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International Journal of Advancements in Computing Technology Volume 2, Number 5, December 2010 A Comparative Study of Critical Success Factors (CSFs) in Implementation of ERP in Developed and Developing Countries Mohammad Reza Moohebat, MIT. Dept. of MIT, University of Payam-e- Nour, Tehran, Iran, [email protected] Asefeh Asemi 1 , PhD Dept. of Library and Information Sciences, University of Isfahan, Isfahan, Iran, [email protected] Mohammad Davarpanah Jazi Foolad Institute of Technology, Fooladshahr, Isfahan, Iran, [email protected] doi:10.4156/ijact.vol2. issue5.11 Abstract The main goal of this research is to understand is there any difference between ERP implementation's CSF in developed and developing countries? Understanding this subject can help us to implement ERP systems properly in developing nations. This research showed that in developed and developing countries "Change Management" was most important factor and in developed countries "Country-related functional requirements" factor was less important factor and "Fit between ERP and business/process" was the least cited factor among developing nations. In last it concluded that national culture of developing countries has an impressive effect on ERP implementation in these countries. In other hand developing countries companies more depend on ERP vendors in compare to developed countries companies. In addition it seems developing countries underestimate business process reengineering (BPR) and fit between ERP and business/process factors in comparison with developed countries. Keyword: ERP, Implementation, Critical Success Factor, Developed Countries, Developing Countries 1. Introduction Nowadays Information Technology has become inseparable part of any activity. But maybe IT has had more intensive effect on business. After come up the IT and Information Systems, business atmosphere changed forever. Production and service grew and quality promoted and in the same time competition between companies increased. In such competitively situation, organizations can survive better that improve quality, keep down costs in their whole supply chain, reduce inventories, diversify their products and services, provide more reliable delivery dates in better way in comparison to rivals. Advent of enterprise resource planning (ERP) system helped many companies and organization to overcome these problems. Today‟s firms are finding that they can become more flexible and productive by coordinating their business processes more closely and, in some cases, integrating these processes so they focus on efficient management of resources and customer service [1]. ERP systems integrate information and information-based processes within and across functional areas in an organization [2]. Despite benefits that earn from ERP, implementation these systems can be very dangerous because of their complex nature. It reported that three quarters of the ERP projects were judged to be unsuccessful by the ERP implementation firms [3]. About 90 percent of ERP implementations are late or over budget [4]. Recently ERP failure rate is estimated 40% to 60% [5]. It has related antithesis statistics about ERP implementation failure rate yet. But it is obvious that ERP implementation is risky. In spite of these threats ERP market is growing sequentially. It has reported that the ERP market worldwide is expected to grow from US$47.8 billion in 2004 to US$64.8 billion by 2009 [6]. When we juxtapose all these facts it will clear how much ERP implementation can be perilous. 1 Corresponding Author - 99 -

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International Journal of Advancements in Computing Technology

Volume 2, Number 5, December 2010

A Comparative Study of Critical Success Factors (CSFs) in

Implementation of ERP in Developed and Developing Countries

Mohammad Reza Moohebat, MIT.

Dept. of MIT, University of Payam-e- Nour, Tehran, Iran, [email protected]

Asefeh Asemi1, PhD

Dept. of Library and Information Sciences, University of Isfahan, Isfahan, Iran,

[email protected]

Mohammad Davarpanah Jazi

Foolad Institute of Technology, Fooladshahr, Isfahan, Iran, [email protected] doi:10.4156/ijact.vol2. issue5.11

Abstract The main goal of this research is to understand is there any difference between ERP

implementation's CSF in developed and developing countries? Understanding this subject can help us

to implement ERP systems properly in developing nations. This research showed that in developed and

developing countries "Change Management" was most important factor and in developed countries

"Country-related functional requirements" factor was less important factor and "Fit between ERP and

business/process" was the least cited factor among developing nations. In last it concluded that

national culture of developing countries has an impressive effect on ERP implementation in these

countries. In other hand developing countries companies more depend on ERP vendors in compare to

developed countries companies. In addition it seems developing countries underestimate business

process reengineering (BPR) and fit between ERP and business/process factors in comparison with

developed countries.

