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Critical success factors in ERP implementation

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Blerta Abazi Chaushi Agron Chaushi

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ISSN 2410-3918 Academic Journal of Business, Administration, Law and Social Sciences Vol. 2 No. 3
Acces online at www.iipccl.org IIPCCL Publishing, Tirana-Albania November 2016

Critical success factors in ERP implementation

Blerta Abazi Chaushi

Faculty of Business and Economics, SEE-University,
1200 Tetovo, Macedonia

Agron Chaushi
Faculty of Business and Economics, SEE-University,
1200 Tetovo, Macedonia

Zamir Dika
Faculty of Contemporary Sciences and Technologies, SEE-University,
1200 Tetovo, Macedonia

Abstract

This study conducts state of the art literature review of critical success factors for enterprise
resource planning systems implementation success. Since research on critical success factors
for ERP implementation success is very rare and fragmented, this study provides a more
comprehensive list of ten factors that companies that have adopted and struggle with the
implementation, as well as companies who are in the process of considering implementation
of ERP system can easily adopt and follow. The main contribution of this paper is that these ten
new critical success factors are identified through a thorough analysis of 22 selected research
papers and is more comprehensive and straightforwardly employable for use.

Keywords: ERP systems, CSFs, ERP implementation, proposed list of CSFs.

Introduction

Today’s companies face difficulties in maintaining competitive advantage, especially

in the domain of information and communication technologies, since the lack of
seamless integration of business processes that will allow companies to leverage
from customer data on one hand, and faster supply flow on the other, leads to poor
decision making and slow actions and reactions to the changing nature of the business
environment. Thus, there is a need for integration of these business processes which
can be done through an Enterprise Resource Planning (ERP) system.
This paper provides a literature review of the critical success factors (CSFs) for
ERP implementation. These become more and more needed due to the fact that,
although every organization has differing definitions of “success” and “failure,”
more companies are defining their projects as failures when compared to previous
years (21% in 2015 compared to 16% in 2014). These results come from Panorama, a
consulting company that quantifies results from 562 ERP implementations around
the world in their “2015 ERP Report” (Panorama Consulting Solutions, 2015).

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1. Critical Success Factors as found in literature

Critical Success Factors (CSFs) for ERP systems implementation are covered in a
great deal in academic literature. Looking at existing research, four main papers
are distinguished. These research papers are considered to be the foundation of the
concepts of CSF for ERP implementation. They have over one thousand citations and
are referred in a vast amount of the other papers.
To start with, Umble et al., 2003, in their research work identify critical success factors,
so"ware selection steps, and implementation procedures critical to a successful
implementation of ERP system. Although many companies that in the 90’s had
implemented ERPs have reported positive feedback such as savings in millions of
dollars due to inventory reduction, logistics, materials management, still the risks and
challenges remain high with these projects. ERPs take a long time for implementation
and are very costly. As CSF that mitigate the risk of system failure, they distinguish
amongst factors three main areas: 1) 9 CSFs for successful ERP implementation; 2)
12 CSFs for ERP system selection; and 3)11 CSFs for Implementation steps. The
first nine factors from the first area are vastly recognized in the literature. To start
with, the understanding of the strategic goals of the organization, top management
commitment, project management practice, change management practice, the selected
team, data quality, training in all levels of the organization; performance measures of
the system; and last, the implementation approach for handling the multi-site issues–
are the factors most important for organizations to prepare themselves to reduce the
risk of failure of an ERP implementation (Umble et al., 2003).
Then, Nah et al., 2001 in their paper state that research on CSF for ERP implementation
success is rare and scrappy, and identify 11 CSF. To be more accurate, they put
the significance of the constitution of the team that will work in the ERP project
implementation, change management, premier level of management support; clear
plan and vision for implementation; minimum customization, project management
practice, communication, performance indicators, so"ware preservation, and
managing business and IT legacy systems as CFS. Unlike Umble et al., Nah et al.
factors extend over the whole life-cycle of ERP implementation.
A"erwards, Hong and Kim, 2002, analyze the high rate of ERP failures from the
insight of the “organizational fit of ERP”. Given that the data they collect is primary
data from interviews and questionnaires, their study plays a part in the awareness
of the success factors. Out of the thirty four organizations interviewed, empirical
analysis shows that organizational fit has significant effect on the success rate of ERP
implementation, as well as that organizational resistance has negative effect on ERP
implementation success.
To finish with, Holland and Light, (Holland, Light, & Gibson, 1999), recommend
framework for CSFs so that organizations can develop their ERP implementation
strategy. The factors are distinguished between business or within technical scope,
and divide the CSFs into two main groups of factors: 1) strategic and 2) tactical - where
in the first importance of understanding the legacy systems, ERP strategy, business
vision, top management support and project plan/schedule are key CSFs; and in the
second, the significance of consultation, personnel, BPR, so"ware configuration,

