the modeling procedure to apply ISM. The model details and fmdings are discussed in Section 4. Finally, the paper is summarized in Section 5.

82

II.

LI1RATURE REvIEW

D.

User training

Implementation of an ERP system is successful if it meets predetermined goals within the project scope and over a longer period of time. There are many studies reporting more than 50% of ERP implementations have not been successful [[3], [7]]. Therefore, it is not surprising that many organizations are not convinced to implement ERP systems. The risk of ERP projects fail to be implemented successfully has motivated many researchers to investigate the reason an ERP implementation project fail. We have investigated and classified literatures on the failure of ERP projects. Based on an extensive literature review along with discussion sessions with experts from both Iranian SMEs managers and specialists in ERP, 9 CSFs have been identified. The result is summarized in Table 1, and will be discussed in the following subsections.
TABLE I.

Training is another crucial critical success factor in ERP implementation. Everyone who uses ERP systems needs to be trained on how they work and how they relate to the business process early in the implementation process [[31]]. Tarafdar and Roy [[32]] suggest that the training should encompass the development of IT skills. Gupta [[33]] suggest that adequate training can help increase success for ERP systems. Vosburg and Kumar [[34]] observe that lack of proper training can frustrate ERP users.
E. Business process reengineering

CRITICAL SUCCESS FACTORS FOR ERP IMPLEMENTATION PROJECT

Business process reengineering is defmed as a radical redesign of processes in order to gain significant improvements in cost, quality, and services. The role of business process re-engineering (BPR) in implementing enterprise resource planning systems is of p aramount importance [[35]].
F.

1. Top management
commitment and support

Critical Success Factors

ERP

Reference
[[I], [8], [9], [10], [II] , [12], [13], [14], [15],[16], [17], [18], [19], [6], [21], [22]]

Use of consultant

[[8], [13], [IS], [16], [23], [18], [24], [9] , [19], [6], [211, [2211 3. Change management [[I], [8], [9] , [25], [19], [6], [21], [22]] [[I], [8] , [24], [10], [11], [12], [13], [14], [15], [16], . 4. User training [261; [191; [61, [2211 5. Business process [[1], [10], [11], [IS], [16], [26], [17], [27], [28], [19], reengineering [2Ij, [22j] 6. Use of consultant [[24], [19], [6] , [22]] 7. Effective [[IS], [19], [6] , [21], [22]] 2. Clear goals and
objectives Communication infrastructure

The need for an ERP consultant as part of the implementation team is one of the most widely cited CSFs in the literature [[31]]. Consultants may have required experiences in specific industries. Many organizations use consultants to facilitate the implementation process, to perform requirements analysis, to recommend a suitable solution, and to manage the implementation.
G.
Effective communication

8. Technological 9. Project management A.

[[13], [16], [17], [23], [19], [6] , [21], [22]] [[I], [8] , [25], [24], [9], [10], [II], [191, [61, [2211

Communication among various functionsllevels and specifically, between business and IT personnel is another identified CSF [[6]]. Communication is one of the most challenging and difficult tasks in any ERP implementation project.
H.

Top management commitment and support

Technological irifyastructure

Top management commitment and support is one of the most important and widely cited CSFs in the literature. Successful ERP implementation completely depends upon strong and persistent top management involvement [[29]]. Therefore, top management support needs to be included in each step and in all company levels.
B. Clear goals and objectives

It is essential to assess the IT readiness of the organization, including the architecture and skills [[6], [32]]. Adequate IT infrastructure is crucial for an ERP system to be successful. If necessary, infrastructure might need to be upgraded or revamped [[6]].
L

Project management

Clear goals and objectives are crucial critical success factor in ERP implementation. It is important to set the goals of the project before even seeking top management support [[30]]. ERP implementations require that key people throughout the organization create a clear vision of how the company should operate in order to satisfy customers.
C. Change management

Project management is an important success factor in implementing ERP. Project Management involves the use of skills and knowledge in coordinating the scheduling and monitoring of defmed activities to ensure that the stated objectives of implementation projects are achieved [[30]]. Umble et al. [[8]] mention that successful ERP implementation requires excellent project management. III.
METHODOLO GY

Successful implementation of ERP systems requires the organization to change its existing business practices in a way to fit the new system [[19]]. Effective change management is critical for implementation of an ERP system. It is estimated that half of ERP implementations fail to achieve expected benefits because companies significantly underestimate the efforts involved in change management.