Keyword: ERP, Implementation, Critical Success Factor, Developed Countries,

Developing Countries

1. Introduction

Nowadays Information Technology has become inseparable part of any activity. But maybe IT has

had more intensive effect on business. After come up the IT and Information Systems, business

atmosphere changed forever. Production and service grew and quality promoted and in the same time

competition between companies increased. In such competitively situation, organizations can survive

better that improve quality, keep down costs in their whole supply chain, reduce inventories, diversify

their products and services, provide more reliable delivery dates in better way in comparison to rivals.

Advent of enterprise resource planning (ERP) system helped many companies and organization to

overcome these problems. Today‟s firms are finding that they can become more flexible and

productive by coordinating their business processes more closely and, in some cases, integrating these

processes so they focus on efficient management of resources and customer service [1]. ERP systems

integrate information and information-based processes within and across functional areas in an

organization [2].

Despite benefits that earn from ERP, implementation these systems can be very dangerous because

of their complex nature. It reported that three quarters of the ERP projects were judged to be

unsuccessful by the ERP implementation firms [3]. About 90 percent of ERP implementations are late

or over budget [4]. Recently ERP failure rate is estimated 40% to 60% [5]. It has related antithesis

statistics about ERP implementation failure rate yet. But it is obvious that ERP implementation is risky.

In spite of these threats ERP market is growing sequentially. It has reported that the ERP market

worldwide is expected to grow from US$47.8 billion in 2004 to US$64.8 billion by 2009 [6]. When we

juxtapose all these facts it will clear how much ERP implementation can be perilous.

1 Corresponding Author

- 99 -

A Comparative Study of Critical Success Factors (CSFs) in Implementation of ERP in Developed and Developing

Countries

Mohammad Reza Moohebat, Asefeh Asemi, Mohammad Davarpanah Jazi

Critical success factors (CSF) define as “factors which, if addressed, significantly improve project

implementation chances” [7]. To identify critical issues and bottlenecks and make easier ERP projects

implementation, different researchers have tried to recognize the CSFs that have important effect in

these projects. Most of these researches have accomplished in developed countries but many

developing countries interest to apply ERP systems. But does developing countries encounter to the

same critical factors that developed countries had been confronted? What are the differences between

ERP implementation in developing and developed countries? What points should vendors and

consultants prognosticate in during ERP implementation in these countries?

In this paper was tried to specify CSFs differences in ERP implementation between developed and

developing countries. Therefore in the first step all the mentioned CSFs in different papers identified

and classified, also developed and developing countries listed and identified, finally different CSFs

counted and represented for each group to conclude which CSFs are more important in developing

countries versus developed countries and what is the differences.

2. Review of literature

2.1. Enterprise Resource Planning (ERP)

Gartner Institute described ERP as Business strategies and enabling software that integrate

manufacturing, financial and distribution functions to dynamically balance and optimize enterprise

resources. ERP software suites include integrated manufacturing, distribution and financial applications.

ERP can enable enterprises to optimize their business processes and analysis capabilities for improved

speed and efficiency [8] ERP systems evolved from MRP II (Manufacturing Resource Planning II)

systems but unlike MRP II, which focused on manufacturing, ERP systems serve other businesses,

such as distribution and services. ERP systems integrate inventory data with financial, sales, and

human resources data, allowing organizations to price products, produce financial statements, and

manage human, materials, and financial resources [9, 10]. ERP systems were first implemented in the

1980s. Since then, some success stories in implementing and using an ERP system have been reported

[11]. In a survey of 800 U.S. companies almost half had installed an ERP system and these systems

were commanding on average 43% of a company‟s application budget. Research into 1000 U.S.

Fortune companies also indicated that over 60% had implemented an ERP system. It is estimated that

300 billion dollars were spent on ERP systems during the 1990‟s [12]. However, the implementation of

ERP is a complex process, and many adopters have encountered problems in different phases [13].

Robbins-Gioia surveyed 236 companies in 2001, finally revealed that 51% of ERP projects are

unsuccessful [14]. With regard to the high ERP failure rate and enormous expenditures of these

systems, notice to factors which raise ERP implementation success can be very essential and helpful.

2.2. Critical success factor

The definition of success depends on the point of view of the person who defines it. It became clear

early on in the research that people often mean different things when talking about information systems

or ERP success [9,15]. In information systems implementation research, there has been a lot of

attention given to measuring “success” in implementation [16]. Research on CSF can be traced back to

1961, where Daniel [17] first discussed “success factors” in management literature. In a broad

approach, he focused on industry-related CSFs which are relevant for any company in a particular

industry [18]. Bruno and Leidecker [19] define CSF as “those characteristics, conditions or variables

that, when properly sustained, maintained, or managed, can have a significant impact on the success of

a firm competing in particular industry”. Today CFS approach applies in different subjects such as

project management, base on Ramaprasad and Williams [20] survey, CSF approach uses in three major

area include project management (63.49 %), IS implementation (49.21 %), and requirements (47.62 %).

