ENTERPRISE RESOURCE PLANNING (ERP): A COMPREHENSIVE REVIEW OF THE SUCCESSFUL ADOPTION AND THE FACTORS AFFECTING ITS IMPLEMENTATION

A RESEARCH PAPER IN SOFTWARE ENGINEERING "Enterprise Architecture Development Issues"

Submitted by:

MARITES D. ESCULTOR MSIT-MIS Student

Submitted to:

PROF. ROSICAR ESCOBER EAD Professor

ENTERPRISE RESOURCE PLANNING (ERP): A COMPREHENSIVE REVIEW OF THE SUCCESSFUL ADOPTION AND THE FACTORS AFFECTING ITS IMPLEMENTATION

INTRODUCTION

The global nature of modern marketplace requires active players to internationalize their operations. In the past, companies were used to competing based on one or two competitive performance objectives such as price and quality (Yusuf, 2003). However, present markets demand both price and quality in addition to greater flexibility and responsiveness and thus todays organizations must compete based on all competitive objectives.

In order to achieve such simultaneity in performance objectives, some organizations have decentralized their operations by global outsourcing of activities. This places enormous challenge on companies to achieve a coordinated and integrated supply chain. The emergence of various information technologies such as the Internet, electronic data interchange (EDI) and WWW facilitate the attainment of an integrated supply chain and in turn flexibility and responsiveness in meeting changing market requirements. Information systems such as manufacturing resource planning (MRPII) and enterprise resource planning (ERP) in particular have gained ground in providing support for achieving an integrated supply chain.

Firms around the world have been implementing ERP systems since the 1990s to have a uniform information system in their respective organizations and to re-engineer their business processes (Rajagopal, 2002). ERP system as a packaged software has the advantages of reduced cost, rapid implementation, and high system quality (Lucas et al., 1988). Although application packages have these benefits over custom design software, packaged software have problems of uncertainty in acquisition and hidden costs in implementation. Successful ERP implementation must be managed as a program of wide-ranging organizational change initiatives rather than as a software installation effort. Such IT-driven initiatives require change of the organizations socioeconomic system, which is intertwined with technology, task, people, structure, and culture.

Thus organizational resistance to change is identified as a critical success factor for ERP implementation (Hong and Kim, 2002).

Organizational fit and adaptation are important to implementation of modern large-scale enterprise systems that are built with pre-determined business process methodology. As a result, customization is a crucial, lengthy, and costly aspect in the successful implementation of ERP system, and has, accordingly, become a major specialty of many vendors and consulting companies. Gefen (2002) examines how such companies can increase their clients perception of engagement success through increased client trust that is brought about through respective and dependable customization.

Considering the importance of ERP in SCM, an attempt has been made in this paper to analyze the implementation issues of ERP and the successful adoption different companies. The lessons learned from this study would be useful for other companies in their efforts to successfully implement modern ERP system.

OBJECTIVES OF THE STUDY The general objectives of this study is to identify the success implementation adoption of Enterprise Resource Planning (ERP) in different companies and the advantages it has in contributing improvements on the operations and transactions of companies.

Specifically, it aims to: 1. identify the characteristics of ERP and its implications in the organization 2. identify the reasons for adopting ERP, 3. determine the importance of Enterprise Systems, 4. issues and challenges in implementing ERP 5. identify the factors affecting the implementation of ERP 6. provide sample case studies of issues relative to enterprise architecture and 7. present the short-term and long-term value of EA.

ENTERPRISE RESOURCE PLANNING Enterprise Resource Planning implementation issues are necessary to encourage. Therefore, various aspects of ERP implementation have attracted the attention of academicians, researchers and policymakers from time to time in the country. It is what encourages the researcher to conduct this study.

Enterprise systems are commercial software packages that enable the integration of transactions-oriented data and business processes throughout an organization (and perhaps eventually throughout the entire inter-organizational supply chain). In our definition, enterprise systems include ERP software and such related packages as advanced planning and scheduling, sales force automation, customer relationship management, and product configuration. Organizations that adopt enterprise systems have a wide range of options for implementation and ongoing operations, from do it yourself, through selective external assistance, to total outsourcing.

ERP uses Internet technologies to integrate the flow of information from internal business functions as well as information from customers and suppliers. The system uses a relational database management system, within client/server network architecture, to capture valuable management data. The key principle behind the system involves entering the data from a series of modular applications only once. Once stored, the data automatically triggers the update of all related information within the system. The systems can support virtually all areas of an organisation, across business units, departmental functions and plants. The development of an ERP system within a large manufacturing organisation requires the integration of working practices and the information systems (Davenport, 1998; Mandal and Gunasekaran, 2002).

CHARACTERISTICS OF ENTERPRISE SYSTEMS

Enterprise systems have several characteristics, each with important implications for the organizations that adopt them.

 Integration. Enterprise systems promise seamless integration of all the information flowing through a companyfinancial and accounting information, human resource information, supply chain information, and customer information (Davenport, 1998, p. 121). However, it is extremely important to note that achieving this integration depends on configuring (setting up) the system in particular ways. Configuration in this context6 means choosing which package modules to install and setting software parameters to represent, for example, the companys products, customers, accounts and the particular arrangement of business processes, such as centralized or decentralized warehousing and purchasing. An additional important part of the configuration task is capturing configuration decisions and their rationale. The quality of such documentation is essential to the organizations ability to make future changes efficiently and effectively. It is possible, especially in large, complex organizations, to configure enterprise systems so that the benefits of integration are not achieved. For example, companies may purchase and install only the financials modules of an enterprise system, thus depriving themselves of the potential advantages of integrating accounting data with sales, manufacturing, and distribution data. Furthermore, an organization may allow each of its business units to adopt a different enterprise system or to configure the same enterprise system however they see fit, with the result that it is not possible to obtain integration benefits from common purchasing or better decision making. Packages. Enterprise systems are commercial packages; that is, they are purchased or leased from software vendors rather than being developed in-house from scratch. This has two important implications for the organizations that adopt them. First, the IS life cycle is different.8 Rather than designing a system to meet the organizations idiosyncratic ways of working, the adopters of an enterprise system often adjust the organizations ways of working to fit the package (because modifying packages has numerous negative consequences). Consequently, package adopters sometimes forgo or curtail the analysis of current information requirements and business processes that is a hallmark of the traditional IS life cycle. Furthermore, the process of configuring an enterprise system for an organization differs substantially from software programming. Programming involves creating new software