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acceptance, monitoring and feedback, communication and troubleshooting are

crucial CSFs. Although 8 case studies were included to make the framework more
significant, this framework however lacks to assess the impact of the factors on the
ERP implementation.

Methodology and Analysis

Throughout the analysis of these four research studies, a pa$ern of factors for ERP
failure was created as it can be seen in Table1. The severity of the factors is presented
with round icons. The fuller the icon is, the more importance is given to the factor. For
instance, what all of these authors agree upon mostly is that ERPs typically require
and have to get a huge managerial support, while the one that doesn’t seem to be the
concern of all four of them is that ERPs require consulting firms and consultants firms
during the implementation phase. These results show that what these authors portray
as factors that influence the increase of the failure rates for ERP implementation,
correspond to the disadvantages of ERP systems commonly found in the literature.
This again reinforces the statement that literature doesn’t seem to have a clear cut
representation of the terms used to analyze and describe ERP conditions.
Table 1: Factors for ERP failures based on four most cited research papers

Failure factors / ERP Disadvantages Umble et al., (Nah et al., (Hong and (Holland et
2003 2001) Kim, 2002) al., 1999)
It takes long time to implement
It disrupts the culture and the business
It needs a lot of training
It needs a lot of managerial support
It is very costly
It requires consulting/consultants
It requires reengineering of the business processes (BRP)

The analysis of these four papers and another 18 studies, has resulted in a more
comprehensive and combined list of ten new critical success factors (see Table 2 and
Table 3). Moreover, the reason why 22 studies were selected from a large amount
of published research is due to the uniqueness factor and since the other studies
deem not to carry whatever thing exceptional to critical success factors and as such,
they are merely a repetition or summary of the already existing literature. The four
abovementioned studies, where most of the proposed CSFs in this paper have been
derived, seem to have created the grounded theory on CSFs on ERP implementation
success. Ten main factors were derived from the work of these prestigious authors
that can be used by relevant parties interested in implementation of ERP systems
that can facilitate the process and the successful completion. As you can see in Table
2, ten clear success factors while implementing ERP are specified. Initially, given that
Umble et al. identifies 22 CSFs, Nah distinguishes 11 CSFs, Hong at most 8 CSFs and
Holland classifies 13 CSFs in two major categories, it becomes challenging to follow

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one specific list that will aid the adoption and implementation of ERP systems. These
ten critical success factors given in Table 2 are cra"ed using meta-synthesis method
for qualitative research, an a$empt to integrate the critical success factors from the
four different but inter-related qualitative studies of critical success factors in ERP
implementation success. For each given factor in the table, common rudiments from
contextual analysis of the studies are obtained, and for each of the factors where does
the author insinuate that it belongs to this category if not clearly stated.
Table 2: Proposed list of Critical Success Factors for successful ERP implementati

