Multidimensional and Interrelated Barriers and Risks Affecting Long-Term ERP Success in Chinese State-Owned Enterprises

1. Introduction And Background Of Study

With the remarkable economic growth at an annual rate of around 10% during the last quarter century, China has now emerged as one of the world’s economic superpower. Information Technology (IT) is certainly one of the most important driving forces in supporting this rapid economic development in the country. In fact, and ever since the beginning of the 21^st century, China has constructed a nationwide IT network that covers more than 2000 cities across the whole country (China Economic Yearbook Editing Committee, 2004). With this well-established national information infrastructure, IT has been increasingly embedded into the everyday life of Chinese citizens. This is evident from the increasing number of China’s internet users, which has grown dramatically from only 0.62 million in 1997 to more than 420 million in 2010 (China Internet Network Information Center, 2011). Apart from its impacts on social life, IT has also become an essential part of the organisational structure of most contemporary Chinese companies. According to CCW Research (a well-known Chinese IT consulting firm), IT investments of China’s manufacturing sector had increased from RMB 24.5 billion in 2004 to RMB 52.9 billion in 2010 (CCW Research, 2010). A very substantial part of these IT investments of Chinese companies was made to implement Enterprise Resource Planning (ERP) systems.

ERP systems are cross-functional enterprise information system (IS) packages, which consist of a number of software modules that aim at supporting and integrating all key business processes across the various functional divisions of an organization by using a single data repository (Peng & Nunes, 2012). It is arguably the most important development in the corporate use of IT in the 1990s (Davenport, 1998). Many previous IS research (e.g. Oliver et al, 2005; Bergstrom & Stehn, 2005; Shang & Seddon, 2002) indicated that successful adoption and use of ERPs can potentially bring companies with a wide range of benefits at operational (e.g. reduce operational and inventory cost), managerial (e.g. improve resources planning and control), and strategic levels (e.g. increase global operation power). These features and potential benefits of ERPs have resulted in a continuing high implementation rate of such integrated systems in Western companies (Buonanno et al., 2005). In China, both private companies and state-owned enterprises (SOEs) have also frequently set ERP implementation as a top priority in their IS development agendas (Pan et al., 2011). Consequently, data provided by a prominent Chinese consulting firm (CCID Consulting) shows that, the Chinese ERP market has expanded rapidly from only RMB 560 million in 2000 to RMB 6,956 million in 2010.