Factors enabling or inhibiting acceptance and use of (ERP)

system technology in organizations

Abstract
Purpose
This dissertation aims to discover the competitive advantage development that can be applied
through implementation of ERP. For this purpose, ERP pre and post implementation that fit
for a company are sought and critically reviewed. Then chosen parts from ERP are applied in
companies to recommend strategy potentials for competitive advantage.
Design/Methodology/approach
First, due to the seeking for feasible benefits from implementation of ERP to create
competitive advantage for a company, secondary data from books and articles from business
journals were used. Secondly, to approve the potential for companies implementing ERP, a
case segment of academic papers were chosen.
Findings
Implementation with proper preparation of ERP systems that combines basic strategy tools
with more customer and service based focused tools lead to explore crucial strategy potentials
relating to create competitive advantage for companies.
Research limitations
The analysis of the ERP system was mainly based upon reading scientific analysis and
previous research carried out. Hence, the gathered information depended on the provision of
accessible data.
Practical implications
Through this dissertation the author contributes to the debate of ERP system, its development
and its impact on the way systems are managed in modern day companies.
1.0 What is ERP?
1.1 History of ERP
1.2 Why is it growing so fast? or Why did companies start using ERP?
1.3 How fast is it growing?

2.0 What are the ERP System benefits?

2.3 What are the benefits for employees?

4.0 How to solve or deal with challenges?

5.0 Conclusion:

References:
1.0 What is ERP?
An Enterprise Resources Planning (ERP) is an information system that manages and tracks
all the information and operational service in a company. Production, human resources,
finance and logistics are some of the examples of ERP can cover in an organization.
Generally ERP is subdivided into modules that each of them covers a management perimeter
of company. The ERP concept is to develop computer applications that can meet the right
Time, right Quality, right Quantity and right Price (Mohadab, Bouikhalene, Safi 2017).

1.1 History of ERP

How it began
The history of ERP began with early attempts at using calculating machines for business in
the 1940’s. The focus on factory output increased and computing solutions were created in
the 1960s. In the 1960’s, applications that handled inventory management and control were
introduced. In the 1960s, Enterprise Resource Planning (ERP) was born in infancy in the
early 1960s . It was a joint effort between J.I. Case, the manufacturer of tractors and other
construction machinery, and their IT partner IBM. This further led to the creation of software
known as Materials Requirements Planning(MRP). MRP in the 1970’s helped plan raw
material requirements for manufacturing, purchasing and delivery.

The Early Days in the history of ERP

By 1975, MRP software was running in hundreds of large companies though it was only
affordable for the larger firms. The system ran on huge mainframe computers that were very
expensive though their computing power was not comparable even to some of the portable
computers of today. In 1972, the firm SAP was started in Germany. The company initials
stood for “Systems, Applications & Products”. SAP aimed to create business software that
worked in real time. This was really path breaking in an era of reel-to-reel tapes and punch
cards. SAP launched its first financial accounting system in 1973. In the 1980s, MRP evolved
to what many termed MRP II, or Manufacturing Resource Planning by adding more
manufacturing processes and capabilities in order to manage as a one stop production
planning solution.

The term ERP is first used

The term ERP – Enterprise Resource Planning was first used in the 1990’s. It was able to deal
with other business functions like engineering, finance and accounting, HR and project
management etc. The approach was modular applications with advanced features. All the
systems in the 1990’s used a legacy on-premise model till Netsuite came into being in 1996.
Netsuite created an ERP system that worked across the business functions of a company but
was not on-premise and was delivered over the internet. In 2000, the Gartner Group defined
ERP II as internet enabled software that gave real time access to the ERP solution. It also
provided functionalities outside of the business like supply chain management, customer
relationship management (CRM) and business intelligence.
The Cloud appears in the history of ERP
After 2005 or so, the trend has turned towards cloud software solutions and moved away
from traditional client servers models. Cloud ERP software solutions provided comparable
functionalities to on-premise ERP at a much lower cost. They were attractive especially for
small and mid-sized businesses. They now have remote, web-based access via advanced apps
that run even on mobile devices. Today’s Cloud ERP systems cover every necessary aspect
of business. They have advanced reporting, analytics, business intelligence tools and
functionalities. Cloud ERP is also as secure if not more than legacy ERP solutions. The future
will see the integration of Cloud ERP with IoT, IoE, social media and even greater security
competence.