Critical Success Umble et al. Nah et al. 2001 Hong et al. 2002 Holland et al.
Factor 2003 1999
1. Detailed N/A Determine Analyzed Legacy
knowledge of the the IT and under the factor systems
organization and organizational Organizational
legacy systems change required fit (also
for success+ knowledge
appropriate of ERP before
business and IT adoption)
legacy systems
2. Having a clear The strategic Business plan Under the Business
and concise goals of the and vision + factor ERP vision
strategy organization; Clear Business Implementation
model Success
3. Having top Commitment Top N/A ERP strategy
management of the top management Top
sponsorship management; support + project management
champion Support
4. Following top- Project Project Mentioned Project
notch project management management under the factor schedules/
management practice with Organizational plans
practices clear definition fit
of objectives;
Change Change Mentioned Client
5. Following top- management management under ERP acceptance
notch change practice program and Adaptation, Client
management (since ERPs culture, and Process consultation
practices may enforce BPR and Adaptation
BPR of key minimum
processes within customization
organizations);
6. Having a The team that ERP teamwork Under the N/A
skillful and will be devoted and composition factor ERP
knowledgeable and selected Implementation
team according to Success
composition their skill sets;
7. Creating clear Data quality N/A Mentioned not N/A
procedures for that has to be significantly
data entry and established for under the factor
accuracy accuracy; Organizational
fit

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8. Conducting Training in all Effective N/A Monitoring and

training and levels of the communication feedback
Communication
streamlining the organization (as
communication a most widely
recognized CSF
for enabling
people to work
with the system);
9. Creating Measures of Monitoring and Under the BPC
performance performance for evaluation of factor ERP
measures the new system performance Implementation
that have to be Success
established;
10. Deciding on the The So"ware N/A so"ware
implementation implementation development, configuration
approach approach which testing and
might lead to the troubleshooting
issues of multi-
site

Table 2 is an endeavor to create a more all-embracing list of success factors that

companies can follow. As it can be noticed, most of these factors are handled by all
of these four authors. When critical success factors are examined, literature takes
extensive dimensions. Except for Umble, Nah, Hong and Kim, and Holland, there are
many other authors who deal with the importance of critical success factors in pre,
during and a"er ERP implementation process. It is very vital that this list is followed,
especially since 48% of any ERP implementation is either a failure or it hasn’t reached
the success envisaged, and that most of the implementations, around 60% are over
budget (Panorama Consulting Solutions, 2015). Figure 1 shows the reasons why
companies end up over-budget, and Figure 2 depicts the reasons of exceeding the
planned duration of the ERP implementation.

Figure 1: Reasons why ERP implementations go over budget.

Source: (Panorama Consulting Solutions, 2015)

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Figure 2: Reasons why companies go over planned duration.

Source: (Panorama Consulting Solutions, 2015)

To emphasize the importance of having clear list of critical success factors, and
looking at Figure 1 and Figure 2 makes it more clear that there is a need for such a
list, each of the ten identified factors is explained in the result section of this paper to
give a more detailed rationale why it was chosen among many others as a critical one.

Results

To start with the detailed analysis of the 10 identified and proposed critical success
factors, which is the main contribution of this paper, a rationale that shows extensive
work to obtain the same is given in Table 3. It is an endeavor to showcase the
importance of the ten identified success factor by looking at their appearance in the
list.
Table 3: Extended list of critical success factor for ERP implementation
Sommers and Nelson 2001/04
Akkermans and Helden 2002

Sammon and Adam, 2008

Finney and Corbett, 2007

Shaul and Tauber, 2013

Hanafizadeh et al, 2011
Ehie and Madsen, 2005
Al-Mashari et al, 2002

Olson and Zhao, 2007

Wong and Tein, 2003

McLeond et al, 2011

Al-Fawaz et.al 2008
Poonam Garg, 2010
Jarrar et al, 2000

Ngai et al, 2008

Critical Success Factor

Hawking, 2007

Han et al, 2010

Bradley, 2008

1.Detailed knowledge of the organization and legacy systems

2.Having a clear and concise strategy
3.Having top management sponsorship
4.Following project and process management practices for BPR
5.Following top-notch change management practices
6.Having a skillful and knowledgeable team composition
7.Creating clear procedures for data entry and accuracy
8.Conducting training and streamlining the communication
9.Creating performance measures
10. Deciding on the implementation approach

