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ERP Software Implementation in Indian Small and Medium Enterprises

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					    International Journal of Emerging Trends & Technology in Computer Science (IJETTCS)
       Web Site: www.ijettcs.org Email: editor@ijettcs.org, editorijettcs@gmail.com
Volume 1, Issue 2, July – August 2012                                          ISSN 2278-6856



     ERP Software Implementation in Indian Small
              and Medium Enterprises
                                               Dr.M.P.Thapliyal1, Pooja Vashishta2
                              1
                                  Associate Professor, Department of Computer Science & Engineering
                                      HNB Garhwal University, Srinagar(Garhwal), Uttarakhand
                                  2
                                      Research Scholar, Pacific University, Udaipur (Rajasthan), India


                                                                       integrate data and processes from all areas of the
Abstract: ERP (Enterprise Resource Planning) is a way to               organization and unify it, to provide ease of access and an
integrate the data and processes of an organization into one           efficient work flow. ERP Systems usually accomplish this
single system. Its main goal is to integrate data and processes        through one single database that employs multiple
from all areas of the organization and unify it, to provide
                                                                       software modules. The ideal configuration is then to have
ease of access and an efficient work flow. ERP Systems
usually accomplish this through one single database that               one ERP system for an entire organization, but
employs multiple software modules. In India, SMEs are the              organizations that are very large have been known to
backbone of the economy and are today faced with global                create an ERP system and then add external interfaces for
competition. Therefore, it becomes imperative to look for              other stand alone systems considered more powerful or
means of responding to the dynamic markets. ERP systems                able to fulfill the organization's needs in a better way.
have become the most common IT strategy for most large                 Recently the ERP vendors have developed and customized
companies.      Present    research     argues     that   ERP
                                                                       the ERP software for the use of all types of industries.
implementation in Indian SMEs should extend its scope
beyond the configuration to the strategic, managerial,                 This has created a great demand on the use of ERP
technical and organizational issues by considering critical            among business entities to integrate and maximize their
success factors for successful ERP implementation at Indian            resources. The growing demand for ERP applications
SMEs that may put Indian SMEs on the competitive position.             among business firms has several reasons-
In this paper, we have examined ERP in India.                          • Competitive pressures to become a low cost producer.
                                                                       • To increase the revenue growth.
Keywords: SME.
                                                                       • Ability to compete globally.
                                                                       • Maximizing the resources and the desire to re-engineer
1. INTRODUCTION                                                        the business to respond to market challenges (Gattiker
ERP (Enterprise Resource Planning) is an outcome of                    and Goodhue, 2005).
Information Technology and is a way to integrate the data
and processes of an organization into one single system,               2. LITERATURE REVIEW
using sub-systems that include hardware, software and a
                                                                       This area has been subjected to a significant amount of
unified database in order to achieve integration, to store
                                                                       prior research. Several approaches have been taken.
the data for various functions found throughout the
                                                                       Slevin & Pinto (1987) originally proposed ten CSFs for
organization. The term ERP used to refer about how
                                                                       project management. Their work was built upon by
large organizations of the industrial type planned to use
                                                                       Holland & Light (1999). They partitioned the
organizational wide resources. Today ERP is used in
                                                                       implementation process into strategic and tactical
almost any type of organization it doesn't matter whether
                                                                       subgroups, adding factors specific to software projects.
it is large, small or what industry it falls in. How do we
                                                                       The application and modification of existing project
know what software system can be considered ERP? First,
                                                                       management techniques to ERP was also addressed by
it must provide an organization with functionality for at
                                                                       Weston (2001), who also considered the issues
least two systems or more. However, many of today's
                                                                       surrounding the development stages that the project
ERP systems can cover more than just two functions and
                                                                       passes through, associated metrics, and the software used
integrate them into one unified Data Base. Human
                                                                       in ERP implementations. These issues have been further
Resources, Supply Chain Management, Customer
                                                                       investigated by other researchers. Notably Ahituv et. al.,
Relations Management, Financial, Manufacturing
                                                                       (2002) who investigated systems development
functions and Warehouse Management functions can be
                                                                       methodologies for ERP systems, while Huang et al.,
found on modern companies under one umbrella - the
                                                                       focused upon the need for organizations to create a
ERP system.
                                                                       repository of implementation best practice to ensure
The Key to ERP is integration. Its main goal is to
Volume 1, Issue 2 July-August 2012                                                                                     Page 107
   International Journal of Emerging Trends & Technology in Computer Science (IJETTCS)
       Web Site: www.ijettcs.org Email: editor@ijettcs.org, editorijettcs@gmail.com
Volume 1, Issue 2, July – August 2012                                          ISSN 2278-6856


