CRITICAL SUCCESS FACTORS IN ERP PROJECTS

8/7/2019 CRITICAL SUCCESS FACTORS IN ERP PROJECTS

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CRITICAL SUCCESS FACTORS IN ERP PROJECTS

ERP System

The main aim of ERP system is obtain the optimum utilization of its resources. This can

be archived by standardization and integration of business operation. ERP systems have

the following characteristics:

1. ERP systems are packaged software designed for a client server environment,

2. ERP systems integrate the majority of a businesss process.

3. ERP systems process a large majority of an organizations transactions.

4. ERP systems use an enterprise-wide database that typically stores each piece of data

5. ERP systems allow access to the data in real time.

In some cases, ERP calls for an integration of transaction processing and planning

activities (e.g., production planning) Support for multiple currencies and languages

(critical for multinational companies) Support for specific industries (e.g., SAP supports a

wide range of industries, including oil and gas, health care, chemicals, and banking)

Ability to customize without programming

Why EPR implementations success is critical

The definition and measurement of success are thorny matters. First, success depends

on the point of view from which one measures it. Even within a single company people

will have different ideas.

For example, implementation specialists often define success in terms of completing the

project plan on time and within budget while the user and adopter tend to focus on the

transition from old systems and stable operation.

ERP systems are commercial software packages that enable the integration of

transactions-oriented data and business process throughout an organization. Beginningwith the manufacturing and financial systems, ERP systems may eventually allow for

integration of inter-organizational supply chains. Because these systems touch so many

aspects of a companys internal and external operations their successful deployment and

use are critical to organizational performance and survival.

Implementing an ERP system is not an inexpensive or risk-free venture. In fact, 65% of

executives believe that ERP systems have at least a moderate chance of hurting their

business because of the potential for implementation problems. Most organizations have

extensive experience managing traditional MIS projects but these new ERP projects may

represent new challenges and present new risk factors that must be handled differently.


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Critical success factors in ERP implementation

A critical success factor is something that the organization must do well to succeed. In

terms of information system projects, a critical success factor is what a system must do

to accomplish what it was designed to do. The methodology of studying CSFs behind

ERP implementations is very similar to the approach used in a variety of studies in

Information Technology (IT) implementation research. Some of these factors are the one

that have been found to be significant in other IT implementations.

Three factors consistently appear as critical success factors for information systems

projects:

Top management support, Client consultation (user involvement) Clear project

objectives.

1. Strategic factors:

Top management supports have shown that the ERP implementation was in general a

top-down decision and the success of such an implementation depended on the

alignment of the ERP adoption with strategic business goals.

2. Tactical factors:

Effective project management in order to successfully accomplish the decision to

implement an ERP system, the effective project management comes into play to plan,coordinate and control such an intricate project Re-engineering business processes it is

very important to consider the extent to which the company needs to re-engineer its

current business processes in order to be compatible with the ERP software. Suitability of

software and hardware management must make a careful choice of an ERP package

that best matches the legacy systems, e.g. the hardware platform, databases and

operating systems.

3. Operational factors:

Education and training when the ERP system is up and running it is very important that

the users be capable to use it, hence they should be aware of the ERP logic and

concepts and should be familiar with the systems features. User involvement

participating in the system development and implementation, the users go through a

transition period that gives them time to better understand the projects consequences.

Critical success factors in ERP implementation are as follow:

?Project Champion ?Project Management ?Business Plan and Vision ?

TopManagement Support and Executive Commitment ?ERP Team

and Composition?Project Support and Effective Communication ?Legacy Systems

and Informaion Technology ?Business Processes ?System Integration ?System


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Testing ?A Vanilla ERP Approach ?Software Selection and Support ?Strategic

Initiatives ?Human Resources ?Training ?Data Quality ?Vendor Resources ?

Organizational Culture?Competitive Analysis of Enterprise Integration Strategies ?

Organizational Knowledge Management ?Risk Management ?Readiness

Core Modules Of ERP:ERP software is made up of many software modules. Each ERP software module mimics

a major functional area of an organization. Common ERP modules include modules for

product planning, parts and material purchasing, inventory control, product distribution,

order tracking, finance, accounting, marketing, and HR. Organizations often selectively

implement the ERP modules that are both economically and technically feasible.

Different ERP Vendors provide ERP system with some degree of speciality..

But the core modules are almost the same for all of them. Some of the core modules

found in the successful ERP system are the following:

Accounting management Financial management Manufacturing management Production

management Transportation management Sales & distribution management Human

resources management Supply chain management Customer relationship management

E-Business

Literature Review:

Critical Success factors have been cited in IT research. There are a great number of

articles on CSF. In this literature review section the only focus is on the CSF in ERP

implementation. The difficulties and high failure rate in implementing ERP systems have

been widely cited in the literature, but research on critical success factors (CSFs) in ERP

implementation efficiency is still fragmented. Most literature combines the CSFs with

different ERP characteristics. Here I choose some classic literature examples and review

them by chronology.

Larsen and Myers (1997) found that an ERP experience could be an early success and a

later failure. This result is supported by a case study a BPR project involved

redesigning the main accounting process within one organization in the New Zealand

financial services industry.

The following two factors would lead to failure:

1. Inappropriately cutting project scope

2. Cutting end-user training

Their finding show the different measures of success are appropriate at different points in

the ERP experience cycle and that the outcomes measured at one point in time are only

loosely related to outcomes measured later. This occurs because the experience cycle is


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a process (actually a set of processes) and not a mechanical connection between

starting conditions and final results. Some suggestions on implementation are proposed

such as the decomposition of the project into manageable parts, the level of budget to be

allocated to the project and shakedown phases of each part, an appropriate project

leader and/or implementation partner, and so forth.Bancroft et al. (1998) provided criticalsuccess factors for ERP implementation including top management support, the

presence of a champion, good communication with shareholders, and effective project

management. This is derived from discussions with 20 practitioners and from studies of

three multinational company implementation projects. Before implementing ERP it is

important to develop key IT capabilities.

Willcocks and Sykes (2000) propose several scenarios and use cases to prove these

scenarios. Unlike the development of new simple software applications the main target of

ERP is to fulfill BPR (business process reengineering). Many companies failed on this

aspect of ERP implementation. This failure was driven by the need for major change in

human, culture, and organization relationships.

Willcocks and Sykes emphasize Feeny and Willcocks (1998) nine core IT capabilities

and believe these nine core IT capacities must be retained in-house, since in come cases

the companies have to outsource human resources to work closely with the in-house

team and ensure that a transfer of learning takes place.

In order to obtain necessary IT capabilities, Willcocks and Sykes suggested some

strategies to manage the ERP implementation:

1. User versus technology

With business requirements changing rapidly, further learning and innovation is required.

As IT becomes more organizationally pervasive, development will not rely on IT

specialists or external IT suppliers. Users themselves will approach IT through

multifunctional teamwork, personal relationship, and business goals.

2. Governance and staffing

Effective business innovation requires high-level support and a project champion. An

efficient team combination is recommended including: Full-time, high-performing users

In-house IT specialists People with bridge-building interpersonal skills Fill-in external IT

staff and knowledgeable users/managers

3. Time-box philosophy

They recommend decomposing implementation into smaller projects. This approach can

help reduce project risk. This is also known as converting whales (large unmanageable

projects) into dolphins (smaller and more manageable projects).

