Identifying success factors for implementation of ERP at Indian SMEs

Identifying success factors forimplementation of ERP

at Indian SMEsA comparative study with Indian large

organizations and the global trend

Shashank Saini, Siddhartha Nigam and Subhas C. MisraIndian Institute of Technology, Kanpur, India

Abstract

Purpose – The purpose of this paper is to identify the success factors for implementation ofenterprise resource planning (ERP) at Indian small to medium-sized enterprises (SMEs) and to providea comparative study with the trend in Indian large organizations and the global trend.

Design/methodology/approach – In this paper, the authors propose a hypothetical success factorsmodel to address the research questions and validated the hypotheses using large-scale survey-basedmethodology. In this research the authors evaluated the success factors for implementation of ERP inIndian SMEs and then compared them with large Indian organizations and the global trends. In thispaper, the authors have also tried to give some intuitive explanation to the possible reasons ofdifference between factors for SMEs compared to large organizations and global trends.

Findings – It was found that four of the five hypothesized technological factors are significantlyrelated to the success of ERP implementation. They are: comprehensiveness of softwaredevelopment/process integration plan; significance of age of IT infrastructure; comprehensiveness ofdata migration plan; and extensiveness of system testing. Also, four of the nine hypotheses/sub-hypotheses amongst the people factors are significantly related to the success of ERPimplementation. They are: blend of cross-functional employees in the team; extent of empowerment ofdecision-making team; significance of morale of the implementation team; and exhaustiveness of usertraining. The authors have found that ten of the 11 hypothesized organizational factors are significantlyrelated to the success of ERP implementation. They are: organisation’s adaptability to changes;involvement of top management; degree of customization; efficiency of business process re-engineering;exhaustiveness of contingency plans; clarity in definition of milestones; clarity in evaluation ofmilestones; alignment of ERP package with business processes; comprehensiveness of implementationstrategy; involvement of consultant in implementation strategy; clarity of project status disclosure; andappraisal of clients about ERP strategy.

Originality/value – Though enough work has been done on implementing ERP systems in largeorganizations across the globe, the small and medium-sized firms of India are largely left untouched.Through this paper, the authors aim to find out the various critical factors that any of these SMEsshould keep in mind when planning the implementation of an ERP system.

Keywords India, Small to medium-sized enterprises, Large enterprises, Multinational companies,Management, Performance management, Resource management, Critical success factors,Enterprise resource planning

Paper type Research paper

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/1746-5664.htm

Some preliminary work of this paper appeared in the Proceedings of The 2nd IEEE InternationalConference on Information Management and Engineering (ICIME) 2010, held April 16-18, 2010,in Chengdu, China.

Journal of Modelling in ManagementVol. 8 No. 1, 2013

pp. 103-122q Emerald Group Publishing Limited

1746-5664DOI 10.1108/17465661311312003

Identifyingsuccess factors

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1. IntroductionAfter the opening up of Indian economy in 1991, Indian economy has consistently beenone of the fastest growing economies in the world. Since then India has seen a lot offirst generation entrepreneurs venturing into business. Most of these successfulentrepreneurs with time have observed increasing trends, in both the scale of theiroperation as well as the size of their company.

Traditionally, small and medium enterprises (SMEs) have played a major role ineconomic growth across the globe. They are major contributors to national economiesin terms of their contribution to employment, production and exports. Indian SMEsalso have the same strategic importance. With the growth in business, the need forsuperior technology as well as planning tools are required and typical enterpriseresource planning (ERP) products cater to these requirements. With different size andscales of operations of the companies the requirements and expectations from any ERPproduct change significantly, this difference can be in multiple factors including spanof operations, process reengineering, resource availability, etc. there can be multiplereasons for these differences ranging from the flatter structure, leaner decision makingteam to simpler or limited operations.

An ERP system is an enterprise wide packaged software system that helps anorganization to manage and effectively use of its resources (materials, human resources,finance, etc.) by providing an integrated solution for its information-processing needs.It supports a process-oriented view of an organization and standardizes businessprocesses. Even when ERP systems can bring competitive advantage to organizations, itis the high failure rate in ERP implementation that is the major concern across theindustries (Davenport, 1998) where it is implemented.

This paper aims at improving the understanding of ERP implementation using asurvey based statistical study. Primarily, we have attempted to address the followingquestion:

. What are the critical success factors (CSF) for ERP implementation in SMEs inIndia and how are these factors different from the factors for larger Indianorganizations and the global organizations?