1.2 Reasons for the rapid development of ERP

According to a recent report published by Allied Market Research, titled, "ERP Software
Market by Component, Deployment Model, Business Function, Industry Vertical, and
End User: Opportunity Analysis and Industry Forecast, 2019-2026," the global ERP
software market was valued at $35.81 billion in 2018, and is projected to reach $78.40 billion
by 2026, growing at a CAGR of 10.2% from 2019 to 2026.
Factors such as increase in need for operational efficiency and transparency in business
processes and rise in demand for data-driven decision-making are expected to fuel the market
growth. In addition, surge in the adoption of cloud as well as mobile applications is expected
to drive the growth of the ERP software market. However, availability of open source
applications and higher investment and maintenance costs are expected to impact negatively
on the global market. On the contrary, increase in demand for ERP among small & medium
sized enterprises and technological advancements in enterprise resource planning software
are expected to provide lucrative opportunities for the market growth in the coming years.
Five operational trends driving growth have been identified :-
 The recession resulted in a streamline of operational processes and a pursuit of
increased efficiencies across companies. Companies continue to seek solutions that
support, build, and improve on those processes.
 Companies are pursing technical integration of organizational applications (sales,
finance, inventory, production, distribution, service, etc) yet wish to reduce
integration costs. More applications and data points results in more integration and
administration costs. ERP solutions cover more areas of business, thus reducing data
points.
 Organizations are performing advanced reporting across the entire business. Summary
data no longer suffices. Leaders want robust reporting and key performance indicators
down to a concise level for functional areas and employees within departments, cross-
sections of products, specific business and customer activities.
 Real-time data available for all resources is a growing expectation. Strategic business
decisions can be made in a matter of hours. Customer decisions can be made in
minutes. Current information needs to be available from the bank office and
warehouse through the sales rep and all the way to the customer.
 Technology advances, especially in relation to the cloud, are bringing enterprise class
solutions to the mid and small business markets at a price point where business
 process advancements and efficiencies easily produce a favorable return on
investment.

1.3 How fast is it growing ?

In the year of this dissertation (2019) and beyond, the factors that drive organizations to
compare cloud ERP (enterprise resource planning) systems often begin with a few strong
focuses. In particular, product quality, production and process monitoring, an increased use of
analytics and business intelligence (BI) applications and the need for greater mobility are
becoming necessities for companies adopting new ERP software. Companies adopting ERP
in the cloud are also focusing on how they can be smart about planning and managing rapid
growth. Manufacturers tend to be more selective and successful with the growth strategies
they pursue based on the insights gained from cloud based ERP systems. This means that
mergers and acquisitions help to fuel cloud ERP adoption. The new business entities created
from these transactions seek to improve product quality and speed.

The following data points quantify cloud-based ERP’s current and projected growth:

 According to Gartner, by 2020, at least 35 percent of new product-centric ERP

deployments in large enterprises will be software as a service (SaaS) loosely
integrated with on-premise manufacturing execution systems (MES)
 The global cloud ERP market is expected to be worth $28B by 2022, attaining an
eight percent compound annual growth rate (CAGR) between 2016 and 2022,
according to market research firm Statista
 The cloud ERP market size is estimated to grow from $18.52B in 2016 to $29.84B by
2021, attaining a CAGR of 10 percent in the forecast period
 The North American cloud ERP market share is predicted to grow from $8.4B in
2018 to $11.1B in 2022, attaining a CAGR of 5.7 percent, according to Statista.

2.0 What are the benefits of the ERP system ?

The benefits of implementing an Enterprise Resource Planning system are endless. First and
most important, all ERP systems are focused on the customer and end results. This means
better products and services produced and delivered quickly. ERP allows open
communication among suppliers, vendors, customers and all other facets of the business.
Second, ERP can put a company with a standard set of business practices across the whole
organization.

Five reasons why Enterprise need an Open ERP :

(1) Transparency: Profitability is key for organizations of all sizes, but for medium
sized companies a lack of profitability can prove to be fatal in a much shorter time span.
This is why they very rapidly need to identify – throughout the organization – which
products, departments and customers are profitable and which are not.
 (2) Data reliability: This second point is closely linked to the first one. To take the
right decisions, you need data you can trust. “Tailor-made” systems, which have grown
over many years through specific programming and interfacing with other applications.