4. Supplier/ consultant role in ERP


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First, consultants fill in the in-house shortage of skills. Secondly, the company may

choose to outsource the entire IT project to decrease the risks. Nah, Fiona Fui-Hoon, et

al. (2001) propose 11 factors as being critical to ERP implementation success: ERP

teamwork and composition, a change in management program and culture, top

management support, business plan and vision, business process reengineering withminimum customization, project management, monitoring and evaluation of performance,

effective communication, software development, testing and troubleshooting, project

champion, appropriate business and IT legacy systems

Elisabeth J. Umble, et al (2003) point out that commercially available software packages

promise seamless integration of all information flows in the company-financial and

accounting information, human resource information, supply chain information, and

customer information. However, managers have struggled, at great expense and with

great frustration, with incompatible information systems and inconsistent operating

practices.

They divide CSFs into 10 categories:

1. Clear understanding of strategic goals.

2. Commitment by top management

3. Excellent implementation project management

4. Great implementation team

5. Successfully coping with technical issues

6. Organizational commitment to change

7. Extensive education and training

8. Data accuracy

9. Focused performance measures

10. Multisided issues resol

Among them some are already pointed in past literatures. But some factors were

new..

1) Data accuracy.

2) Focused performance measures.

3) Successfully cope up with technical issues.


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4) Extensive education & training.

According to Majed Al-Mashari(2003), et al the measuring and evaluation of performance

are very critical factors in ensuring the success of any organization. It is suggested in the

taxonomy that measurement take place in a balanced perspective and for the purpose of

proving useful information that can facilitate the decision making process, deliver the

corporate objectives and forward the business competitively. To obtain this system, the

authors advise that regular auditing and benchmarking should be considered for

optimization of the potential available to all aspects of business. Furthermore, external

benchmarking may bring new ideas, knowledge and better practices on dealing with

deficiencies in ERP systems, de-bottlenecking, streamlining the processes, optimizing

and redesigning for more extensive benefits.

After extensive research on CSF (Critical Success Factors) , generally factors are divided

into 3 main categories:

1. Strategic factors:

Top management supports have shown that the ERP implementation was in general a

top-down decision and the success of such an implementation depended on the

alignment of the ERP adoption with strategic business goals.

2. Tactical factors:

Effective project management in order to successfully accomplish the decision to

implement an ERP system, the effective project management comes into play to plan,

coordinate and control such an intricate project Re-engineering business processes it is

very important to consider the extent to which the company needs to re-engineer its

current business processes in order to be compatible with the ERP software. Suitability of

software and hardware management must make a careful choice of an ERP package

that best matches the legacy systems, e.g. the hardware platform, databases and

operating systems.

3. Operational factors:

Education and training when the ERP system is up and running it is very important that

the users be capable to use it, hence they should be aware of the ERP logic and

concepts and should be familiar with the systems features. User involvement

participating in the system development and implementation, the users go through a

transition period that gives them time to better understand the projects consequences.


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2

CRITICAL SUCCESS FACTORS FOR THE IMPLEMENTATION OF

ENTERPRISE RESOURCE PLANNING (ERP):

EMPIRICAL VALIDATION

T.R. Bhatti

College of Business, Zayed University

PO Box 19282, Dubai, United Arab Emirates

Email: [email protected]

ABSTRACT

Implementing an Enterprise Resource Planning (ERP) system project is a difficult and

high cost proposition as it places tremendous demands on organizations time andresources. The ERP implementation literature contains many case studies of

organizations that have implemented ERP systems successfully. However, many

organizations do not achieve success in their ERP implementation projects. Much has

been written about implementation and the critical success factors for ERP

implementation projects. But there very few studies have scientifically developed and

tested constructs that represent critical success factors of ERP implementation

projects. Based on a survey of 53 organizations in Australia, the results suggest that a

65 item instrument that measures seven dimensions of ERP implementation is well -

validated. It is argued that model proposed in the paper is valuable to researchers and

practitioners interested in implementing Enterprise Resource Planning systems.

Keywords: ERP, Implementation, Constructs development, Critical Success Factors

1. INTRODUCTION

The business environment is changing dramatically and in order to stay competitive in

the market, organizations must improve their business practices and procedures.

Organizations within all departments and functions upgrade their capability to

generate and communicate accurate and timely information. The organizations which

have successfully implemented the ERP systems are reaping the benefits of having

integrating working environment, standardized process and operational benefits to the

organization. Not all ERP implementations have been successful. There have been

horror stories of ERP implementation and improper implementation has taken thecompanies to bankruptcy and in several cases organizations decided to abandon the

ERP implementation projects. The questions many academicians and researchers

have asked what are the reasons of success and failure of ERP implementations. Some

of the reasons cited in the literature are lack of support of top management support,

resistance from employees, poor selection of ERP systems and vendor etc. Majority of

these studies have used case studies to conclude their findings and very few have

used the empirical to study the ERP. This research is an attempt to extend the

ERP implementation research by defining the conceptual domains constructs and

operational measures specific to ERP implementation critical success factors to

advance ERP research. The objective of this paper is to develop an instrument for

measuring ERP implementation critical success factors. We follow two stepprocesses; first, we identify 12 constructs covering critical success factors for ERP


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implementation. Second, because the constructs are latent variables, we apply a

rigorous procedure for ensuring the psychometric adequacy of the resulting new

multi-item measurement scales. In the first section of this paper, constructs are

defined and then a rigorous empirical scale development process in order to identify

sets of survey items that exhibit satisfactory levels of reliability and validity.

Section 2 presents a brief background of the research context and defines andillustrates the specific constructs for which new measurements scales are developed.

The third section provides details on the preliminary scale development methodology

and field database. Section 4 describes and reports on The Second International

Conference on Innovation in Information Technology (IIT05)

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results. In section 5, we conclude with a discussion of the implications of our results

and usage of the scales, review the limitations of our study, and offer some

concluding thoughts. We conducted a cross-disciplinary literature review

encompassing BPR, Change management, MIS, strategic management, innovation

diffusion, and operations to develop a framework, construct definitions,

and item generation for this study. This process yielded the baseline model depictedand a set of initial measurement scales for twelve theoretically important critical

success factors.

2. MODEL DEVELOPMENT

Figure 1: Enterprise Resource Planning Systems implementation framework.

Figure 1 illustrates the conceptual model developed for this study. Drawing from

multiple literature bases,

we introduced an integrative, conceptual framework of what we call integrated ERP

implementation, which is comprised of a set of theoretically important constructs.

This framework has been developed based on the project life cycle approach, in which

the ERP implementation project goes through different phases before it goes live.

There are number of factors that affect the ERP implementation process are termed in

this study as implementation critical success factors. Upon the completion of ERP

implementation project, performance is measured by a mix of project outcomes and

the project and business outcomes (intended business performance improvement).

ERP Implementation Process

Analysis

Investiture

Final Preparation

Go Live

Implementation SuccessImplementation CSFs

Project Management

Process redesign

User training

Technological infrastructure

Change management.