The outline for the paper is as follows: in Section 2, we talk about the background andmotivation for this work. In Section 3, we discussed about the literature review done toform the basic structure of the possible success factors. Post that we identified theperceived industry success parameters. In Section 5, we hypothesize the various successfactors. In Section 6, we describe our research methodology and finally in Section 7talks about the findings from the survey we administered for this research. At the endwe gave the managerial implications of this study followed by conclusion.

2. Background and motivationBased on our literature review we found that there was a lot of work done on identifyingCSF for implementing ERP across the globe and these factors do change with changinggeographical location of the organization that are getting ERP implemented. In ourextensive literature review of 85 research papers and articles we found that no workwas done on Indian SME sector, even when it is the one the fastest growing sector of thecountry. In this section we tried to identify and categorize the key critical factors basedupon our literature review and experience based on our interviews of industry experts.

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ERP solutions provide lot of business benefits to the organizations; still they have ahigh failure rate. Thus, there is a need for greater understanding of the CSF ofimplementation of ERP package (Somers et al., 2000). Moreover, due to smaller pocketsize of the SMEs and high switching and implementation cost of ERP systems, thestakes are even higher. So to safeguard this segment we did an extensive literaturereview using internet and various databases of published works.

Many studies had been conducted to identify critical factors that determine thesuccess of ERP implementation, with various papers doing empirical studies for thekey factors. Several studies have identified the various issues that an organizationfaces, that hamper the success of ERP implementation (Finney and Corbett, 2007;Holland et al., 1999; Bingi et al., 1999; Rosario, 2000; Zuckweiler and Lau, 2003;Stefanou, 1999; Sumner, 1999; Siriginidi, 2000a, b; Motwani et al., 2002; Mandal andGunasekaran, 2003; Holland and Light, 1999).

Roberts and Barrar (1992) in the earliest studies on the matter had identified theimportance of a stable running business and process reengineering for ERPimplementation. Buckout et al. (1999) stated the issues regarding the strategic choicesand implementation issues that led to failure. Falkowski et al. (1998) in their articlehighlighted importance of communication at various levels in the organization.

According to Wee (2000), overall architecture for ERP should be formulated beforestarting its deployment, thus preventing reconfiguration at various stages. Otherpapers indicated that the use of proper and formal modelling methods, tools andarchitecture will be useful in ensuring ERP success (Murray and Coffin, 2001; Scheerand Habermann, 2000).

Shanks et al. (2000) highlighted importance and difference in people component ofERP implementation with his study on different success factors for implementation inChina and Australia. Ngai et al. (2008) also talked about the importance of nationalculture and country-related functional requirements. Sheu et al. (2004) highlighted thedifferences between the cultural legacies of various countries and hence, the impact onpeoples factor from location to location. Tarafdar and Roy (2003), in their study foundout the kind of issues that a typical Indian firm usually faces while implementing anERP system.

Some papers highlighted the importance of organization, its participation, supportfrom the top management and proper communication in implementing the project canhelp in reducing the failure rate of ERP implementation (Motwani et al., 2008;Yusuf et al., 2004). Then others talked about the challenges for the ERPimplementation like flexibility of the system and global implementation (Gupta, 2000).

Lin et al. (2006) addressed CSF for ERP implementation using total qualitymanagement techniques like quality function deployment. Lee and Kang in theirstudy about ERP implementation in an oil seal manufacturing company emphasized onthe fact that success of implementation depends upon the attitude of the staff towardsthe ERP project. They should view it as a process innovation rather than the mereautomation of existing process. Paper also stressed on the fact that postimplementation support also plays a crucial role in determining the overall success(Trimi et al., 2005).

Ferratt et al. (2006) in their article have concluded that sticking with the projectmanagement basics and adopting the best practices contribute significantly to thesuccess of ERP implementation.


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Though enough work has been done on implementing ERP systems in largeorganizations across the globe, but the small and medium-sized firms of India arelargely left untouched. Through this paper we aim to find out the various criticalfactors that any of these SMEs should keep in mind when they plan to get ERP systemimplemented in their firm.

3. Success parametersIn this section we will be discussing about the key parameters that are considered foridentifying whether the ERP implementation is a success or a failure. Theseparameters are given below.

