The Analysis of Critical Success Factors of ERP Implementation Based on Company Size and Industry Type: a Literature Review

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The Analysis of Critical Success Factors

of ERP Implementation Based on

Company Size and Industry Type: a

Literature Review

Master Thesis Supply Chain Management

University of Groningen

June 23

rd

, 2014

Xiangyu Fan

Student Number: S2328291

Email:

x.fan.2@student.rug.nl

Supervisor/ University: Prof. dr. J. (Jan) de Vries

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Abstract

Nowadays still many companies start to apply ERP systems in their companies. However the failure rate is quite high. Therefore, the purpose of this paper is to analyze the CSFs (critical success factors) of ERP implementation based on company size and industry type, and determines the relation between these CSFs and ERP implementation success. A literature study has been conducted, which includes two parts. The first part is to find out the different CSFs for companies with different sizes and industry types: five cases of each kind of company, except only two small-medium sized service companies. The second step is to find the relationship between these CSFs and ERP implementation success by reviewing 229 papers. The result shows that company size has great influence on the factor ‘change management’ and the industry type has significant impact on the factor ‘project tracking’. Aside from the three unaffected CSFS (implementation strategy, support of top management, and project management), all the other CSFs are relatively independent by the classification of companies. However, all these CSFs are positive influence ERP implementation success. As there are several limitations of this research, some suggestions for the further study are provided.

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Preface

This paper is my master thesis for supply chain management program. This research is to analyze the CSFs (critical success factors) of ERP implementation based on company size and industry type, and determines the relation between these CSFs and ERP implementation success.

Many people have helped me to write thesis. Firstly I would like to thank Prof. Dr. J. (Jan) de Vries, who is my supervisor. He always encourages me when I am confused and supports me with comments during the whole process.

Secondly, I would like to thank Dr. S. A. (Carolien) de Blok for being my second supervisor, for offering me detailed feedback on my research proposal and during the final thesis presentation. She helps me to pay more attention to details.

In addition, I would like to thank to my group mates, Weifeng Sun and Theodoros Rodarakis. We have a meeting each time before the appointment with our supervision. Each time they can give me some useful suggestions on my research. In addition, I would like to thank my friend Yi Yin who helps me with the English spelling and grammar checking.

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1. Introduction

Since the 1990s, there has been an increasing demand for implementing Enterprise Resource Planning (ERP) systems in companies to maintain their competitiveness (Holland & Light, 1999). ERP systems, when successfully implemented, link not only the internal departments of the company but also the external suppliers and customers into a tightly integrated system with shared data and visibility (Escalle, Cotteleer & Austin, 1999). This integration allows the organization to gain a competitive advantage by saving resources, reducing costs, reducing labor and responding to the ever-changing business environment (Barker & Frolick, 2003). Therefore, to this day still more and more companies start to or expect to adopt ERP systems (Parthasarathy, Anbazhagan & Ramachandran, 2006; Shual & Tauber, 2013). However, several papers indicated that the failure rate of ERP implementation is quite high. Therefore, this research is going to find out the factors that will influence ERP implementation, and the relation between them.

Majed (2000) reported that 70% of ERP implementations have not achieved their expected benefits. What is even worse, the failure rate reaches to 90% after a four-year period (Chang, 2004). Ten years later, the annual report of Panorama software indicates that the success rate of ERP implementation is only 63%1, which means by that time still at least 37% of ERP projects fail. Therefore it is essential to determine the factors (defined in this paper as critical success factors, or CSFs), which might influence ERP implementation success. As Boynlon and Zmud (1984) said, the CSFs are in relation with the operating activities in progress, which means the CSFs vary from company to company. The word “firmographics” presents descriptive attributes of firms which combines demographics and geographic factors of an organization (Webster, Malter & Ganesan, 2005). Webster et al. (2005) also indicated that company size and industry type are the top two attributes in firmographics. Therefore, the aim of this paper is to find out the CSFs for companies of different size and industry type, and the relation between these CSFs and the ERP implementation success.