Risk Management

Top management support

Communication

Team work

User involvementUse of consultant


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Clear goals and objectives

Business

Outcomes

Project

Outcomes)

3. CONCEPTUAL DOMIANS OF CSFS FOR ERP IMPLEMENTATION

Since the model constructs are latent variables, which cannot be measured directly,

multi-item scales, each composed of a set of individual items, were needed to obtain

indirect measures of each construct. The items listed in this section represent the

scales as drawn from the practitioners, and refined through an

expert judge-based manual sorting process [1]. These scales were further refined (and

some items were dropped) as a result of an empirical test of a survey instrument

containing these initial scales. Critical success factors (CSF) are widely used in the

information systems arena [2]. CSFs can be understood as the few key areas where

things must go right for the implementation to be successful. Past studies have

identified a variety of CSFs for ERP implementation, among which context relatedfactors consistently appear. Following are the commonly identified CSFs identified

by several researchers and are pertinent for the success of ERP implementation

project.

3.1 Project Management

Project Management involves the use of skills and knowledge in coordinating the

scheduling and monitoring of defined activities to ensure that the stated objectives of

implementation projects are achieved. The formal project implementation plan defines

project activities, commits personnel to those activities, and promotes organizational

support by organizing the implementation process.

3.2 Business Process Reengineering

Another important factor that is critical for the success of ERP implementation is the

Business Process Reengineering. It is defined by [3] asthe fundamental rethinking

and radical redesign of business processes to achieve dramatic improvements in

critical, contemporary measures of performance, such as cost, quality, service and

speed. Organizations should be willing to change their businesses to fit the

ERP software in order to minimize the degree of customization needed. The

implementation of ERP requires examination of many business processes, which

believed to be one of the important and beneficial results of the implementation of

ERP system.

3.3 User training and educationIn ERP implementation process many projects fail in the end due to lack of proper

training. Many researchers consider users training and education to be an important

factor of the successful ERP implementation [4] [5] [6] [7] [8]. The main reason for

education and training program for ERP implementation is to make the user

comfortable with the system and increase the expertise and knowledge

level of the people. ERP related concept, features of ERP system, and hands on

training are all important dimensions of training program for ERP implementation.

Training is not only using the new system, but also in new processes and in

understanding the integration within the system how the work of one

employee influences the work of others.

3.4 Technological infrastructure [8] and [9]argued that adequate IT infrastructure,hardware and networking are crucial for an ERP systems success. It is clear that ERP


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implementation involves a complex transition from legacy information systems and

business processes to an integrated IT infra-structure and common business

process throughout the organization. Hardware selection is driven by the firms choice

of an ERP software package. The ERP software vendor generally certifies which

hardware (and hardware configurations) must be used to run the ERP system. This

factor has been considered critical by the practitioners and as well as by theresearchers. The Second International Conference on Innovation in Information

Technology (IIT05)

3.5 Change management

Change management is a primary concern of many organizations involved in ERP

project implementation

[4]. Many ERP implementations fail to achieve expected benefits, possibly because

companies underestimate the efforts involved in change management.

[5] identify organizational change is the body of knowledge that is used to ensure that

a complex change, like that associated with a new big information system, gets the

right results, in the right timeframe, at the right costs. Generally, one of the mainobstacles facing ERP implementation is resistance to change. [11] points out that the

resistance to change is one of the main hurdles faced by most companies. Resistance

can be destructive since it can create conflicts between actors, it can be very time

consuming. To implement an ERP systems successfully, the way organizations do

business will need to change and ways people do their jobs will need to change as

well [12].[13] propose the recurring improvisational change methodology as a useful

technique for identifying, managing, and tracking changes in implementing an

ERP system. Change Management is important and one of the critical success factors

identified in the literature. It is imperative for success of implementation project

starting at the initial phase and continuing throughout the entire life cycle.

3.6 Management of Risk

Every Information technology implementation project carries important elements of

risk; hence it is probable that progress will deviate from the plan at some point in the

project life cycle. ERP implementation project risks are described as uncertainties,

liabilities or vulnerabilities that may cause the project to deviate from the defined

plan. Risk management is the competence to handle unexpected crises and deviation

from the plan [14]. The implementation of ERP system project is characterized as

complex activity and involves a possibility of occurrence of unexpected events.

Therefore, risk management is to minimize the impact of unplanned incidents in the

project by identifying and addressing potential risks before significant consequencesoccur. It is understood that the risk of project failure is substantially

reduced if the appropriate risk management strategy is followed.

3.7 Top Management Support

Top management support has been consistently identified as the most important and

crucial success factor in ERP system implementation projects [4]. [14] define top

management to provide the necessary resources and authority or power for project

success. Top management support in ERP implementation has two main facets: (1)

providing leadership; and (2) providing the necessary resources. To implement

ERP system successfully, management should monitor the implementation progress

and provide clear direction of the project. They must be willing to allow for a

mindset change by accepting that a lot of learning has to be done at all levels,including themselves [10].


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3.8 Effective Communication

Communication is one of most challenging and difficult tasks in any ERP

implementation project. It is considered a critical success factors for the

implementation of ERP systems by many authors [5]. It is essential for creating an

understanding, an approval of the implementation and sharing information between

the project team and communicating to the whole organization the results and thegoals in each implementation stage. In addition to gaining approval and user

acceptance, the communication will allow the implementation to initiate the necessary

final acceptance. The communication should start early in the ERP implementation

project and can include overview of the system and the reason for implementing it

be consistent and continuous. The Second International Conference on Innovation in

Information Technology (IIT05)

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3.9 Team work and composition

ERP team work and composition is important throughout the ERP implementation

project. An ERP project involves all of the functional departments and demands the

effort and cooperation of technical and business experts as well as end-users.According to a survey conducted by [6], ERP implementation team comprises of,

functional personnel and management, IT personnel and management,

topmanagement, IT consultants, ERP vendor , parent company employees,

management consultants, hardware vendor.

The ERP team should be balanced, or cross functional and comprise a mix of external

consultants and internal staff so the internal staff can develop the necessary technical

skills for design and ERP implementation. According to [16] survey, having

competent members in the project team is the fourth most important success factor for

IS implementation. Further, the members of the project team(s) must be

empowered to make quick decisions.

3.10 User Involvement

User involvement refers to a psychological state of the individual and is defined as the

importance and personal relevance of a system to a user. It is also defined as the

users participation in the implementation process. There are two areas for user

involvement when the company decides to implement an ERP system: (1) user

involvement in the stage of definition of the companys ERP system needs, and (2)

user participation the implementation of ERP systems. The functions of the ERP

system rely on the user to use the system after going live, but the user is also a

significant factor in the implementation.

3.11 Use of consultants

Due to the complexity of implementing an ERP system, it requires the use of eitherinternal or external experts who are knowledgeable about the installation and

software. Many companies prefer or must have external consultants to perform ERP

implementation. [4] revealed in their research on ERP implementation that

consultants may be involved in different stages of the ERP project implementation.

Clearly, it is critical success factor and has to be managed and monitored very

carefully.

3.12 Goals and Objectives

Clear goals and objectives are essential to guide an ongoing organizational effort for

ERP implementation as it usually exceeds the time frame for a typical business

project. Clear goals and objectives were the third most critical success factors in a

study of MRP implementation. It is important to set the goals of the project beforeeven seeking top management support [14]. The triple constraint of project


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management specifies three often competing and interrelated goals that need to be

met: scope, time, and cost goals. There must also be clear definitions of goals,

expectations, and deliverables. Finally, the organization must carefully define why the

ERP system is being implemented and what critical business

needs the system will address.