Interpretive Structural Modeling (ISM) which first proposed by Warfield (1973) is an interactive learning process in which a set of different and directly related elements is structured into a comprehensive systemic model. ISM is often used to provide fundamental understanding of complex situations, as well as to put together a course of

83

action for solving a problem. The ISM process transforms unclear, poorly articulated mental models of systems into visible, well-defmed models useful for many purposes [[36]]. The various steps involved in the ISM methodology are introduced in the following subsections.
A.

particular CSF is the total number of CSFs which may help achieving it.
TABLE I I I.

FINAL REACHABILITY MATRIX 1 I 1 0 0 0 0 0 1 0 3 2 3 4 5 6 7 8 9 1 1 0 0 0 0 0 I 0 3 1 1 1 1 1 1 0 1 1 8 1 1 0 1 0 1 0 1 0 5 1 1 1 1 1 1 0 1 1 8 1 1 0 0 0 1 0 1 0 5 1 1 1 1 1 1 I I 1 9 1 1 0 0 0 0 0 I 0 3 1 1 1 1 1 1 0 1 I 8

CSF
1. 2. 3. 4. 5. 6. 7. 8. 9.
Top management commitment Clear goals and objectives Chanl!:e manal!:ement User training Business process reenl!:ineerinl!: Use of consultant Effective Communication Technological infrastructure Project management Dependence

Structural self-interaction matrix

driving power
9 9 4 6 4 6 I 9 4

The frrst step is to analyze the contextual relationship of type "leads to" that is one CSF leads to another. Based on this contextual relationship, a structural self-interaction matrix (SSIM) is developed.
TABLE I I.

STRUCTURAL SELF-INTERACTION MATRIX

1. 2. 3. 4. 5. 6. 7. 8. 9.

CSFs
Top management commitment Clear goals and objectives Change management User training Business process reengineering Use of consultant Effective Communication Technological infrastructure Proiect management

V V V
X 0 X

V V

8 7 6 5 4 A V V V V X V V V V 0 0 A X A A 0 A V A V 0 A 0 A

312111 VIx I VI

C.

Level partitions

Four symbols, as shown below, are used to denote the direction of relationship between factors i andj in the table: V: CSF i will help to achieve CSFj; A: CSFj will be achieved by CSF i; X: CSFs i andj will help to achieve each other; and 0: CSFs i andj are unrelated. In this research, 14 experts, including Iranian SMEs managers and academia were consulted to identify the nature of contextual relationship among the CSFs. Based on expert's responses, the SSIM is constructed as shown in Table 2. The numbers on each column corresponds to the same CSF listed on the rows of the table.
B. Reachability Matrix

From the fmal reachability matrix, the reachability set and antecedent set for each CSF is found. The reachability set includes CSF itself and others which it may help to achieve, similarly the antecedent set consists of CFS itself and the other CSFs which help in achieving it. Then, the intersection of these sets is derived for all CSFs. The CSF for which the reachability and intersection sets are same is the top-level CSF in the ISM hierarchy.
TABLE IV.

ITERATION I

CSFs
1 2 3 4 5 6 7 8 9

Reachability set
1, 2, 3, 4, 5, 6, 7, 8, 9 1, 2, 3, 4, 5, 6, 7, 8, 9 3, 5, 7, 9 3, 4, 5, 7, 9 3, 5, 7, 9 3, 4, 5, 6, 7, 9 7 1, 2, 3, 4, 5, 6, 7, 8, 9 3, 5, 7, 9

Antecedent set
1, 2 , 8 1, 2 , 8 1, 2, 3, 4, 5, 6, 8, 9 1, 2, 6, 8 1, 2, 3, 4, 5, 6, 8, 9 1, 2, 8, 6 1, 2, 3, 4, 5, 6, 7, 8, 9 1, 2 , 8 1, 2, 3, 4, 5, 6, 8, 9