There is already ample literature about the CSFs of ERP implementation. According to Shaul and Tauber (2013), the dimensions within which these CSFs have been explored are summarized into 10 categories, including Strategic –Tactical, Large Enterprises (LEs) – Small-medium enterprises (SMEs), Global – Local, Private Sector – Public Sector, Life cycle – Specific Phase, Partner – Vendor, Integrated Components – Core ERP, Developed countries – Developing countries, and Organization – End user. It is clear that each side of these dimensions makes the CSFs different, such as the size of a company: CSFs in LEs and SMEs are different. Most of the dimensions are part of a company’s firmographics, such as the size (LEs – SMEs), the function of the company (organization – end user), and the market of the company (Global – Local). As one of the top attributes of firmographics, industry type of the company (manufacturing – service) is missing which can also be an interesting topic to study. Compared to manufacturing companies, service companies are not commonly known to be the initial target zone of many ERP vendors. ERP systems were generated from the material requirement planning (MRP)

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systems (Robert Jacobs, 2007), which is more focused on the material/resource planning. The main difference between manufacturing and service companies is their goods; most service companies do not have tangible products like manufacturing companies do. In addition, a service company such as a consultant company delivers service when the client requires it. Most manufacturing companies operate in a completely different way, with a need for planning in terms of materials such as inventory planning. However, ERP systems are still increasingly being implemented in the service sector (Botta-Genoulaz & Millet, 2006). But there must be difference between service and manufacturing companies when they apply ERP systems. In other words, whether the industry type influences the CSFs in ERP implementation constitutes a gap in the existing literature and need to be explored. Furthermore, company size has a great influence on ERP implementation even among companies of the same type (Snider, da Silveira &Balakrishnan, 2009). For instance, large companies have greater financial capabilities and advanced technology for applying new systems compared to small and medium companies (Snider et al. 2009). Therefore, the company’s industry type and size can lead to a difference in CSFs. However, company size and industry type as two important company characteristics, have not been explored together in existing literature. Therefore, the differences of CSFs between companies’ categories based on both size and industry type need to be researched.

Hence, at the theoretical level, the contribution of this paper is to fill the gap in existing literature by studying CSFs from a new dimension and create a new CSFs category for enterprises with different size (large or small and medium-sized) and industry type (manufacture or service). The result can show how size and industry type make the CSFs different for different companies. In addition, based on previous literature, this paper will provide an overview of the impact of company size and industry type on CSFs and the relationship between CSFs and ERP implementation success. At the managerial level, the contribution is that the result of this study can help the management of a company. If they clearly know which categories their companies belong to, they can realize the main CSFs and how the factors influence their implementation beforehand, and thus pay more attention on these factors. As a result, they can increase the success rate of ERP implementation in their companies.

Based on the discussion above, the main research question is raised: ‘What are the CSFs based on company size and industry type, and what is the relation between these CSFs and ERP implementation success?’ To answer the main research question, several sub questions are formulated:

 What are the CSFs of ERP implementation in general  What are most relevant CSFs of ERP implementation for

-Small and medium-sized service enterprises.

- Small and medium-sized manufacturing enterprises. - Large sized service enterprises.

- Large sized manufacturing enterprises.

 How these CSFs influence the result of ERP implementation success

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2. Theoretical background

In this section the theoretical foundation of this study will be described. Firstly, an overview of the existing theory on ERP system is described, including the definition and history of ERP systems, the benefits of the ERP implementation and the implementation stages. Secondly, the CSFs will be described and the relations between CSFs and the results of ERP implementation will be elaborated upon. Then the classification of company scale and characteristics is defined. Finally, the concept model of this research is provided, summarizing the relationships that will be investigated, which form the foundation of this study.

2.1 ERP systems

ERP is an abbreviation for Enterprise Resource Planning and has been defined by various authors but with few differences. An ERP system is mostly defined as an information system (IS) that supports and integrates many facets of a business, including planning, manufacturing, sales, and marketing (Chen, Law & Yang, 2009; Jessup & Valacich, 2006). According to Robert Jacobs (2007), ERP systems came from the MRP (material requirement planning) systems in the 1970s and the term was first coined in the early 1990s by the Gartner Group (Wylie, 1990). The purpose of ERP is to integrate the techniques (software) and concepts for the management of business as a whole from the viewpoint of the effective use of management resources to improve the efficiency of enterprise management (Leon, 2008). Specifically, the main benefits can include improved management decision making, improved financial management, improved customer service and responsiveness, ease of expansion/growth, increased flexibility, more accurate transactions, cycle time reduction and improved inventory management. (Hawking, Stein & Foster, 2004; Shaul & Tauber, 2013).