functionality. Configuration involves adapting the generic functionality of a package to the needs of a particular organization (usually by setting parameters in tables). Configuration is often performed by teams of end-users with IS specialists working primarily on infrastructural issues.9 In other words, enterprise package implementation obsoletes some of the IT skills commonly found in IT adopting organizations and requires the acquisition of new skills. In particular, enterprise systems put a premium on skills related to (1) mapping organizational requirements to the processes and terminology employed by the vendor and (2) making informed choices about the parameter setting. Second, organizations that purchase an enterprise system enter into longterm best practices embedded in enterprise systems, most adopting organizations must commit themselves to some degree of business process reengineering (Connolly, 1999). There is great debate about the relative advantage of doing business process reengineering15 before, during, or after enterprise system implementation. But there is general consensus that business process change adds considerably to the expense and risk of the implementation of enterprise systems. The principal reason is the difficulty of managing large-scale human and organizational change. For example, four business functions are involved in the early phases of aircraft design and manufacture: contract management, project accounting, project management, and estimating. In traditionally organized aerospace firms, these four functions may be performed by different organizational units with consequent recycling and layers of approval. Baans software for aerospace and defense industries requires (by means of screen design and software processing logic) that all four functions be performed by an integrated product team comprising all four sets of skills. Enterprise systems have many such embedded business practices, the details of which may vary from vendor to vendor. Some organizations rebel against the inflexibility of these imposed business practices; even when organizational leadership accepts the need for change, the process of implementing enterprise systems can involve considerable change in organizational structure, job design, work sequencing, training, and so on.

 Some Assembly Required. At one level, the claim of enterprise systems to be integrated is wildly overstated. What is integrated is the software, not the computing platform on which it runs. Empirically, enterprise systemadopting companies have had great difficulty integrating their enterprise software with a package of hardware, operating systems, database management systems software, and telecommunications suited to their particular organizational size, structure, and geographic distribution.16 And this is only one of the integration challenges associated with enterprise systems. Marketing claims aside, in todays state of the art, no single enterprise system meets all the information-processing needs of the majority of organizations. In many cases, enterprise systemadopting organizations will need to interface the package to the companys own proprietary legacy systems, for which the enterprise system does no t provide an adequate replacement. The organizations may also need to acquire and interface the package to any number of bolt-on applications from third-party vendors for various tasks. Sometimes the adopting organization may turn to a third party that has integrated the enterprise package around the special needs of a particular industry segment. Finally, some organizations adopt a best-of-breed strategy in which they try to integrate several enterprise packages from different vendors, each designed to be the best fit in its class with the needs of the adopting organizations. Examples of companies that have adopted the best-of-breed approach are American Standard Companies (Bashein et al., 1997) and Starbucks (Aragon, 1997). Evolving. Finally, like all of IT, enterprise systems are rapidly changing. First, they are changing architecturally. In the 1980s enterprise systems were designed for the mainframe system architecture. Today, they are designed for relationships with software vendors. It is true that some organizations purchase an enterprise system with the idea that they will modify the packages to suit idiosyncratic needs. But doing so reduces their ability to benefit from vendors continued development of the packages, and it may create dependency on outside contractors who specialize in enterprise software customizations. (Vendors generally do not undertake to support or maintain customers modifications of their software.) Consequently, many organizations depend on the vendor for continued enhancement of the package (for example, redeveloping the software for future computing architectures). As a result, purchasers of an enterprise system may need to become active in user organizations, a mechanism by which

software buyers collectively try to influence the vendors plans for package maintenance and enhancement. Because of their dependence on vendors, organizations are vulnerable in the event that their chosen vendor goes out of business or lacks the resources for continued technical development. Furthermore, they are committing themselves to upgrading the software periodically if they hope to avoid major conversion headaches. Best Practices. Because they are designed to fit the needs of many organizations, enterprise systems are built to support generic business processes that may differ quite substantially from the way any particular organization does business. By talking to many businesses and looking to academic theory (or to APICS)12 about the best way to do accounting or manage a production floor, the vendors of enterprise systems have crafted what they claim to be best practices.13 Best practices represent a powerful reason to adopt enterprise systems without modifying them because few organizations claim to have redesigned all their business processes for crossfunctional efficiency and effectivenesswhich was the stated purpose of business process reengineering (Hammer, 1990). But to realize the advantages of the client-server architectures. Some vendors have just released Web-enabled versions of the software; most vendors have object-oriented versions under development. Baan is pursuing a strategy of componentization, consisting of an open backbone to which the offerings of other vendors can be connected. The functionality of enterprise systems is also evolving. Today, enterprise software vendors are releasing extensions to their core products19 designed to handle front office (i.e., sales management), supply chain (i.e., advanced planning and scheduling), data warehousing, specialized vertical industry solutions, and other functions. Enhancements such as customer relationship management and electronic commerce are in the works. Service arrangements are also changing. Some services firms offer packaged implementation services; others (often called application service providers) are offering ongoing enterprise software functionality on an outsourced basis. Enterprise systems terminology will undoubtedly change, too; only time will tell whether the extensions continue to be identified as something different from enterprise systems or are eventually folded into the enterprise system rubric. However things are called, many people now regard enterprise systems (or enterprise integration achieved in other ways) as the organizational infrastructure that will support future

value-generating applications, such as linking the organizations operations with those of suppliers and customers, leading to substantial reductions in duplicated activities across firms.

