by DAN CALLOWAY
Published 16 June 2010
WEAVERVILLE, NC – Most computer-based information systems and especially those involving large system development projects in 
the past several decades have involved the business sector – especially for large businesses – or have been associated with the business sector in some way. These information systems have been collectively referred to as Enterprise Resource Planning (ERP) systems. Hoffer, George, and Valacich (2011) define ERP as “a system that integrates individual business functions into a series of modules so that a single transaction occurs seamlessly within a single information system rather than several separate systems” (p. 529). Umble, E. J., Haft, and Umble, M. (2003) describe the evolution of the ERP beginning in the 1960s when the focus on the manufacturing process was on inventory control, through the development of Materials Requirement Planning (MRP) in the 1970s when businesses discovered they could no longer maintain just-in-time inventories on-hand to satisfy customer requirements, and on into the 1980s when companies realized they could take advantage of the increased power and affordability of available technology and were able to combine the movement of inventory with the coincident financial activity within the business (p. 242). This latter movement spawned the development of MRP II systems, which involved the incorporation of the financial accounting system and the financial management system along with the materials management and manufacturing systems within the business sector that allowed companies to have a more integrated business. This new integrated business system derived the material and capacity requirements associated with the desired operations plan, allowed for the input of detailed activities, translated this information into a financial statement, and suggested a strategy to address those actions that were not in balance with the desired operations plan. By the early 1990s, technological advances allowed MRP II to be expanded to include all the resources and planning for those resources within the business organization. Additional areas such as product design, materials planning, information warehousing, capacity planning, communications systems, human resources, finance, and project management could be combined with MRP II to include the entire Enterprise and, thus, the term ERP was coined (E. J. Umble et al, p. 242).
E. J. Umble et al. (2003) cites a case study of a successful implementation of an ERP system by Huck International, Inc., a designer, manufacturer, and distributer of a wide range of commercial, industrial, and aerospace fastening systems, during 1998 and 1999. The E. J. Umble et al. study attributes the success of Huck International, Inc. as the degree to which they adhered to the critical success factors, system selection guidelines, and implementation procedures of the ERP system – elements of a successful ERP that are not practiced by typical business organizations worldwide and, as a consequence, result in implementation failures. E. J. Umble et al. in citing a survey by Information Week of IT managers, goes on to state that the top three reasons for failures of IT projects and information systems implementation within the business are: (1) Poor planning or poor management [cited by 77%], (2) Change in business goals during the project [cited by 75%], and (3) Lack of business management support [cited by 73%]. Furthermore, as a direct consequence, most of the Information Systems implementation projects fall short of their potential payback, and 26% are canceled before completion. In many of the completed projects, technology is implemented in a vacuum and many users resist them. E. J. Umble et al. (citing Langenwalter, 2000) claims that as many as 40% – 60% or higher of ERP systems implementations can be classified as failures.
Based on the extensive studies conducted by E. J. Umble et al. (2003), the list of reasons for the implementation failures of ERP systems within business can be classified into the following ten categories:
- Strategic goals are not clearly defined whereby the organization has not clearly thought through the goals, expectations, and deliverables
- Top management is not committed to the system, does not see the profound changes that it engenders, and/or does not actively participate in the implementation process
- Implementation project management is poor wherein the organization underestimates the scope, size, and complexity of the systems implementation projects
- The organization is not committed to change
- A good implementation team is not chosen
- Inadequate education and training results in users of the system who are unable to run it properly
- Data accuracy is not ensured
- Performance measures are not adapted to ensure that the organization changes
- Multi-site issues are not properly resolved; and,
- Technical difficulties, such as bugs in the software, problems interfacing with existing systems, and hardware issues can lead to implementation failure.
References:
Hoffer, J., George, J., & Valacich, J. (2011). Modern Systems Analysis and Design (6 ed.). Upper Saddle River, New Jersey: Prentice Hall.
Langenwalter, G. (2000). Enterprise Resources Planning and Beyond: Integrating Your Entire Organization. Boca Raton, FL: St. Lucie Press.
Umble, E. J., Haft, R., & Umble, M. (2003). Enterprise resource planning: Implementation procedures and critical success factors. European Journal of Operational Research, 146(2), 241-257. Retrieved from http://www.sciencedirect.com.library.capella.edu/science?_ob=ArticleURL&_udi=B6VCT-47G3XP2-3&_user=4421785&_coverDate=04%2F16%2F2003&_rdoc=1&_fmt=high&_orig=search&_sort=d&_docanchor=&view=
c&_acct=C000063116&_version=1&_urlVersion=0&_userid=4421785&md5=7106269fe40a527a34ce488e5c7dea6e.
Dan Calloway