consistency across ERP implement (Huang,2004). Zviron           not all ERP implementations are successful in improving
et al., considered the issues surrounding the measurement       the productivity and competencies of a company.
of user satisfaction and perceived usefulness in the ERP        According to Gattiker and Goodhue (2005), ERP
context (Zviran, 2005). While Sumner (1999) considered          implementation failure rate is from 40%, yet companies
implementation issues through series of ERP case studies        try to implement these systems because they are
resulting in a set of guidelines designed to promote            absolutely essential to responsive planning and
success in large software project implementations. Nah,         communication. The competitive pressure unleashed by
Lau and Kuang (2001) undertook a literature search of           the process of globalization is driving implementation of
                                                                ERP projects in increasingly large numbers, so a
ERP implementations and identified eleven CSFs and
                                                                methodological framework for dealing with complex
considered their relationship to Markus and Tanis's
                                                                problem of evaluating ERP projects is required. It has
process-orientated ERP Life cycle model (200). Bajwa            been found that, unique risks in ERP implementation
and Garcia (2004) developed an integrative framework            arises due to tightly linked interdependencies of business
for the assimilation of ERP systems, extending the              processes, relational databases, and process reengineering
literature in the area of critical extemal antecedents, while   (Wright and Wright, 2002). According to Gordon (2006),
Gulledge and Sommer (2004) examined the issues                  three main factors that can be held responsible for failure
surrounding scoping business processes when splitting           of ERP system are-
SAP instances. Parr and Shanks (2003) built on their            • poor planning or poor management
earlier research into CSFs, identifying ten enabling            • change in business goals during project
factors, then using further case research to construct a        • lack of business management support.
project phase model for ERP implementation. Meanwhile           In another study, it has been found that companies spent
an influential study by Somers and Nelson (2001) also the       large money in developing ERP systems that are not
literature for CSFs and took Cooper and Zmud's six              utilized. From a software perspective ERP systems is
stages IT implementation process model (1990) as a basis        complete. But from the business perspective it is found
for ranking and categorize them by stage. The Somers-           that software and business processes need to be aligned,
                                                                which involves a mixture of business process design and
Nelson CSF classification was extended by Akkermans
                                                                software configurations (Mabert et., 2003). So a purely
and van Helden who, through the application of a
                                                                technical approach to ERP system design is insufficient.
longitudinal case study, showed that inter-dependencies
                                                                According to Gordon (2006), a careful use of
both indirect and direct exist within the success factors       communication and change management procedures is
and importantly that 'they all influenced each other in the     required to handle the often business process
same direction i.e., all positive or negative, leading to a     reengineering impact of ERP systems which can alleviate
self perpetuating or cycle of good or poor performance'         some of the problems, but a more fundamental issue of
(2002). Research has also been undertaken on subsets of         concern is the cost feasibility of system integration,
CSFs classifications; for example, Sarker and Lee (2003)        training and user licenses, system utilization, etc. need to
examined three major social enablers in ERP                     be checked. A design interface with a process plan is an
implementations, while Gefen (2004) considered the issue        essential part of the system integration process in ERP.
of trust between vendors and clients within ERP
implementations and Luo and Strong proposed a                   4. OBJECTIVE OF STUDY
framework for evaluating implementation choices                 The primary objective of this research is to examine the
pertaining to the customization of an ERP ( Luo, 2004).         critical success factors of ERP implementation to
                                                                minimize the ERP implementation failure rate among the
3. CHALLENGES IN ERP IMPLEMENTATION                             local companies. The research was focused in different
A lot of firms in the developing countries face numerous        sectors of the economy. Apart from that the study also
challenges in implementing technologies such as                 aimed to identify the ERP usage contribution to the
Enterprise Resource Planning (ERP) systems, including a         business performance of the organizations. ERP
lack of human and financial resources to support such           implementations completed between 1995 and 1998 in
initiatives (Wright et al., 2002). Furthermore, the             India can give a sense of specific hurdles that companies
government’s commitment to the development of                   may encounter in ERP deployment. Several companies
technology infrastructure can also be seen from the Indian      were surveyed, and numerous ERP professionals were
Industrial Master Plan from 2006-2020, coinciding with          interviewed in order to assess the state of ERP in India.
the country’s vision for 2020. For example, the                 The results indicate that Indian companies are moving
government has implemented numerous policies and                forward with ERP implementation primarily in response
strategies under this plan which was formulated to              to thrusts from parent collaborators, to revamp in order to
enhance the growth of the industries through the entire         meet increased load, or to reduce lead times and inventory
value chain and to encourage cluster based industrial           levels, and improve customer satisfaction. Resistance to
development. However various studies have revealed that         change was a major hurdle faced during many ERP

