Erp Case

FROM THE TRENCHES:Wolfgang B. Strigel, editor * wstrigel@spc.ca

ompanies are radically changing their information technology strategies

by purchasing prepackaged software instead of developing IT systems

in-house. Price Waterhouse predicts that by 2000, two-thirds of

all business software will be bought off the shelf. More specifically,

Deloitte and Touche states that businesses prefer to replace legacy systems with

enterprise resource planning systems. According to AMR Research, the ERP systems

market was $15.68 billion in 1997 and is likely to increase at a compound rate of 36

percent, to $72.63 billion, by 2002. The associated consultancy market is approximately

$30 billion. These statistics clearly indicate a shift in the ERP market.

There are mixed reports concerning the outcome of ERP projects. Successful ERP

implementations are certainly publicized, such as Pioneer New Media Technologies

(see http://Datamation.com/PlugIn/erp/index.htm) and Monsanto,1 but less successful

projects have led to bankruptcy proceedings and litigation against IT suppliers.

2 Approximately 90 percent of ERP implementations are late or over budget,3

which may be due to poor cost and schedule estimations or changes in project

scope rather than project management failure.4

Christopher P. Holland and Ben Light, Manchester Business School

An effective IT infrastructure can suppor t a business vision

and strategy; a poor, decentralized one can break a company.

More and more companies are turning to off-the-shelf ERP

solutions for IT planning and legac y systems management.

The authors have developed a framework to help managers

successfully plan and implement an ERP projec t.

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A Critical Success

Factors Model For

ERP Implementation

ERP software automates core corporate activities,

such as manufacturing, human resource, finance,

and supply chain management, by incorporating

best practices to facilitate rapid decision-making,

cost reductions, and greater managerial control.

These factors make ERP software integration complex,

because consensus is required from an entire

enterprise to reengineer a core business process and

take advantage of the software.5

ERP implementation can reap enormous bene-

fits for successful companies--or it can be disastrous

for organizations that fail to manage the implementation

process. We must ask ourselves two critical

questions, "How can ERP systems be implemented

successfully?"and "What are the critical success factors

for ERP implementation?"

CRITICAL SUCCESS FACTORS

FRAMEWORK

There are different strategic approaches to ERP

software implementation. The two main technical

options are the implementation of a standard package

with minimum deviation from the standard settings,

and the customization of a system to suit local

requirements. From a management perspective, the

nature of the ERP implementation problem includes

strategic, organization, and technical dimensions.

Therefore, ERP implementation involves a mix of

business process change, or BPC, and software configuration

to align the software with the business

processes.

We developed a CSF research framework based

on a review of literature6-9 and the experiences of

the organizations in the study. The model, shown in

Figure 1, groups the CSFs into strategic and tactical

factors. Each has factors specific to ERP projects.

CSF models have been applied to general project

management problems,9 manufacturing system

implementation,10 and reengineering.11 We

have identified the factors needed to ensure a successful

ERP project and to explain different project

outcomes. Our approach is particularly suitable for

the analysis of ERP projects because it includes the

influence of tactical factors, such as technical software

configuration and project management variables,

together with broader strategic influences,

such as the overall implementation strategy. Our

framework will guide managers in the development

of an implementation strategy and will help them

make decisions by identifying the role and influence

of individual factors