ntersection set Level

1, 2 , 8 1, 2 , 8 3, 5, 9 4 3, 5, 9 6 7 1, 2 , 8 3, 5, 9 1

The SSIM is transformed into a binary matrix, called the initial reachability matrix by substituting V, A, X, by 1 and 0 as follows: If the (i, j) entry in the SSIM is V, then the (i, j) entry in the reachability matrix becomes 1 and the (j, i) entry becomes O. If the (i, j) entry in the SSIM is A, then the (i, j) entry in the reachability matrix becomes 0 and the (j, i) entry becomes 1. If the (i, j) entry in the SSIM is X, then the (i, j) entry in the reachability matrix becomes 1 and the (j, i) entry also becomes 1. If the (i, j) entry in the SSIM is 0, then the (i, j) entry in the reachability matrix becomes 0 and the (j, i) entry also becomes O. Then the transitivity of each element is checked, that is if CSF i leads to CSF j and CSF j leads to CSF k, then CSF i should lead to CSF k. The fmal reachability matrix as shown in Table 3 is obtained. In this table, the driving power and dependence of each CSF are also shown. The driving power of a particular CSF is the total number of CSF (including itself) which it may help to achieve. The dependence of a

The top-level CSF m the hierarchy would not help achieve any other CSF above its own level. Once the top level CSF is identified, it is separated out from the other CSFs (see Table 4). Then, the same process is repeated to find out the CSFs in the next level. This iterative process is continued until the level of each CSF is found. Results of the process are summarized in Table 5. The resulting levels help in building the digraph and the final model.
TABLEV.

ITERATION II-IV

Iteration CSFs
ii ii ii iii iv v v

Reachability Antecedent set intersection set Level set

3, 5, 9 3, 5, 9 3, 5, 9 4 6 1, 2 , 8 1, 2 , 8 1, 2, 3, 4, 5, 6, 8, 9 1, 2, 3, 4, 5, 6, 8, 9 1, 2, 3, 4, 5, 6, 8, 9 1, 2, 6, 8 1, 2, 8, 6 1, 2, 8 1, 2, 8 3, 5, 9 3, 5, 9 3, 5, 9 4 6 1, 2, 8 1, 2, 8 2 2 2 3 4 5 5

3 5 9 4 6 1 2

84

1, 2 , 8

1, 2, 8

1, 2, 8

D.

Building the ISM model

From the fmal reachability matrix (Table 3), the structural model is generated, as depicted in Figure 1. If there is a relationship between CSFs i and), it is represented by a directed arrow from i toj. That is the resulting graph is called a directed graph, or digraph. After removing the transitivity of CSFs, the digraph is fmally converted into the ISM-based model (Figure 1 ).,r----.

Proj ect mana !!ement

reen g ineering

Clear goals and objectives

Figure l.

commitment

Technological infrastructure

linkage CSFs that have strong driving power and dependence. Any action on these CSFs will have an effect on the CSFs in the higher level. In this case, user training and use of consultant are the linkage CSFs. It implies that all the CSFs above this level would be affected by these two CSFs. In addition, these linkage CSFs are dependent on the lower level CSFs of the ISM model. The fourth cluster includes independent CSFs with strong driving power and weak dependence. In this case, the three SCFs top management commitment and support, clear goals and objectives, and technological infrastructure fall in the category of independent (driver) CSFs. Based on the fmding of the ISM model, it is concluded that Iranian SMEs should invest enough resources to enhance the top management commitment, in order to implement ERP systems successfully. It is also necessary to have clear goals and objectives to ensure that the project will be ended up with nothing but success. The availability of required technological infrastructure is the third critical factor which contributes to a successful implementation of ERP system. As it is shown on Figure 2, these three factors are the most important and influential CSFs in an ERP implementation project. IV.
SUMMARY

Structural model of CSFs in ERP implementation

One of the primary objectives for implementation of an ERP system is to enhance the effectiveness and efficiency of the enterprise. To achieve this objective, successful implementation of ERP system is needed. This research identifies the CSFs of ERP implementation projects. Several interesting fmdings for the implementation of ERP arise from the application of interpretive structural modeling approach. This paper proposes new considerations regarding the successful implementation of ERP projects. The driving power-dependence diagram (depicted in Figure 2) helps to classify various CSFs into four clusters. The first cluster includes "autonomous CSFs" which have a weak driving power and weak dependence. These CSFs are relatively disconnected from the system. We have found none of the nine CSFs is in the autonomous cluster. 9 I I 2, 8 I I 8 r-- INDEPENDENT LINKAGE 7 ... " r-6 4,6
0 c..