4. SCALE DEVELOPMENT FOR CSFS OF ERP IMPLEMENTATIONScale development, or the design and re-finement of multi-item scales employed to

measure the constructs are vital to empirical research in management information

systems [16]. Establishing the validity of the scales is dependent first upon

establishing that they are reliable measures [17]. One of the goals of this research

study is to create reliable and valid multi-item scales for measuring the 12

constructs described in Section 2. The content validity of these constructs was

tentatively established by extensive literature reviews and interviews with managers

and customers of technology-mediated services. The Second International


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4.1 Item generationThe construct brief discussion provided in Section 3 are necessary, but not sufficient,

to advance our understanding of the critical success factors of ERP implementation.

Thus, the first step in constructing new multi-item measurement scales is to generate

sets of items that tap into the latent constructs and permit us to accurately and reliably

assess these constructs from management perspectives [17]. Some of the constructs

involved in this research have been operationalized in previous studies and scales

were available for these constructs. However, none of the existing scales was exactly

appropriate for re- application in the context of ERP implementation.

4.2 Iterative item refinement

To refine the scales, we adapted [17] widely used methodology for instrument

development. This method recognizes that the complexity inherent in many business

processes cannot be adequately measured by a single scale. Multi-item measures can

reduce measurement error by providing a more robust construct of complex variables

through averaging several individual items. The challenge is to develop a set of items

that capture the essence of the construct with the desired reliability and validity. [17]

recommends an iterative process consisting of several steps.

After the initial item pool was generated, then the items were purified. This

purification step is designed to remove the potential for measurement error from the

new construct to improve their reliability.

Collecting data from an initial sample of respondents helps to address these issues.

Specifically, a manual factor technique [18] was used to establish tentative scalereliability and validity, as well as to assess potential problems with the

unidimensionality of the constructs. The manual sorting procedures was

conducted iteratively, using independent panels of expert judges for each round. The

judges had recent industry experience with the implementation and use of ERP

software in a business environment.

Each expert judge was given a questionnaire containing short descriptions of each of

the proposed constructs, together with a randomized list all of the items generated

from the literature. In each round, the panel of expert judges was asked to assign each

item to one of the identified constructs. Items that were not consistently grouped into

their target construct during this process were considered for rewording or

elimination. Note that this sorting procedure follows the technique described in [19],which differs from the traditional Q-sort technique [20] in that there are no


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restrictions on the number of items which may be placed in any of the defined

construct categories.

To assess the pretest scale reliability of the quantitative judgments made by the

questionnaire respondents, item placement ratios [19] measure was used as indicator

to measure the observed proposition of agreement between judges that is greater than

would be expected from chance. The item placement ratios assess both the validity ofthe generated items and the reliability of the proposed measurement scales. If there is

a high degree of interjugde agreement, then the percentage of items place in the target

construct will also be high. In addition, scales based on a high degree of construct

validity and also exhibit the potential to be reliable.

In table 1 (available from author) we present the final round item-placement ratios for

the constructs using format, which provides additional insight into the performance

of the proposed measurement scales.

Each of the organizational aptitude and performance constructs is listed on the rows

of the table. Let us examine, for example, the Project management construct. It has 6

items, so perfect item placement for this construct would be a score of 30 (6 items x 5

judges). In this case, only 25 judge-items were classified as intended, while 5 wereclassified under not all relevant to any of the critical success factors. The

itemplacement ratio for Project Management thus equals 25/30 or 83%. According to

[19] item placement ratio of 70% or greater is generally considered acceptable. All of

the constructs met or exceeded these criteria for the final sorting round. The Second

International Conference on Innovation in Information Technology (IIT05)

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5. FIELD SURVEY

Satisfied by the apparent reliability and parsimony of our new measurement scales,

we moved into the next phase of testing our survey instrument in a field setting. For

this phase, the mail survey was targeted at decision makers within the Australian

Companies that have implemented Enterprise resource Planning system. The

questionnaire used in this study attempted to measure the theoretical model illustrated

and discussed in section 2. Prior to piloting the questionnaire, [17] instrument

development methodology was adopted to generate the pool of items for each

construct. Items were drawn from the literature review and based on the interviews

with executives and consultants involved in the implementation of Enterprise

Resource Planning. Manual sorting procedure [18] was conducted using industry

experts experienced in ERP systems. [21] advocates this approach for new scale

development. Initial survey instrument was pilot tested during mid of 2003 and it was

further refined to be ready after a pilot survey was undertaken. The final survey was

sent out to the respondents in November - December, 2003 and comprised of 18questions in eight sections. Data used to test the CSF instrument were obtained

from 53 respondents from Australia. Each respondent company had implemented

ERP system and the respondents had experience in either been involved in ERP

implementation of their organization. The questionnaire was sent through mail to the

500 organizations and 53 usable surveys were received making the response rate to be

around 11%. Most of the items in this study were itemized using Likert- Scale, in

which respondents were asked to indicate their level of importance for each of the

construct items (critical success factors) using their response on a seven point scale.

The measurement analysis emphasizes explanations of the reliability and validity of

the new instruments for measuring these constructs. The validity and reliability

measure indicate that the instrument has thepotential for use in further studies.


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5.1 Reliability Analysis

Reliability is one of the most critical elements in assessing the quality of the construct

measures [17], and it is a necessary condition for scale validity. A statistically reliable

scale provides consistent and stable measures of a construct. Composite reliability

estimates are used to assess the inter-item reliability of the measures. Estimates

greater than .70 are generally considered to meet the criteria for reliability. Someitems may be removed from the construct scales if their removal results in increases in

the reliability estimate, however, care must be taken to ensure that the content validity

of the measures is not threatened by the removal of a key conceptual element.

As shown in the table below that reliability of each factor is above .75. In table 2, are

listed the composite reliability estimates for each of the measurement scales.

5.2 Factor Analysis

An exploratory factor analysis was conducted on the different measures to purify the

instrument. Factor analysis was also used to identify underlying factors or the

dimensional composition of instrument. Items which were not factor ally pure were

eliminated. The data from 53 responses were examined using principal component

method. At this stage, items with factor loading of less than 0.5 on each factor orabove 0.5 on additional factors should be deleted to purify the measure. After the

extraction no items are deleted but the project management items and risk

management are loaded on one factor and leaving total of 11 factors with an Eigen

value of greater than one. Factor loadings, Eigen value and Cronbach Alpha value are

presented in table 4

- 10 in appendix (not included in the paper).

The Second International Conference on Innovation in Information Technology

(IIT05)

8

Table 2: Constructs (CSFs) items and reliability values

Constructs Items Alpha

Project Management 10 .89

Business Process Reengineering 5 .85

Users training 5 .88

Technological Infrastructure 5 .88

Change management 5 .89

Top Management Support in ERP implementation 5 .87

Communication in ERP Implementation 5 .75

Team Composition in ERP Implementation 5 .81

Users Involvement in ERP Implementation 5 .86

Consultants involvement in ERP implementation 5 .84Clear Goals of ERP implementation 5 .89

5.3 Content Validity

The content validity of a questionnaire refers to the representative ness of item

content domain. It is the manner by which the questionnaire and its items are built to

ensure the reasonableness of the claim of content validity. The conceptualization of

survey instrument constructs are based on preliminary literature review to form the

initial items, the personal interviews with practitioners and experts used for scale

purification suggest that the survey instrument has strong content validity.