Project completion in budgetIt is a crucial factor in determining the overall success of the ERP implementation,since if the allocated budget is exceeded there is a pressure to reduce the cost ondownward phases like training, etc. which are core for implementation project. In astudy conducted by an independent consulting firm Panorama Consulting Group(2010) involving a survey spanning over 1,600 organizations that have selected orimplemented ERP within the last four years, it was found that more than half of theimplementations ended up overshooting the planned budget. It was also interesting tonote that only 8.6 percent of the implementations were completed with less than theallocated budget (Figure 1).

Project completion in stipulated time frameAnother big cost to the companies comes in terms of the delays in implementation ofthe package, thus causing the delay in getting the positive returns from the ERPsoftware and also a huge delay in the break-even time. In the same study by PanoramaConsulting, it was found that more than 1 of every three cases of the ERPimplementations exceeded the stipulated time frame as decided at the start of theproject. Hence, the metric of project completion in stipulated time frame was consideredfor determining the success or failure of an ERP implementation (Figure 2) (PanoramaConsulting Group, 2010).

High business benefit realizationAnother important parameter is the business benefit realization of the package. Duringthe sales pitches there are lot of promises made, but by the end of projectimplementation it is realized that the extent of business benefits realized are not as

Figure 1.Budget factor for ERPimplementation

51.4%

8.6%

40.0%

Over Budget

Under Budget

On Budget

ERP Vendor Analysis Report, Panorama Consulting

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many as were perceived initially. In the same study, it was also found that nearly twoof every three implementations were not able to realize even half of the businessbenefits. Hence, a high business benefit realization was considered as a parameter forclassifying the success or failure of an ERP implementation (Figure 3) (PanoramaConsulting Group, 2010).

4. Success factorsIn this section, we propose a framework to address the research question afterreviewing research papers previously published on ERP. We have proposed a set ofhypotheses subsequently it will be validated using the data collected from the survey.

CSF are those factors or conditions which are the most important for successfulimplementation of ERP. After doing literature review of more than 70 research papers,we have categorised the CSF cited in them into three broad categories, namely,organisational factors, technological factors and people factors.

Organisational factorsChange management culture and program. The commitment of an organization tochange influences the implementation process significantly. Cultural and structuralchanges encompassing the organization should be managed, which includes theinternal staff and the organization (Rosario, 2000). In many of the ERP failure cases, ithad been observed that whenever an ERP deployment overruns the stipulated budget,the cost cutting axe falls on downward activities like training. Proper training shouldbe provided to the users of the ERP system as they would now be making decisions

Figure 2.Time schedule adherence

35.5%

43.0%

21.5%

Longer than Exp.

As Expected

Shorter than Exp.


Figure 3.Business benefit

realization of ERPimplementation

62.0%

38.0%

Fail to Realize 50% +

Realize 50% +



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which would affect many other business functions rather than just one. Also thereshould be more involvement of the end-users in design and implementation phase ofnew business processes and ERP system to help them understand how their roleswould be experiencing a change by the introduction of ERP system (Bingi et al., 1999;Holland and Light, 1999).

Top management support. Top management has to play a leadership role which isdriven by the commitment for the organization. The attitude of top management, theirinvolvement and willingness, to a large extent determines the priority and resourceallocation to the project. The need for having a senior management people who couldforesee any glitches that might occur in future and be involved in strategic decisionsmaking (Motwani et al., 2002; Sheu et al., 2004) is also expressed.

BPR with minimum customization. Large amount of process re-engineering isrequired to leverage the best out of an ERP system. Organizations should be ready toalign their processes to match the software in order to align to industry best practicesand minimize amount of customizations needed. Large-scale customization ofERP software is generally done due to reduced compliance and understanding of bestpractices. Customization can render the ERP system virtually handicapped to switchto newer available upgrades (Rosario, 2000). Morton and Hu (2008) talked aboutthe importance of BPR and organizational fit between company and ERP, for itsimplementation success.

Business plan and vision. An information system that spans the whole enterpriseneeds a well-defined business plan and vision to maneuver the direction of theimplementation (Buckhout et al., 1999). The goals should be quantifiable and planningshould also include certain element of risk and quality management (Mandal andGunasekaran, 2003). Business plan should also include benchmarking internal andexternal best practices for ERP implementation (Al-Mudimigh et al., 2001).

