CHAPTER-1

A STUDY OF CRITICAL SUCCESS FACTORS IN ERP POST

IMPLEMENTATION SYSTEMS IN INDIAN COMPANIES:
INTRODUCTION

1. Introduction:

Enterprise resource planning have been an important subject of research from few decades.
Success of an organization’s ERP implemented can be assessed when it is being used without
any issues and upgraded from time to time. This chapter has framed as an introduction to what
exactly and ERP is. It comprises of introductory part of ERP in modern world. The composition
of the chapter is 1.1: Introduction of ERP; 1.2 Evolution of ERP systems; 1.3 Reason for
adopting ERP systems; 1.4 brief review of literature; 1.5 Relevant research studies; 1.6 Need of
research: Problem statement; research method; 1.7 Chapter scheme; 1.8 Chapter concluding note.

1.1 Introduction of ERP:

With the rapid globalization and booming economies, the world has come to a common platform
of computerization and information technology. The one touch button generation has taken place
and now everyone needs a system which gives output/ solution in touch of a button. Days are not
far when things will be available just on thinking. With technofication of modern industry, the
growth of ERP has taken a boom. From SME’s to LE’s, from service industries to, Banking, IT,
finance, etc., every has adopted the race of computerization. ERP implementations were a
nightmare a decade back. But, with growth of Information technology and modernization of
computers, ERP has become basic need of all.

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Small or big, retail, manufacture or wholesale, service or support, everyone wants ERP support
system to make their business data secure and easily available. With increase in any business, the
volume of accounting data does increase, resulting to chaos in managing and getting out the most
important and reliable data at a go. With ERP the systemization of voluminous data of an
organization becomes way easier. The information technology has taken a step ahead of building
a total solution to bulky business environment of a business organization. The software, which
carries all the data in itself with the help of servers, makes it easy to enter data and fetch out
reports within the organization globally.

The history of Enterprise Resources planning goes back to implementing software’s like SAP,
Oracle, PeopleSoft, Microsoft etc. The software industry has taken a boom in last two decades
and has been rapidly grown to suffice the needs of industry. Umble et.al. (2003) propounded in
their research that ERP has been implemented and accepted by most of the companies now a
days. Like APICS data showed that 34.5% of its companies having revenue around $ 1 billion or
more opted and/or upgraded for ERP. Bingi et al., (1999) found during their research ERP by
2019 will be catering the market by $1 trillion and continues . As Ross et.al. (2003) stated in
their research that Millions have been invested in ERP implementations by companies
upgrading from traditional system to technology based set up, which leads to readily deliverable
orders, reduced cost of operations and real time data availability. This has made the companies
work on total integrated softwares which in turns lead to quick managerial decision making and
customer needs satisfaction.

Enterprise Resource Planning (ERP) programs are integrated tools which connect all the areas
and dimensions of business together and make a core competent system of information recording
and summarizing. ERP is a total integrated solution tool which makes a manager/ administrator
to cater integrated solution into the organization for decision making. The process in business
can be summaries as a compilation of data to make processed reports and generate decision
making tools. ERP is such tool which combines the data from different segments/ departments
(sales, marketing, manufacturing, logistics, accounting, and staffing) and summaries them into
meaningful reports for top management.

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The ERP market in India is flooded with opportunities when it comes to small and medium scale
industries. The needs of these industries is limited and hence they can opt for smaller ERPs as
compared to big and costly ERPs like SAP or Oracle. There are many companies which offer
exceptionally good and small ERP solutions for SMEs like Sage Software or Microsoft
Dynamics as well. Such ERPs can be adopted on the basis of requirement and are web based. It’s
convenient for small companies to adapt such ERP which can be available at low cost and can
suffice their requirements. These ERP’s as come with a low cost of maintenance are preferable
by small companies. Such ERPs includes modules like Finance, Accounts Receivable, Accounts
payable, Inventory, Production, Banking etc. As India is a developing economy, the requirement
of ERP has increased a lot especially in small and medium scale companies, in such case these
small software (Web based) provide them solution and growth at low cost. In Toto ERP is
everywhere, whether buying or selling ERP gives what is in the best interest of the organization
at a desirable cost. It’s just the company should know which ERP fits them best and what are
their requirements and expectations with the ERP and the solution is readily available.