5.4 Construct Validity Analysis

Construct validity is established by showing that the instrument measures the

construct it is intended to measure. Construct validity is evaluated by performingcorrelation and factor analysis. High correlations considered to indicate construct


15/46

validity. It is interesting to observe that the relative strength of the correlation

between critical success factors

constructs. Project Management critical success factor is strongly correlated with the

other success factors, with the exception of consultants involvement in the

implementation process. This may be due to the project management scale contains

items such as effective partnership with ERP vendors avoids problems that would beexpected to be success factor in the ERP implementation. Business process

reengineering correlates most strongly with technological infrastructure (.73), Change

management (.73) and User involvement (.77). Change management and ERP

training to users are strongly correlated indicating the overarching nature of these

success factors implementation project. Top management involvement is correlated

highly with user involvement, demonstrating the close relationship between

business processes and team members in an ERP environment. Based on the

estimated correlations, the strongest relationship between the critical success factors

project management, business process reengineering, change management, top

management involvement and user involvement. The Second International

Conference on Innovation in Information Technology (IIT05)9

CONCLUSION

The primary contributions of this paper are the definition of new constructs associated

with the ERP implementation and the development of new multi-item measurement

scales for measuring these constructs. Unlike much prior ERP implementation

research, our study takes a grounded theory approach using ERP experts perceptions.

Future ERP implementation empirical research linking these constructs in causal

models in an ERP will benefit significantly from the existence of relevant construct

definitions and good measurement scales. A secondary contribution of this work is the

demonstration of a rigorous empirical scale and item development process.

Like any research, our approach and our results have some limitations. First, the use

of convenience samples in the pre- and pilot-tests may have limited our insights early

in the process. The use of random sampling in the final data analysis, however,

alleviated much of the concern regarding this issue. A second limitation is the fact

that our experts manual sorting approach resulted in some scales having only three

indicators. While this may prove to be a limitation in some applications and some

models, identification methods do exist that support their re-use in new models

(Bollen, 1989).

REFERENCES

[1] Jeff Stratman and V Roth,Beyond ERP Implementation: Critical Success

Factors for NorthAmerican Manufacturing Firms Supply Chain & Logistics Journal, Vol 5, Issue 1,

pp. 5-8, 2002.

[2] Rockart F, "Chief executives define their own data needs", Harvard Business

Review Issue 57,

pp. 81-93, 1979.

[3] M. Hammer and J. Champy, Reengineering the cooperation: a manifesto for

business

revolution, New York, NY, 1993.

[4] Somers & Nelson, A taxonomy of players and activities across the ERP project

life cycle,

Information & Management, pp.1-22, 2003.[5] Esteves, J. and Pastor, J., Analysis of critical success factors relevance along SAP


16/46

implementation phases. Proceedings of the 7th Americas Conference on Information

Systems (AMCIS), Boston, Massachusetts, USA, 2001.

[6] Kumar K and Hillegersberg, J.,ERP experiences and evolution,

Communications of the ACM,

Vol 43, Issue 4, pp. 23-26, 2000.

[7] Zhang Liang, Zhang Zee and Banerjee Probir Critical Success Factors ofEnterprise Resource

Planning Systems Implementation Success in China, 36th Hawaii International

Conference on

System Sciences, IEEE, 2002.

[8] Al-Mashari, M. Enterprise resource planning (ERP) systems: a research agenda,

Industrial

Management & Data Systems, Vol. 102, No. 3, pp. 165-170, 2002.

[9] Yasser Jarrar, ERP Implementation and Critical Success Factors, The Role and

Impact of

Business Process Management, Proceedings of The 2000 IEE International

Conference onManagement of Innovation and Technology, Singapore, pp. 167- 178, 2000.

[10] Rao S., Enterprise resource planning: Business needs and technologies,

Industrial Management

& Data Systems, Vol 100, Issue 2, pp 8188, 2000.

[11] Gupta (2000), Enterprise resource planning to emerging organizational value

systems,

Industrial Management & Data System (100), pp.114 -118, 2000.

[12] Davenport, Putting the enterprise into the enterprise system, Harvard Business

Review, Vol 76,

Issue 4, pp. 121 131, 1998.

[13] Nah, F. F., Lau, J. L. and Kuang, J, Critical factors of successful

implementation

of enterprise systems, Business Process Management Journal, Vol. 7, Issue 3, pp.

285-

296, 2001. The Second International Conference on Innovation in Information

Technology (IIT05)

10

[14] D.P. Slevin, J.K. Pinto, The project implementation profile: new tool for project

managers,

Project Management Journal, Vol 17, Issue 4, pp. 5770, 1996.

[15] Jiang, Managing entry-level IS professionals: using career oriented constructs",Journal of

Computer Information Systems, Vol 36, Issue 3, pp 105-110, 1996.

[16] Jeff Stratman and Roth, Enterprise Resource Planning (ERP) Competence

Constructs: Two -

stage Multi-Item Scale Development and validation". Decision Sciences, Vol 33,

Issue 4, pp. 601-

626, 2002.

[17] Churchill, A paradigm for developing better measures of marketing constructs.

Journal of

Marketing Research,Vol 16, Issue 3, pp. 64-73, 1995.

[18] Menor, An empirical investigation of new service development competence andperformance,


17/46

working paper, Kenan Flager Business School, 1998.

[19] Moore, G.C. & Benbasat. Development of an instrument to measure the

perceptions of adopting

an information technology innovation. Information Systems research, Vol 2, Issue

2, 192 -272,

1991.[20] Stephenson, W. The study of Behavior: Q-technique and its methodology.

Chicago, University

of Chicago Press, pp. 78, 1953.

[21] Hensley, R.L. A review of OM studies using scale development techniques,

Journal of

Operations Management, Vol 17, Issue 3, pp.343-358, 1999.

3

The Second International Conference on Innovation in Information Technology

(IIT05)

1

CRITICAL SUCCESS FACTORS FOR THE IMPLEMENTATION OF

ENTERPRISE RESOURCE PLANNING (ERP):

EMPIRICAL VALIDATION

T.R. Bhatti

College of Business, Zayed University

PO Box 19282, Dubai, United Arab EmiratesEmail: [email protected]

ABSTRACT

Implementing an Enterprise Resource Planning (ERP) system project is a difficult and

high cost proposition as it places tremendous demands on organizations time and

resources. The ERP implementation literature contains many case studies of

organizations that have implemented ERP systems successfully. However, many

organizations do not achieve success in their ERP implementation projects. Much has

been written about implementation and the critical success factors for ERP

implementation projects. But there very few studies have scientifically developed and

tested constructs that represent critical success factors of ERP implementation

projects. Based on a survey of 53 organizations in Australia, the results suggest that a65 item instrument that measures seven dimensions of ERP implementation is well -


18/46

validated. It is argued that model proposed in the paper is valuable to researchers and

practitioners interested in implementing Enterprise Resource Planning systems.

Keywords: ERP, Implementation, Constructs development, Critical Success Factors

1. INTRODUCTIONThe business environment is changing dramatically and in order to stay competitive inthe market, organizations must improve their business practices and procedures.