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Detailed knowledge of the organization and legacy systems – Umble et al, doesn’t
seem to give a lot of importance to this factor. But Nah et al. believe that the knowledge
of the organization is required for change planning and knowledge of legacy systems
is needed to create an appropriate business and IT system (Nah et al., 2001). Hong et
al. also give importance by analyzing this under the organizational fit factors (Hong
& Kim, 2002), whereas Holland et al, says that without a proper understanding of the
legacy systems there cannot be a successful implementation of an ERP project. It is of
an immense importance that organizations understand that they need to recognize
their business processes for the purpose of fitness between the ERP package and the
overall business strategy of the organization. Legacy systems also have to be carefully
evaluated and defined to determine the nature and scale of the problems that the
organization may come across during the implementation. Some authors (like
Bradley) also link a complete management function that will choose the right system
according to the legacy systems in place. According to Finney, the consideration of
legacy systems is a tactical factor during the implementation of ERP systems. (Al-
Mashari, Al-Mudimigh, & Zairi, 2003; Bradley, 2008; Ehie & Madsen, 2005; Finney &
Corbe$, 2007; Han, Liu, Swanner, & Yang, 2010; Hawking, 2007; Ngai, Law, & Wat,
2008; Shaul & Tauber, 2013; Wong & Tein, 2003)
Having a clear and concise strategy – It is obvious that all the four authors analyzed
when this factor was derived agree that a company will not be successful during
ERP implementation if it does not have a clear list of strategic goals (Umble), clear
business model and plan and vision (Nah, Holland, Hong). Moreover, Mashari states
that without a clear guidance and thorough strategic planning, ERP implementation
initiative can suffer a huge failure. Bradley adds by analyzing this from the
management perspective and puts it in the planning management function by
exclaiming that there should be clear project goals, detailed formal plan and well
defined tasks. Clear goals, clear objectives, the business vision and mission, strategic
plans, focus and scope are factor in most authors that deal with critical success factors
(Akkermans & van Helden, 2002; Al-Fawaz, Al-Salti, & Eldabi, 2008; Al-Mashari et al.,
2003; Bradley, 2008; Finney & Corbe$, 2007; Hanafizadeh & Ravasan, 2011; Olson &
Zhao, 2007; Shaul & Tauber, 2013; Somers & Nelson, 2001; Wong & Tein, 2003Having
top management sponsorship – this factor is of immense importance for every large
scale project, and especially IT project for one organization (Laudon & Laudon,
2012). According to Akkerman, if the top management is not actively backing up
the ERP project there is li$le hope that the project will be successful. Bradley adds
it in the leading management function where he states that top management is not
just involved, but engaged, and the support can come in form of bonuses tied with
success or in any other form. Appropriate involvement of the top management is also
described by Somers, who proposes that a steering commi$ee if formed consisting
of senior management from across different functions, project management
representatives, and end users who will have daily contact with the ERP. One thing
is in common, without top management sponsorship, ERP project have li$le chance
of success. (Akkermans & van Helden, 2002; Bradley, 2008; Ehie & Madsen, 2005;
Finney & Corbe$, 2007; Jarrar, Al-Mudimigh, & Zairi, 2000; McLeod & MacDonell,
2011; Ngai et al., 2008; Somers & Nelson, 2001).

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Following top-notch project management practices and process management