1.2. Evolution of ERP

2000
1960 Mid Onwards
1970's 1980's
(Inventory 1990's Web
MRP MRP II
control) ERP enabled
ERP

Figure 1.1: The Evolution of ERP

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Somers & Nelson, (2003) gave a detailed description of Evoluation of ERP. According to them
the ERP history goes back to 1960s, where almost all software included inventory and finance.
In 1970. Material Requirements Planning (MRP) systems was introduced, which worked on two
modules i.e., bills of material and production. This system later upgraded more towards sales and
customers and planning of future stocks as well. Somers & Nelson, (2003) as found in their
research that with upgradation of technology this old MRP II system was turned more modern by
including financial accounting, material and manufacturing at one common platform . With this it
became easy for companies to plan for inventory and material with financial information and
make decision quite in time. It focused on optimize the material and production requirement by
systematizing the manufacturing process by extending the services to different modules like
finance, project, human resources, distribution etc. By 90s the time had come when ERP turned
into a full fledge integrated tool sufficing the requirements of all the modules like supply chain,
leads and customer management, finance, human resource, production etc. Somers & Nelson,
(2003).

Year 2000 brought Y2K issues but nothing kept the ERP journey at a pause. This was the era of
extended ERP systems. Which had all the modules shown below in the diagram; which also
included advanced modules like cloud, data analytics and mobile computing etc. Cre8tive
Technology and Design (2014)

Finance

Statergic & Human

opertaions Resource

Manufacturin Logistics
g Management

Server

Material Maintenance
Management management

Quality Sales &

Management Distribution

Figure 1.2: ERP System

Source: Altekar, (2009)

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Figure 1.2, clearly shows how one stop solution ERP software can make functions in an
organization easier and integrated by replacing old standalone system. It integrates all
departments like strategic and finance, operations, human resource, sales, maintenance etc. Thus
with total integration of the organization every department (Subject to workflows and approvals)
can have access to any necessary data or report with click of a button. For example, any end user
from any department can check and plan for inventory requirement by indenting for same if it is
not available with the organization, he can just go and check in the system whether the stock is
there or not.

1.3. Reasons behind ERP Implementations:

Managing the whole organization is not an easy task. Inter connectivity may often lead to
disruptions in operations and mismanagement of data. The requirement of an integrated total
solution has been raised with rapid advancement of information technology. There are many to
implement an ERP in an organization. Dhinakaran (2015) gave the list of Technological,
operational and business reasons to implement / acquire ERP by organizations.

Technological Reasons:
1. Replacement of old IT infrastructure.
2. Standardization of the business processes
3. Cost reduction of IT in long term
4. Improve software systems
5. Outsourcing of software to reduce maintenance.

Operational Reasons:
1. Improve operational processes.
2. To control cost and operate workflows
3. Improve customer satisfaction and market new product development
4. Improve management efficiency and effective decision making.
5. Data integration and reporting ease.

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Business Reasons:
1. For Global market
2. To adapt best practices in the ERP tools.
3. For better business process reengineering.
4. Peer pressure.
5. Flexibility and agility.

1.4. Brief Outline of Review Literature:

Perera & Withanage (2008) analyzed in their research which was designed to identify the CSFs
in post ERP implementation. With Delphi technique and survey through questionnaire, factors
for success of ERP were identified for both during and post implementation stage of ERP. With
the help of survey questionnaire, the authors identified the key success factors and figured out
the correlation between these factors. Factors like Business process changes, Job enhancement,
Management involvement after Go- Live Job role changes, big fixing, and users training after go
live, Change in software, change in management and identification of priorities. Etc., came out to
as key factors for data collection.

Yu (2005) did research on post implementation ERP scenario and collected the information
through key success factors identification. Researcher studied ERP survey in Taiwan and also
studied literature thoroughly to figure out the main factors which affect all the three different
stages of ERP implementation i.e., from Pre –implementation to post implementation.
Theoretical study was done from literature review to analyses end to end ERP process. Survey
study was done 127 valid responses were collected on the questionnaire which was made on five
point Likert scale. With regression analysis the conclusion derived was that the factors which
affects post implementation success of ERP are; CEO involvement commitment and,
Management and Knowledge of professional MIS Leaders , Middle and top management
commitment, Commitment and involvement of users.

