Literature review EnterpriseResource Planning systems are integrated and complex systems for businesses andmost operate them successfully. Enterprise Resource Planning (ERP) is asoftware solution that integrates business functions and data into a singlesystem to be shared within a company.
While ERP originated from manufacturingand production planning systems used in the manufacturing industry, ERPexpanded its scope in the 1990’s to other corporate functions such as humanresources, finance and production planning. Swartz, D., & Orgill, K.(2001). Higher education ERP: Lessons learned.
Educause Quarterly, 24(2), 20-27.A significant number of organizations have adopted ERP over the last two decades,and the revenue of the ERP market has grown from $17.2 billion in 1998 to $39.7billion in 2011 Dover, C. (2012). Worldwide enterprise resource management applications2012–2016 forecast and 2011 vendor shares . (MARKET ANALYSIS No. 238476,Volume: 1).
Companiessuch as Hershey, Whirlpool and Samsonite that suffered tremendous disasters doacknowledge that the systems are able to handle the job. The systems are ableto function as required however, companies run into costly and sometimes fataldifficulties with the implementation and subsequent maintenance of these systempackages. According to The Gartner Group, 70 percent of all ERP projects failto be fully implemented, even after three years Gillooly, C.
(1998),”Disillusionment”, Information Week, 16 February, pp. 46-56. There is no singlefactor responsible for a failed implementation, and no individual reason to becredited for a successful implementation.
According to the Journal Success and failure factors of adopting SAP501 Business Process Management Journal Vol. 11 No. 5, 2005 pp. 501-516 publishedby Emerald Group Publishing Limited. Thereare generally two levels of failure that is, complete and partial failures. Ina complete failure, the project either was completely compromised beforeimplementation or it failed to the extent that the company suffered major long-termfinancial damage.
The partialfailure implementations are often those that resulted in non-stop adjustment tobusiness processes, resulting in disruptions in the daily operations. In the same vein, an ERP success can be a completesuccess – one in which everythinggoes off without a hitch, or one in which there are minimal downtime,adjustments or alignment issues problems.Studies reveal that ERPimplementation is a highly complex process and concludes that further researchis needed to investigate issues which influence the success and failure of ERPimplementation.
However it should be taken to note that the factors whichaffect ERP implementation differ from region to region and company to company. Developed countriesEurope and North America representthe largest portion of ERP market because these regions have infrastructureswhich effectively facilitate the integration of business processes andInformation Technology. These countries also are the ones that havemultinational entities. Dillard, J. F.
, & Yuthas, K. (2006). Enterpriseresource planning systems and communicative action. Critical Perspectives onAccounting, 17(2), 202-223 stated that most multinational firms are using ERPand that more small and midsize companies have begun to adopt ERP.
Their rapideconomic growth further drives the need for new technology. The Unites StatesOf America is the primary target for ERP vendors and represents 66 percent ofrevenues for the major vendors such as SAP and PeopleSoft. Government policiesand deregulation by the government fuel technology development.Europe is the second largesttarget ERP sales market (at 22 percent). Many big ERP vendors started theirbusiness from Europe; e.
g. SAG AG, Baan, JBA International and Intentia.Historically, strong manufacturing industry is an underlying reason for so manyERP vendors in Europe. There are several reasons for Europe’s ERP market.
First, economically advanced countries have a solid industrial andmanufacturing base. Second, there is a strong national informationinfrastructure. Third, the multiple-language and multi-currency requirementsmake the ERP software attractive. Fourth, quality employees are available toimplement advanced technologies. Europeans designed the first integrated ERPsystem SAP in Germany, 1972, whereas, organizations in North America seem tohave richer experience in this kind of software and have used integratedsoftware solutions for decades.Japan is one of the mosttechnologically advanced countries in the world, however their situation isunique. Japan’s geographic/regional location and IT culture constrain ERP usagebecause Japanese organizations emphasize employee loyalty and provide all meansto retain employees, they build systems in-house or customize existingsoftware. Companies in developed countries are more likely to succeed in theERP imlementation.
Also organizations are developing a strong processmanagement orientation (Davenport, 1994). BPR is practiced frequently in NorthAmerican and European countries.Much of the research that has beencarried out in the developed countries has provided evidence that the failureof ERP implementations is not mainly caused by the ERP software itself, butrather by a high degree of complexity from the massive changes ERP systemscause in organizations (Scott, J. E.
, & Vessey, I. (2000). Implementingenterprise resource planning systems: The role of learning from failure.
Information Systems Frontiers, 2(2), 213-232; Helo, P., Anussornnitisarn, P., & Phusavat, K. (2008). Expectationand reality in ERP implementation: Consultant and solution providerperspective.
Industrial Management & Data Systems, 108(8), 1045-1059,Maditinos, D., Chatzoudes, D., & Tsairidis, C.
