Enterprise Resource Planning (ERP) is essentially a commercial software package that enables the integration of transaction-oriented data and business processes throughout an organization.
In order to remain competitive in this global business scenario, the small and medium scale enterprises (SMEs) are opting for ERP implementation. In Indian SME sector, the adoption of
ERP is rapidly increasing.
There are many instances where organizations, even after implementing such novel information systems like ERP, are unable to derive the benefits of Data integration. It is, therefore, not surprising that implementation of enterprise information systems in general is quite difficult due to size, scope and complexity.
There is a need to identify some issues that would lead to positive outcome for the implementation of ERP systems in the context of Indian SME sector. This analysis thus attempts to identify and to prioritize the factors influencing proper implementation of ERP systems in a business organization particularly for Indian small and medium businesses (SMBs).
The data presented here is specifically targeted the Indian SMEs, in the process of implementing a ERP system.
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Enterprise Resource Planning (ERP) systems have emerged as the center of successful information management system and are considered as the backbone of organizations. Today, organizations of any magnitude have implemented or in the process of implementing ERP systems in order to remain competitive in this global business scenario.
ERP can be regarded as highly integrated management information system having the capability to manage all aspects of business operations of organizations, which include production, manufacturing, sales, accounting, customer service, etc.
ERP are increasingly becoming accepted platform for the small and medium scale industrial sectors and it is viewed as one of the ways to achieve competitive advantage and to reengineer business process. To achieve synergy across product lines, these businesses must implement a set of standard business applications and consistent data definitions across all business units.
ERP packages are extremely useful for integrating a global company and for providing a “common language” throughout the organizations. Over the past few years, global economic downturn has put some spotlight on many business organizations of any magnitude. Indian small and medium business were also affected with such scenario. However, the large establishments have attempted to tackle in their own way and it is the small and the medium scale enterprises (SME) that are showing their huge potential growth.
Indian SMEs contribute well above 60% of country’s gross domestic product (GDP) and, because of its potential growth ERP, vendors are moving their attention towards small and medium business (SMB) by offering customized and cheaper solutions from both the organizational and technological point of view (Chen, 2001). SME's creates the largest employment opportunities for the Indian populace.
India’s SME sector is a vibrant, dynamic, flexible and productive entity, containing as many as 12 million units and employing around 30 million people. At the time of removal of
quantitative restrictions under WTO in 2001, it was widely feared that the sector would collapse under the onslaught of global products.
On the contrary, the sector quickly adapted and restructured itself to face the competition head-on. It embraced high technology, accepted norms of quality and competitiveness and continued to expand faster than the rest of the industrial economy. However, A vast majority of small and medium scale organizations have some significant constraints in their resources.
While Indian SMEs overlook the benefits of integrating ERP systems stating that such ERP software are beyond their budgets as the reason, but there is no doubt that the implementation of ERP software can improve the company’s performance as well. The awareness of implementing enterprise business application (i.e. ERP) among SMEs is less than 35%, as compared to over 80% for large organizations as per survey conducted by International Data Corporation (IDC). The critical influencing business drivers for SME segment will be to increase the overall business efficiency, to increase the capital and labor productivity and to reduce the fixed and variable cost.
Research and survey by leading IT vendors clearly points out that the need for technology solutions is not only confined to Tier 1 cities in India but also business organizations operating from Tier II and Tier III cities also need ERP solutions as well.
As all ERP vendors are focusing on this market, the Indian SME segment will have many alternatives to choose any one out of such high competitive price.
It has been found from the outcome of several researches that the implementation of ERP systems is more complex and expensive task for small organizations
Research shows many instances where companies, in spite of spending huge amount of money, are not able to derive any benefits out of it. A number of publications have highlighted the problems and frustrations that the companies had to go through while implementing such information system.
A study by Aberdeen group finds SMEs are focusing on growth strategies and service to customers, sometimes balancing between the two, but more often, they are focusing exclusively on one or other. As organizations grow in their sizes and improve performance, they are more likely to invest in an ERP system that will grow with them. However, growth cannot come at the expense of customer service. So, Micro-small and medium scale enterprises (MSME) tend to operate in distributed environment and hence seek help from enterprise business applications (e.g. ERP in particular) in order to streamline and integrate business operations.
As cases of ERP failures have increased, many studies try to identify the factors for Indian small and medium scale enterprises that could lead to successful implementation process of ERP.
Analysis presented here is specifically targeted for Indian SMBs which are in the process of implementing ERP systems.
Factors influencing ERP Implementation
There are certain factors in the context of the implementation of ERP projects. Below are the critical success factors that the organizations must focus on to be successful. Identifying the critical success factors is important and needs careful attention.
These factors allow firms to decide whether they have the required capability & capacity to build the necessary requirements to meet them or not.
We can identify 17 factors that lead to positive implementation of ERP in organizations, a few were found inapplicable to the context of ERP implementation in SME’s of India.
17 important factors influencing ERP implementation
Top Management SupportScalability & scopeProject sponsorProperly defined goals & objectivesERP ImportancePackage SelectionUser KnowledgeProject ManagementVendor SupportProject ChampionUser TrainingPrevailing IT InfrastructureCost of ProjectExternal ConsultantERP Team CompositionImproved work efficiencyInterdepartmental Communication