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Rana et al. (2011) studied the Indian small and medium (SMBs) business by identifying the
factors with influence the implementation of ERP systems. This research explicitly targeted the
Indian Small and medium enterprises who have previously implemented the ERP’s, in short the
research was primarily based on post implementation ERP success factors. The factors identified
by the authors after rigorous literature review were namely; Top Management Support, Project
sponsor, Scalability & scope, properly defined goals & objectives, User Knowledge, ERP
Importance Package Selection, Vendor Support, Project Management, Project Champion,
Prevailing IT Infrastructure, User Training, Cost of Project, External Consultant, Improve work
efficiency, ERP Team Composition, Interdepartmental Communication. A questionnaire was
sent to collect data which in turn responded by 104 respondents. With the help of statistical
software SPSS 17.0, testing was done on the data so collected. The testing was restricted to
principal component analysis with Varimax rotation. Six factors were derived from these test:
ERP importance; package selection; user knowledge; project champion; user knowledge; and
interdepartmental communication. Also, factors like top management support, planning, project
management, implementation strategy, role of consultant were implied to be important for the
implementation.

Muscatello (2002) in his research developed a survey instrument on the basis of factors identified
like; Business-based ERP strategy, support of leaders, complete ERP plans, project range,
business process restructuring pre ERP, and training, proper ERP module, valuation of sub-
system, overall project management and how performance evolution is done.. With the help of
factors analysis and other statistical tools it was concluded that most of the above mentioned
factors were crucially critical for an ERPs Success in an organization.

Soltan et al. (2015) did their research with the help of Technological, Organizational and
Environmental (TOE) theory prepared conceptual framework in a post ERP implementation
environment by identifying critical success factors through rigorous literature review. They
identified certain factors which were not included in prior researches like; Implementation team
of ERP, ERP communication and ERP implementation strategy. The authors here using prior
research theories and models presented a new model which was developed by identifying CSF
and were totally establishing a relationship in post implementation success scenario (PIS). This
research was done to complete the gap technical factors of ERP success and PIS in ERP.

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All-Mashari (2010), did research particularly focuses on unified implementation methodologies
with respect to identified critical success factors. That are actually not considered by most of the
firm and hence there are so many ERP failures in the business society. The authors here focused
on the long left area in the area of ERP critical success factors and ERP success by developing an
integrative methodology on these factors. Here the factors like strategic tactical and operational
level. They researched on the factors like ,” critical top management support/commitment;
benchmarking; project management; change management; communication; business process
reengineering; software configuration; alignment; consultation; software package selection;
customization and role of project team” were considered to develop the framework and was
further used in many researches to evaluate the performance of ERP in post implementation
scenario Painter (2015).

Wee (2000) made primary focus on the importance of resources as such team members in ERP
success. He stated that the several studies have worked towards key success factors for a
successful ERP implementation and found Project team from both users and implementer’s
perspective as a key factor for ERP success. Other factors recognized under this study are “top
management support, project team, user’s involvement and training, support from vendor,
efficient project leader, business process re-engineering, supportive organizational culture, data
accuracy for positive outcomes and clear communication”.

Akkermans & Helden (2002) undertook research on the basis of critical success factors given by
Somers & Nelson, (2001). 10 critical success factors were shortlisted and on the basis of case
study methodology the authors investigated the implication of those factors on the firms. They
tried to describe performance of an organization is affected with the use of critical success
factors given by previously mentioned study. The factors so taken were: “top management
support, planning, project management, consultants, implementation team, communication,
training and learning, user support, project leader, change management program, vendor support,
suitability of hardware & software”. Finally, the concluded that the factors identified by Somers
& Nelson are perfect to establish the reasons behind success and failures in any organization and
most of them are fit for any scenario.

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Almutairi & SubraManian (2005) did their research on testing of information system success
model with the help of existing D & M model in private organizations in Kuwait. The factors
which were tested by them were, “Information Quality, System Quality, Service Quality, Ease of
Use, and Users Satisfaction”. They tested 7 organizations from seven different sectors in Kuwaiti
stock market to check IS success. From correlation analysis of these factor so identified, the
authors supported the original DeLone and Mclean model with a few changes. Regression
analysis subsequently Confirmed this research as well.