Project management. Project management involves, clear outlining of milestones andcritical paths along with the training and HR plan and creation of steering committeewhich includes top level management from business functions. The steering committeewould be involved in the selection of ERP package, tracking the implementationprogress and managing relationships with external consultants (Nah et al., 2001; Somersand Nelson, 2001). There should be an active monitoring of the status of milestones andtargets in order to check progress of the project. Roberts and Barrar (1992) indicated thefollowing two measures that may be used:

(1) project management-based criteria should be used to measure againstdeadlines, quality and budget; and

(2) operational criteria that should be used to track the production system.

Communication. It includes the disclosure of project progress to the organization andits stakeholders using meetings, newsletters and other modes of communication(Mandal and Gunasekaran, 2003; Falkowski et al., 1998; Shanks et al., 2000).

Implementation strategy and timeframe. A phased approach to ERP implementationhad been cited by many as one of the key success factors. Other decisions that need tobe taken are whether the implementation should be centralized or decentralized and theadvantages of introducing a Greenfield site (Siriginidi, 2000a, b).

Project cost planning and management. Usually due to the nature of ERPimplementations, there are costs associated which are unforeseen and hence the overall

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project cost might increase. Hence, a flexible budget policy is recommended to counterthe various contingencies (Ribbers and Schoo, 2002).

Client consultations. Researchers have also emphasized on the need for anorganization to keep its clients well informed of the projects to avoid misleadingassumptions and speculations regarding the project (Al-Mudimigh et al., 2001).

ERP selection. ERP selection plays a crucial role in determining the success ofimplementation. One important thing to note here is that the system must be alignedwith the business processes and the ERP that is closest to the requirement should onlybe used (Chen, 2001).

Consultant selection and relationship. Involvement of an external ERP consultant inimplementation team is considered as one of the necessities of an ERP implementation.However, knowledge should be shared by the consultant to the company in orderto minimize the reliance on the consultant and improved success probability(Motwani et al., 2002).

Technological factorsSoftware development, testing and troubleshooting. Taking into account the mostimportant needs of the implementation, the overall ERP architecture should beestablished well before the deployment. To ease the process; rigorous and sophisticatedsoftware testing should be performed. To leverage the full potential of the ERPimplementation, integration of the in-house systems with the ERP system is required.Organizations should strive to build a middle-layer interface in case none exists(Bingi et al., 1999; Zuckweiler and Lau, 2003).

Appropriate business and IT legacy systems. The more is the complexity of thelegacy systems, the more is the extent to which changes in technology andorganization is required. Also, an organization which is more responsive to change canreduce some of the difficulties resulting from the complex systems (Siriginidi, 2000a, b;Holland and Light, 1999; Roberts and Barrar, 1992).

IT infrastructure. The IT infrastructure of the organization, which encompasses theIT architecture and skills is a significant factor in determining the success of the ERPimplementation and should be upgraded whenever required (Motwani et al., 2008).

Data conversion and integrity. One of the success factors cited was the accuracymaintained during the data conversion process. The conversion process should be suchthat it does not lead to loss of data during migration (Ngai et al., 2008; Yusuf et al., 2004).

System testing. Variety of test cases should be executed in order to perform a rigoroussystem testing before the system goes “live”. This includes performing simulation andexecuting test cases to check the robustness of the system (Yusuf et al., 2004).

People factorsERP teamwork and composition. The ERP team should consist of “best and brightestbrains” in the organization. It should include cross-functional expertise and a blend ofinternal staff and the external consultants. The amount of interaction between themmakes the contributing factor for the success of the project (Haines and Goodhue, 2000).

Project champion. A project champion should be a senior level person who has theauthority to define goals and give approval to changes. The person should also workfor the benefits of the organization and must continually handle conflicts and showskills in tackling resistance from the people (Stefanou, 1999; Falkowski et al., 1998).


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Empowered decision makers. The need for the team to be authorized to make thedesired decisions within a given time frame is indispensible, in order to get the best outof the ERP implementation (Gupta, 2000).

Team morale and motivation. A high level of sustainable employee morale andmotivation is required throughout the implementation. Also, staff retention is one ofthe primary concerns, as losing staff in between the running project, had been cited asone of the reasons for project failure (Mandal and Gunasekaran, 2003).

Training and job redesign. A hands-on training in development of IT skills shouldbe given to users of ERP system. To achieve this, training facilities should bedeveloped where project team and user training can be imparted. Also, restructuring ofstaff should be done along with chalking out new compensation plans (Siriginidi,2000a, b; Motwani et al., 2002; Mandal and Gunasekaran, 2003).