(3) Integration of new technologies: A lot of medium-sized companies need to move

fast, innovate, stay ahead of competition, propose new products and services, in order to
attract new clients and keep faithful ones.

(4) Reduce Total Cost of Ownership (TCO): if analyzed thoroughly, the maintenance
cost of “tailor-made” legacy systems often reveals to be gigantic, offering no radical
evolution perspectives. The TCO of an existing system is often considered low, as there
is a limited license cost and many direct costs are already depreciated from an
accounting point of view.

(5) Reduce operational risk: The knowledge regarding “tailor-made” legacy systems
often is contained in just a couple of “brains” in an organization. The potential
discontinuation that could occur if something happens with these valuable “brains” is
enormous. The advantage of an ERP system that can be implemented using standard
available functionality is then double: any person that has experience with the
implemented ERP solution can work on it (modify the configuration), the use of
standard available functionality also guarantees smooth upgrades to new releases of the
solution.
Mushtaque Ali, MCA. Rajiv Gandhi Proudyogiki Vishwavidyalaya Bhopal et al (2013)

2.1 Benefits for Organisations using ERP

Every organization has its unique processes, services and products which altogether make it
different from others. Enterprise Resource Planning or ERP tool is not only essential for big
companies, but it is also effective for small SMEs and startups. It is worth mentioning that
ERP systems play a significant role, when it comes to organize and process financial data. It
also improves the overall business development activity in the long and short term. In
addition to these advantages, by utilizing ERP Software for your organization, you can
increase the efficiency of your processes, decrease costs, streamline processes and as well as
improve productivity.
1. Greater Efficiency

An ERP or Enterprise Resource Planning software greatly reduces the need to manually enter
information and also eliminates several repetitive processes. An ERP software can also
streamline business processes by making them efficient and easier for organizations to collect
data and information, irrespective of the various departments.

2. Customer Service
Your Clients can also avail several benefits from the utilization of an ERP software. Since
client information is streamlined and centralized, your sales team will be able to focus on
maintaining and building strong customer relationships, globally as well as domestically. You
can easily access ERP’s contact center software and marketing automation and ensures that
your customers and clients are being interacted properly.

3. Data Security

One of the notable benefits of ERP Software is data security. Data security is not a concern
when you rely on an ERP solution for your organization. An ERP software can improve the
security consistency and accuracy of data, all through built-in firewalls and resources.

4. Improved Reporting

ERP software helps in improving reporting further making it customized and easier. This
software gives you the ability to compare functions across departments and analyze them
without the hassle of several emails and spreadsheets. With improved and enhanced reporting
capabilities, your organization can easily respond to complicated data requests.

5. Flexibility

Modern Enterprise Resource Planning or ERP software systems are flexible, configurable and
robust. They can cater to the unique needs of your business organization. ERP software can
adapt to the ever changing needs of a growing business and allocates the resources in a
sufficient manner.

6. Productivity

ERP helps in controlling your organization’s costs efficiently, saves your time and even
increases the production levels. It further implies that you will be able to manage your whole
business organization effectively. ERP Software implementation also improves the
productivity of a company’s managers and employee.

2.2 What are the benefits for managers?

Traditionally, each department in any specific company has their own information tracking
and operating system. And most of them run separately, which leads to a lack of
interconnectivity between departments, wasting time and being hard to keep track your
inventory. As a result, workflow is not efficient and sometimes creates frustration. This is
where the ERP system steps in to help alleviate those pains and makes the life of managers
dramatically easier allowing them to concentrate on managing.

1. Increased productivity

Due to the integrated feature of ERP systems, all the different processes are integrated and a
platform has been created to share information at all levels. ERP systems also help to increase
data accuracy and reduce the amount of data entry. Therefore, both internal and external
communication with prospects and customers are improved, which contributes to increased
corporate productivity. Additionally, ERP systems can lessen the stress and frustration from
data duplication and collecting information in different departments.

2. Easier data accessibility

Data is typically owned by different departments, and if you want to get all the information
you need you have to access several different departments. However, the information is
centralised in ERP systems, so it enables decision-makers to access real-time, reliable and
consistent data. Additionally, Cloud features help users access the information they need
wherever and whenever they want with their mobile devices. So you can show customers
your current stock when you meet them or even when you are away from the office you still
know what is happening with your warehouse.