(2012). Factors affectingERP system implementation.effectiveness. Journal of Enterprise InformationManagement, 25(1), 60-78.
). The failures can be explained by the fact that ERPimplementation is forcing companies to follow the principle of ‘best practices’in most successful organizations and form appropriate reference models. (Zornada& Velkavrh, 2005) According to Helo et al., (2008), “Unlike otherinformation systems, the major problems of ERP implementation are nottechnologically related issues such as technological complexity, compatibility,standardization, etc. but mostly about organization and human related issues likeresistance to change, organizational culture, incompatible business processes,project mismanagement, top management commitment, etc. Such ISare expected to help organisationsmeet their strategic objectives ofdevelopment, and sustain their visibility within the globalmarket (Mhlanga et al.
, 2012). ERP in developing countriesThe Asia-Pacific ERP market accountsfor 9 percent of revenues, and Latin America for 3 percent.Economic expansion, especially inAsian countries, is the major reason. Second, fierce competition andpressures from Westerncorporations force firms in developing countries to vigorously pursueinformationtechnology. However, ERP is in itsearly stages in developing countries.
Inadequate IT infrastructure,governmentalpolicies, small size of companies,lack of IT/ERP experience, and low IT maturity seriously affect the adoptiondecision. China, India, and Brazilare selected as representative countries for ERP discussion. ChinaChina has achieved impressiveeconomic growth in recent years. It is undergoing a technological change withhuge IT investments in both publicand private sectors.
However, there are only a handful of companies usingERP systems.International vendorsplay a primary role. There are a few local software packages that are low costbut areprimarily accounting and financialapplications. For example, Yongyous software is widely utilized, but itfocuses on accounting functionsand is not a real ERP system. There are no local professional ERP vendors.Major international vendors haveopened their business in major cities. Some vendors access the market viatheir delegated internationalcompanies such as IBM, Compaq, Andersen, and Price Waterhouse Coopers.
Infrastructure is a major problem.Telecommunications, though significant improvements have been made inrecent years, is good only inmajor cities. The telephone density, although increasing, is still quite low(Dutta,1996). Internet service isexpensive, not to mention ISDN, ATM, T1, T3 and other broadband services. Thegovernment is finding it necessaryto allow competition and profit making organizations (even foreigncompanies) to raise the telephonedensity to its target of eight per 100 by year 2000.Low IT maturity of China’sindustries is also a major problem. Low IT maturity manifests into severalsymptoms.
Enterprises lack along-term MIS strategy, and IS departments/staff (if they exist) lack projectexperience. Often, companies havelimited process management knowledge, and BPR is seldom conducted.Chinese management style, informalplanning and process modeling, highly interdependent social andorganizational relationships, andattitudes towards organizational change all limit process innovation efforts(Martinsons, 1998). Most companieshave limited knowledge of international business practice. Language isalso an important concern.Mandarin is the official language and spoken by most Chinese, whereas Englishisused by MNCs.
The language causescommunication barriers between Chinese users and international ERPvendors. Furthermore, higheconomic growth built on a weak base has lead to diverse business practices andcross industry enterprisestructure.Owing to these reasons, major ERPcustomers in China are limited to global MNC corporations. Some largestate-owned organizations arepotential ERP users but they are haunted by high costs. Small and middle-sizedenterprises are virtually excludedout of this market. India India has also achievedsignificant economic growth in recent years. Its IT industry growth is quiteadmirable.
India is the largest developingcountry base for global software outsourcing (Heeks, 1996). Moreover, globalsoftware outsourcing continues togrow rapidly, with over US$3.00 billion in contracts from developingcountries in 2000 (and expected tobe $15 billion by 2003). India also owns the best software engineers in theworld. Because English is theofficial business language, its IT staff can communicate effectively withcounterparts in the world.However, IT diffusion andimplementation lags far behind, and ERP growth in India has been quite slowexceptin recent years (Erry, 1998).
While the country boasts of decades of manufacturing, availability of skilledworkers, English as the businesslanguage, and the first MRP-II/ERP systems introduced over a decade ago, yetthe ERP penetration is estimatedat a piddling 6 percent. Even this rate was achieved after a 75 percent growthin the last two years. Accordingto one estimate, this market was expected to be only around US$10 million byyear 2000 (Erry, 1998).The low ERP penetration is due toseveral reasons. The first reason is that the infrastructure is far below anyorganizational requirements.
Thecountry’s telephone density is quite low with 0.6 phones per 100 in 1990(Dutta 1996), although it hasincreased some since then. The telecom industry is still a monopoly of thestategovernment. In 1997, Asia PacificTelecommunication Indicators pointed out that India would need to invest$14.43 billion over three years toachieve a telephone density of 2.
34 per 100.The second reason, both for Indiaand China, is that organizations lack a culture that regards computers as apervasive way of doing business.Indian state excise authorities refuse to accept excise returns in a formatotherthan manual registers. India’s PCpenetration is only at 0.7 per 1,000 (Erry, 1998). IT maturity is quite lowamong local firms.