5. Conceptual framework and research hypothesesHere we developed a framework and research hypotheses for three factors namely,technological, people and organizational factors that are required for successful ERPimplementation (Figures 4-6).

Figure 4.Conceptual modelfor success factorsin technology

Figure 5.Conceptual model forsuccess factors in peoplerelated factors

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Hypothesizing technological factors

HT1a. The more comprehensive the software development plan, the better is thesuccess rate of ERP implementation.

HT1b. The more comprehensive the process integration plan, the better is thesuccess rate of ERP implementation.

HT2. The stable the legacy system is the better is the success rate of ERPimplementation.

HT3. The newer the IT infrastructure of the organization is, the better is thesuccess rate of ERP implementation.

HT4. The comprehensive is the data migration plan, the better is the success rateof ERP implementation.

HT5. The rigorous the system testing is before the system goes “live”, the betteris the success rate of ERP implementation.

Hypothesizing people’s factors

HP1a. The more balanced the team is the better is the success rate of ERPimplementation.

HP1b. The higher the interaction between the internal staff and externalconsultants, the better is the success rate of ERP implementation.

HP2. The more experienced the project champion is, the better is the success rateof ERP implementation.

HP3a. The more empowered the team is to make decisions; the better is thesuccess rate of ERP implementation.

Figure 6.Conceptual model

for success inorganization factors


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HP3b. The flatter the hierarchy in the organization; the better is the success rate ofERP implementation.

HP4a. The higher the team morale and motivation, the better is the success rate ofERP implementation.

HP4b. The lesser the employee attrition is, the better is the success rate of ERPimplementation.

HP5a. The more exhaustive the user training is, the better is the success rate ofERP implementation.

HP5b. The longer the user training is, the better is the success rate of ERPimplementation.

Hypothesizing organisational factors

HO1. The more adaptive the organization is to change, the better the success rateof ERP implementation.

HO2. The more involvement of top management, the better the success rate ofERP implementation.

HO3a. The lesser the amount of customization, the better the success rate of ERPimplementation.

HO3b. The more efficient the BPR is, the better the success rate of ERPimplementation.

HO4. The better the planning is done for contingencies, the better the successrate of ERP implementation.

HO5a. The more clearly are the milestones and goals defined, the better thesuccess rate of ERP implementation.

HO5b. The more clearly are the milestones and goals evaluated, the better thesuccess rate of ERP implementation.

HO6. The more the ERP implementation aligns with the business process; thebetter is the success rate of ERP implementation.

HO7. The more comprehensive the implementation strategy, the better thesuccess rate of ERP implementation.

HO8. The more the budget for unplanned activities, the better is the success rateof ERP implementation.

HO9. The more the involvement of consultant in the implementation phase, thebetter is the success rate of ERP implementation.

HO10. The clearer the project status disclosure is, the better is the success rate ofERP implementation.

HO11. The more an organization keeps its client apprised; the better is the successrate of ERP implementation.

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6. Research methodologyResearch for this paper was conducted using a phased methodology having followingthree phases.

Phase 1: questionnaire designingThis phase involved design of questionnaire for testing the given hypotheses. Likertscale, with five values ranging from “very significant” to “very insignificant” wasincorporated in questions for capturing the significance, a respondent attaches to aparticular factor. After the questionnaire was prepared, it was sent to eight ERPindustry experts including ERP consultants, ERP professors and business analysts forpretesting. We got the replies along with the feedback for the questionnaire from six ofthem. The changes suggested by these experts were incorporated into the survey form.

Phase 2: data collectionPhase 2 involved the collection of data based on the survey designed in the previousphase. The survey was open for 51 days between 1 March 2010 and 20 April 2010. Forselecting the respondents, we used convenience sampling wherein only those personswho were related with ERP implementation were selected. The survey was sent bye-mail to 213 ERP professionals. The survey link was also posted on multiple ERPcommunities on networking sites (linkedin.com, facebook.com and orkut.com). Thesurvey was mailed and posted multiple times on these e-mail ids and networkingportals.

The survey received responses from a total 204 respondents, but only 164 responsesout of them were complete, thus only they were considered for the analysis andcalculation.

Phase 3: survey data analysisPhase 3 involved the analysis of the data obtained from phase 2. This section is dividedinto two parts, i.e. the analysis of respondents profile and the other for evaluating thehypothesis proposed above.