3. Cost reduction

One of the immediate results of implementing ERP systems is reducing operation costs such
as inventory, production and marketing costs. Since ERP systems integrate cost, profit and
revenue information in one place, it helps avoid information duplication, and updates
information much faster. ERP systems can ensure that you are using your warehouse as a link
between suppliers and customers, not as a home. Another feature of ERP systems to help you
reduce costs is tracking costs in detail. It allows you to set spending budgets and compare
with actual costs within certain time frames. Thus, you have higher control over the costs
your business generates.

4. Enhanced inventory management

Managing warehouses is one of the headaches of manufacturing organisations. How to

manage stock well and effectively? An ERP system can be the answer you are looking for by
 allowing you access to real-time information. Here are 3 inventory management benefits ERP
systems offer you:

 Integrated POS system in different locations

 Prevent out-of-stock condition and excessive inventory
 Record order to improve the next orders

5. Better security

For an ERP system, security is about user-based control which means enterprises can limit a
user-access system and customise their own authority access level. For example, an account
payable clerk cannot access the data of HR and inventory modules within the ERP system. It
also can offer data encryption where users cannot export database.

3.0 What are the challenges?What companies need to take

care of before they start ERP?

ERP is an all-in-one system management software that helps you in your business. ERP is
well liked for its ability to reduce expenses and increasing profits. It has six significant
sectors where it works. The sectors are supply chain management, business intelligence,
customer relationship management, financial management, human resource sector and
manufacturing resource planning. They provide you with certain information that helps you
in your business.

Steps to run through pre-implementation of ERP

Take Time to Understand the System

First of all, take your time to understand the new system that is to be implemented. If your
company has just decided to use an ERP solution then take time to study and understand
every little detail of your company as well as the process. This will help you to understand
exactly in which sector your company needs the help of ERP the most.

Fix the Strategy

Once you are well aware of your company and the system it is time for you to plan or in other
words fix the strategy. You just don't wake up one day and start using ERP. The success of
ERP needs proper planning. You have to decide if you want ERP in a simple, standard or
advanced stage. Selection of projects, creating a task, setting a time and deadlines a plan for
probable damage control all these should have a proper planning. You must have a
backup plan too.

Taking Care of Budget

The purpose of using ERP is to maximize your profit with minimum investment. So budget is
an important part here. You have to be careful in investment and in setting a goal for that
investment. If the solution does not work as expected it can bring greater downfall than an
expected interest. This is why you should never forget about the collateral damage when you
are fixing a budget.

Groom Your Employees

You have to groom your employees in this new system. This is a common knowledge that
your employees should undergo a training session every time a new system is introduced.
You have to select the right group of people for appropriate works. A good team with proper
training can take the system forward.

Supervise the Changes

After all those steps you will run the system. Then comes the most important part. When you
have already started the new system, you have to supervise how the new system is going on.
You have to observe both the positive and negative changes it brings in your business.

Of course, the automated system can help you keep your hands from system loss but it also
needs regular software and customizations to bring out the best result. If you supervise
closely then you will be able to see the shortcomings and work on those.

Don't Rush into Anything

There is a phrase for this stage -“lead evolution not revolution”. You cannot bring great
changes all at once. You have to move slowly to the change. Moving from manual process to
auto or digital process will take such times. You will need regular meetings, teamwork,
identify loopholes, mending them, suggesting improvements and then gradually adopt the
system.

This is why there is a suggestion not to rush into anything rather go spontaneously and let the
process come smoothly to your mastery.

Keep Spaces for Objection

You will always have to be open about objections. It is better to have a listening organization
for that. As ERP is a new system for your company your staff, employees, vendors even
customers will have something to tell. They will have their objections. Let them suggest, let
them tell. This way you will find out where you should improve.

Adapt and Adopt

In the end, you will get used to the system. This will happen gradually. In order to do that you
can have regular sessions after a project is done and discuss how much you have learned so
far. This sharing will help everyone to add something to their boxes. With co-operation and
sharing you will finally adapt and adopt the ERP system.