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According to Esteves & Pastor (1999), the implementation of ERP systems covers six different stages, shown in Figure 2.1. In each stage several activities will be undertaken; for instance, in the adoption decision stage, managers must think about the requirements the new ERP systems should meet, the goals and benefits after implementation of the new systems, and analysis of the impact of adoption at a business and organizational level. In the second stage, they first need to decide which ERP software to select. Second, in order to minimize the need for customization, a consulting company is needed to help the next stages in the ERP life cycle. Third, the price, training and maintenance services need to be analyzed. Finally, in this stage, the return on the investment of selected products needs to be analyzed. Consultants assist in the implementation methodologies, know-how and training of the customization and adaptation of the ERP package in the third stage. The fourth stage is mainly to return expected benefits by using the product and minimize disruption via maintenance, such as correcting some malfunctions, optimizing requests and improving general systems. The evolution stage is to integrate more capabilities into the ERP system to provide new benefits, such as advanced planning and scheduling, supply-chain management, customer relationship management, and workflow. The last stage occurs when there are new technologies.

Figure 2.1 ERP life cycle

Adoption Decision

•Definition of system requirements •Goals and benefits

•Analysis of the impact of adoption at a business and organizational level

Acquisition

•Product selection

•Consulting company selection

•Factors definition, such as price, training and maintenance •Analysis of the return on investment

Implementat ion

•Customization or parameterization and adaptation of the ERP package

Use & Maintenance

•Use of the product •Malfunctions correction •Special optimization

•General systems improvements

Evolution

•Advanced planning and scheduling •Supply chain management

•Customer relationship management •Workflow

Retirement

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2.2 Critical success factors

According to Rockehart (1979), CSFs were those specifically distinguished areas that an organization needed to “get right” in order for the business to successfully compete and make the company remain competitive. In terms of an ERP implementation, the CSFs are those conditions that must be met in order for the implementation process to occur successfully (Finney, & Corbett, 2007). To quote some of the latest literature on this topic, there are more than 37 different CSFs in ERP implementation in Huang’s research (2012) and in the latest research of Shaul and Tauber (2013) the number of CSFs rose to 94. Other researchers’ studues, such as Umble et al. (2003); Somers et al. (2001); Fui-Hoon Nah et al. (2003), have been covered in these two papers, and Shaul and Tauber (2013) explained CSFs more in detail.

Figure 2.2 shows the 16 major fields of the classification for the 94 CSFs, namely implementation strategy, support of top management, enterprise system, software maintenance, data management, project management, project tracking, enterprise system selection process, change management, project team competence, organizational experience of major change, acceptance control, education and training, vendor, environment and user involvement (Shaul & Tauber,2013). These factors are too broad and difficult to understand. However, there are several sub-factors in these 16 fields which are more related to daily processes in ERP implementation (For details see appendix I).

However, these CSFs are not factors affecting the same organization, but summarized from all studies published in top information systems journals in the period between 1999–2009 and early 2010. Some researchers indicated that the CSFs can be different for different companies due to the various situations each company faced. As Boynlon et al. (1984) said, the CSFs have a relation with the operating activities in progress, which means the CSFs vary from company to company. Furthermore, Yingjie (2005) also indicated that the CSFs are affected by all kinds of company characteristics and some vendors provide very specific solutions to niche industries based on the characteristics of the operational environment (i.e. process and business) and enterprise size. Difference in size can also make the CSFs different, as shown by Doom et al., (2010). They indicated that the critical success factors for the implementation of ERP in a SME environment may differ substantially from ERP implementations in large enterprises (Doom et

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al., 2010), because the technological and organizational factors are the main factors which influence the ERP adaption in SMEs; meanwhile, large companies focus more on environmental factors (Ramdani et al., 2009). Therefore, company size and industry type can lead to the difference in CSFs among companies. The different CSFs in this study means that the CSFs are with different orders, based on the importance the CSF is for particular company, rather than totally different CSFs.

2.3 Classification of company scale and industry type

As mentioned before, there are presumed differences among companies of their CSFs, because of their size and industry type. In order to study in depth, the companies are divided into four categories, namely small and medium-sized service enterprise, small and medium-sized manufacturing enterprise, large sized service enterprise and large sized manufacturing enterprise. The classification of the companies is shown in Table 1. The size of the companies is simply determined based on the relevant regulation in EU law (2003/361/EC2) that the number employees in SMEs should be larger than 10 and smaller than 250 and the turnover between 2 million euro and 50 million euro. If the number of employees and turnover is greater than those limits, the company will be defined as a large enterprise.