REASONS FOR ADOPTING ENTERPRISE SYSTEMS

Given the richness of enterprise systems in terms of functionality and potential benefits to adopting organizations, it should not be surprising that companies are adopting these systems for many different reasons20 (Ross, 1999). Some companies have largely technical reasons for investing in enterprise systems. Examples are the desire to reduce mainframe system operating costs, the need to solve the Y2K and similar problems, the need for increased systems capacity to handle growth, or the need to solve the maintenance headaches associated with aging legacy systems. Other companies give largely business reasons for adopting enterprise systems. For example, the company may need but not have, due to limitations in its legacy systems, the ability to present one face to the customer or to know whether it has finished goods inventory or planned production capacity available to promise to the customer on a regional or global basis. Many companies have both technical and business reasons for adopting enterprise software.

Both small and large companies can benefit both technically and strategically from investments in enterprise systems. Generally, the needs and opportunities of small companies are a subset of those facing large companies. For example, in addition to problems stemming from unintegrated legacy applications, large companies (particularly those that have grown through acquisition or have had a highly decentralized IT management regime) may also have the headaches of maintaining many different systems of the same application type. In large companies, it is not unheard of to find, say, 42 different general ledger packages or 22 separate purchasing applications in use at the time of adopting an enterprise system. Boeing, for example, had 14 bill-of-material systems and 30 shop-floor control systems before the company adopted ERP (Schneider, 1999). (See Table 10.1 for a summary of reasons that companies give for adopting enterprise systems.)

TABLE 1 Reasons for Adopting Enterprise Systems Small Companies/ Large Companies/ Simple Structures Technical reasons Solve Y2K and similar problems Integrate applications crossfunctionally Replace hard-to-maintain systems interface Reduce software maintenance burden through outsourcing Eliminate redundant data entry and concomitant errors and difficulty analyzing data Business Reasons Improve IT architecture Ease technology capacity constraints Decrease computer operating Costs Accommodate business growth Acquire multilanguage and multicurrency IT support Improve informal and/or inefficient business processes Clean up data and records through standardization Reduce business operating and administrative expenses Reduce inventory carrying costs and stockouts Eliminate delays and errors in filling customers orders for merged businesses Most small/simple company reasons plus Provide integrated IT support Standardize different numbering, naming, and coding schemes Standardize procedures across different locations Present a single face to the customer Acquire worldwide available to promise capability Streamline financial consolidations Improve companywide decision support Most small/simple company reasons plus Consolidate multiple Structures Complex

different systems of the same type (e.g., general ledger packages)

It is important to take into account these wide variations in motivation to adopt enterprise systems when attempting to assess or explain their impacts and downstream consequences. Some goals are much more ambitious than others; if companies are like people, those with more ambitious goals are likely to achieve more than companies with less ambitious goals, but they are less likely to realize their full aspirations, and they may encounter many more difficulties along the way. Furthermore, enterprise systems may be better suited to realizing some goals than others. For example, the largest companies may face technical capacity constraints that prevent full data integration. Clearly, what companies think they are about when they adopt enterprise systems must figure somehow in the ways they approach the enterprise system experience and in the outcomes they achieve.

REASONS FOR NOT ADOPTING ENTERPRISE SYSTEMS

Of course, not all organizations adopt enterprise systems, even when they have some or all of the listed motivations for adopting. Some who do adopt enterprise systems choose to use only certain modules, relying on legacy systems or new custom development for their remaining needs. And some who do adopt discontinue implementing or using these systems for a variety of reasons.

One reason for nonadoption, partial adoption, or discontinuance is lack of featurefunction fit between the companys needs and the packages available in the marketplace. There are very few companies that dont have specialized processes dictated by their industry, according to one consultant (Slater, 1999). Many ERP system manufacturing modules were developed for discrete part manufacturing; these systems do not support some processes in process industries (e.g., food, paper), project industries (e.g., aerospace), or industries manufacturing goods with dimensionality, such as clothing and footwear. When organizational size and scale of operations are taken into account, there simply may be no commercially available package suitable for a particular organization.

More commonly, the organization may choose to adopt only certain parts of an enterprise system or may modify the system to improve feature-function fit. Consider examples of the implementation of SAP R/3 from Visio (a software company) (Koch, 1997). The first example concerns deferred channel revenue. The article implies that Visio met this need with legacy code. Many software companies dump extra product with distributors at the close of a quarter so that they can pump up weak sales revenue totals. The downside of the strategy is that some of the extra software may flood back to the company in unsold returns. . . . To break the cycle, Visio tracks sales through to the retail outlets and compares the retail sales with the number of units shipped to distributors each month. If the retail stores sell less than Visio anticipated, Visio defers some of the revenues from the sales . . . ; if sales are up, it adds back some deferred revenues from previous months. . . . Unfortunately for Myrick and the Visio team, its a complex and fairly unique way of handling revenuestwo attributes that really annoy R/3. (Koch, 1997) The second situation in which SAP R/3 did not meet Visios needs concerns Visios method of handling inventory. Visio outsources its manufacturing. . . . But R/3 doesnt let companies track something they dont own outright, and it doesnt recognize inventory that has no assigned value, like trial software, marketing handouts and other freebies. The consultants offer Visio two massively unpopular choices: Visio could assume ownership of the inventory throughout the manufacturing cycle, or it could send two invoices . . . [to customers]. . . . [The consultant] agrees to absorb the cost of fixing the inventory ownership process, ultimately conceding that sending two invoices to customers each month was unacceptable. (Koch, 1997)

The consultants apparently found a way to change the process with a bolt-on that did not require expensive and risky modification of the SAP code itself. In addition to the lack of feature-function fit, a second major set of reasons for nonadoption, partial adoption, or discontinuance of enterprise systems concerns company growth, strategic flexibility, and decentralized decision-making style. Dell Computer Corp., for instance, planned full implementation of SAP R/3 but stopped after the HR module. The CIO claimed that the software

would not be able to keep pace with Dells extraordinary growth rate (Slater, 1999). Visio cited strategic flexibility as a reason for performing sales commission analysis outside of its enterprise system: I wanted to retain the flexibility to change the commission structure when I needed to because its such a critical process. It was my understanding that it might take awhile to do that within SAP and that once it was done, it wouldnt be so easy to change. Because the commission structure is so closely linked to the organizational structure of the sales groups, Buckley and Myrick decided to keep commissions analysis out of R/3. (Koch, 1997)

Companies that continually change their organizational structures and business models and particularly those that are not run in a very top-down manner may find enterprise systems unsuitable as a corporate solution (Bancroft, Seip, & Sprengel, 1997).22 For example, at Kraft Foods Inc., a highly decentralized company that is gradually moving toward a one -company philosophy, enterprise systems were viewed as a culturally inappropriate strategy for systems integration (Bashein & Markus, 2000).