Although theeconomy has been opened up, foreign investors face daunting proceduresforgovernmental approvals. Local corporations lack stiff competition; thusthere is little stimulus to adopttechnology.The third has to do with commonperceptions about ERP. The common belief is ERP systems are only for largercompanies because of the highcosts of acquisition, implementation and maintenance. As a result, service andsupport are rudimentary. Mostorganizations are first-time users and perceive a lack of expertise.Additionally,some companies did not have a verysuccessful experience with ERP and do not see many benefits.Characteristics of ERPimplementation in developing countriesSeveral factors from the frameworkwere significant in ERP implementation in developing countries.
Amongnational/environmental factors,current economic status and economic growth, infrastructure, and governmentregulations fundamentally impacton IT adoption and ERP penetration. In infrastructure such as transportation,telecommunications, Internet andintranet, mobile telecommunications, and public database systems, developingcountries obviously have a poorrecord and suffer from the consequences. ERP is not a stand-alone system andhas to work in an integratedenvironment to gain maximum value. However, infrastructure alone cannot boostERP adoption: other factors suchas governmental policy encouraging foreign investment and fair competitionare also essential.From an organizational andinternal perspective, low IT maturity, small firm size, and lack of processmanagement and BPR experiencehamper ERP adoption.
Enterprises commonly lack MIS long-term strategyand project experience. As aresult, most customers of IT applications are not domestic companies, butsubsidiaries of MNCs. Indeveloping countries, SMEs play a major role in the national economy.Therefore,affordability and availability aremajor concerns.
Firms also lack process management orientation and BPRexperience. Unlike past computersystems, ERP systems are off-the-shelf and impose their own logic on thecompany, often forcing companiesto change the way they do business. While promising, the actual experienceof using IT to redesign businessprocesses is limited in developing countries. According to SeyedM.
S. Hosseini (2012) Successful implementation ofERP requires the change in staff behavior, processes, departments and organizations. This was their conclusion drawn from a researchthat was carried out in India. InAfrica The African continent is endowedwith a specific context of poor economic capacities, limited infrastructure, limitedhuman skills, and a particular culture of resistance to technologicaladvancement (Al-Debei and Al-Lozi, 2012).
Given the complexities and risksrelated to ERP systems (Mukwasi and Seymour, 2015), implementing them withinthe African context might enhance the difficulties of the implementation. Thesedifficulties raise the problem of defining an efficient way to implement ERP systemswithin the African context. Pouransafar, M., Cheperli, M.
and Tabrizi, M.R.F.
2013, Failure Factors of ERP stated that 70 percent of all ERP projects fail tobe fully implemented even after three years. Ahanyan, S., Azar, A.
and Fard, H.D. 2012. Utilising multi-aspectual understanding as a framework for ERP successevaluation: A case study, Journal of Enterprise Information Management, 25(5),pp 479-504 added that the management team has to concentrate not only oneconomic and formative objectives but also on the other aspectual objectiveswhich are more qualitative and intangible for the success of ERP implementation.Projects in an Iranian Context,IOSR Journal of Business and Management (IOSRJBM), 9(4), pp 83-87.
In ZimbabweEnterprise Resource PlanningSystems are the tools that at assist companies in developing and maintaining acompetitive edge in this paradigm of global integration. However, the absenceof Enterprise Resource Planning systems is a determining factor for most organizationsto compete globally (Bhagwat & Sharma, 2007). As such, large multinationalcompanies have increasingly invested in ERP systems to address the informationrequirements needed to be competitive in an increasingly globalized environment(Madapusi & D’Souza, 2012). ERP Systems were ranked the third (3rd) mostimportant information technology (IT) application in the 2009 and 2010 Societyfor Information Management (SIM) membership survey, moving from the 14thposition in 2008 (Luftman & Zadeh, 2011). This development was due to costreductions associated with ERP systems through automation, given that businessproductivity and cost reduction were the biggest management concerns (Koh,Gunasekaran & Cooper, 2009; Luftman & Zadeh, 2011; Madapusi &D’Souza, 2012). ERP systems can potentially impact costs by reducing inventorylevels, decreasing lead times, increasing productivity, facilitating corporatecommunication, improving information and decision making capabilities, andimproving customer service Furthermore, intra firm ERP systems enable firms tostandardize, integrate, and streamline their data and process flows (Koh,Gunasekaran & Cooper, 2009; Madapusi & D’Souza, 2012)There is a high emphasis placed onERP systems as a means to increase business productivity and reduce costs inorder to be more competitive in a global business environment (Luftman &Zadeh,2011). REFERENCES Davenport, T.
H. (1998),”Putting the enterprise into the enterprise system”, Harvard BusinessReview, JulyAugust, pp. 121-31.