Despite the fact that many enterprises have reported gains from implementing ERP systems, there are many other organizations which have experienced failure in implementing ERP systems. According to previous researches, there are a number of factors contributing to a successful implementation of ERP systems. There are an increasing number of Iranian SMEs willing to implement ERP systems to gain the benefits vendors claiming. In this study, we applied Imperative Structural Modeling to investigate the importance role and inter-relationship between nine critical success factors in an ERP implementation project. We found that top management commitment, clear goals and objectives, and technological infrastructure are the most important CFSs for a successful ERP implementation project. They are indeed critical in explaining why an ERP implementation fails. We learned that in order for Iranian SMEs to adapt an ERP solution, it is significantly important to decide on the availability of independent CFSs, before starting the project.
REFERENCES [1) J.H. Wu, and Y.M. Wang, "Measuring ERP Success: The Ultimate Users' View", International Journal of Operations & Production Management, Vol.26 No.8,2006, pp.882-903. AM. Aladwani, "Change Management Strategies for Successful ERP Implementation", Business Process Management Journal, Vol. 7,No. 3,2001,pp.266-275. EW. Ngai, C.C. Law, and F.K. Wat, "Examining the Critical T. H. T. Success Factors in the Adoption of Enterprise Resource Planning", Computers in Industry, Vol.59,2008,pp.548-564. T.H. Davenport, and J. Brooks, "Enterprise systems and the supply D. chain", Journal of Enterprise Information Management, Vol. 17, No. 1,2004,pp.8-19. S. Sawah, AA Tharwat, and M. Rasmy, "A Quantitative Model E. H. to Predict the Egyptian ERP Implementation Success Index",

.;;

Oll c

4 3 2

I I r-AUTONOMOUS 2

I I I

I I

5,9 8 7 9

DEPENDENT 4 5 6 7

[2)

Dependence

Figure 2. Driving power and dependence diagram

[3)

The second cluster consists of the dependent CSFs that have weak driving power but strong dependence. In the present case, effective communication, change management, business process reengineering, and project management are in the category of dependent CSFs. The third cluster includes

[4)

[5)

85

Business Process Management Journal, Vol. 14 No.3,2008, pp.288306. [6] S.Finney,and M.Corbett,"ERP Implementation: A Compilation and Analysis of Critical Success Factors", Business Process Management Journal, Vol.13,No.3,2007,pp.329-347. J. Bradley, "Management based Critical Success Factors in the Implementation of Enterprise Resource Planning Systems", International Journal of Accounting Information Systems, Vol. 9, 2008,pp.175-200. E. Umble, R. Haft, and M. Umble, "Enterprise Resource Planning: Implementation Procedures and Critical Success Factors", European Journal of Operational Research, Vol.146,2003,pp.241-257. G. Shanks, A.Parr, B. Hu, B. Corbitt, T. Thanasankit, and P. Seddon, "Differences in Critical Success Factors in ERP Systems Implementation in Australia and China: a Cultural Analysis", in: Proceedings of the 8th European Conference on Information Systems, 2000,pp.537-544.

[25] M. AI-Mashari, and A. AI-Mudimigh, "ERP Implementation: Lessons from a Case Study, Information Technology & People, Vol.16,2003, pp.21-33. [26] Y. Xue, H. Liang, W. Boulton, and C. Snyder, "ERP Implementation Failures in China: Case Studies with Implications for ERP Vendors", International Journal of Production Economics, Vol. 97, 2005, pp. 279-295. [27] V. Kumar, B. Maheshwari, and U. Kumar, "An Investigation of Critical Management Issues in ERP Implementation: Empirical Evidence from Canadian Organizations", Technovation, Vol. 23, 2003,pp.793-807. K. Hong, and Y. Kim, "The Critical Success Factors for ERP Implementation: An Organizational Fit Perspective", Information & Management, Vol.40,2002,pp.25-40.