Critical Success Factors (CSFs) approach was first used by Rockhart [21] in IS area [22]. Many

researchers have tried to identify critical success factors that affect on ERP implementation [16,23-32].

CSF in ERP implementation is defined as "factors needed to ensure a successful ERP project " [22].

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International Journal of Advancements in Computing Technology

Volume 2, Number 5, December 2010

Holland and Light [24] in their article under the title of "A Critical Success Factors Model for ERP

Implementation" studied 8 ERP systems in different companies and industries. They investigate CSF in

three dimensions insisting of strategic, organizational and technical. After that ERP's CSF is divided

into strategic (legacy systems, business vision, ERP strategy, top management support, project

schedule and plans) and tactical (client consultation, personnel, BPC and software configuration,

client acceptance, monitoring and feedback, communication, fault-finding) factors.

Nah and Lau [26] studied prior researches in order to identify the CSFs in ERP implementation.

They categorized CSFs based on Markus and Tanis's four stages ERP implementation model. They

specified CSF for each phase. Eleven factors are identified, including of: "ERP Team of

implementation maker and its composition", "Top management support and championship", "Business

plan and vision", "Effective Communication", "Project management", "Project Champion",

"Appropriate business and Legacy system", "Change management program and culture", "Business

Process Reengineering(BPR) and minimum customization", "software development, testing and

troubleshooting" and "monitoring and evaluation of performance".

Jafari et al [33] after review previous researches selected 10 factors and then these factors were

surveyed with sent questionnaires to Malaysian consultant, IT sophisticated and ERP users. At last it

reveals that "Top management support" and "clear goals and objectives" are more important than other

factors in Malaysia.

3. Method

The first stage to do this research was to clarify CSF. In different research many CSFs have cited as

Critical Success Factor. But one the best classification of CSF is Nagi et al research [13]. He classified

different CSFs into 18 main groups and several sub groups; this classification covers all the cited CSFs

in different researches so this classification used in this study again (Table 1).

Table 1. CSF and Sub CSF base on Nagi classification [13]

CSF Sub CSF Appropriate business and

IT legacy systems

Business

plan/vision/goals/justifica

tion

Justify the project based upon factors of cost and economic scale

Business process/rules are well understood

Business Process

Reengineering

Minimal customization

Change management

Change management culture and programme

User involvement

Organizational culture and political structures

Commitment to change

Understanding corporate culture

Re-train IT workforce in new skills

Training and education

Developed clear education and training strategy

Education on new business process

Communication

Inter-departmental communication

Communicated regularly with all who would be affected Open and honest

communication

Data accuracy

Data management

Data analysis and conversion

Data quality control

ERP strategy and

Implementation

Regard as a technological, business, and organizational project

Alignment between business strategy and IT strategy

Begin process changes first

Strategic alignment of exercise

ERP is treated as a program not a project

Phased vs. Big Bang

Use accelerated implementation strategy

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A Comparative Study of Critical Success Factors (CSFs) in Implementation of ERP in Developed and Developing

Countries

Mohammad Reza Moohebat, Asefeh Asemi, Mohammad Davarpanah Jazi

Deep understanding of the key issues relating to ERP implementations

Select a good methodology

Careful selection of appropriate package

Suitability of software and hardware

Decision-making process/style

ERP project team

ERP teamwork and composition (Personnel)

Steering committee

Project team competence

Empowered decision makers

Selecting the right employees

Employee morale (incentives)

Business and technical knowledge of team members and consultants

Balanced or cross-functional implementation team

Managing consultants

Staff retention

Full-time team members

Employee/personnel relations

Sparing use of consultants

ERP Vendor

Vendor-customer partnerships

Use of vendors‟ customization tools

Vendor support

Kept suppliers/customers informed

Monitoring and

evaluation of

performance

Benchmarked implementation progress against clear milestones or

performance metrics

Focused performance measures

Client acceptance

Monitoring and feedback

Organizational

characteristics

Had technology/infrastructure in place

Organizational experience of IT or organizational change projects of a

similar scale

Company-wide commitment

Implementation of ERP was not due to competitive pressure

Project champion

Project management

Clear and defined project plan (goals, objectives, strategy, scope, schedule)

