A FRAMEWORK FOR EVALUATING DIFFICULTIES

IN ERP IMPLEMENTATION

Luis I. Ferrario

Facultad Regional Santa Fe, Universidad Tecnológica Nacional, Argentina

Red Megatone, Information System Department, Av.Santa Fe 252, (2300) Rafaela, Argentina

Jorge M. Montagna

Facultad Regional Santa Fe, Universidad Tecnológica Nacional, Argentina

INGAR, Instituto de Desarrollo y Diseño, Avellane

da 3657, (3000) Santa Fe, Argentina

Keywords: Enterprise Resource Planning; ERP implementation; ERP pro

ject

Abstract: Various sources point out very high percentages of failures to implement ERP systems. In this work, the

main difficulties for this task are analyzed and a systematic classification of fundamental reasons is

intended. By considering the reasons that lead to failure, a simple and effective mechanism is generated to

evaluate in advance complications the project might present. In this way, the tools to be used can be

adjusted to the specific characteristics of the project. Somehow, it is intended to solve the problem presented

by general methodologies, which are used for any kind of enterprise, without previously considering its

conditions and state to face this type of projects.

1 INTRODUCTION

ERP systems support most key processes of an

organization by using a common data base that

stores all the organization’s data (Abdinnour-Helm

et al., 2003). These packages expanded rapidly due

to their advantages over the rest of the legacy

systems: high integration level, operation on the

organization’s business processes, reduction of

operative costs, etc. All these advantages are not

easy to achieve. Implementing an ERP is extremely

complex and implies a great challenge for the

enterprise (Davenport, 1998).

This has led to important failure rates in

ementations. One source of problems resides in

the difference of interests between customer

organizations who search for a unique business

solution and ERP sellers who prefer a generic

solution to be adjusted to a wide market (Hong and

Kim, 2002). In their efforts to have “their business

solution”, enterprises invest a lot of money in

customizing ERPs, which then brings about many

problems in the system updating.

This work presents a systematic classification of

urces

of failures to identify their origins and to

foresee solutions to overcome them. A framework is

generated to allow for a priori evaluating the main

difficulties of the project so as to focus resources

towards the appropriate direction. In general terms,

implementation methodologies tend to be general

and do not previously take into account the

difficulties they will have to face. In this case, the

complexity of the project is intended to be estimated.

2 ERP IMPLEMENTATION

In the last years, many enterprises acquired ERPs to

replace their legacy systems, attaining better

integration of their functional areas. Unlike legacy

systems, ERPs are not made to meet the

organization’s requirements but they have to be

parameterized according to the business processes of

the organization. It is not an easy task since it brings

about a great change in the organization. There are

various methodologies to implement an ERP, many

460

I. Ferrario L. and M. Montagna J. (2004).

A FRAMEWORK FOR EVALUATING DIFFICULTIES IN ERP IMPLEMENTATION.

In Proceedings of the Sixth International Conference on Enterprise Information Systems, pages 460-465

DOI: 10.5220/0002612504600465

 SciTePress

of which are developed by suppliers themselves (Al-

Mashari and Zairi, 2000; Rebstock and Hildebrand,

1999; Bancroft et al., 1997). They include technical,

operative, and organizational issues.

Making the ERP system operative poses a series

of important challenges for the enterprise. In many

cases, the definition that considers when the system

is implemented is an issue to be discussed

(Gottschalk, 1999). It is also a discussion topic when

all the value the ERP system can provide for the

enterprise was reached (Davenport, 1998).

3 SOURCES OF FAILURES

We can evaluate the different sources of failures by

studying the factors that make an implementation

successful. These factors can be divided into three

big groups: human/organizational, economic and

technical factors. Within these three groups, there

are various elements that allow for identifying

possible sources of failures. This section is intended

to make a systematic classification of those elements

that are considered as source of failures in the ERP

implementation taking into account previous works

in this area (Gefen, 2002; Bajaj and Nidumolu,

1998; Hong and Kim, 2002; Jianga and Kleinb,

1999; Kuruppuarachichi et al., 2002; Krumbholz and

Maiden, 2001; Mabert et al., 2003a, 2003b; Somers

and Nelson, 2003; Mandal and Gunasekaran, 2003;

Westerveld, 2003; Soffer, 2003; Stensrud, 2001).