[7]

[8]

[28]

[9]

[10] L. Zhang, M. Lee, Z. Zhang, and P. Banerjee, "Critical Success Factors of Enterprise Resource Planning Systems Implementation Success in China", in: Proceedings of the 36th Hawaii International Conference on System Sciences,2003,pp.236-245. [11] Z.Zhang,M. Lee,P. Huang,L.Zhang,and X. Huang, "A Framework of ERP Systems Implementation Success in China: An Empirical Study", International Journal of Production Economics, Vol. 98,2005, pp.56-80. [12] M. Bradford, and J. Florin, "Examining the Role of Innovation Diffusion Factors on the Implementation Success of Enterprise Resource Planning Systems", International Journal of Accounting Information Systems, Vol.4,2003,pp.205-225. [13] V. Mabert, A. Soni, and M. Venkataramanan, "Enterprise Resource Planning: Managing the Implementation Process, European Journal of Operational Research, Vol.146,2003,pp.302-314.

[29] D. Zabjek, A. Kovacic, and M.1. Stemberger, "The Influence of Business Process Management and Some other CSFs on Successful ERP Implementation", Business Process Management Journal, Vol. 15,No.4,2009,pp.588-608. [30] T.R. Bhatti, "Critical Success Factors for the Implementation of Enterprise Resource Planning (ERP): Empirical Validation", The Second International Conference on Innovation in Information Technology. [31] S. Uliana, "Critical Success Factors in Romanian SME's ERP implementation", Proceedings of the 3rd International Workshop IE&SI,2006,pp.308-315. [32] M. Tarafdar, and R.K. Roy, "Analyzing the Adoption of Enterprise Resource Planning Systems in Indian Organizations: A Process Framework",Journal of Global Information Technology Management, Vol.6,2003,p.31. [33] A. Gupta, "Enterprise Resource Planning: the Emerging Organizational Value Systems", Industrial Management & Data Systems, Vol.100,No.3,2000,pp.114-8. [34] J. Vosburg, and A. Kumar, "Managing Dirty Data in Organizations Using ERP: Lessons from a Case Study", Industrial Management & Data systems, Vol.101,No.1,2001,pp.21-31. [35] S. Subramoniam, M. Tounsi, and K.V. Krishnankutty, ''The Role of BPR in the Implementation of ERP Systems", Business Process Management Journal, Vol.15,No.5,2009,pp.653-668. [36] V. Ahuja, J. Yang, and R. Shankar, " Benefits of Collaborative ICT Adoption for Building Project Management", Construction Innovation, Vol.9,No.3,2009,pp.323-340.

[14] M. Murray, and G. Coffin, "A Case Study Analysis of Factors for Success in ERP System Implementations", in: Proceedings of the 7th Americas Conference on Information Systems,2001,pp.1012-1018. [15] C. Holland, and, B. Light "A Critical Success Factors Model for ERP Implementation",IEEE Software, Vol.16,1999,pp.30-36. [16] D.Allen,T. Kern, and M.Havenhand,"ERP Critical Success Factors: An Exploration of the Contextual Factors in Public Sector Institutions", in: Proceedings of the 35th Hawaii International Conference on System Sciences,2002,pp.3062-3071. [17] I. Ehie, and M. Madsen, "IdentifYing Critical Issues in Enterprise Resource Planning (ERP) Implementation", Computers in Industry, Vol.56,2005,pp.545-557. [18] A. Parr, and G. Shanks, "A Model of ERP Project Implementation", Journal of Information Technology, Vol.15,2000,pp.289-303. [19] S. Dezdar, and A. Sulaiman, "Successful enterprise resource planning implementation: taxonomy of critical factors",Industrial Management & Data Systems, Vol.109,No.8,2009,pp.1037-1052. [20] J. Motwani, R. Subramanian, and P. Gopalakrishna, "Critical Factors for Successful ERP Implementation: Exploratory Findings from Our Case Studies",Computers in Industry, Vol.56,2005,pp.529-544. [21] V.B. Gargeya, and C. Brady, "Success and Failure Factors of Adopting SAP in ERP System Implementation", Business Process Management Journal, Vol.11,2005,No.5,pp.501-16.

[22] T.M. Somers, and, K.G. Nelson, "A Taxonomy of Players and Activities Across the ERP Project Life Cycle", Information & Management, Vol.41,2004,No.3,pp.257-78. [23] L. Ho, and G. Lin, "Critical Success Factor Framework for the Implementation of Integrated Enterprise Systems in the Manufacturing Environment", International Journal of Production Research, Vol.42,No.17,2004,pp.3731-3742. [24] K. Reimers, "Implementing ERP Systems in China", Communications of the Association for Information Systems, Vol.11, 2003,pp.335-356.

86