Respondents profile. Respondents to the survey ranged from diverse backgroundsand demographic profiles. Respondents from 17 countries participated in the surveywith varying organization sizes and work profiles. Respondents included ERPconsultants, owners of SMEs, and employees of SMEs and ERP implementers. A briefpictorial representation about the survey respondents is shown in Figures 7-9.

For the survey we got responses from a total of 17 countries which included bothdeveloped countries like the USA, Japan, Norway, Sweden, etc. and the developingcountries like India, Israel and Bangladesh, etc. However, most of the responses camefrom India only.

We had a mix of responses in terms of the organization size of the respondents.Nearly half of the respondents were from the large implementing organizations, butrest of the responses came from the people working in the organizations of all sizesright from companies with less than ten people in the company to larger companieswith more than 500 employees.

Domain knowledge of the respondents also was equally distributed with nearly halfof the respondents working on ERP packages while the other half of the respondentsworking in non-ERP domain which includes the owners, senior management and


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Figure 8.Respondentsorganization size

Figure 7.Demographic profileof respondents

Figure 9.Domain experienceof respondents

Domain Expertise

Non-ERP48%

ERP52%

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end-users for the various ERP products implemented at their organizations.The breakup of the profile of the respondents is shown in Figure 10.

Hypothesis testing parametersFor evaluation of the hypothesis the responses for the technological, people andorganizational factors the data was statistically analysed using a suitable data analysistechnique. The technique included use of the statistical z-test with the followingparameters:

. Threshold value. The threshold value was set at a level of “significant” or higher.Any value above the given threshold and within the given level of significancewas accepted in z-test.

. Alpha (level of significance). It determines the probability of rejecting the nullhypothesis when in fact it is true. Here we have set alpha equal to 0.05.

The mean and standard deviation for the various factors considered in our hypothesisare as given in Table I.

7. Survey findingsThe results from the analysis done using the above mentioned parameters and analysisare summarized as given in Table II.

Success factors of Indian SMEsThere are a total of 21 hypothesis/sub-hypothesises that were accepted for IndianSMEs.

Technological factors. The only factor that was rejected was that of the stability ofthe legacy system. The possible explanation for this can be that these days theimplementation teams lay a special stress on data migration plan. And even astandardized migration plan templates are available that help in smoothing out thecomplete migration activity. Thus, the risk of implementation failure is reduced by asignificant factor, so it is possibly not considered as a CSF.

People factors. In people factor a total of five hypothesis/sub-hypothesises wererejected in the analysis based on the survey results.

Figure 10.Profile break-up

of respondents


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We always had an intuitive feeling that due to smaller structure of the SMEorganizations and a fewer people working at the managerial and senior managerialroles make the section less relevant compared to its importance for other largerorganization. This point is proved by rejection of hypothesis for interaction betweeninternal and external consultants.

With comparatively less comprehensive operations of SMEs the amount ofexperience required for the project champion was also not a very important and criticalto the project’s success.

It was also observed during the analysis that employee attrition is not considered asa success factor as knowledge management processes and the knowledge transfersessions that are the rule in the industry now, help in minimizing the loss of knowledgein the company due to loss of an employee.

When we consider the exhaustiveness of the user training, the results showed thatthe user training should not be an exhaustive training. Indeed according to the surveyresults most ERP professionals believed that ideally the training should be of amedium duration and depth, so that the people who will be working on the ERPpackage are aware of the general and frequently used functionalities and do not feellike aliens to the package, however the results also inferred that the training should notbe very exhaustive, long and detailed.

Category Hypothesis Minimum score Maximum score Mean SD

Technological factors HT1a 1.00 5.00 3.9695 0.78657HT1b 1.00 5.00 4.2317 0.81095HT2 1.00 5.00 3.5427 0.85336HT3 1.00 5.00 3.8293 0.80344HT4 1.00 5.00 4.1402 0.79018HT5 1.00 5.00 4.2256 0.77004

People factors HP1a 1.00 5.00 4.0488 0.77384HP1b 1.00 5.00 3.8841 0.80945HP2 1.00 5.00 3.8780 0.78154HP3a 2.00 5.00 4.0549 0.74515HP3b 1.00 5.00 3.4146 0.89923HP4a 1.00 5.00 4.0122 0.70917HP4b 2.00 5.00 3.7439 0.84811HP5a 1.00 5.00 3.8720 0.79997HP5b 1.00 5.00 3.1159 0.84650