Organizations within all departments and functions upgrade their capability to

generate and communicate accurate and timely information. The organizations which

have successfully implemented the ERP systems are reaping the benefits of having

integrating working environment, standardized process and operational benefits to the

organization. Not all ERP implementations have been successful. There have been

horror stories of ERP implementation and improper implementation has taken the

companies to bankruptcy and in several cases organizations decided to abandon the

ERP implementation projects. The questions many academicians and researchers have

asked what are the reasons of success and failure of ERP implementations. Some ofthe reasons cited in the literature are lack of support of top management support,

resistance from employees, poor selection of ERP systems and vendor etc. Majority of

these studies have used case studies to conclude their findings and very few have

used the empirical to study the ERP. This research is an attempt to extend the ERP

implementation research by defining the conceptual domains constructs and

operational measures specific to ERP implementation critical success factors to

advance ERP research. The objective of this paper is to develop an instrument for

measuring ERP implementation critical success factors. We follow two step

processes; first, we identify 12 constructs covering critical success factors for ERP

implementation. Second, because the constructs are latent variables, we apply a

rigorous procedure for ensuring the psychometric adequacy of the resulting newmulti-item measurement scales.

In the first section of this paper, constructs are defined and then a rigorous empirical

scale development process in order to identify sets of survey items that exhibit

satisfactory levels of reliability and validity.

Section 2 presents a brief background of the research context and defines and

illustrates the specific constructs for which new measurements scales are developed.

The third section provides details on the preliminary scale development methodology

and field database. Section 4 describes and reports on The Second International


2

results. In section 5, we conclude with a discussion of the implications of our results

and usage of the scales, review the limitations of our study, and offer some

concluding thoughts. We conducted a cross-disciplinary literature review

encompassing BPR, Change management, MIS, strategic management, innovation

diffusion, and operations to develop a framework, construct definitions, and item

generation for this study. This process yielded the baseline model depicted and a set

of initial measurement scales for twelve theoretically important critical success

factors.


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2. MODEL DEVELOPMENTFigure 1: Enterprise Resource Planning Systems implementation framework.

Figure 1 illustrates the conceptual model developed for this study. Drawing from

multiple literature bases, we introduced an integrative, conceptual framework of what

we call integrated ERP implementation, which is comprised of a set of theoreticallyimportant constructs. This framework has been developed based on the project life

cycle approach, in which the ERP implementation project goes through different

phases before it goes live. There are number of factors that affect the ERP

implementation process are termed in this study as implementation critical success

factors. Upon the completion of ERP implementation project, performance is

measured by a mix of project outcomes and the project and business outcomes

(intended business performance improvement).

ERP Implementation Process

Analysis

InvestitureFinal Preparation

Go Live

Implementation Success

Implementation CSFs

Project Management

Process redesign

User training

Technological infrastructure

Change management.

Risk ManagementTop management support

Communication

Team work

User involvement

Use of consultant

Clear goals and objectives

Business

Outcomes

Project

Outcomes The Second International Conference on Innovation in Information

Technology (IIT05)

3

3. CONCEPTUAL DOMIANS OF CSFS FOR ERPIMPLEMENTATION

Since the model constructs are latent variables, which cannot be measured directly,

multi-item scales, each composed of a set of individual items, were needed to obtain

indirect measures of each construct. The items listed in this section represent the

scales as drawn from the practitioners, and refined through an expert judge-based

manual sorting process [1]. These scales were further refined (and some items weredropped) as a result of an empirical test of a survey instrument containing these initial


20/46

scales. Critical success factors (CSF) are widely used in the information systems

arena [2]. CSFs can be understood as the few key areas where things must go right for

the implementation to be successful. Past studies have identified a variety of CSFs for

ERP implementation, among which context related factors consistently appear.

Following are the commonly identified CSFs identified by several researchers and are

pertinent for the success of ERP implementation project.

3.1 Project Management

Project Management involves the use of skills and knowledge in coordinating the

scheduling and monitoring of defined activities to ensure that the stated objectives of

implementation projects are achieved. The formal project implementation plan defines

project activities, commits personnel to those activities, and promotes organizational

support by organizing the implementation process.

3.2 Business Process Reengineering

Another important factor that is critical for the success of ERP implementation is theBusiness Process Reengineering. It is defined by [3] asthe fundamental rethinking

and radical redesign of business processes to achieve dramatic improvements in

critical, contemporary measures of performance, such as cost, quality, service and

speed. Organizations should be willing to change their businesses to fit the ERP

software in order to minimize the degree of customization needed. The

implementation of ERP requires examination of many business processes, which

believed to be one of the important and beneficial results of the implementation of

ERP system.

3.3 User training and education

In ERP implementation process many projects fail in the end due to lack of propertraining. Many researchers consider users training and education to be an important

factor of the successful ERP implementation [4] [5] [6] [7] [8]. The main reason for

education and training program for ERP implementation is to make the user

comfortable with the system and increase the expertise and knowledge level of the

people. ERP related concept, features of ERP system, and hands on training are all

important dimensions of training program for ERP implementation. Training is not

only using the new system, but also in new processes and in understanding the

integration within the system how the work of one employee influences the work of

others.

3.4 Technological infrastructure

[8] and [9]argued that adequate IT infrastructure, hardware and networking are crucial

for an ERP systems success. It is clear that ERP implementation involves a complex

transition from legacy information systems and business processes to an integrated IT

infra-structure and common business process throughout the organization. Hardware

selection is driven by the firms choice of an ERP software package. The ERP

software vendor generally certifies which hardware (and hardware configurations)

must be used to run the ERP system. This factor has been considered critical by the

practitioners and as well as by the researchers. The Second International Conference

on Innovation in Information Technology (IIT05)

4


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3.5 Change management

Change management is a primary concern of many organizations involved in ERP

project implementation [4]. Many ERP implementations fail to achieve expected

benefits, possibly because companies underestimate the efforts involved in change

management.

[5] identify organizational change is the body of knowledge that is used to ensure that

a complex change, like that associated with a new big information system, gets the

right results, in the right timeframe, at the right costs. Generally, one of the main

obstacles facing ERP implementation is resistance to change. [11] points out that the

resistance to change is one of the main hurdles faced by most companies. Resistance

can be destructive since it can create conflicts between actors, it can be very time

consuming. To implement an ERP systems successfully, the way organizations do

business will need to change and ways people do their jobs will need to change as

well [12].[13] propose the recurring improvisational change methodology as a useful

technique for identifying, managing, and tracking changes in implementing an ERP

system. Change Management is important and one of the critical success factorsidentified in the literature. It is imperative for success of implementation project

starting at the initial phase and continuing throughout the entire life cycle.

3.6 Management of Risk

Every Information technology implementation project carries important elements of

risk; hence it is probable that progress will deviate from the plan at some point in the

project life cycle. ERP implementation project risks are described as uncertainties,

liabilities or vulnerabilities that may cause the project to deviate from the defined

plan. Risk management is the competence to handle unexpected crises and deviation

from the plan [14]. The implementation of ERP system project is characterized as

complex activity and involves a possibility of occurrence of unexpected events.

Therefore, risk management is to minimize the impact of unplanned incidents in the

project by identifying and addressing potential risks before significant consequences

occur. It is understood that the risk of project failure is substantially reduced if the

appropriate risk management strategy is followed.

3.7 Top Management Support

Top management support has been consistently identified as the most important and

crucial success factor in ERP system implementation projects [4]. [14] define top

management to provide the necessary resources and authority or power for project

success. Top management support in ERP implementation has two main facets: (1)providing leadership; and (2) providing the necessary resources. To implement ERP

system successfully, management should monitor the implementation progress and

provide clear direction of the project. They must be willing to allow for a mindset

change by accepting that a lot of learning has to be done at all levels, including

themselves [10].