A third factor in the nonadoption of enterprise systems is the availability of alternatives for increasing the level of systems integration. Data warehousing, a bundle of technologies that integrates data from multiple source systems for query and analysis, provides what some describe as the poor mans ERP. The usefulness of data warehousing as an integration strategy is limited by the quality of the source systems. Nevertheless, it can provide enormous relief for some organizations suffering from some of the technical problems shown in Table 10.1. Data warehousing was the integration strategy favored by Kraft Foods Inc. (Bashein & Markus, 2000).

Another alternative to enterprise systems involves rearchitecting in-house systems around a layer of middleware that isolates application systems from stores of master data. When Dell abandoned SAP R/3 as its integration strategy, the company designed a flexible middleware architecture to allow the company to add or subtract applications quickly and selected software from a variety of vendors . . . to handle finance and manufacturing functions (Slater, 1999). Consultants say that rearchitecting systems with middleware is a viable alternative to enterprise

systems when a company is basically satisfied with its software functionality and wants only to improve software integration and upgrade the user interface. This strategy is widely adopted in the financial services industries, where enterprise systems have made relatively few inroads (other than for administrative systems).

Discussions of reasons for not adopting enterprise systems usually conflate the issues just mentioned above with three other issuescost, competitive advantage, and resistance to change. For example, Allied Waste recently announced plans to pull the plug on a $130 million computer system (Bailey, 1999). The reason given was that SAP was too expensive and too complicated to operate. Yet it also seems clear that the software no longer fits the management style and structure of the company, as it presumably did at the time the decision to adopt SAP was made. Apparently, Allied Waste grew rapidly in the 1970s and 1980s when the firm was acquiring hundreds of trash haulers. When industry profits suffered, the company responded by cost cutting through centralized operations, a style of management well supported by SAP. Today, the company is moving toward much greater management decentralization. In this case, cost reasons, it seems, are tightly bound up with issues of management culture.

Some analysts have cited competitive advantage as a major reason for not implementing enterprise software (Davenport, 1998). Here, too, it is difficult to disentangle competitive advantage from explanations based in fit. If a company claims it will lose competitive advantage from adopting an enterprise system, it is also saying that it does things differently than the enterprise system does. The question here is whether lack of fit reflects an organizations valueadding best practice (albeit different from best practices in the software) or a costly inefficiency that the organization is culturally unwilling to give up. Not surprising, vendors are more likely to cite resistance to change (or lack of top management commitment) than they are to cite competitive advantage or lack of feature-function fit as a major reason for nonadoption of enterprise systems. In practice, careful analysis is necessary to determine whether or not an enterprise system is a good solution in a particular situationand what the scope of the implementation project should be.

IMPORTANCE OF ENTERPRISE SYSTEMS

Enterprise systems are an important topic for IS research for several reasons. 1. Financial Costs and Risks. Installing an enterprise system is an expensive and risky venture. Large companies have been spending on the order of hundreds of millions of dollars to make the technical and business changes associated with enterprise systems. There have been several visible enterprise systems failures, and nonacademic studies have questioned the financial and business payoffs from enterprise system projects. Therefore, enterprise systems raise questions that have long been studied in the IS field under the following labels: the payoffs from investment in information technology,23 IS project success and failure,24 and IS implementation process and change management25 (training,26 user involvement, communication, etc.).

2. Technical Issues. Enterprise systems are technically challenging. Among the more important technical areas of research around enterprise systems are the development life cycle for enterprise system packages; software selection approaches; enterprise modeling and software configuration tools and techniques; reference models for particular industry segments, systems integration strategies, and systems and software architectures; and data quality, reporting, and decision support for enterprise systems.

3. Managerial Issues. Enterprise system projects are managerially challenging since they may involve parties from many different organizations and cut across the political structures of the organization. Furthermore, enterprise systems have important implications for how companies should organize and manage their information systems functions. Finally, enterprise systems raise interesting challenges in terms of personnel and skill acquisition and retention. Therefore, the following areas of research are invoked by enterprise systems: IT project management;27 IT project sponsorship and user involvement; IS-business relationships, vendor management, structuring the IS function and IT management more generally, and IS personnel management. 4. IT Adoption, Use, and Impacts. Enterprise systems have been widely adopted across organizations, and the adoption of these technologies may spread further. However, it is

not yet known how widely these technologies have been assimilated (Fichman & Kemerer, 1997)29 in organizations, for example, how extensively they are used within the organization, how faithfully they are used, and how effectively they are used. Furthermore, these systems have large potential impacts30 at all levels of analysis: individual and societal (employment, occupational structure, skills required, and quality of work), work system (cooperation, business process efficiency), organizational (competitive advantage, business results), and interorganizational (impact on supply chain, industry structure). For example, at the individual level, enterprise systems may entail a substantial increase in the visibility of an individuals performance, leading to changes in the accountability and control regimes in the organization. In addition to the general topics of IT adoption, use, and impacts, enterprise systems are linked to research on business process reengineering, interorganizational information systems, and the strategic use of information technology.

5. Integration. Finally, enterprise systems suggest some unique questions not easily subsumable within existing bodies of information systems research. First, to what extent are enterprise systems bound up in a complete restructuring of organizations and industries around the capabilities of information technologies? Second, to what extent are we observing a structural change in the provision of IT services, from predominantly inhouse to predominantly outsourced? What is the emerging role of the so-called system integrators (such as Andersen Consulting and IBM)? How should organizations manage a long-term IT development trajectory involving heavy dependence on external products and service companies? Third, what are the pros and cons of the enterprise systems approach vis--vis other strategies for achieving integration around information technology, such as rearchitecting systems around middleware and the object development paradigm or the looser integration strategy implied by data warehousing?

