Enterprise resource planning success. An exploratory study of the financial executive perspective
| DOI | https://doi.org/10.1108/02635570610712582 |
| Published date | 01 December 2006 |
| Pages | 1288-1303 |
| Date | 01 December 2006 |
| Author | Alan R. Peslak |
| Subject Matter | Economics,Information & knowledge management,Management science & operations |
Enterprise resource planning
success
An exploratory study of the financial
executive perspective
Alan R. Peslak
Penn State University, Dunmore, Pennsylvania, USA
Abstract
Purpose – To explore the views of top corporate financial executives on the success of
implementation of enterprise resource planning (ERP) systems as well as the variables associated
with ERP project success. Specifically, relationships between dependent variables cost and budget
performance on the independent variable overall project success are studied. Variables influencing
cost and time performance are also explored.
Design/methodology/approach – An analysis of secondary data obtained from the 2003 financial
executives international comprehensive survey-based research on technology issues for financial
executives. Multiple regression analysis and other statistical methods are used.
Findings – The findings indicate that ERP implementations are generally viewed as moderately
successful by top financial executives. In addition, both cost and time were significantly correlated
with an overall view of success with cost performance holding higher influence. Several variables were
found to significantly correlate with cost and time performance.
Research limitations/implications – The study can be used as a basis for further exploration on
the influences on ERP success as well as serve as a preliminary model to analyze any IT project
success.
Practical implications – The findings can be used to guide management teams in emphasizing
control of the important variables in implementing ERP that influence project success.
Originality/value – The paper provides a large sample set which empirically reviews major ERP
implementations and their success perception. In addition, it begins to explore the variables
influencing overall ERP project success perception.
Keywords Resource management, Project management, Information systems,
Performancemanagement, Cost analysis, Time study
Paper type Research paper
Introduction
Enterprise resource planning (ERP) systems have become the de facto standard for
large and mid-sized organizations to run all their major functional and process
operations. Generally, they consist of a series of functional modules that are integrated
through standard business processes and include all the data and information about
vendors, customers, employees, and pr oducts. The common modules include
accounting, sales and marketing, logistics, purchasing, manufacturing, human
resources, and inventory. According to Miller (2003) the key parts of an ERP system
are integrated modules that allow business process that cross business functional
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/0263-5577.htm
The author wishes to thank FEI for providing the raw data from their survey so that this
research could be undertaken.
IMDS
106,9
1288
Industrial Management & Data
Systems
Vol. 106 No. 9, 2006
pp. 1288-1303
qEmerald Group Publishing Limited
0263-5577
DOI 10.1108/02635570610712582
areas; one large real-time database that allows for a single entry and repository for
information across business functions; and seamless business transactions across
business functions.
Okrent and Vokurka (2004) note six core processes that are streamlined in ERP
systems: quote to cash, procure to pay, plan to perform, manufacturing operations,
product life cycle, and financial management. McAdam and Galloway (2005) suggest
ERP systems allow “standardising business processes, ensuring integrity of data, and
removing the number, complexity, and expense surrounding old independent legacy
systems.”
ERP systems had their origins in materials requirements planning and
manufacturing resource planning and generally supported materials purchasing,
delivery, and labor scheduling for production operations. The name was coined by the
Gartner Group in 1990 (Yu, 2005). ERP systems, by coordinating business functions
and processes, are suggested to lower costs “in its entire supply chain by either
shortening throughput times; lowering inventory or by providing quality service”
(Gupta et al., 2004). McAdam and Galloway (2005) suggest that ERP systems can play
an “increasingly important role in sustaining ‘leading edge’ competitiveness.”
The importance of ERP systems are evidenced by the size of their sales, estimated at
$12 billion (ARC Advisory Group, 2003) to $30 billion (King and Ensuring, 2005) and
by their market penetration estimated at 70 percent of the Fortune 1000 (Bingi et al.,
1999). But the importance and pervasiveness of ERP systems have not been without
difficulties.
ERP success measurements
The comprehensive nature of ERP has resulted in complex systems that most often
take years to implement. Since, these systems are so large, complex, and require
participation across so many functional areas, ERP systems implementations are
reported to have an uneven record of success in organizations. Estimates vary widely
on the failure rate of ERP implementations. Barker and Frolick (2003) suggest that
50 percent of ERP implementations are failures. Hong and Kim estimate a 75 percent
“unsuccessful” rate. And Scott and Vessey (2002) and Martin (1998) estimate failure as
high as 90 percent. Other research has suggested “current industry demand to
implement the ERP system is growing fast, but currently there are relatively few
success stories” (Ho et al., 2004). Clearly, the exploration of this issue deserves
significant research attention. In addition, the question of how ERP systems are judged
to be a success or failure has merited little attention from a research perspective.
Al-Mashari (2003) notes that “research in the ERP area is still lacking and the gap in
the ERP literature is huge.”
Hunton et al. (2002) noted the “paucity of empirical research examining the impact
of ERP system implementations on firm performance.” Though internal perceptions of
ERP systems have not previously been studied, Hunton and others have studied one
area of performance: the market reaction to implementation of ERP systems. Hayes
et al. (2001) found that the market value of firms generally increase when
announcements of ERP systems implementations are made. There were positive
increases in market value when firms announced ERP implementation plans. Healthy
firms had more positive market reactions. And SAP and PeopleSoft showed more
positive market reactions than lesser ERP vendors. Hunton et al. (2002) followed up
Enterprise
resource
planning success
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