3.8 Effective Communication

Communication is one of most challenging and difficult tasks in any ERP

implementation project. It is considered a critical success factors for the

implementation of ERP systems by many authors [5]. It is essential for creating an

understanding, an approval of the implementation and sharing information between


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the project team and communicating to the whole organization the results and the

goals in each implementation stage. In addition to gaining approval and user

acceptance, the communication will allow the implementation to initiate the necessary

final acceptance. The communication should start early in the ERP implementation

project and can include overview of the system and the reason for implementing it be

consistent and continuous. The Second International Conference on Innovation inInformation Technology (IIT05)

5

3.9 Team work and composition

ERP team work and composition is important throughout the ERP implementation

project. An ERP project involves all of the functional departments and demands the

effort and cooperation of technical and business experts as well as end-users.

According to a survey conducted by [6], ERP implementation team comprises of,

functional personnel and management, IT personnel and management, top

management, IT consultants, ERP vendor , parent company employees, managementconsultants, hardware vendor. The ERP team should be balanced, or cross functional

and comprise a mix of external consultants and internal staff so the internal staff can

develop the necessary technical skills for design and ERP implementation. According

to [16] survey, having competent members in the project team is the fourth most

important success factor for IS implementation. Further, the members of the project

team(s) must be empowered to make quick decisions.

3.10User Involvement

User involvement refers to a psychological state of the individual and is defined as the

importance and personal relevance of a system to a user. It is also defined as the

users participation in the implementation process. There are two areas for user

involvement when the company decides to implement an ERP system: (1) user

involvement in the stage of definition of the companys ERP system needs, and (2)

user participation the implementation of ERP systems. The functions of the ERP

system rely on the user to use the system after going live, but the user is also a

significant factor in the implementation.

3.11Use of consultants

Due to the complexity of implementing an ERP system, it requires the use of either

internal or external experts who are knowledgeable about the installation and

software. Many companies prefer or must have external consultants to perform ERPimplementation. [4] revealed in their research on ERP implementation that

consultants may be involved in different stages of the ERP project implementation.

Clearly, it is critical success factor and has to be managed and monitored very

carefully.

3.12Goals and Objectives

Clear goals and objectives are essential to guide an ongoing organizational effort for

ERP implementation as it usually exceeds the time frame for a typical business

project. Clear goals and objectives were the third most critical success factors in a

study of MRP implementation. It is important to set the goals of the project beforeeven seeking top management support [14]. The triple constraint of project


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management specifies three often competing and interrelated goals that need to be

met: scope, time, and cost goals. There must also be clear definitions of goals,

expectations, and deliverables. Finally, the organization must carefully define why the

ERP system is being implemented and what critical business needs the system will

address.

4. SCALE DEVELOPMENT FOR CSFS OF ERPIMPLEMENTATION

Scale development, or the design and re-finement of multi-item scales employed to

measure the constructs are vital to empirical research in management information

systems [16]. Establishing the validity of the scales is dependent first upon

establishing that they are reliable measures [17]. One of the goals of this research

study is to create reliable and valid multi-item scales for measuring the 12 constructs

described in Section 2. The content validity of these constructs was tentatively

established by extensive literature reviews and interviews with managers and

customers of technology-mediated services. The Second International Conference onInnovation in Information Technology (IIT05)

6

4.1 Item generation

The construct brief discussion provided in Section 3 are necessary, but not sufficient,

to advance our understanding of the critical success factors of ERP implementation.

Thus, the first step in constructing new multi-item measurement scales is to generate

sets of items that tap into the latent constructs and permit us to accurately and reliably

assess these constructs from management perspectives [17]. Some of the constructs

involved in this research have been operationalized in previous studies and scaleswere available for these constructs. However, none of the existing scales was exactly

appropriate for re- application in the context of ERP implementation.

4.2 Iterative item refinement

To refine the scales, we adapted [17] widely used methodology for instrument

development. This method recognizes that the complexity inherent in many business

processes cannot be adequately measured by a single scale. Multi-item measures can

reduce measurement error by providing a more robust construct of complex variables

through averaging several individual items. The challenge is to develop a set of items

that capture the essence of the construct with the desired reliability and validity. [17]

recommends an iterative process consisting of several steps.

After the initial item pool was generated, then the items were purified. This

purification step is designed to remove the potential for measurement error from the

new construct to improve their reliability. Collecting data from an initial sample of

respondents helps to address these issues. Specifically, a manual factor technique [18]

was used to establish tentative scale reliability and validity, as well as to assess

potential problems with the unidimensionality of the constructs. The manual sorting

procedures was conducted iteratively, using independent panels of expert judges for

each round. The judges had recent industry experience with the implementation and

use of ERP software in a business environment.


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Each expert judge was given a questionnaire containing short descriptions of each of

the proposed constructs, together with a randomized list all of the items generated

from the literature. In each round, the panel of expert judges was asked to assign each

item to one of the identified constructs. Items that were not consistently grouped into

their target construct during this process were considered for rewording or

elimination. Note that this sorting procedure follows the technique described in [19],which differs from the traditional Q-sort technique [20] in that there are no

restrictions on the number of items which may be placed in any of the defined

construct categories.

To assess the pretest scale reliability of the quantitative judgments made by the

questionnaire respondents, item placement ratios [19] measure was used as indicator

to measure the observed proposition of agreement between judges that is greater than

would be expected from chance. The item placement ratios assess both the validity of

the generated items and the reliability of the proposed measurement scales. If there is

a high degree of interjugde agreement, then the percentage of items place in the target

construct will also be high. In addition, scales based on a high degree of constructvalidity and also exhibit the potential to be reliable.

In table 1 (available from author) we present the final round item-placement ratios for

the constructs using [19] format, which provides additional insight into the

performance of the proposed measurement scales. Each of the organizational aptitude

and performance constructs is listed on the rows of the table. Let us examine, for

example, the Project management construct. It has 6 items, so perfect item placement

for this construct would be a score of 30 (6 items x 5 judges). In this case, only 25

judge-items were classified as intended, while 5 were classified under not all relevant

to any of the critical success factors. The itemplacement ratio for Project Management

thus equals 25/30 or 83%. According to [19] item placement ratio of 70% or greater is

generally considered acceptable. All of the constructs met or exceeded these criteria

for the final sorting round. The Second International Conference on Innovation in

Information Technology (IIT05)

7

5. FIELD SURVEYSatisfied by the apparent reliability and parsimony of our new measurement scales,

we moved into the next phase of testing our survey instrument in a field setting. For

this phase, the mail survey was targeted at decision makers within the Australian

Companies that have implemented Enterprise resource Planning system. The

questionnaire used in this study attempted to measure the theoretical model illustrated

and discussed in section 2. Prior to piloting the questionnaire, [17] instrument

development methodology was adopted to generate the pool of items for each

construct. Items were drawn from the literature review and based on the interviews

with executives and consultants involved in the implementation of Enterprise

Resource Planning. Manual sorting procedure [18] was conducted using industry

experts experienced in ERP systems. [21] advocates this approach for new scale

development.

Initial survey instrument was pilot tested during mid of 2003 and it was further

refined to be ready after a pilot survey was undertaken. The final survey was sent out

to the respondents in November - December, 2003 and comprised of 18 questions in


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eight sections. Data used to test the CSF instrument were obtained from 53

respondents from Australia. Each respondent company had implemented ERP system

and the respondents had experience in either been involved in ERP implementation of

their organization. The questionnaire was sent through mail to the 500 organizations

and 53 usable surveys were received making the response rate to be around 11%.