In short, the enterprise system phenomenon has strong conceptual links with just about every major area of information systems research. In addition, the phenomenon suggests the potential value of entirely new research directions.

The enterprise system phenomenon is so all-encompassing for organizations and their key business partners that it virtually demands a framework by which to understand it as a whole. As suggested, many bodies of literature and, hence, many theories are relevant to understanding important pieces of the enterprise system phenomenon, but what is lacking is an overarching framework within which many specific questions can be asked and their answers integrated. Our purpose in the remainder of this chapter is to propose such a framework. The framework is designed around the perspective of an enterprise systemadopting organization. That is, the framework is designed to shed light on the questions facing the executive leadership of an organization considering whether, why, and how to participate in the enterprise system experience and what to do at various points in the process.

ISSUES AND CHALLENGES:

Though the market for ERP seems to be growing, there are several issues and challenges one has to contend with when implementing an ERP system in the SME segment. Some of these are:

Awareness: There is a low level of awareness amongst SMEs for ERP vendors, applications etc. most of the time they do not even know what ERP systems are and what they can do. They consider ERP systems to be a magic wand, which will help solve all their business problems, be it in terms of quality, or process defects. ERP brings in a more disciplined execution of business process giving more transparency and visibility to the working of the organization.

Perception: SMEs have the perception that ERP is meant only for large firms mainly owing to the high costs of acquisition, implementation and maintenance as also the complexity. Some of the SMEs even feel they do not need ERP.

Earlier Implementations: SMEs have heard of the much-publicized failures in ERP implementation, which have led firms to bankruptcy. Some SMEs who have implemented ERP earlier have failed. This has led SMEs to believe that ERP implementations are a waste of time and effort and can even lead to the demise of company.

Approach to implementation: ERP vendors advice SMEs to mould the business to ERPs way of working. Considering that ERP systems will bring it best business practices. This is the plain vanilla approach that was mentioned earlier, which would bring down the cost of implementation. But most SMEs have processes that they have evolved over time and hold very dear to their hearts. As a result, SMEs are having the entire ERP system customized to meet their requirements. This would increase the overall cost of implementation. A good approach would be to keep the customization to a minimum.

Cost: SMEs have less of capital than their larger counterparts.

Change management: One of the major reasons why ERP implementations nationwide have been known to fail is due to the implementation being considered as an automation project instead of one that involves change management. This results in the system being put in place but not being used effectively due to people not ready to accept the change. Limited resources: Most SMEs do not have an in-house IT team. Due to this they have to rely on external agencies to help them and this adds to the implementation costs.

FACTORS AFFECTING ERP IMPLEMENTATION:

The major factors can be classified into four subheadings namely, the top management, training, the data collection & Software design and Testing. The 8 factors affecting the ERP implementation are determined. The consensus among the ERP team and top management is very important to indicate the need for application framework. The factors are can be illustrated as fallows-

1. Data provided: Adequate and correct data should be provided it had to be collected from the distributed Tally 7.0 Servers, had to be reconciled, mapped into the ERP System in its standard format and finally the data had to be uploaded into the system. A strong management direction is needed for the managers at each of the branches so that adequate and appropriate data is duly provided.

2. Parallel systems: When issues began to crop up after implementation of ERP in Finance module, sales and distribution module was completely ignored, they shifted work with these modules back to the old system. This hampered the proper integration of organization data and led to data mismatch in other modules as well. As a result, support system provided by the vendor became obsolete and difficult to implement. Hence, use of parallel systems should be avoided outright.

3. Training and testing: Training and testing of the system should be done properly by the ERP Consultants, that is, the vendor is provided as part of the implementation procedure to only a 30% group of people from the clients side known as the Core Team. This core team in turn trains a rest of people who are actually responsible for day-to-day transactions called the End Users. It was observed that the 50% second leg of training which is provided to the end users was not carried out mainly due to lack of computer literacy, not will to accept the responsibility this triggered a strong resistance to change for the new system being installed and caused reduction in employee motivation.

4. Expectations from the ERP System: Clarity in management objectives and expectations from the ERP System are clearly stated to the vendors. This led to a belief of the systems power to integrate the company actual functions. According to the vendor, management expected a quick return on investment which was not practical since it takes around three to four months to notice any significant returns. Hence, top management should be patient with the new system and any fear of failure should be done with for a successful running system.

5. Employee Retention: It was observed that after the completion of ERP training provided to the staff and within some days of the system going live, many of the trainees from the organization quit the company causing great losses to organization in the form of shortage of key resources i.e. trained staff. This was a big percentage of employee attrition rate and it is not possible for a company to hold back any of its employees even with the most stringent contract.

6. Design & Testing: is a very important part of software testing and should not be neglected the computer work stations are set up in a room to represent each of the major tasks of customer service /order entry, planning, goods-in, stores and finance. A simplified data set is loaded and the company operations run through. The data is gradually increased as first the project team, then managers and finally users get more familiar with the software. This is conducted just before the ERP becomes fully functional in the organization.

7. Customization should be less than 30%- Customization Services involves any modifications or extensions that change how the out-of-the-box ERP system works. Customizing an ERP package can be very expensive and complicated. Some ERP packages have very generic features, such that customization occurs in most implementations. Customization work is usually undertaken as "changes requested beforehand" software development on a time and materials basis. But ideally, experts in the ERP implementation field have suggested that customization should be less than 30%. The level of customization in the case of Multiplex exceeded beyond this and posed a great deal of problems when key applications were run and found to be not working as they were intended to.

8. Stakeholders shall be identified in the initial phase including customers and vendors: Stakeholders are all those who are directly or indirectly affected by a company implementing any new ERP system be it organizations like those of the supplier as well as the vendors. A failure to identify the stakeholders gives the implementing company a major setback when the concerned people or organizations work against the new system. So identification of all stakeholders has to done in advance.