Volume 1, Issue 2 July-August 2012                                                                               Page 108
   International Journal of Emerging Trends & Technology in Computer Science (IJETTCS)
       Web Site: www.ijettcs.org Email: editor@ijettcs.org, editorijettcs@gmail.com
Volume 1, Issue 2, July – August 2012                                          ISSN 2278-6856


implementations. Additionally, the duplication required        these groups, it becomes apparent that the courier,
in the initial stage, and the intense pressure exerted on      transportation, and entertainment industries do not have
manpower proved to be problematic, as did the level of         specific current needs for ERP. Banking and
customization necessitated by disparities between              telecommunication each have very specialized
company requirements and solutions offered by ERP              requirements that the manufacturing-inclined software
software. This problem is diminishing due to advances in       solutions on the market would not effectively address.
the software facility models. Cost overruns also proved to     The same holds true for the medical care and hospitality
be a pervasive problem with ERP implementations. To            industries. The service sector has the potential to become
avoid this problem, top management must develop the            an important ERP market within a few years. At this time
necessary commitment to ERP, and all employees should          ERP implementation in the services sector is very limited
be prepared for the change before the ERP                      - only a few hospitals and banks have done small-scale
implementation process is started. This model should           experiments. New software and processes will need to be
help to eliminate needless project time and cost               developed to meet the specific demands of the service
ballooning.                                                    industries, so ERP players should begin now to prepare
                                                               themselves for the tremendous potential of this future
5. ERP IN INDIA                                                market.