Smaller scope

Avoid scope creep

Implementation costs

Realistic deadlines for implementation are set Realistic expectations with

regard to ROI and reduced IT/IS costs exist

Management of expectations

Total-quality management

Interdepartmental cooperation

Dedicated resources

„„To-be concept‟‟ as project guideline

Knowledge management

Managing conflicts in ERP projects

Clear and simple project organization

Software Development,

testing, and

troubleshooting

Defining the choices of architecture

Integration

Software configuration

Troubleshooting

Functional requirements are clearly defined before selecting an ERP product

Perceived complexity

Top management support

Fit between ERP and

business/process

National culture

Country-related

functional requirements

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International Journal of Advancements in Computing Technology

Volume 2, Number 5, December 2010

In order to classify CSFs base on developed and developing countries it was essential to define these

countries. The term developed country is used to describe countries that have a high level of

development according to some criteria. Which criteria and which countries are classified as being

developed, is a contentious issue and is surrounded by fierce debate. Economic criteria have tended to

dominate discussions [30]. Different organization has proclaimed various lists of developed countries

(UN, CIA, OECD, FTSE and IMF). After review these reports it revealed IMF list is more correspond

to this research. IMF specified 34 countries as developed Economies (Table 2) and 149 countries as

Emerging and Developing Economies.

Table 2. Advance Economies countries [31]

Advanced Economies

Australia

Austria

Belgium

Canada

Cyprus

Czech Republic

Denmark

Finland

France

Germany

Greece

Hong Kong SAR

Iceland

Ireland

Israel

Italy

Japan

Korea

Luxembourg

Malta

Netherlands

New Zealand

Norway

Portugal

Singapore

Slovak Republic

Slovenia

Spain

Sweden

Switzerland

Taiwan Province of

China

United Kingdom

United States

To investigate probably differences between ERP critical success factors in developed and

developing countries it was essential to find enough researches that were accomplished about ERP

implementation and its CSF; hence various scientific databases (Sciencedirect, Proquest, IEEE,

Emerald, Elsevier, Inderscience, Springerlink) and search engines like Google scholar, Ojose,

Citeseerx, Scirus was used to find related researches and surveys about ERP success factors in different

countries and finally 400 articles, thesis and dissertations gathered and eventually with review on them

repetitive, unrelated sources took away and only 85 sources remained.

After that our sources revealed, with help of MS Access 2007, needed information from each of

resources collected and in this way frequency of each CSF in developed and developing countries

specified. Finally this information transferred to SPSS 16 and with Descriptive statics our information

analyzed.

4. Results

52 researches identified as a representative of developed countries and 33 as developing countries.

Among these researches 14 developed and 16 different developing countries identified. USA with 25

and China with 11 researches had most resources in this study respectively between developed and

developing nations. In table2 and table3 different countries and number of researches that each one had,

has shown.

- 103 -

A Comparative Study of Critical Success Factors (CSFs) in Implementation of ERP in Developed and Developing

Countries

Mohammad Reza Moohebat, Asefeh Asemi, Mohammad Davarpanah Jazi

Table 1. Developing countries

Developing countries Number of research resource Bahrain 1 [32]

Chile 1 [29]

China 11 [33], [34], [35], [28], [27], [31], [36], [37],

[26], [38], [39]

Egypt 1 [22]

India 3 [40], [41], [42]

Iran 2 [43], [44]

Jordan 1 [45]

Malaysia 3 [33], [46], [47]

Mexico 1 [11]

Poland 1 [48]

Saudi Arabia 3 [49], [28], [50]

South Africa 1 [51]

Sri Lanka 1 [52]

Thailand 1 [53]

UAE 1 [37]

Venezuela 1 [54]

Table 2. Developed countries

Developing countries Number of research resource Australia 7 [55], [56], [57], [58], [59], [27], [60]

Belgium 1 [61]

Canada 2 [62], [63]

Denmark 1 [64]

Finland 1 [65]

France 1 [66]

Hong Kong 1 [67]

Israel 1 [68]

Japan 1 [69]

Netherland 2 [70], [71]

Singapore 1 [39]

South Korea 2 [72], [73]

UK 7 [74], [75], [76], [77], [78], [79], [80]

USA 24

[50], [81], [82], [83], [84], [85], [86], [87],

[98], [89], [90], [91], [59], [92], [93], [94],

[95], [96], [97], [98], [99], [25], [100],

Frequency of CSF for each of developed or developing countries counted separately and earned

result depicted in Table 3. In developed countries, "Change management" factor with 34 frequencies

was most popular factor and "Country-related functional requirements" with 6 repetitions was known

as less quoted factor. But in developing countries, factor with the name of "Fit between ERP and

business/process" was the least cited factor and "Change Management" with frequency of 30 had the

highest rank. Table 3 shows and compares the frequency of critical success factors in developed and

developing countries and also the whole result from both groups depicted.