The following classification has been obtained:

Human/Organizational factors: They become

more important when the level of change of the

business processes is more significant. They include:

• Leadership: It arises from the sponsor group of

the project. It selects and directs functional leaders,

supports them in decision-making and provides them

capacity for deciding on the main implementation

aspects. Lack of leadership inevitably leads to

failure (Sarker and Lee, 2003).

• Communication: Everyone in the enterprise

must be informed of changes that have been already

made or are to be introduced. Communication must

be open and honest in order to minimize employees’

resistance against change.

• Organizational culture: Implementing an ERP

system implies a change in the organization’s

business processes that can be radical in most cases.

It is convenient to have a culture that enables this

kind of changes. The employees’ attitude towards a

change of this kind is vital for a project of these

characteristics to be successful.

• Implementation team: It must be balanced; i.e.

it should include people from every area of the

enterprise and it should be 100% committed to the

project.

• Organizational adjustment: The way in which

an ERP system is adjusted to the organization’s

processes is crucial and it is an important criterion to

select an ERP (Lozinsky, 1998). Suppliers strongly

recommend implementing the system following the

processes contained in the ERP, “the best practices”,

because they have been extracted from successful

examples, and reducing customization. On the other

hand, there are organizations whose business

processes cannot be adjusted to the ERP procedures.

Mainly, strategic information systems are difficult to

customize since they correspond to distinct practices

from which the enterprise gets competitive

advantages. When implementing an ERP system, its

adjustment degree to the organization must be well

defined because otherwise implementation could be

too long and expensive and could not meet the

company’s requirements.

• Company size: Organizations have different

reasons for implementing an ERP, depending on

their size. Big organizations are motivated by

strategic needs, and the smallest ones are motivated

by operative considerations. The number of

implemented modules, plans, and the expected

results are different. Big companies report great

benefits in the financial area, whereas small ones

report them in manufacture and logistics.

• Lack of experience to work on this kind of

projects: The required effort is quite big and usually

there is no experience of working with similar

previous projects. There are great risks for the

project to be out of budget and time. A careful

administration of all resources is required.

• Lack of a methodology: Most suppliers of

ERP systems have their own general implementation

methodology, which is not always compatible with

the organization it will be applied to. Many times,

people in charge of this task try to make the

organization adjust itself to the methodology

requirements, without knowing if they are the most

convenient ones according to the company’s culture.

• Satisfaction and use of the system by users: A

great effort for implementation is useless if the final

user is not satisfied by the system and does not want

to use it. It is essential to early integrate users so that

they can become involved in the project and to take

their requirements into account (Gelderman, 1998).

• Understanding of the organization strategic

objectives: To attain a successful implementation, a

clear definition of the project objectives is required.

Key managers must determine the foundations over

that the business processes have to operate to satisfy

users, company goals, employees’ needs, etc.

A FRAMEWORK FOR EVALUATING DIFFICULTIES IN ERP IMPLEMENTATION

461

Economic Factors: If the needed funds are not

available, it is impossible and unfeasible for a

project to be continued. Some factors are:

• Economic plan: It is important to control costs

coming from different sources, mainly licences,

technical resources, and human resources. The last

one is the most significant one and includes

consulting, the firm staff expenses, incorporation of

specialized technical staff, etc.

• Budget adjustment: If the organization does

not respect the settled budget for the project, it will

inevitably fail. It should be taken into account that in

this kind of projects there are hidden costs that

should be considered, for example customization.

Technical Factors: the organization’s technical

capacity for implementing this type of systems must

be considered. The most important factors to be

taken into account are:

• Customization and software testing: Highly

trained staff is required to keep the ERP system

operating in future updatings. An adequate testing is

important to avoid errors at further stages.

• Staff with technical knowledge: It is necessary

to count on people that have an adequate technical

profile to manage the technological change,

minimize the impact this might cause, and reduce

implementation time.

• IT resources: The bigger the amount of

technology to be incorporated, the more expensive

and complicated the project. This technology must

be ready and available before the project starts.

4 FRAMEWORK TO ANALYZE AN

ERP IMPLEMENTATION

Frameworks are useful because they allow us to

organize and integrate the elements of a problem in a

simple and consistent way, assuring the attainment

of the pursued outcomes. In addition, they allow

holding a common work discipline. The benefits of

counting on this kind of tools exceed the reached

objectives. The framework development process and

the associated discussion among participants provide

fundamental contribution to the project (Boyer et al.,

2002; Heeks, 2003; etc.).