CASE STUDIES PRESENTING THE DIFFERENT ISSUES RELATIVE TO ENTERPRISE ARCHITECHTURE AND ITS BENEFITS

Case 1: Cutting Costs Over the course of a two-year EA program, a leading Australian bank realized cost savings of more than AU$200 million (US$161 million), or about 1.4 percent of total operating expensesprimarily through consolidation, sharing, and reuse of technology assets. The banks EA maturity score placed it in the top third of organizations surveyed.

The bank integrated EA deeply into its operations, an effort that has been fundamental to its success. Bank executives point to three key mechanisms in pursuing that integration: Ensuring that the strategic planning process includes input from the EA program, particularly where investment decisions are required. Securing EA input into other governance processes, such as project planning, which in turn has steadily increased EAs profile across the organization. Building a federated EA model with a central EA practice supporting domain experts in each business unit. This enabled the delivery of business-specific information underpinned by consistent frameworks.

Assessment/Interpretation: The proven value of EA has only whetted the banks appetite for expanding its EA capability. There is sufficient feedback, the banks head of enterprise architecture noted, to suggest that senior management expects EA to step up to the next level to set the strategic agenda. For that to happen, however, the bank must develop the hybrid business and technology skills enterprise architects need. Doing so means creating more attractive career paths for enterprise architects to ensure that their skills are retained.

Case 2: Improving Efficiency and Customer Service As part of a government mandate, a large U.K. government agency embarked on a transformation to improve its efficiency and customer service. The agency had been largely paper-based, with separate business processes for the various benefits it administered. Fragmented workflow processes and outdated IT systems had adversely affected customer service, efficiency, and staff morale. The use of EA was a key enabler in the transformation, which resulted in a reduction of the average time it took to process claims by more than 70 percent, from more than four weeks to just five days, and reduced the number of processing centers by 60 percent, from 25 to 10. Among the benefits of the agencys EA efforts: EA provided clarity for the agencys vision and helped it facilitate the transition from its paper-based processes to modern CRM-based processes. The transition plan allowed for the coexistence of old and new processes, while targeting quality assurance on activities in critical areas. This helped reduce operational risk while the transformation was taking place. EA drove the alignment of business and IT objectives by following focused principles and discipline. It enabled the use of common software packages with minimal customization, for example, and the implementation of a CRM system in a wrapper pattern to cut costs and minimise the new systems impact on legacy systems. EA encouraged the reevaluation of a number of third-party contracts; subsequent renegotiations resulted in a reduction of 25 percent on the agencys end-to-end IT systems integrator contracts, for a total savings estimated at 10 million (US$14 million).

Assessment/Interpretation: By providing an integrated view of its business and IT architectures, EA was instrumental in helping the agency meet its transformation objectives, while managing operational risk along the way. The agency had initially outsourced its EA efforts to external professionals, but by adopting a systematic approach to capturing the knowledge gained, it now has the expertise to continue with minimal external support.

Case 3: Managing Complexity A leading European bank needed to ensure that its recently outsourced IT activities continued to provide optimum service to the business. By expanding its EA capability, which had traditionally resided within the IT function, the bank successfully integrated those outsourced services. And by reusing applications and processes across its previously soiled business lines, it also reduced complexity and costs. The success of the program was driven by: Formalizing EAs strategic role in the governance of the new outsourcing arrangements to ensure that services provided by the extended organization were aligned with the needs of the business. Building comprehensive organizational knowledge of the EA capability by locating architects within each business line. Maintaining EAs technology roots through close engagement between internal solution and infrastructure architects internally and the new outsourcing partners.

Assessment/Interpretation: The bank has begun to reap the rewards of EAs growing profile and influence, in part because it is now the only function able to provide an integrated view across the extended enterprise. The banks key future challenges lie in further strengthening the relationship between business and IT, and their joint governance of EA, and in formalizing its business processes and aligning them with a corresponding master plan for IT.

Case 4: Driving IT Portfolio Prioritisation A sophisticated EA program allowed a large U.S. government agency to unify its disparate portfolio management processes across its many business lines and guide its US$1.04 billion IT investment portfolio. Over three years, the agency estimates, the effort saved approximately $102 millionmore than 3 percent of its annual IT budgetprimarily by eliminating duplicate investments and capturing gains in business process efficiency.

Furthermore, the ability to reprioritize IT investments allowed the agency to reap significant business benefits by completing major IT projects early. One IT investment, a system designed to speed up a case resolution process, was delivered a year early; now cases are being resolved 25 percent faster, resulting in efficiency gains and cost savings. The agency attributes the success of its new IT portfolio management process to several key factors: EA provided executives with a common language and a single integrated businessIT planning framework for navigating complex planning and investment activities. The new EAdriven process enabled the agency to make trade-offs with an understanding of the implications of and dependencies between business processes, IT systems, and data. EA encouraged the use of a collaborative, business-driven engagement model that ensured a high level of executive and business involvement. EA allowed planners to take a top-down perspective on the many business challenges and capabilities that the modernization effort needed to address. That perspective sharpened the focus on high-priority initiatives, building momentum and maintaining credibility with the business.

Assessment/Interpretation: Thanks to its EA efforts, the agency has significantly improved its decision-making and planning capabilities; now it intends to integrate EA into planning across all business lines. Despite the success of this pilot effort, however, the agency faces a key challenge shared by many not-for-profit organizations: measuring and communicating the value of EA to the rest of the business. Much of the value is related to achieving business benefits [such as increased operational efficiencies], not just reduction of costs, says the agencys senior advisor for EA.

ENTERPRISE ARCHITECTURE IN A SHORT AND LONG TERM Enterprise architecture is a critical capability for organizations looking to create longterm value. Building long-term value, however, will also bring benefits in the shorter term. By

improving transparency, refining business processes, and tightening the connections between tactics and strategy, EA can help support prudent near-term planning and decision makinga vital capability as organisations work to improve their agility in response to every market situation.