‘Company industry type’ in this study means the company is either a service company or manufacturing company. In theory, the classification of economic activities has three conventional subdivisions. The primary sector covers the extraction of primary resources and agricultural activities. The secondary sector involves the transformation of primary resources into products. The tertiary sector covers services and administration activities, such as the activities in government, schools, and hospitals (Botta-Genoulaz et al., 2006). Therefore, manufacturing companies belong to the secondary sector of economic activities. Meanwhile, service companies are in the tertiary sector. Several differences between services and manufacturing industries have been identified in literature. The first, and also the most important one, is the tangibility of their output. The output of a service firm is often intangible, such as consultancy or maintenance. In contrast, manufacturers produce physical goods that customers can see and touch, such as the chemical and electronic industries (Kellogg &Nie, 1995). Secondly, service firms lack inventories. Thirdly, service companies are highly labor intensive (Verma & Young, 2000).They recruit people with specific knowledge and skills in the service disciplines that they offer, and cannot be replaced by automation. Meanwhile, although a manufacturing company can use automation instead of labor on their production line, lots of labor is still needed. Only small portion the labor in a manufacturing company needs a high level of education (such as in the Research and Development department). Most service companies do not have tangible products, but there are some exceptions, such as restaurants. It has been identified by Schmenner (1986) that all airlines, trucking enterprises and hotels are service factories; all hospitals and repair services are service shops; all retail businesses are mass service, whereas all doctors, lawyers, accountants and architects are professional service providers.

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Table2.1 Classification of companies

Small and medium company Large company

10 <Employees< 250 2 million < Turnover < 50 million

Employees> 250 Turnover > 50 millions

Service company Manufacturing company

Consultancy Training or maintenance

Healthcare (Fast food) restaurants

Etc Chemical Production Electronic industry Food industries Etc

2.4 ERP implementation success

ERP implementation success can be defined in different ways (Zhang et al., 2002). There are various definitions and measures of ERP success in literature. Delone and McLean (1992) define six dimensions of the success of information systems, including system quality, information quality, use, user satisfaction, individual impact and organizational impact. In addition, Duplaga and Astani (2003) have investigated many companies to find out how the companies themselves define success. The result shows that companies usually use six indicators to measure ERP implementation success: short duration of implementation, timeliness of implementation within the budget, maintenance of data integrity, the functionality of the system lack of disruptions to normal business, and user acceptance. However, implementation success is frequently defined in terms of the achievement of some predetermined goals, which normally include the duration of implementation, cost, performance, quality and safety (Lim and Mohamed, 1999). They are kinds of final targets of ERP implementation. Therefore, ERP implementation success in this study is also defined as whether the company has achieved its goal.

2.5 Concept model

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3. Methodology

In this section, the research design and methodology will be introduced. Firstly, a description is given about the research design of this study, providing the reason for choosing a literature study and introducing the research steps. Secondly, each step is interpreted in detail. Thirdly, the CSFs from different articles are translated, because they are described in different ways in different papers.

3.1 Research design

According to Seuring et al. (2005), a literature review fulfils two functions. First, it summarizes the existing state of research on a topic by identifying the main themes and issues, and thus providing a starting point for new research. Second, any scientific contribution has to be enfolded against the existing scientific knowledge and theories, and in this regard a literature review is a useful tool (Saunders et al., 2006). In addition, a literature study can combine qualitative approaches with powerful quantitative analyses (Duriau et al., 2007). The aim of this paper is to analyze the CSFs based on different company size and industry type, and then figure out the relationship between these CSFs and ERP implementation success. Therefore, the study is divided into two parts. The first part is to find these different CSFs for different kinds of companies, and the second part is to show the relationship between these CSFs and ERP implementation success. Furthermore, only the final results of literature (secondary data) are useful, not the original data from the case in the literature. In these respects, a literature study is conducted in this paper.

To design a literature study, according to Seuring et al., 2005, there are four steps, namely material collection, descriptive analysis, category selection, and material evolution. Based on these steps and considering the aim of this study, a three-step literature study has been applied (Figure 3.1). The following sections are going to explain each of these three steps.

Figure 3.1 Literature study steps (adapted from Seuring et al., 2005)

3.11 Data collection

In this step, the unit of analysis is determined, which is single academic papers. In order to provide a comprehensive bibliography of literature on CSFs in the context of ERP implementation, research through ERP literature was conducted. Literature published between

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2000 and early 2014 in the main information systems (IS) journals and supply chain management journals are reviewed. The Academic Journal Quality Guide by the British Association of Business Schools (ABS), lists top journals in these fields such as the Information Systems Research/ European Journal of Information Systems in IS journals and Journal of Operations Management in SCM journals3 (for others see Table 3.1). In order to maintain the high quality of research, papers from these journals are preferred.