Before starting a project, it is convenient to bear

in mind which are the main difficulties to be

overcome and their effect over the project. For this

purpose, a framework is presented that allows

estimating the degree of difficulty and failure

probability so as to prepare suitable measures to

overcome problems. It should be taken into account

that not all projects are alike, neither should the

same methodologies be used. The tools to be used

must be adjusted to each project’s needs.

This framework is based on two states: “Where

we are now” that measures the organization’s

current reality, and “Where we want to arrive” that

estimates the desired situation when the project

ends. Failure probability or project difficulty can be

estimated through the gap existing between both

states. The greater the gap, the greater the

implementation project difficulty. It is intended to

see the enterprise’s position to face the project.

For the case of a small gap, the framework

would indicate that it is probable for the project to

be successfully finished. It also indicates that the

change level is low, which leads to questions such

as: In the face of a low level of change, is it worthy

to undertake an ERP project? Do legacy systems

with some modifications satisfy our expectancies?

Do the project objectives adequately take advantage

of ERP system capacities?

By using the previously considered factors, we

assume that an ERP implementation can be analyzed

through seven key dimensions, which we consider

necessary and enough to analyze the existing gap

between the current situation and the designed one:

• Information: It considers the information the

enterprise counts on for making decisions related to

the project.

• Technology: A very expensive technology is

needed. This dimension can be expanded to consider

hardware, data base, connectivity, etc.

• Business Processes: It deals with a quite wide

dimension. It is intended to measure the existing

distance between current and redesigned processes

to be used in the company.

• Organizational Culture: It is necessary to

count on an adequate culture, i.e. the right people

having a good predisposition to changes and creative

and optimistic personality. It also considers inner

resistance. Communication policy, previous projects

in the company, etc. must be taken into account.

• Adjustment to the ERP: Correspondence

between the organization’s redesigned business

processes with the best practices incorporated into

the ERP system must be considered. The greater the

adjustment, the easier and more economical the

implementation.

• Employees’ Skills: Training of the people

involved in the project is analyzed. It requires people

having experience in similar projects so as to make

implementation faster.

• Work with Methodologies: We analyze if the

organization is used to working with methodologies,

and if some kind of similar experience has been

developed.

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Figure 1 presents a model for evaluating an

organization as regards the specified dimensions. In

each dimension, triangles slide horizontally from

“Where we are now” to “What we want to arrive”,

determining the organization’s position to face the

project and defining the dimension’s rating. For

example, if the triangle is near “What we want to

arrive”, it means that in that dimension the

organization is near the pursued goals (the required

level of change is low). On the other hand, if the

triangle is nearer “Where we are now”, it means that

great reforms are needed in that dimension so as to

carry out the project. Particular dimensions can be

added, depending on the kind of organization.

If the gaps between reality and planning could be

reduced, we could also reduce the risk of failing in

the implementation. Anyway, it is not generally

possible to reduce these gaps since they correspond

to conditions related to the enterprise and to the

project. These gaps allow for predicting or

estimating the difficulties to be faced. In this way, it

is easier to determine and use the appropriate

resources and to foresee the project length.

5 METHODOLOGY

We present the general steps to follow for using the

presented framework.

5.1 Evaluation of gaps

For each dimension, an analysis is made to evaluate

the existing gap between the current situation of the

organization and the desired situation expected after

implementing the ERP system. Numerical values are

assigned to consider distance between both

situations. For this purpose, a 0 to 100 scale has

been taken for each dimension. For the purpose of

guidance, we provide meanings for some values, but

any value can be assigned in this range:

• 0 Value: It indicates that there is no difference

between the current and the redesigned situation.

• 50 Value: It indicates that there is a degree of

mean difference between the current and the

redesigned situation.

• 100 Value: It indicates that the current

situation is completely different from the solution

proposed with the ERP system.

A particular dimension can be divided in several

subdimensions with a weight according to their

relative importance in the main dimension. For

example, we can take Technology dimension and

subdivide it into four elements: Data Base,

Operative System, Hardware and Connectivity.

Once all proposed dimensions have been

assigned, a global indicator, or general gap, is

generated, which estimates the degree of success the

ERP implementation project may have. It is obtained

from the sum of the gaps of the proposed dimensions

in the model. Here weights for each dimension can

be considered.

The table shows how to interpret simply results

obtained for the General Gap:

General Gap Interpretation

501-700 The project is highly risky and many

precautions must be taken before starting in

order to do so successfully.

301-500 The project has a considerable risk if the

appropriate measures are not taken.

Precautions should be taken on the most

affected dimensions.

