Examining the Factors Affecting Project and Business Success of ERP Implementation

Introduction

ERP systems have drawn much attention of many researchers and practitioners in the last two decades (Wagner et al., 2006; Ehie & Madsen, 2005; Beheshti, 2006). They have been considered as a shift in corporate computing (Sandoe et al., 2001; Davenport, 2000; Turban et al., 2005). The essence of this shift is twofold. Firstly, it helped replacing the firm’s many standalone applications that could not communicate with each other within the organization or externally with customers and suppliers, with large systems that facilitate enterprise-wide integration. Secondly, it stimulated organizations’ IT strategies to rely more on purchasing large applications software such as ERP systems, instead of in-house-built information systems. These packages offer general or universally applicable solutions that claim to embody “best practices” of business integration.

ERP systems could be defined as comprehensive software packages that seek to integrate the complete range of business processes and functions in order to present a holistic view of the business from a single information and information technology architecture (Gable, 1998). Among the most important attributes of ERP systems are their abilities to: automate and integrate an organization’s business processes; share common data and practices across the entire enterprise; and produce and access information in a real-time environment.

Having made substantial progress toward putting these packages in place, organizations began to work on realizing and extending the benefits from these systems. In a field study by Market Data Group, it was found that main perceived benefits of implementing ERP systems are: standardizing or improving business processes; lowering costs; solving Y2K problem of the legacy systems; and accommodating corporate growth or market demand (Connolly, 1999). Tangible benefits included reduction in staff, operational efficiencies, reduction in training, and better inventory management. Also sources of intangible benefits included better compliance with the customer requirements, improved systems reliability, higher data quality, and greater agility in implementing new businesses.

On the other side, the scale and complexity of these systems have proved a challenge to both IS specialists in terms of implementation, and business management in terms of managing business changes essential to gaining benefits from these very expensive investments. In fact, the use of ERP systems has not always led to significant organizational improvements. In many cases, problems in implementing these systems have led to failures. For example a survey of ERP implementers reported that 51% of the ERP systems implementation projects were judged to be unsuccessful by the ERP implementing firms (Aiken, 2002). However as investments in ERP systems continue to increase, implementations problems suggest that causes of these problems or failures need to be understood and solutions leading to success need to be found (Calisir and Calisir, 2004).

Responding to this need, various streams of research have appeared recently. The first and probably the most famous is the one concentrating on identifying ERP systems’ critical success factors (Holland et al., 1999 and Bingi et al., 1999). This line of research has its roots in IS success studies in the past two decades (Delone and Mclean, 1992). Somers and Nelson (2004) see that better description of IS implementation success come from understanding the key players and activities associated with ERP implementation. Diffusion of Innovation (DOI) is another important trend used for studying ERP implementation success (Bradford and Florin, 2003). DOI research has evolved from a focus on the organization’s innovation, its organizational characteristics, and also its environment as the main groups of variables that affect the diffusion of IT in organizations.