practices for BPR – It sounds very obvious that a project will not succeed if it doesn’t
follow practices of the project management, as well as that a major project such as
an ERP requires business process reengineering to improve the functionality of the
so"ware in accordance with the needs of the organization. According to Somers,
“minimal customization Fortune 1000 companies regarding ERP customization policies
indicates that 41% of the companies re-engineer their business to fit the application, 37%
of the companies choose applications that fit their business and customize a bit, and only
5% customize the application to fit their business” which shows the importance of
customization of the business processes in the organization (Somers & Nelson,
2001). Ngai states that organizations should reengineer business processes to fit the
so"ware instead of trying to modify the so"ware to fit the organizations current
business processes. Mashari, in his study verbalizes that one of the major benefits
of ERP comes from its enabling role in reengineering the company’s existing way of
doing business, and that to take advantage of an ERP, BPR is a prerequisite. On the
other side, project management practices are of mammoth significance during an ERP
implementation. Somers gives this role to the project champion, whereas Akkerman
states that the success should be projected to be positively associated with fit and
compatibility with the IT vendors employed. Olson, puts this factor under the second
phase of an ERP implementation – into planning and phase 3 – where the actions are
taken by the project champion. According to Hawking, lack of commitment to project
management and project activities lead to many failures, including here ineffective
communication, user resistance and reporting failure. Bradley looks at this factor from
the management perspective in the organization management function. In line with
this, he states that there is a need for full time project manager, reporting level, time,
budget, scope and workload clearly defined. In the planning function, clear project
goal must be outlined, and in the staffing function there is a need to identify project
leaders who are likely to be veterans, team members to be decision makers, and a
project champion who will be held responsible (Akkermans & van Helden, 2002; Al-
Mashari et al., 2003; Al-Mashari & Zairi, 1999; Bradley, 2008; Finney & Corbe$, 2007;
Hawking, 2007; McLeod & MacDonell, 2011; Ngai et al., 2008; Olson & Zhao, 2007;
Somers & Nelson, 2001).
Following top-notch change management practices – According to Umble, practice
for change management is required since ERP implementation enforces BPR of key
processes within organizations. Hong does give a slight importance mentioned
under the ERP adaptation process as well as process adaptation, whereas Holland
implies that change management is important especially for client acceptance of the
project. Change management involves the effective balancing of forces in favor of
a change over forces of resistance (Ngai et al., 2008). Thus training and education
become imperative in the change management process. According to Mashari, “it
is estimated that about half of enterprise system projects fail to achieve hoped-for benefits,
because managers significantly underestimate the efforts required to manage effectively the
wide range of changes involved” (Al-Mashari et al., 2003). Shaul states the importance
of dealing with conflict management issues, management expectations and risks,
as well as identifies change management program and colture as one of the most

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important factors in ERP implementation. Bradley, on the other side, states that
change management should go hand in hand with project management function,
whereas Finney, looks at change management as strategic role for managing the
change and the cultural change ERP imposes to the organization (Al-Mashari et al.,
2003; Bradley, 2008; Finney & Corbe$, 2007; Jarrar et al., 2000; Ngai et al., 2008; Shaul
& Tauber, 2013).
Having a skillful and knowledgeable team composition – Many authors have identified
that the composition of the team that will lead the ERP project implementation should
be consisted of people selected according their skill sets and that will be devoted to
the project. Mashari, in his study depicts that inadequate training has shown to be one
of the significant reasons of many ERP systems failures. Somers and Akkerman also
ad that the competence of the team is of significant importance for project success.
Payam seems to give this factor more value by dividing two categories: under staff
with three factors and under skills with three factors as well. Shaul emphases that
knowledge, morale and motivation, as well as retention of the skilled members of the
team paly a huge role in implementation success, whereas Finney suggest that the
best, the brightest and empowered decision makers should be members of the team
composition that will lead ERP project implementation (Akkermans & van Helden,
2002; Al-Fawaz et al., 2008; Al-Mashari & Zairi, 1999; Bradley, 2008; Finney & Corbe$,
2007; Hanafizadeh & Ravasan, 2011; Shaul & Tauber, 2013; Somers & Nelson, 2001;
Wong & Tein, 2003).
Creating clear procedures for data entry and accuracy – data management seems
to be one of the new factors which is not included in Nah et al, study. It looks like
more and more there is a need for validating the data and convert the data into single
and consistent format before the system is used. Umble states that data quality has
to be established for accuracy, and Hong mentions it not very significantly under
the factor organizational fit. However, Somers seems to give an importance to data
quality and conversion. Similarly, Shaul, under data management states that there is
a need for the organization to create a data analysis plan, quality control, migration
and data cleansing as well as data accuracy. Finney considers this factor as tactical
under the data conversion and integrity (Finney & Corbe$, 2007; Ngai et al., 2008;
Shaul & Tauber, 2013; Somers & Nelson, 2001).
Conduction training and streamlining the communication – according to Umble,
one of the most recognized CSF for enabling people to work with the system is the
training in all levels of the organization. Hong doesn’t seem to give importance to
this factor, whereas Nah and Holland point to effective communication as a success
factor. Communication includes formal promotion of ERP project teams and
announcement (Ngai et al., 2008). Moreover, communication has to cover the scope,
objectives and tasks of an ERP implementation project (Al-Mashari et al., 2003). Payam
places communication under his style factors, whereas Wong et al, place three CSF
for training and communication. Bradley from the management perspective in the
leading function, gives and importance to management education, communication
and expectations, as well as the communication between the team and the rest
of the organization as a success factor for ERP implementation. Ehie places the
communication under the human resource development but it doesn’t specifically