Figure 1: Model for Evaluating the Project Gap.

Information

Technology

Business Processes

Organizational culture

Adjustment to the ERP

Emplo

ees’ Skills

Work with methodolo

ies

Where we are now

Where we want to arrive

A FRAMEWORK FOR EVALUATING DIFFICULTIES IN ERP IMPLEMENTATION

463

101-300 The project does not have too many risks.

There might be problems if we do not work

on dimensions with significant gaps.

0-100 The project will surely be successful,

without significant risks. Te settled goals

must be analyzed since the change and the

impact on the business are low and thus the

ERP acquisition might not be justified.

5.2 Analysis of the general gap in

relation to available resources

Available resources cannot be analyzed in the same

way that previous dimensions but the general gap

must be related to three key resources (Budget,

Availability of Human Resources, Time Assigned to

the Project) to determine the probability of the

project success. Figure 2 shows four quadrants to

indicate possible locations of the organization

relating both elements, whose meanings are:

• Quadrant I: It encompasses organizations with

a low general gap that do not count on enough

resources to undertake the project. The organization

is not in optimal conditions to start implementation

but with some adjustments it can go further towards

a successful project.

• Quadrant II: The general gap is high and the

organization does not count on the resources needed

to face implementation. There are great probabilities

of failure. The effort to be made in order to achieve

a successful project is very significant and risky.

• Quadrant III: Organizations with greater

possibilities of success. They have a low general gap

and count on enough resources assigned to the

project. Taking into account the value of the general

gap, available resources should be assigned to

analyze the project goals so as to know if it is really

necessary to implement an ERP system since the

level of change is too low, or if the project

objectives have not been well planned according to

the ERP potentialities.

• Quadrant IV: Organizations that have

resources for the project but as the general gap is

high, there are many difficulties for the project. A

great effort is required. However, having available

resources may constitute an incentive to try to

overcome the existing problems and constraints

using a suitable methodology.

Appropriate scales should be defined over each

axis. The previous analysis has been made taking all

resources into consideration simultaneously. It can

be very useful to unfold the graph in Figure 2 for

each separated resource in the y-axis. Also, the

different levels of the resources and the general gap

must be considered in a detailed analysis.

5.3 Determining actions to be taken

In most cases, the studied organizations will be

located over 100 points, for which actions should be

taken so as to minimize project risks. One option is

to try to reduce gaps. In many cases this is not

feasible, because it attacks project quality and leads

to less ambitious goals. In some cases a revision of

the gaps of certain dimensions may be necessary.

For example, in Technology we can consider

questions such as: Is it necessary to buy a new data

base? In Business Processes, we can analyze

whether the redesign proposal has been too

ambitious. Therefore, in many cases the first step

consists of iterating over previous stages and

evaluating other alternatives.

The most important action is to adjust the

implementation project steps according to the

obtained results; i.e., we must set a period of

realistic time for the project, define stages, and make

a good distribution of resources. This implies

considering each of the standard stages in the

methodology and revises them according to the

available elements. In many cases, this forces the

project to have longer stages with a greater level of

detail and more sophisticated tools so as to assure

the project’s success.

Budge

Availability of human resources

Time assigned to the project

Low

Hig

High

Low

General Ga

Figure 2: Analysis Model (General Gap of Project vs Resources)

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6 CONCLUSIONS

ERP implementation presents a low rate of success.

Usually suppliers and firms that implement them

count on general methodologies for this task. One

source of the aforementioned problems may arise

from the fact that methodologies are general and

cannot be adjusted to the project’s elements.

This adjustment between methodology and the

project must be done a priori, before starting. Going

back in the project execution, reassigning resources,

etc. are mechanisms that probably lead to failure if

they are applied during the project development.

Therefore, before starting to work, the main

problems to be solved should be clearly identified.

We present a framework that allows estimating

the difficulties of an ERP implementation project. A

series of dimensions is analyzed that are considered

as basic for the success of this kind of projects and

have been derived from a bibliographic review of

works on this area and from the authors’ personal

experiences. By analyzing the difference between

the enterprise’s current situation and the one planned

with the ERP, the difficulties in the implementation

can be estimated. Then, the values obtained for this

gap are matched to the available resources to

undertake the project.

Regardless of the obtained results, the need of

carrying out the posed steps, evaluating the

elements, and revising relationships between

detected gaps and available resources allows those

groups that face such problems to exactly measure

the constraints they will have to overcome.

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