Most of the items in this study were itemized using Likert- Scale, in whichrespondents were asked to indicate their level of importance for each of the construct

items (critical success factors) using their response on a seven point scale.

The measurement analysis emphasizes explanations of the reliability and validity of

the new instruments for measuring these constructs. The validity and reliability

measure indicate that the instrument has the potential for use in further studies.

5.1 Reliability Analysis

Reliability is one of the most critical elements in assessing the quality of the construct

measures [17], and it is a necessary condition for scale validity. A statistically reliable

scale provides consistent and stable measures of a construct. Composite reliabilityestimates are used to assess the inter-item reliability of the measures. Estimates

greater than .70 are generally considered to meet the criteria for reliability. Some

items may be removed from the construct scales if their removal results in increases in

the reliability estimate, however, care must be taken to ensure that the content validity

of the measures is not threatened by the removal of a key conceptual element.

As shown in the table below that reliability of each factor is above .75. In table 2, are

listed the composite reliability estimates for each of the measurement scales.

5.2 Factor Analysis

An exploratory factor analysis was conducted on the different measures to purify theinstrument. Factor analysis was also used to identify underlying factors or the

dimensional composition of instrument. Items which were not factor ally pure were

eliminated. The data from 53 responses were examined using principal component

method. At this stage, items with factor loading of less than 0.5 on each factor or

above 0.5 on additional factors should be deleted to purify the measure. After the

extraction no items are deleted but the project management items and risk

management are loaded on one factor and leaving total of 11 factors with an Eigen

value of greater than one. Factor loadings, Eigen value and Cronbach Alpha value are

presented in table 4

10 in appendix (not included in the paper).The Second International Conference on Innovation in Information Technology

(IIT05)

8

Table 2: Constructs (CSFs) items and reliability values

Constructs Items Alpha

Project Management 10 .89

Business Process Reengineering 5 .85

Users training 5 .88

Technological Infrastructure 5 .88

Change management 5 .89

Top Management Support in ERP implementation 5 .87Communication in ERP Implementation 5 .75


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Team Composition in ERP Implementation 5 .81

Users Involvement in ERP Implementation 5 .86

Consultants involvement in ERP implementation 5 .84

Clear Goals of ERP implementation 5 .89

5.3 Content ValidityThe content validity of a questionnaire refers to the representative ness of item

content domain. It is the manner by which the questionnaire and its items are built to

ensure the reasonableness of the claim of content validity. The conceptualization of

survey instrument constructs are based on preliminary literature review to form the

initial items, the personal interviews with practitioners and experts used for scale

purification suggest that the survey instrument has strong content validity.

5.4 Construct Validity Analysis

Construct validity is established by showing that the instrument measures the

construct it is intended to measure. Construct validity is evaluated by performingcorrelation and factor analysis. High correlations considered to indicate construct

validity. It is interesting to observe that the relative strength of the correlation

between critical success factors constructs. Project Management critical success factor

is strongly correlated with the other success factors, with the exception of consultants

involvement in the implementation process. This may be due to the project

management scale contains items such as effective partnership with ERP vendors

avoids problems that would be expected to be success factor in the ERP

implementation. Business process reengineering correlates most strongly with

technological infrastructure (.73), Change management (.73) and User involvement

(.77). Change management and ERP training to users are strongly correlated

indicating the overarching nature of these success factors implementation project. Topmanagement involvement is correlated highly with user involvement, demonstrating

the close relationship between business processes and team members in an ERP

environment. Based on the estimated correlations, the strongest relationship between

the critical success factors project management, business process reengineering,

change management, top management involvement and user involvement. The

Second International Conference on Innovation in Information Technology (IIT05)

9

CONCLUSION

The primary contributions of this paper are the definition of new constructs associated

with the ERP implementation and the development of new multi-item measurementscales for measuring these constructs. Unlike much prior ERP implementation

research, our study takes a grounded theory approach using ERP experts perceptions.

Future ERP implementation empirical research linking these constructs in causal

models in an ERP will benefit significantly from the existence of relevant construct

definitions and good measurement scales. A secondary contribution of this work is the

demonstration of a rigorous empirical scale and item development process. Like any

research, our approach and our results have some limitations. First, the use of

convenience samples in the pre- and pilot-tests may have limited our insights early in

the process. The use of random sampling in the final data analysis, however,

alleviated much of the concern regarding this issue. A second limitation is the fact

that our experts manual sorting approach resulted in some scales having only threeindicators. While this may prove to be a limitation in some applications and some


27/46

models, identification methods do exist that support their re-use in new models

(Bollen, 1989).

REFERENCES

[1] Jeff Stratman and V Roth,Beyond ERP Implementation: Critical Success

Factors for North

American Manufacturing Firms Supply Chain & Logistics Journal, Vol 5, Issue 1,

pp. 5-8, 2002.

[2] Rockart F, Chief executives define their own data needs, Harvard Business

Review Issue 57,

pp. 81-93, 1979.

[3] M. Hammer and J. Champy, Reengineering the cooperation: a manifesto for

business

revolution, New York, NY, 1993.[4] Somers & Nelson, A taxonomy of players and activities across the ERP project

life cycle,

Information & Management, pp.1-22, 2003.

[5] Esteves, J. and Pastor, J., Analysis of critical success factors relevance along SAP

implementation phases. Proceedings of the 7th Americas Conference on Information

Systems (AMCIS), Boston, Massachusetts, USA, 2001.

[6] Kumar K and Hillegersberg, J.,ERP experiences and evolution,

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Definition and Analysis of Critical Success Factors for ERP Implementation Projects

Abstract:

ERP is one the latest technologies that many organizations have undertaken. Typically,

Enterprise Resource Planning (ERP) systems are software packages composed of several

modules, such as human resources, sales, finance and production, providing cross-

organizational integration of transaction-based data management throughout embedded

business processes support. These software packages can be customized up to a certain limit

to the specific needs of each organization. ERP was characterized as the most important

development in the corporate use of technology in the 1990s. Unfortunately, many ERP

projects have not been effective enough and hence have been unable to achieve all the results

envisaged. As the cost of an ERP implementation project is very high, it is critical for an

organization to make the project a success and start obtaining benefits out of it as fast as

possible. But what is it that makes an ERP implementation project successful?

To address this issue we propose the use of a Critical Success Factors (CSF) approach to

manage ERP implementation projects. After an extensive literature review on ERP research

and ERP implementation project studies, we have studied and have proposed results along the

following issues:

The identification and definition of a comprehensive list of CSF.

The relevance of CSF along the typical ERP implementation phases.

The definition of Key Performance Indicators (KPI) for CSF.

The analysis of CSF management in some organizational contexts.

A theoretical framework was developed in order to aid the process of answering the implied

research questions. In order to accomplish the research aims of this research, we have

proposed an interpretive research approach and a multimethod research framework that

combines various research methods, both quantitative and qualitative, with predominance of

qualitative ones. Several results have already been produced out of our research project, with

our chosen theoretical and research framework:


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An annotated bibliography on ERP research.

A CSF unified model for ERP implementation projects.

A CSF relevance schema along the typical ERP implementation phases.

A new criticality indicator for Process Quality management (PQM) method.

A tentative set of KPI for some CSF and a systematic approach to develop the rest of

KPI.

An ERP implementation model.

A CSF management analysis in two organizational contexts:

CRITICAL SUCCESS FACTORS IN ERP PROJECTS

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