Table3 .1 Search criteria, Journals and Database

Search criteria: Critical success factors, Factors, CSF, Success, Risk, ERP implementation Second criteria: SME, Small (medium), Large, service, manufacturing

Journals Database

European Journal of Information Systems Information Systems Journal

Information System Research

Industrial Management and Data Systems Journal of Operations Management

International Operation and Management Journal IEEE Journals

International Journal of Production Economics

Business Source Premier Web of Science

Academic Search Premier

To conduct research into these papers, databases as shown in Table 3.1 are used to search for articles related to ERP implementation. Table 3.1 also shows the key words used during the research. In addition, in the first part of the literature study, papers using a case study as their research method are preferred as then one can determine which type of company these CSFs belong to base on the case information.

3.12 Category selection

In this step, the analytical categories of literature are selected. The motivation for the choice of categories comes from the purpose of this research. In the first part of the literature study, there are four categories, namely small-medium sized service enterprise, small-medium sized manufacturing enterprise, large service enterprise and large manufacturing enterprise. These four categories can assist in finding the differences of CSFs among different kinds of companies. In the second part, the categories are the critical success factors list found in the first part. These categories can help determine the relationship between the CSFs and ERP implementation success.

3.13 Data analysis

In the first part of the literature study, the process of analyzing papers is shown in Figure 3.2. First, the papers are found based on the research criteria. Second, these papers are divided by

3

Data from website http://www.associationofbusinessschools.org/sites/default/files/Combined%20Journal%20Guide.pdf

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company size and industry type. The CSFs from these papers are then categorized based on the company size and industry type. Then the CSFs mentioned in these papers need to be sort out by the classification of companies. Finally, the CSFs are listed in the order of their appearance frequency in these papers, and then fill in the matrix based on different categories of the companies.

When Sun, Yazdani, and Overend (2005) addressed a framework to critical success factor assessment of ERP system implementation, and proposed a structured approach to help SME identify the key requirements that determine its achievement of ERP implementation, they analyzed data from six companies to solve the problem. When Doom, Milis, Poelmans and Bloemen (2010) study the CSF for ERP implementations in Belgian SMEs, they chose four companies as cases to research. In addition Sinder, da Silveira and Balakrishnan (2009) chose to use five companies as cases to study the CSF for ERP in SMEs. This study seeks to make a structured approach to help companies identify the key requirements that determine their achievement of ERP implementation, not only for SMEs but also large enterprises. Therefore, around five papers about the CSFs for each kind of company needed to be found.

Figure 3.2 Paper Assessment

In the second part of the literature study, papers are categorized by the CSFs which have been determined in the first part. Papers only mentioned these CSFs is insufficient, the relationship between CSFs and the result of ERP implementation need to be indicted, and then the papers are selected for the second part literature study. The papers selected refer to the relationship between each CSF and ERP implementation success will be presented and in the end combination of the two parts of literature study can prove the concept model of this study.

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3.2 Translation of CSFs

The results of CSFs listed in literature need to be reviewed to draw conclusions for this study. Sometimes, when several articles mention the same CSFs but with different words to describe it, then the translation of CSFs is needed. This paper aims to summarize the CSFs into 16 fields of CSFs; the main way to translate them is to cross-reference them with the 94 CSFs in the appendix I, and then find which field they belong to. Another way is to understand the similar meaning of the CSFs (shown in Table 3.2). Because of the great number of CSFs needed to translated, only the common ones are listed in the following table.

Table3.2 Overview of Operationalization of Variables

CSFs Operationalized CSFs

Support of top management Top management support

Top management commitment and support Implementation strategy

ERP strategy

Clear goals and objectives Business plan and vision

Project management Project schedule and plans

Communication plan Communication

Effective communication Team morale and motivation

ERP teamwork and composition Training and education Education on new business process

User training Consultant selection and relationship Use of consultants

Vendor partnership

3.3 Research Quality

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4. Result of the literature study

This search yielded 229 articles, including 10 proceeding papers (shown in Appendix II). The full text of each article is reviewed to eliminate if they were actually related to CSFs of ERP implementation. Articles are excluded if they are not in English and study in psychological field; only studies in the computer/ IT, SCM/logistic, and management fields are included. As literature study is divided into two parts, the results are also presented separately.