With compare these results it will clear that "Change management" identified as most important

factor and "Fit between ERP and business/process" as least popular critical factor in ERP

implementation in different countries around the world.

To understand what differences exist between ERP critical success factors in these two groups of

counties, CSF frequency of both groups drew in one line chart (Chart 1). As it has shown in Chart 1,

both of the diagrams almost have a similar pattern. But there are some differences, as it shows in Chart

1 a few factors like "ERP vendor" and "National culture" seem more important for developing

countries and in some factors like "Business process reengineering" and "Fit between ERP and

business/process" distinction among developed and developing countries is unusual.

- 104 -

International Journal of Advancements in Computing Technology

Volume 2, Number 5, December 2010

Table 3. compare ERP critical success factors in developed and developing countries

CFS Developed

countries

Developing

countries

Developed and

Developing

countries Appropriate business and IT legacy systems 6 6 12

Business plan/vision/goals/justification 13 14 27

Business Process Reengineering 31 19 50

Change management 35 30 65

Communication 20 19 39

Country-related functional requirements 3 3 6

Data accuracy 9 8 17

ERP project team 31 24 55

ERP strategy and Implementation 24 17 41

ERP Vendor 8 13 21

Fit between ERP and business/process 9 1 10

Monitoring and evaluation of performance 9 7 16

National culture 4 10 14

Organizational characteristics 7 6 13

Project champion 13 6 19

Project management 31 26 57

Software Development, testing, and

troubleshooting 13 6 19

Top management support 28 29 57

Chart 1. compare CSF in developed and developing countries

5. Discussion

The purpose of this study was to discover is there any differences between ERP's Critical Success

Factors (CSF) in developed and developing countries or not. And if there are any differences, what are

- 105 -

A Comparative Study of Critical Success Factors (CSFs) in Implementation of ERP in Developed and Developing

Countries

Mohammad Reza Moohebat, Asefeh Asemi, Mohammad Davarpanah Jazi

they? This study showed that in during ERP implementation CSFs are not much different in developed

and developing countries but still there are undeniable differences. It seems national culture of

developing countries has an impressive effect on ERP implementation in these countries. In other hand

developing countries companies more depend on ERP vendors in compare to developed countries

companies. In addition apparently developing countries underestimate business process reengineering

(BPR) and fit between ERP and business/process factors.

There are a lot of studies have done about CSF in ERP implementation. But this is first study that

tried to discover probably distinction between developed and developed countries. One of the

challenges of this research was that some of the former researcher investigated CSF in multiple

companies around the world and in some cases it's not possible to distinguish the exact country and

further more it was difficult to find related research in some developing countries some of them could

not afford such expensive systems like African nations and in some cases there were not any published

researches (for example Russia). Another problem was that CSF classified in 18 groups but these

groups were not match completely with cited CSF in other studies and it was necessary to map them to

one of these groups.

These findings accommodate with Huang and Palvia study, they after compare ERP implementation

in developed and developed countries declared technology faces additional challenges in developing

countries related to economic, cultural and basic infrastructure issues [101]. In addition Rajaspakse

identified high cost, culture, integration and lack of knowledge as four factors that make ERP

unsuitable for many organizations in Sri Lanka and Asia [52]. These cases show cultural issue is very

important factor that differentiate developed and developing countries in ERP implementation.

This study revealed that ERP implementation's CSF in both developed and developing countries

almost behave in similar pattern. But we should not forget the national culture of developing countries

because ERP technology has evolved in developed countries and includes the culture of developed

countries implicitly. Then maybe for this reason these countries need more support from vendors to

solve their problems. It seems necessary that future studies scrutinize what cultural differences exist

between ERP implementation in developed and developing countries and how they effect to ERP

implementation and how we can diminish them and why these countries underestimate BRP and fit

between ERP and business process.

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