Organizational factors HO1 1.00 5.00 4.1280 0.71920HO2 1.00 5.00 4.0976 0.87374HO3a 1.00 5.00 4.0488 0.76587HO3b 1.00 5.00 4.0488 0.67201HO4 1.00 5.00 3.8841 0.71272HO5a 2.00 5.00 4.1098 0.72647HO5b 1.00 5.00 4.0915 0.70766HO6 2.00 5.00 4.1707 0.71453HO7 1.00 5.00 4.0732 0.68785HO8 1.00 5.00 3.7805 0.75168HO9 1.00 5.00 3.8963 0.67940HO10 2.00 5.00 3.9451 0.70278HO11 1.00 5.00 3.8293 0.75624Table I.

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Category Hypothesis FactorsIndianSMEs

LargeIndian firms

Globalfirms

Technologicalfactors

HT1a Comprehensiveness of softwaredevelopment plan

U U U

HT1b Comprehensiveness of processintegration plan

U U U

HT2 Stability of legacy systems x x xHT3 Significance of age of IT

infrastructureU x x

HT4Comprehensiveness of datamigration plan

U U U

HT5 Extensiveness of system testing U U U

People factors HP1a Blend of cross-functional employeesin the team

U U U

HP1b Interaction of internal and externalconsultants

x U x

HP2 Experience of project champion x U xHP3a Extent of empowerment of decision

making teamU U U

HP3b Flatness of hierarchy inimplementing organisation

x x x

HP4a Significance of morale of theimplementation team

U U U

HP4b Effect of employee attrition x x xHP5a Exhaustiveness of user training U U xHP5b Duration of user training x x x

Organizationalfactors

HO1 Organisation’s adaptability tochanges

U U U

HO2 Involvement of top management U U U

HO3a Degree of customization U U U

HO3b Efficiency of business processre-engineering

U U U

HO4 Exhaustiveness of contingencyplans

U x x

HO5a Clarity in definition of milestones U U U

HO5b Clarity in evaluation of milestones U U U

HO6 Alignment of ERP package withbusiness processes

U U U

HO7 Comprehensiveness ofimplementation strategy

U U U

HO8 Budget for unplanned activities x x xHO9 Involvement of consultant in

implementation strategyU x x

HO10 Clarity of project status disclosure U U U

HO11 Appraisal of clients about ERPstrategy

U x x

Notes: U – hypothesis is accepted; x – hypothesis is rejected Table II.


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Organizational factors. In the organizational factors, all the factors were accepted assuccess factors for SMEs except for budget for unplanned activities the possible reasonfor this can be that due to non complex and non exhaustive requirements of the SMEs theneed for unplanned activities is quiet low. In all, 21 factors emerged out as successfactors for the SMEs.

Indian SMEs vs Indian large organizationsWhen compared to Indian SMEs, only 19 hypotheses/sub-hypotheses were consideredstatistically significant for success amongst the large organizations.

In technological factors, we can see that age of the IT infrastructure emerges out asa success factor for Indian SMEs but not for Indian larger organizations, this can bebecause the larger organizations have much higher recurring budget for their ITdivision and thus for them to provide the IT infrastructure which can support the latestERP packages is much more easier compared to the Indian SMEs who have a very littleor limited budget for their no competence divisions.

In the organizational factors, the interaction between the internal staff and externalconsultants is amongst the key success factor for Indian large organizations but not forIndian SMEs. These results were not an aberration from the anticipated factors as for anIndian SME, since the size of the organization is small there is little need felt forexplicit meetings between project stakeholders, usually progress on the ERP project isknown to everybody and hence team interaction was expected to be ruled out as asuccess factor.

Also when we consider the importance of the project champion for a largeorganization’s ERP deployment, the knowledge and exhaustiveness of the experiencethat the project champion must have is of prime importance as the amount as there is alot of complex dependence and interactions at all levels both inside each module andalso during the integration of various modules.

Going on similar rationale, in the organizational factors, exhaustiveness ofcontingency plans, involvement of consultant in implementation strategy and appraisalof clients about ERP strategy are success factors for Indian SMEs but not for Indianlarge organizations.

Indian SMEs vs global trendThere were just 16 hypotheses/sub-hypotheses which were proved statisticallysignificant to be considered as success factors globally as compared to 21hypotheses/sub-hypotheses for Indian SMEs.