PRO – CONS PRE-IMPLEMENTATION OF ERP

For many decades companies have adopted the strategy of using Commercial-off-the-
Shelf Enterprise Resource Planning (ERP) systems to meet their requirements. Almost all of
them do come with some known ERP implementation risk.
The availability of extensive pre-existing functionality in these are supposed to reduce risk
and improve the performance of business (as they claim!). However, a study estimates that
only 10% of ERP implementations succeed with full functionality.
The key issue is that, given pre-existing functionality, organisations need to make significant
strategic and tactical decisions about whether to change the business to fit the system or
whether to change the system to fit the business.
Based on own experience and a number of academic sources such as Barki et al. (1993), Keil
et al. (1998), Block (1993), Ewusi-Mensah (1997) and others the authors identified these 9
ERP implementation risks:

1. Failure to Redesign Business Processes to Fit the Software:

There is a strong desire to fit the new ERP system to fit to the current process. But this is
hardly the case. In fact, the right thing is to redesign your current processes to fit to purchase
an ERP system.
The reality is neither option is easy. It is very difficult in most business to change old or
existing processes and to customize the ERP system to fit to current processes is a costly and
time-consuming venture. In my view this is the biggest ERP implementation risk.

2. Lack of Senior Management Support

Support of top management 
is crucial for accomplishing projects objectives. It is easy for
senior managers to become a sponsor but very difficult to let go the crucial team member for
pilot testing or superuser training.
The unfortunate fact is the people who need to be trained as “Super Users”, are the same
“key” people who run the business. The lack of senior people support to give time away from
the desk, as they are too afraid to miss sales, delivery to customer is one of the most common
ERP implementation risk.
3. Insufficient Training and Reskilling of End-Users
A number of firms learned that 
investment in training and reskilling the employees were
higher than expected. Most ERP implementation comes with deadlines that need to meet. As
a result, there is hardly enough time to train most people and give them skills they need to
reach the satisfactory performance state.

4. Lack of Ability to Recruit and Retain Qualified Systems, Developers

Many of the organizations found it difficult to recruit and retain good ERP specialists because
the market rates for these people are high. The developers of biggest market share ERP
vendors like SAP, Oracle, Microsoft Dynamics and Infor are in high demand and moves from
one consultancy project to another. So not finding an in-house ERP specialist could be
significant ERP implementation risk.

5. Inability to Obtain Full-Time Commitment of Employee to Project Management and

Project Activities
Similar to point 2, it might be difficult to get managers and employees to commit to project
management roles because they may be uncertain about what responsibilities will still be
open to them once they are transferred back to their positions.
Or, in some cases, there’s no back up for their day job while busy in implementation and
testing causing backlog of work, up-set customers and compounding stress as a result.

6. Lack of Integration
Once ERP is implemented or about to be implemented, it is very important that key business
processes cover areas related to feasibility, requirements, prototyping and implementation
ERP functionalities. These areas are the source of many issues in ERP implementation.
Further, ERP implementations increasingly include technical work through enhanced
configuration features and the need for extensive integration with other systems (for example
financial, supply chain or quality software & tools).
Another example would be old metrics which was life blood to measure the business is no
more available as they used, hence, process and systems functionalities must fit each other for
proper integration.

7. Lack of Change Management

It is very easy to take for granted that all employees will accept that implementing an ERP
system is ‘Good Thing’! It might not be the case when you talk to the employer who is using
the same old system for the last 10 years and feels the things he/she is doing a fine job for
business and customers with the old system.
The people who know most in business and are very good at their job sometimes can be the
biggest roadblock of new system deployment and can come up with all possible reasons why
it will not work as they know the business inside out! Hence, imposing significant ERP
implement risk.
Therefore, it is important to launch a change in a management program to make them
understand why business and they have to go through the pain and why the grass is greener
on the other side.

8. Poor Technology Planning

Lack of adequate technical expertise and adequate technology infrastructure for supporting
project requirements, these ERP implementation risk factors include technological newness
(need for new hardware and software), application size (project scope, number of users and
team diversity), application complexity and failure of technology to meet specifications.

9. Less than Awesome Project Management

Let’s accept it, implementing ERP is a massive project and last anything between 18 and 24
months or more. Less than awesome project management in any business is significant ERP
implementation risk.
The extent of risk of project cost and time overrun due to the lack of a measurement system
for assessing and controlling project risk depends on project size, experience with the new
technology and project structure.