EA can help executives make significant contributions to the business in the near term in four key areas: Controlling costs and budget: When cost pressures are high, executives must find ways of doing more with less. During downturns, organizations often make the mistake of cutting costs by a predetermined percentage across every part of the business, a tactic that too often results in destroying value and alienating customers. EA provides executives with the transparency to look across aspects of the business holistically, to assess their investments in operations and specific projects, and thus prioritize those areas that will bring in the most value. Managing the extended enterprise for value: As demand for offshore services shifts and currency markets fluctuate, the offshore vendor landscape and offerings will likely change. In order to keep up, executives, particularly those in operations and IT, will need to make the right decisions to extract value from vendor contracts and choose the winning vendors. By helping executives better understand how specific outsourced services are being supplied to specific business lines, EA can help executives manage their portfolio of vendor relationships as these changes take place. Generating capital at a time of need: Given the high cost of capital in tough times, particularly at financial services organizations, IT and operations assets can serve as a source of leverage. By providing a holistic view across the landscape of IT systems and vendor services, EA can help executives carve out areas that can generate cash. These might include creating innovative financing arrangements when buying hardware or software, switching to leasing deals for major assets such as server farms, or moving to more highly leveraged financing arrangements for large-scale outsourcing contracts. Developing positive relations with regulators and external parties: Regulators are demanding more and more data from organizations and greater control over IT as they try to manage risk, particularly at financial services companies. At the same time, public service organizations

find themselves under greater scrutiny as oversight agencies demand more transparency and internal controls. By providing top-down clarity into IT assets and information, EA can help executives respond to regulatory requirements and external stakeholder demands, offering effective solutions while limiting the cost and distraction.

Short-term agility offers a further long-term advantage. At a time when industries are being reshaped, organizations must be sure to define their strategies clearly, and implement and maintain cohesive architectures of operations and IT capabilities around those strategies including the extended enterprise of partners, vendors, and other stakeholders. Organizations possessing these capabilities will be best equipped to create innovative new products and services that can put them at a competitive advantage as markets change and grow. In this scenario, EA can help organizations over the longer term in three key areas:

Efficiency and lean operations: Providing visibility across the enterprise, EA helps ensure disciplined standardization and consolidation across operations and IT functions by removing redundant systems, phasing out costly and complex legacy systems, and managing across the extended enterprise. That in turn delivers real savings, measured by monitoring metrics such as cost/income ratio, total and targeted cost savings achieved, and number of processes improved. Agility and innovation: The value of any innovation lies not just in the innovation itself, but in the ability to deliver it quickly. A mature EA function will improve the agility needed to bring new products to market more quickly, while increasing the number of new products launched in alignment with overall business strategy. How EA contributes to agility can be difficult to measure; still, executives can track metrics such as time-to-market for new products and the number of new business plans executed with the help of EA. Customer-focused services: Building and maintaining competitive advantage depends greatly on continuously improving the services and support offered to customers. EA can play a key role in planning and executing customer-focused services and managing the end-to-end customer experience. That means creating the right product and service mix, offering compelling and integrated channels, and providing customers with a single view of the organization. Doing so requires the focused integration of information and customer

preferences across multiple channels, as well as the standardization of processes familiar to the customer across the enterprise and across geographic boundaries.

Here, EA helps enhance the traditional distribution system by enabling the identification of lucrative new channels, as well as the channel mix that will produce the greatest margins. This might include developing the common IT infrastructure needed for multichannel sales, and supporting business process integration with transaction layers between the front and back ends.

Again, measuring the gains attributable to EA can be challenging. Some of the basics, such as the number of new channels and services developed for the customer, can be measured easily. More complex, but just as important, are comparative metrics such as customer care performance changes for specific channels and services, and new customers acquired versus customer groups targeted.

REVIEW OF RELATED STUDIES

The review of related literature for this study is mainly focused on the success stories of companies who implemented the ERP or what do other studies said regarding the ERP implementation.

The term ERP stands for enterprise resource planning, however it is not good enough to just plan resources required to run the enterprise, they need to be managed as well. An organization must assess itself, to see if it is ready for ERP. It must determine if it is ready for the competitive business environment of today and then strengthen its position for tomorrows changes. Some of the companies that implement ERP systems do not realize the full benefits that the system offers because most organizations are not organized in the correct fashion to achieve the benefits. Many companies that attempt to implement ERP systems run into difficulty because the organization is not ready for integration and the various departments within it have their own agendas and objectives that conflict with each other (Langenwalter, 2000).

From the literature review of Rosario (2000), it is evident that the success and failure factors for ERP implementation in companies is studied extensively and other implementation issues like the quality issues are not explored much and there is a vast scope for study in this area. Specifically quality issues in ERP implementation are not explored in an Indian SME. Taking this into consideration the present study is aimed at analyzing quality issues in ERP implementation in Companies in NCR Region prioritizing the factors affecting ERP Implementation using a analytical model.

One third of ERP implementations worldwide fail owing to various factors (Sirigindi, 2000). One major factor for failure is considering ERP implementation to be a mere automation project instead of a project involving change management. It is a business solution rather than an IT solution, as is perceived by most organizations. Yet another reason for failure is over customization of the ERP system. Therefore, organizations need to very carefully go about their ERP implementations, if they are to be successful. Most large companies have either implemented ERP or are in the process of doing so. Several large companies in India, both in the

public and private sectors, have successfully implemented ERP and are reaping the benefits. Some of them are Godrej, HLL, Mahindra & Mahindra and IOC. With the near saturation in the large enterprise market, ERP vendors are looking to tap the potential in the SME segment (Davenport, 1999). The spending on ERP systems worldwide is increasing and is poised for growth in the next decade (Yen et al., 2002). Some of the reasons for this are (Stensrud, 2001).

On the other hand, Small and Medium Enterprises cannot adopt the same strategies for ES upgrade and implementation used by large companies (Buonanno et al., 15). In this regard, this study has critically examined how existing organizational competencies and capabilities can be leveraged effectively to propel ES upgrade and implementation through an SME ES implementation and upgrade framework. This framework consists of four phases: (1) Ideas to Planning; (2) Planning to Diagnosis and Implementation; (3) Diagnosis and Implementation to Integration; and (4) Integration to Performance. Based on the research, four key organizational practices and four key competencies and capabilities were identified, thus contributing to the theoretical field and managerial practice. In This study it is evident enough that Enterprise Systems are being used by the company and is a reliable tool in running Small and Medium enterprises.