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address the issue of effective communication and training, whereas Finney places it
as tactical factor where the redesign of the training and jobs is required, as well as a
good communication plan for ERP to succeed (Bradley, 2008; Ehie & Madsen, 2005;
Finney & Corbe$, 2007; Hanafizadeh & Ravasan, 2011).
Creating performance measures – measures of performance for the new system that
will be established takes a critical role in ERP implementation success. Successful
management of user experiences is found to be related with successful system
implementation (Somers & Nelson, 2001). Through monitoring and feedback from
the users, the performance of the ERP system can be reviewed and evaluated to
see whether it is realizing the goals and objectives of the business (Nah et al., 2001;
Ngai et al., 2008; Umble et al., 2003). According to Mashari, “measuring and evaluating
performance is a very critical factor for ensuring the success of any business organization and
indeed for making IT systems such as ERP pay back” and “it is advisable that regular auditing
and benchmarking are considered for optimization of the potential” (Al-Mashari et al., 2003).
Shaul points out to several acceptance control mechanisms like performance metrics,
progress against a milestone and feedback management. Similarly, Wong, and Han
have pointed to factors for monitoring and evaluation of performance (Finney &
Corbe$, 2007; Han et al., 2010; Shaul & Tauber, 2013; Wong & Tein, 2003).
Deciding on the implementation approach – Implementation approach might lead
to issues of multi-sites, so system integration becomes important due to the cross-
module integration nature of the system (Al-Mashari et al., 2003; Umble et al., 2003).
So"ware development, configuration, testing and troubleshooting are commonly
mentioned in literature (Bradley, 2008; Ehie & Madsen, 2005; Finney & Corbe$, 2007;
Han et al., 2010; Holland et al., 1999; Jarrar et al., 2000; Nah et al., 2001; Shaul & Tauber,
2013; Wong & Tein, 2003). On the other hand, some authors for the implementation
approach consider the vendor selection process as important factor, as a good vendor
can provide support ranging from technical assistance to training (Akkermans & van
Helden, 2002; Ngai et al., 2008; Somers & Nelson, 2001).

Conclusions

Since research on critical success factors for ERP implementation success is very
rare and fragmented, this study provides a more comprehensive list of ten factors
that companies that have adopted and struggle with the implementation, as well
as companies who are in the process of considering implementation of ERP system
can easily adopt and follow. The main contribution of this paper is that critical
success factors are identified through an analysis of 22 research papers and is more
comprehensive and straightforwardly employable for use. Indeed, the discussed
papers here were selected from a large amount of published research based on
their uniqueness factor, since the other papers do not bring anything unique to
critical success factors and as such, they are merely a repetition or summary of the
already existing literature. Although many research papers are wri$en for CSFs of
ERP implementation success, most of them rely on the first four that were analyzed
and either extend the factors of one, either are examples of case studies employing
another. This study and the list of the 10 success factors bridges the gap in literature

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for a newer and updated list of CFS for ERP, which is very needed in organizations,
especially keeping in mind that even in 2015, more than 25% of organizations that
have adopted ERP have faces failures in implementation of the same.

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