1.5 Need for Research

1.5.1 Research Problem

ERP implementation as a project is not enough. It is an enabling system and therefore the prior
studies on implementation should benefit one the organization technically implement it. The
effectiveness of ERP is to know whether it helped the organization in achieving benefits in terms
of Financial/ accounting benefits, process improvement, project success and future needs. The
success of ERP depends upon critical success factors like Information Quality, System Quality,
Top management support, training and effective use of ERP, service quality, consultant support,
implementation team support etc. In Indian context few studies like Madapusi (2008);
Najeebuddi (2012) ; Dhinakaran (2015) etc have studied on it but the research on this is thin and
therefore the need for the study in Indian context is made. The study is embodied as “ A study of
Critical Success Fators in ERP Post implementation systems in Indian Companies”.

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1.5.2. Research Method:

The research in this study has been carried out it three phases. The research methods used under
the study are described as follows;

Firstly, the method of rigorous literature review was done using desk method. The literature
review was done from many sources like books, journals, dissertations, search engines like
Google Scholar, Google search and databases like ProQuest, Emerald, Jstor, SSRN etc. Also,
from the papers so extracted, their references were used for further collection of research papers.
For search the terminology used was “ERP and Critical Success Factors”, “Information system
success models”, “Structural Equation modeling techniques in ERP” etc.

With the help of these papers and dissertations a clarity on the research topic was stimulated.
This deep understanding of the area of research and through the literature review a list of critical
success factors and the benefits derived from the same was extracted and a survey questionnaire
was made on the same.

Secondly, the survey was conducted to collect the empirical data. Firstly, an exploratory study
was conducted to check the instrument as two different types of ERP success philosophies were
combined together to analyses the net benefits from them. Hence the survey instrument so made
was first tested throw exploratory analysis using SPSS with Promax rotation for confirmed
pattern matrix.

Thirdly, based on the exploratory study and test results on SPSS the final questionnaire was
administered for final survey. The SEM technique was used for confirmatory factor analysis
using AMOS to find the results and implications of critical success factors. All these findings
including exploratory study results, confirmatory factor analysis and final model are included in
chapter 5, 6 and 7.

The research method in brief can be seen as follows;

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Figure 1.3: Research path

1.5.3. Research Objectives:

Based on the research problem following objectives are framed for the Study:

1. To identify Critical success factors for success of ERP post implementation on the
basis of Literature review.
2. To define the success of ERP system implementation with the help of Net Benefits
derived from literature review.
3. To evolve a model of ERP critical success factors and net benefits for success in post
implementation stage with the help of review of literature.
4. To make empirical exploratory study of the model evolved (Research objective 3) in
Indian companies.
5. To test the model derived from exploratory study with confirmatory study.
6. To offer the SEM model of Critical Success Factors in ERP post implementation
systems in Indian Companies.

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1.6. Chapter Scheme

The study is presented as per following chapter scheme:

CHAPTER 1 Introduction- This chapter gives an overall view of the research. In

tries to find out research gap and gives a brief introduction of the basic
terms of research.

CHAPTER 2 Overview of Enterprise resource planning , evolution of ERP , critical

success factors in ERP.
CHAPTER 3 Review if Literature and Theoretical framework
.
CHAPTER 4 Research Methodology Research problem; Objectives of Study;
Hypothesis of Study; Data Collection Instrument; Sources of Data;
Sample of Study; Data Analysis and Limitations of the study.
CHAPTER 5 Pilot Study and Exploratory Factor Analysis - This chapter includes
pilot study ; data collection for pilot study and demographic profiles;
exploratory factor analysis and extraction of factors for confirmatory
factor Analysis and SEM model through AMOS.
CHAPTER 6 Confirmatory Factor analysis – This chapter has confirmatory factor
analysis through AMOS. This chapter includes model fit, invariance
test, validity and reliability check and confirmatory factor analysis by
Harman’s Single Factor Test to find common method bias
CHAPTER 7 Final Structure Educational Model and Research findings: This
chapter comprises of final model, hypothesis testing, results and
findings of the Research.

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1.7. Chapter Concluding Notes

This chapter explained the context of study of ERP systems, research problem and outline of the
thesis. The next chapter gives overview of ERP theory in the backdrop to help develop
theoretical framework of the present study.

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