While companies such as Cisco Systems, Eastman Kodak, and Tektronix have reaped the expected benefits of ERP systems, many businesses are discovering that their ERP implementation is a nightmare. FoxMeyer Drug, a $5 billion pharmaceutical company, recently filed for bankruptcy (Al-Mashari and Zairi, 2000; Chen, 2001).

Dell Computers spent tens of millions of dollars on an ERP system only to scrap it because the system was too rigid for their expanding global operations (Trunick, 1999). ERP implementations involve, in truth, broad organizational transformation, processes, with significant implications to the organizations management model, organization structure, management style and culture, and particularly, to people (Wood and Caldas, 2001).

Huang and Palvia (2001) analyze the ERP implementation issues in advanced and developing countries. Umble et al. (2003) presents the empirical findings on implementation

procedures and critical success factors for ERP. Van Stijn and Wensley (2001) address some concerns, methods and directions for future research on organizational memory and the completeness of process modeling in ERP systems.

The challenges in global ERP software implementation is studied .the challenges in implementation are identified as non uniform business practices in different countries, conflict of interests between various stake holders, Lack of experienced implementers in all countries, efficient uses of metanational advantages,. From this study it has been found that the benefits of ERP implementation are not same for all functions (Saumyendu Ghosh, 2002). Upadhyay and Dan made an attempt to identify those factors that the organizations must keep in mind so as to ensure positive outcome of successful implementation of the enterprise planning systems. Based on the responses received from the respondents their study reveals that for ensuring successful implementation following issues are considered immense importance namely, clarity in goals and objectives behind implementation, adequacy of user training, competency in project implementation team, acceptance of changes brought about by implementation and adequate vendor support and participation of external consultants (Chen, R. 2008) Vijaya Kumar et al. did a study to prioritize the issues affecting ERP system in medium scale fertilizer industry and the following factors were determined: adequate and correct data, training and testing, never run parallel system, conference room pilot, employee retention, customization, and clarity in management objective, external consultant dependency (Vijaya Kumar,2010 ) Further to this the researchers Upadhyay and Dan identified certain factors that have been found to be critical in context to implementation of IT projects. Seven factors have been identified that are found to be crucial are: Support from Top management, goals and objectives, user knowledge, project champion , project team competency, improve work efficiency, scalability & scope and ERP importance. Out of this the first two are considered as most important (Parijat Upadhyay, 2010). Through regular communication, working with change agents, leveraging corporate culture and identifying job aids for different users.

CONCLUSION

Enterprise systems represent an important contemporary phenomenon in the organizational use of information technology. The most distinct differences between an enterprise system and other transaction-oriented systems are that the enterprise system is a package versus a system custom developed in-house (implying long-term dependence on a vendor) and that embedded in the enterprise system are normative business practices (requiring many adopting organizations to undertake some form of process reengineering). To date, collective experience with enterprise systems remains quite poorly codified; many organizations approach the phenomenon with little directly applicable knowledge and skill.

Whether or not enterprise systems will remain an enduring part of the organizational IT landscape clearly remains to be seen, but, because they have become such a large part of organizational IT infrastructure, they will continue to be a consequential phenomenon for some years to come. Enterprise systems affect nearly all aspects of organizational life, not only at the point of startup but also throughout their operational lives. Indeed, an organizations enterprise system affects its need and ability to upgrade or convert to more modern technologies.

It is very conclusive that ERP adoption of organizations brought significant changes and improvements in its entire operation. Related studies presented in this research provide factual evidence of the successful adoption of enterprise resource planning system (ERP) of organizations. The sustainability of enterprise information systems (EIS) during the postimplementation period needs to be looked into. There is a lack of clear understanding about the strategic needs and requirements for sustaining the effectiveness of large-scale information systems after a period of relative stability following initial implementation. Sustainability management of EIS is therefore a very important research dimension that needs to be explored to maximize the benefits of an expensive information system investment such as ERP.

In the same manner, Enterprise Architecture capability is very vital in the overall success of ERP. By establishing, improving, and measuring the connection between an organizations operations and technology and its overall strategic goals, a mature EA capability has the

potential to create value no matter how weak or strong the economic climate. The key is the ability to be agile, to be responsive to markets and customers, to be flexible in approaching partnership and acquisition opportunitiesin short, to be able to change. Change is never easy, but EA offers the potential to guide companies in their efforts to change, to link business processes and technology more tightly with strategy, to make better investment decisions, and to measure the results of those decisionsall in the service of generating greater business value.

The commitment of top management has been recognized as one of the most important elements in the successful implementation of ERP system. Since the primary responsibility of top management is to provide sufficient financial support and adequate resources for building a successful system, Implementing an ERP package is a complex and costly undertaking, so it's essential to choose the appropriate vendor, adequate scalability features, suitability of H/W and user friendliness of product depending on the size and structure of an organization Project management related factors like Clear goal and objective, Effective project management, Reasonable expectation, Other dept. participation, Change request, Implementation strategy, Data conversion, Clear & effective communication are very critical for a successful ERP implementation. Team member should understand the inner workings of their respective departments thoroughly. And the team must have can do attitude.

Change keeps occurring faster all the time. Successful organizations need to be very flexible. Thus, every organization needs tools that help its managers deal with the problems involved in analyzing and implementing potential changes. In the course of the next few years, the enterprise architecture will evolve into one of the major tools of that organizations rely upon to manage change. It will provide the focus around which business and IS managers meet to discuss organizational goals, business processes, and organizational alignment. The enterprise architecture will assure that all necessary information is located in one place, and indexed to business processes. The simulation abilities provided by enterprise architecture software tools will further assure that managers can quickly run simulations to evaluate the implications of any specific change scenario. In other words, the enterprise architecture is the first step toward an

enterprise that can respond in real time. It provides managers with the foundation they will need to quickly make the key decisions they will face in the future.

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