In Summary
Any business is planning to implement ERP or upgrade the new one should be mindful of:
 All the risks associated with the recruitment and retention of IT/ERP Subject Matter
Expert professionals;
 Insufficient training and reskilling;
 Insufficient internal expertise;
 Failure to mix internal and external expertise effectively;
 Failure to keep to the standard specifications which the software supports;
 Attempts to build bridges to legacy applications.
 The risk of failure to redesign business processes and of following an enterprise-wide
design that supports data integration across the organization.

4.0 How to solve or deal with challenges?

Enterprise Resource Planning (ERP) systems tie together and define a plethora of these
business processes and enable the flow of data between them. By collecting an organization’s
shared transactional data from multiple sources, ERP systems eliminate data duplication and
provide data integrity with a “single source of truth.”
There are six common challenges that need to be overcome on a daily basis just by
implementing an ERP solution are listed below.
Managing Data

Regardless of the number of applications a company implements, there will always be one
source of data with an ERP system. Without the use of an ERP, companies spend valuable
energy and time pulling together fragmented data from different spreadsheets, accounting
sources and sales orders to discover the company’s overall financial position. By implementing
a fully integrated ERP system, significant amounts of time can be saved by eliminating dual
entry of information and needed to perform data searches in various places.

Lot Traceability

Manufacturers have to resort to manually entering numbers into spreadsheets when they don’t
have an ERP system. The issue with this is producing accurate entries in complex manual entry
spreadsheets to keep track of raw material lot numbers used in multiple finished goods and
shipped to numerous customers. Enter ERP. An ERP system offers both forward and backward
lot tracking where information can be accounted for from the beginning of the process to the
very end. With a lot traceability feature, quality control and quality assurance are added
advantages.

Managing Inventory Levels

When it comes to controlling inventory, it’s important to find a balance between having too
much or not enough. Maintaining the right quantities of the correct inventory ensures that a
company or organization can meet the demands of its customers. Lead time should be factored
in when considering inventory because waiting until your material supply is totally depleted
can create problems. The inventory management application of an ERP system provides
manufacturers the transparency and inventory counts necessary for enhanced production
planning. Starting with a customer’s sales order, the inventory is accounted for and any
shortages are noted immediately. If there are deficiencies, the ERP will then automatically
change the status of the inventory order to make it unavailable for any additional sales requests.
Other functions involve monitoring item usages and reporting on inventory status.

Accurate Reporting and Accessing Real-Time Data

Leveraging the right reporting capabilities in an ERP system can create a tool for data visibility.
Database information is automatically updated in real-time with each transactions throughout
the system allowing for optimal accuracy. The data allows you to determine precalculated
summaries and target projections. The compiled data in an ERP system can be designed to
match a company’s personalized requirements and allows for ease of internal and external
distribution of reporting data.
Material Requirements Planning (MRP)

MRP is another part of an integrated ERP system that addresses the challenges of managing
resources. MRP is a production planning, scheduling, and inventory control system used to
manage manufacturing processes. Production planning utilizes manufacturing capacity and
material resources using historical production data and sales forecasting. When implemented
properly, MRP reduces cash flow and increases a company’s profitability by calculating the
optimum production schedule based on the master production schedule, sales forecasts,
inventory status, and open orders. MRP can also reduce waste by providing information about
purchasing the right amount of inventory at the right time, and determines the latest possible
time frame to produce goods and purchase raw materials while still meeting customer
deadlines. With the use of MRP in an ERP system, modifications to the production schedule
can be updated immediately for any changes in orders and/or materials.

5.0 Conclusion:
Today’s enterprises are obligated to develop ‘an integrated information system’ in order to
cut their costs, delivery time, in increase quality and variety of their products. ERP systems
help unleash the true potential of companies by integrating business and management
processes. In this study, how and in what direction ERP Systems affect the decision of the
upper and middle level managers of businesses together with the effects of ERP systems on
strategic knowledge management to make enterprises more innovative and competitively
advantaged, transformable, and decisions based on ERP systems has been investigated. The
role and the impacts of these systems on strategic information management and decision-
making have been presented with both global and local business application examples. The
importance of MIS has been exibited with its stages in detail. MIS ensures managers at
different levels in an organization to access reports and summaries prepared on basic actions
of organization through the information stored in the system.
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