Some of the first Indian companies to have adopted ERP         7. SMES AND ERP
practices are HLL, ONGC, ESSAR, Godrej Soaps,
Cadburys, BASF, Telco, Maruti Udyog Ltd., Century              While many new SMEs start each year, nearly 50% cease
Rayon, Citibank, ACC, ANZ Grindlays, German                    to exist in the first 3 years of business itself. Though it is
Remedies, Blue Star, Mahindra & Mahindra, Rallis India,        assumed that all SMEs desire growth, only 40% survive
Sony India Pvt. Ltd., Ceat Ltd., Indal, Ford Motors,           beyond 10 years. Majority of the firms do not think of
Kirloskar, Knoll Pharmaceuticals, and Glaxo. First tier        long-term business strategy but focus only on survival.
companies (those with a turnover greater than Rs.10            They think of change only when the business begins to
billion) implement ERP to increase internal efficiency         fail as a result of not keeping track of the changing
and external competitiveness. Once ERP is established at       market scenario. The firms who survive and grow are the
this level, these large companies begin to desire similarly    ones who have the ability to take risks and respond to the
increased efficiency from their suppliers. Hence, second       changing circumstances (Levy et al, 2006). An ERP
tier companies are pressured to implement ERP, and a           system would allow SMEs to integrate their business
trickle-down effect ensues. Powered by the axiom that a        functions. SMEs would be able to increase their efficiency
chain is only as strong as its weakest link, Indian industry   and productivity by implementing a suitable ERP system.
quickly has recognized that in order to work at maximum        Over the next five years, the ERP market in India is
efficiency, ERP must be implemented at all levels.             expected to reach Rs. 1,550 crore ($341 million),
Initially, the majority of ERP solutions have been             according to International Data Corporation (IDC), a
marketed to companies with greater than Rs. 2 billion,         market research and analysis firm. Of this, the SME
and generally, according to industry reports, the total cost   potential in India for the enterprise class is projected to be
of deploying ERP has ranged between 1 and 2 percent of         Rs. 728 crore ($160 million) 47% of the overall market
companies' gross sales. Lower cost solutions are available     (Munjal, 2006). ERP vendors like SAP, Oracle,
for comparatively smaller sized companies. Though the          Microsoft, QAD etc. are all trying to increase their
market seems to be very encouraging for ERP                    customer base in the SME segment and have products
implementation, the time-frame for deployment may be           specifically designed to cater to the needs of SMEs.
an issue. However, since many companies that have not          Though SMEs are risk averse, they are keen on adopting
yet implemented ERP are leaders in their markets, it           ERP systems for several reasons. Some of them are:
reasonably can be assumed that they will go for it within      • Pressure from larger counterparts: Due to globalization,
next five years. In fact, the ERP market should grow at a      SMEs today operate in a wider arena. Majority of them
rate somewhere near the industrial growth rate. Some           have MNCs as their clients. These MNCs require SMEs
industry categories, such as Automotive, Steel, Consumer       to implement the same ERP system as them to allow for
Durables, Engineering, and Textiles have shown a very          tighter integration in their supply chain, which permits
high ERP penetration. This means that these categories         them to design and plan the production and delivery so as
represent the greatest potential markets in next two years     to reduce the turnaround time.
- other industries will follow.                                • Peer pressure: Several SMEs are adopting ERP systems
                                                               as their peers have done so.
6. ERP IN THE SERVICE SECTOR                                   • To gain competitive advantage and respond quickly to
                                                               the dynamic market scenario.
Transportation, medical care, hospitality, courier service,    • E-commerce benefits: This benefit will accrue from the
telecommunication, banking and financial services, and         close integration between large enterprises and SMEs.
entertainment represent the major components of India's
service sector, and on probing into the various needs of
Volume 1, Issue 2 July-August 2012                                                                               Page 109
   International Journal of Emerging Trends & Technology in Computer Science (IJETTCS)
       Web Site: www.ijettcs.org Email: editor@ijettcs.org, editorijettcs@gmail.com
Volume 1, Issue 2, July – August 2012                                          ISSN 2278-6856


• Cheaper and faster Internet: Easier access to Internet       of ERP systems in the context of developing countries
reduces the costs further.                                     such as India to ensure successful implementation of
• Cheaper hardware and software: With the advances in          ERP. It, however, should be acknowledged that since this
technology, the costs of both hardware in the form of          research emerges from an in-depth single-case study, the
servers, cables, switches etc. and software like databases     ability to generalize the findings is limited. The findings
have come down.                                                of the study are expected to be more transferable within
                                                               the context of Indian SMEs in general. Furthermore it
8. CRITICAL SUCCESS FACTORS                   FOR    ERP       will also provide a benchmark to further enhance the
ADOPTION                                                       research scope of Indian ERP implementation among
                                                               academicians and researchers.
Nah et al. (2006) investigated critical success factors for
ERP implementation by conducting a literature review.
They found that key organizational issues were teamwork,
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Volume 1, Issue 2 July-August 2012                                                                             Page 110
   International Journal of Emerging Trends & Technology in Computer Science (IJETTCS)
       Web Site: www.ijettcs.org Email: editor@ijettcs.org, editorijettcs@gmail.com
Volume 1, Issue 2, July – August 2012                                          ISSN 2278-6856


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