Impact of Enterprise Resource Planning System for SMEs

1326 words (5 pages) Business Assignment

25th May 2020 Business Assignment Reference this

Tags: Business AssignmentsBusinessEnterprise Resource Planning

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Key findings for both articles

According to Gupta (2018), cloud ERP solutions are essential for SMEs in the modern business world since companies can enjoy the benefits without installing IT hardware and performing regular maintenance.  In order to perform a successful implementation, there are intrinsic and extrinsic factors that companies need to take into consideration. Intrinsic factors, also known as critical success factors (CSFs), include organisational and technological aspects that are mainly under control of the companies (Ngai, Cheng, & Ho, 2004). Organisational factors consists of strategic goals and objectives, reduced organisation resistance, communication, implementation strategy, project budget, business process re-engineering, and project management while technological factors involve selection of ERP package, IT infrastructure, Dara integrity and system testing, and functionality (Gupta et al., 2018). As for extrinsic factors, they are not under the control of SMEs but the cloud ERP service providers. These factors are compliance, network and information security that have an impact on the successful cloud ERP implementation (Gupta & Misra, 2016). Among these extrinsic factors, compliance is the most important factor which has the strongest influence on the implementation, and it is followed by network and information security. In conclusion, although cloud ERP has several advantages which is suitable for SMEs with limited IT resources, an organisation should put the CSFs and the extrinsic factors in sync to secure the success of cloud-based ERP system (Gupta et al., 2018).

At the same time, Kiran (2019) found that a successful ERP implementation in SMEs could drive productivity and efficiency in operations. It requires organisations to clearly understand and follow the success factors and avoid the failure ones. These success factors include organisational commitment, full support from top level management, BPR with minimum customization, effective communication procedures, suitable ERP package selection and adequate training, and change management. On the contrary, the failure factors are employee resistance, lack of inadequate commitment from top level management, inadequate training and education, inadequate requirements definition, inadequate resources, incompatibility between organisation business process and ERP software, unrealistic expectations on ROI, poor selection of ERP packages, heavy customisation and change management inefficiency. Besides these factors, there are also some technical challenges such as security concerns, sufficient IT infrastructure, and problems associated with interconnecting functional systems that managers need to be aware of before performing the implementation (Kamhawi, 2008).  In conclusion, once the successful implementation is well-installed and the SMEs know how to use it effectively, the overall impact is impressive, and organisations could expect a positive return.

Summary of at least one key aspect in common

There is one key aspect for a successful ERP implementation that both articles agreed is communication.  In Gupta’s (2018) research, effective communication can not only used for standardize the working procedures to achieve desired outcomes (Nah & Delgado, 2006), but also reduce the internal resistance and mitigate the risk to ensure the best output of ERP (Imran, Rehman, Aslam, & Bilal, 2016). As for Kiran’s (2019) article, it states that the progress of implementation should be disclosed from time to time (Al-Mudimigh, Zairi, & Al-Mashari, 2001). Furthermore, timeline and implementation strategy need to be explicit through an effective communication procedure.

Summary of at least one key aspect that are different

In terms of customization, both papers have difference point of view. Gupta mentioned that a certain level of customization of cloud-based services allows employees to adopt to new system faster. Also, due to the uniqueness of each business, it will be more efficient to get the ERP customized based on its specific business requirements (Seitz, 2010). In contrast, Kiran pointed out that companies need to follow the current standard of business practices to exploit the software. As a result, a minimum leave of customization will be suggested since it may cause upgrade failures in the future (Rosario, 2000). In conclusion, both articles have different opinions of the level of customization.

Answering the question

From both articles, we know that an ERP system does have a positive impact on SMEs. However, IT infrastructure and internal resistance reduction are the key factors that we should consider before making this decision. As a small enterprise, we may not have adequate IT infrastructure to support a full-size ERP system, both in hardware and software. Since we do not have huge capital as large companies do, we need to decide between cost-efficiency and information security. Therefore, we need to decide to either expand our current IT network and make it capable of installing a full-scale ERP system or choose could-based ERP with potential risk of information leakage. As for internal resistance, our employees may be reluctant to learn a new system since they get used to the current one already. In order to reduce the possible resistance, the changes must be made in a seamless and effective manner which will dramatically reduce the struggle. In conclusion, IT infrastructure and internal resistance are the two main factors that we should consider before adopting an ERP solution.

References

  • Al-Mudimigh, A., Zairi, M., & Al-Mashari, M. (2001). ERP software implementation: an integrative framework. European Journal of Information Systems, 10(4), 216-226. doi:10.1057/palgrave.ejis.3000406
  • Gupta, S., & Misra, S. C. (2016). Moderating Effect of Compliance, Network, and Security on the Critical Success Factors in the Implementation of Cloud ERP. IEEE Transactions on Cloud Computing, 4(4), 440-451. doi:10.1109/TCC.2016.2617365
  • Gupta, S., Misra, S. C., Kock, N., & Roubaud, D. (2018). Organizational, technological and extrinsic factors in the implementation of cloud ERP in SMEs. Journal of Organizational Change Management, 31(1), 83-102. doi:10.1108/JOCM-06-2017-0230
  • Imran, M. K., Rehman, C. A., Aslam, U., & Bilal, A. R. (2016). What’s organization knowledge management strategy for successful change implementation? Journal of Organizational Change Management, 29(7), 1097-1117. doi:10.1108/JOCM-07-2015-0130
  • Kamhawi, E. M. (2008). Enterprise resource-planning systems adoption in Bahrain: motives, benefits, and barriers. Journal of Enterprise Information Management, 21(3), 310-334. doi:10.1108/17410390810866655
  • Kiran, T. S., & Reddy, A. V. (2019). Critical success factors of ERP implementation in SMEs. Journal of Project Management, 4(4), 267-280. doi:10.5267/j.jpm.2019.6.001
  • Nah, F. F.-H., & Delgado, S. (2006). Critical Success Factors for Enterprise Resource Planning Implementation and Upgrade. Journal of Computer Information Systems, 46(5), 99-113. doi:10.1080/08874417.2006.11645928
  • Ngai, E. W. T., Cheng, T. C. E., & Ho, S. S. M. (2004). Critical success factors of web-based supply-chain management systems: an exploratory study. Production Planning & Control, 15(6), 622-630. doi:10.1080/09537280412331283928
  • Rosario, J. (2000). On the leading edge: critical success factors in ERP implementation projects. Business World, 17(May), 15-29.
  • Seitz, T. (2010). SAP ERP in the Cloud. An Oracle White Paper.

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