Chaoyang University of Technology
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Chaoyang University of Technology Presentation Transcript

  • 1. Critical Issues of ERP Systems: A Practitioner’s Perspective By Chuck C. H. Law Department of Information Management, Chaoyang University of Technology
  • 2. Table of Content
    • Objectives
    • Literature Review
    • Frequently Encountered Problems
    • Case Study: Tradeco
    • Professional Practice
    • Conclusion
  • 3. Introduction
    • Objectives:
      • What are the critical issues related to ERP system adoption and management?
      • What are the problems encountered in ERP adoption in the business world?
      • What are considered sound professional practice in addressing these problems ?
  • 4. Literature Review – Critical Issues – Academic Perspective Study Findings Bingi et al. (1999) * Identified 10 critical issues for ERP implementation, including BPR, and senior management support. Hong and Kim (2002)   * Relationship between organizational fit of ERP and ERP success (supported) * Moderating effects of ERP adaptation and process adaptation (supported) Yang et al. (2000)   * Relationship between the extent of business process redesign and ERP benefits. (not supported) Gattiker and Goodhue (2002)   * Positive relationship between ERP adoption and process changes (supported). * Relationship between process changes and the organizational impact of ERP (not supported). Kumar et al. (2002) * 14% of respondents regarded ERP-business process fit as important.
  • 5. Literature Review – Critical Issues – Academic Perspective Study Findings Hitt, Wu, and Zhou (2002) * Relationship between ERP adoption and firm performance (supported) * The impact of ERP varies with the level of implementation. Shang and Seddon (2002) * Qualitative study * Reviewed 233 cases of ERP adoption to identify tangible and intangible benefits of ERP systems. * Interviewed managers of 34 organizations. Murphy and Simon (2002) * Case study on intangible benefits of ERP adoption, and showed how such benefits were considered in project evaluation.
  • 6. Literature Review – Critical Issues – Academic Perspective Study Findings Ein-Dor and Segev (1978) * seniority of IT leader, management support, & organizational structure Davenport (1998) * management support, steering committee chaired by senior business executives Li and Ye (1999) * Reporting distance between CEO and CIO Grover et al. (1995) * management support critical for BPR Sumner (2000) * management support
  • 7. A Summary of Critical Issues
    • impact of ERP, intangible & tangible benefits, justification
    • business process improvement / re-engineering
    • business process – ERP fit
    • process adaptation versus ERP adaptation
    • senior management support of IT & BPI projects
      • reporting relationship between CEO/CIO, & organizational structure
      • strategic intent
      • process re-engineering approach
        • revolutionary versus evolutionary
  • 8. Practical Problems
    • Justification of investment
    • Management support
    • User involvement
    • Business process-ERP fit
    • Business process re-engineering
    • Cultural Issues, for instance,
      • Data ownership
      • Territorialism
  • 9. Practical Problems
    • Organizational issues, for instance,
      • Organizational structure
      • Seniority of IT leader / reporting relationship
  • 10. Case Study - Tradeco
    • A Hong Kong-listed firm
      • Established by Hong Kong/Singaporean families in mid-1960’s
      • Listed in late 1990’s
      • American conglomerate acquired 60% of ownership in 2000.
    • Attempted to replace legacy system by ERP
  • 11. Case Study – Tradeco Problems/Mistakes
    • Lack of Management Support
      • Package evaluation and selection was poorly executed.
      • Managing director ignored recommendation of MIS Manager and selected an ERP package (X) which did not fit business practice and process
      • Steering Committee was not attended by MD and other directors
      • MD carried no leadership role in the project.
    • Lack of User Involvement/support
      • Participation in analysis/design sessions is low
      • Divisions and teams were represented only by junior staff (such as sales assistants and secretaries)
      • Resistance to BPR
  • 12. Case Study – Tradeco Problems/Mistakes
    • Lack of fit between Tradeco and ERP Package Selected
      • Actual costing not supported by ERP package
      • Business process not re-engineered to fit ERP, but instead the ERP was customized
    • Cultural-organizational factors
      • Territorialism
        • fierce competition among teams
      • Data ownership
        • Each team and staff (including senior management) believe that they owned the data resulted from business transactions.
        • Such concept precluded any co-operation and information sharing along ERP processes – an obstacle to BPR.
        • Misuse of ERP security features.
  • 13. Case Study – Tradeco Problems/Mistakes
    • Cultural-organizational factors (cont’d)
      • Company and MIS have no exposure to ERP adoption.
    • Consultant Management
      • Mistakes in recruiting qualified consultants
      • Mistakes in managing consultants’ activities and time.
    • Skills and Training
      • Poorly defined and managed training plan
      • MIS and users were offered only standard training courses, which did not cover Tradeco’s processes.
  • 14. Case Study – Tradeco Problems/Mistakes
    • Methodology & QA
      • Milestones, deliverables, and responsibilities not clearly defined and enforced.
      • Control measures were not enforced at milestones such as review of specification, testing …
      • GAP analysis not conducted
      • BPR not conducted
      • Lacks overall strategy and planning from selection to implementation
  • 15. Professional Practice
    • Cultural-Organizational Factors
      • Senior management support/leadership
      • Steering committee chaired by CEO, and attended by senior staff
      • Promote and manage project as a company initiative, but not an IT/MIS project
      • IT leadership must be positioned high in the committee and in the organization structure
  • 16. Professional Practice
    • ERP-Business Process Fit and Process Management
      • Gap analysis
      • Business process re-engineering
        • Always strive to improve and simplify process
      • Process-oriented approach, rather than function-oriented approach
      • Responsibilities of process owners
  • 17. Professional Practice
    • Methodology and QA
      • well defined project plan
      • Milestones, deliverables, and responsibilities specified.
      • Gap analysis – fit between ERP and process
      • Business process re-engineering
      • Project organization structure must be defined and members empowered.
  • 18. Professional Practice
    • Human Resources & Consultants Management
      • Must staff project team with internal skills in
        • project management
        • systems/process analysis
        • ERP skills
        • (do not rely totally on consultants)
      • Must screen consultants carefully
        • Review resume and references
      • Must clearly define tasks and deliverables assigned to consultants
      • Time report approval – consultant time must be reviewed according to estimates
  • 19. Professional Practice
    • Training Management
      • Needs a long-term perspective in training beyond the project development period
      • Appropriate training should be offered to various categories of stakeholders in the project
      • Training must address company’s business processes
        • Vendor’s standard training courses were insufficient/inadequate
        • Joint efforts between vendor & users in training development
        • Train the trainer approach
  • 20. Conclusion
    • ERP is challenging to most organizations
    • Critical issues/factors must be managed properly to achieve satisfactory outcomes.
  • 21.
    • Thank you!
    • Any Question ?