8/7/2019 CRITICAL SUCCESS FACTORS IN ERP PROJECTS
1/46
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.
8/7/2019 CRITICAL SUCCESS FACTORS IN ERP PROJECTS
2/46
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
8/7/2019 CRITICAL SUCCESS FACTORS IN ERP PROJECTS
3/46
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
8/7/2019 CRITICAL SUCCESS FACTORS IN ERP PROJECTS
4/46
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
8/7/2019 CRITICAL SUCCESS FACTORS IN ERP PROJECTS
5/46
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.
8/7/2019 CRITICAL SUCCESS FACTORS IN ERP PROJECTS
6/46
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.
8/7/2019 CRITICAL SUCCESS FACTORS IN ERP PROJECTS
7/46
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
8/7/2019 CRITICAL SUCCESS FACTORS IN ERP PROJECTS
8/46
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)
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 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
8/7/2019 CRITICAL SUCCESS FACTORS IN ERP PROJECTS
9/46
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
8/7/2019 CRITICAL SUCCESS FACTORS IN ERP PROJECTS
10/46
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].
8/7/2019 CRITICAL SUCCESS FACTORS IN ERP PROJECTS
11/46
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)
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,
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
8/7/2019 CRITICAL SUCCESS FACTORS IN ERP PROJECTS
12/46
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
Conference on Innovation in Information Technology (IIT05)
6
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
8/7/2019 CRITICAL SUCCESS FACTORS IN ERP PROJECTS
13/46
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)
7
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.
8/7/2019 CRITICAL SUCCESS FACTORS IN ERP PROJECTS
14/46
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
8/7/2019 CRITICAL SUCCESS FACTORS IN ERP PROJECTS
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
8/7/2019 CRITICAL SUCCESS FACTORS IN ERP PROJECTS
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,
8/7/2019 CRITICAL SUCCESS FACTORS IN ERP PROJECTS
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 -
8/7/2019 CRITICAL SUCCESS FACTORS IN ERP PROJECTS
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
Conference on Innovation in Information Technology (IIT05)
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.
8/7/2019 CRITICAL SUCCESS FACTORS IN ERP PROJECTS
19/46
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
8/7/2019 CRITICAL SUCCESS FACTORS IN ERP PROJECTS
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
8/7/2019 CRITICAL SUCCESS FACTORS IN ERP PROJECTS
21/46
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
8/7/2019 CRITICAL SUCCESS FACTORS IN ERP PROJECTS
22/46
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
8/7/2019 CRITICAL SUCCESS FACTORS IN ERP PROJECTS
23/46
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.
8/7/2019 CRITICAL SUCCESS FACTORS IN ERP PROJECTS
24/46
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
8/7/2019 CRITICAL SUCCESS FACTORS IN ERP PROJECTS
25/46
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
8/7/2019 CRITICAL SUCCESS FACTORS IN ERP PROJECTS
26/46
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
8/7/2019 CRITICAL SUCCESS FACTORS IN ERP PROJECTS
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,
Communications of the ACM,
Vol 43, Issue 4, pp. 23-26, 2000.
[7] Zhang Liang, Zhang Zee and Banerjee Probir Critical Success Factors of
Enterprise 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 on
Management 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.
8/7/2019 CRITICAL SUCCESS FACTORS IN ERP PROJECTS
28/46
[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 and
performance,
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.
8/7/2019 CRITICAL SUCCESS FACTORS IN ERP PROJECTS
29/46
[21] Hensley, R.L. A review of OM studies using scale development techniques,
Journal of
Ope
rations Management, Vol 17, Issue 3, pp.343-358, 1999.
22222
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:
8/7/2019 CRITICAL SUCCESS FACTORS IN ERP PROJECTS
30/46
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:
Top Related