If we look at the comparison between the Indian SMEs and the global trend, in thetechnological and people factors, only significance of age of IT infrastructure andexhaustiveness of user training figured out as success factors for Indian SMEs but notglobally.

The differences in the organizational factors for Indian SMEs vs theglobal trends were quite noticeable as the success factors for organizational factorsglobally are in line with the factors considered in the Indian large organizationsand even the possible explanation for the difference between the implementationglobally and in SMEs would be more or less in line with that mentioned for theIndian large organizations. Involvement of consultant in implementation, appraisalof clients and exhaustiveness of contingency plans were the factors that were

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considered as crucial for success for Indian SMEs but they were not consideredso for organizations globally.

Managerial implicationsThe overall goal of this work was to identify CSF of implementing ERP in SMEs inIndia from the perspective of all stakeholders involved. The intended benefits forvarious stakeholders are given below.

Benefits for the SMEs. As the SMEs are a lot more risk averse for there non-corecompetence processes. This study will help them to have a timely completion of theimplementation thereby resulting in reduction in unplanned cost as well as costescalations and schedule overruns that happen with time. Second, an overall highersuccess rate and return on investment is achieved in switching to a new ERP. So in allthis study will help them achieve the returns from their investments much faster, andmore secure than the normal traditional implementation practices.

Benefits for the implementing organisation. As the SMEs are becoming more awareand have started spending much more on the IT needs of the organization than everbefore, so with the help of the success factors identified, companies can plan for theimplementation in a more systematic way and more strategically thus reducing timeand cost overruns and in turn will help them achieve a higher resource utilization andprofits that while implementing it in the traditional method.

Benefit for the employees. Most employees are quiet reluctant to change, and even morewhen they are not aware of what is happening and why it is happening. With the help ofthis study the factors are identified that will help the higher management to decide howmuch information and training is to be provided to the employees. So if implementedproperly in the end employees will feel more empowered and will have reduced stresslevels and will get a boost in their motivation levels.

8. ConclusionsThe overall goal of this work was to advance the amount of research in the area ofImplementing ERP packages in Indian SMEs. This was done by initially identifying thefactors that can lead to success of ERP implementation. Post this we used a survey basedex post facto study approach by identifying the success factors from the perspective ofboth ERP implementers and the owners and employees of various SMEs. We alsocompared the differences found from our study between the success factors of SMEsagainst the large organizations and the global trends.

First the hypothetical framework was developed and then different ERP implementersand the owners and employees of various SMEs were approached with closed endedquestions. The responses were obtained from various industry sectors, including thosehaving the primary line of business as computer related (hardware/software/IS/MIS),consulting, banking/insurance, health care, aerospace, manufacturing, etc. Therespondents belonged to both small and large-sized organizations and teams.Responses came from all role types – software developers/testers and managementlevel employees.

We conducted a large-scale empirical study. There had not been a lot of research forSMEs and virtually no work done for Indian SMEs. The feedback we received whileconducting the survey has been overwhelming. Many of the respondents who arealso experts in this area have shown interest in the work and its results.


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Our research contribution can be summarized as follows.

Technological factorsWe have found that four of the five hypothesized technological factors are significantlyrelated to the success of ERP implementation. They are comprehensiveness of softwaredevelopment/ process integration plan, significance of age of IT infrastructure,comprehensiveness of data migration plan and extensiveness of system testing.

People factorsWe have found that four of the nine hypotheses/sub-hypotheses amongst the peoplefactors are significantly related to the success of ERP implementation. They are blendof cross-functional employees in the team, extent of empowerment of decision makingteam, significance of morale of the implementation team and exhaustiveness of usertraining.

Organizational factorsWe have found that ten of the 11 hypothesized organizational factors are significantlyrelated to the success of ERP implementation. They are organisation’s adaptability tochanges, involvement of top management, degree of customization, efficiency ofbusiness process re-engineering, exhaustiveness of contingency plans, clarity indefinition of milestones, clarity in evaluation of milestones, alignment of ERP packagewith business processes, comprehensiveness of implementation strategy, involvementof consultant in implementation strategy, clarity of project status disclosure andappraisal of clients about ERP strategy.

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Appendix. Survey questionnaireSurvey questionnaire has been recreated as a Google doc attachment that can be accessedthrough the link: http://bit.ly/QiciRD

Corresponding authorSubhas C. Misra can be contacted at: [email protected]

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