4.1 CSFs Matrix

In the first part, articles using case studies to research CSFs of ERP implementation are examined. The numbers of employees and which type of industry the company belongs to should be clearly defined in the case description. Articles consulted include five large manufacturing cases, five large service cases, six small-medium sized cases and two small-service sized cases. These articles are used to examine whether the CSFs are different based on the size and industry type of a company. The CSFs in each article are described in a different way, and need to be ‘translated’ to comparable terms (see Appendix III) using the translation mentioned in the previous part. Some of these articles are multiple-case studies, but the authors have analyzed the CSFs for each case, and therefore each case can be used separately. The results of the first part of literature review are shown in Table 4.1: the frequency of appearance of each CSF for each kind of company has been listed. For instance, the factor implementation strategy has been mentioned 1 times in small-medium sized service enterprises, 6 times in small-medium sized manufacturing enterprises, 6 times in large service enterprise and 3 times in large manufacturing enterprises. In addition, 0 in Table 4.1 means that the CSF is not mentioned.

Table 4.1 Appearance frequency of CSFs

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particular type of company is only seven. Compared with the other categories, this is too few. Therefore, only the first seven CSFs among the four categories are listed (Figure 4.1). However, there are CSFs tied for the seventh place in the other three kinds of company, therefore there are 8 CSFs for these three categories (Figure 4.2). In Figure 4.2, the four quadrants present the CSFs of large sized service enterprises, large sized manufacturing enterprises, small-medium sized service enterprises and small-medium sized manufacturing enterprises.

Figure 4.2 CSFs matrix

- Implementation strategy - Support of top management - Project management - Change management

- Enterprise sysetem selection - Project team competence - Project tracking

- Vendor

- Project management - Education and training - Implementation strategy - Support of top management - Change management - Project team competence - Enterprise system - User involvement

- Enterprise system selection - User involvement

- Implementation strategy - Support of top managemnt - Project managment - Project tracking - Education and training

- Implementation strategy - Support of top management - Education and training - Project management - Enterprise system selection - Project team competence - Organizational experience of major change

- User involvement

Large sized Enterprise

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Ente

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Serv

ice Ent

erpr

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4.2 Relation

From the findings based on the appearance frequency of CSFs for all kinds of companies (Table 4.1), all the 16 fields of CSFs influence ERP implementation success, but in this study only the factors with higher frequency are studied (as shown in Figure 4.2). How they influence implementation success and what the relationship is between the CSFs and implementation success is unknown. Subsequently the second part of the literature study has been completed. After reading all the 229 articles, 46 of them are closely related to this topic (Appendix IV). In Table 4.2, the result of second part literature study is shown. The numbers in the left column refer to the 46 articles; each number is one-to-one mapping to the articles show in Appendix IV. For example, 1 means the paper named ‘Vicious and virtuous cycles in ERP implementation: a case study of interrelations between critical success factors’. The first row in Table 4.2 lists the twelve CSFs, and the ‘√’ in the table means that the articles have indicated the positive relationship between the CSF and ERP implementation success. For instance, article No.1 has mentioned that CSFs such as implementation strategy, support of top management, enterprise system, project management, project tracking, enterprise system selection, project team competence, education and training and vendor have positive relationship with ERP implementation success.

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5. Discussion

In this section, the similarity and difference between each category has been presented and the reasons for the differences are discussed. In addition, how these CSFs influence ERP implementation are discussed.

5.1 The similarity among these quadrants

When comparing each type of company, the implementation strategy, support of top management and project management are always the CSFs affecting ERP implementation, which means that these three CSFs are not influenced by the company size and industry type. However, they are critical to an enterprise.

Implementation strategy

The implementation strategy includes the goal and strategy of ERP implementation, the use of consultants, the implementation perspective and so on (Shaul et al., 2013; Akkermans et al., 2002; Woo, 2007). The implementation strategy is vital in the ERP adoption phase; in this phase, after diagnosing the current situation of the company, the new goals and strategy are carried out and then the benefits of achieving the new goals are visualized. Ensuring this step can facilitate a good start for ERP implementation.

Support of top management

The support of top management represents the project champion, the support of CEO, the willingness to become involved, allocating valuable resources and so on (Shaul et al., 2013; Dezdar et al., 2009). The support of top management is instrumental during the whole ERP implementation phase and strong leadership may help the processes of ERP implementation go smoothly (Doom et al., 2009).

Project management

Project management is also a factor appearing with high frequency, but always a little less so than implementation and the support of top management. The project management contains the project plan, the management of expectations and risks, the management of legacy systems and etc. (Shual et al., 2013; Akkermans et al., 2002). Project management is very important for ERP at the implementation stage. During the implementation process, a clear and defined project plan means a map, telling everyone involved what to do. There are many risks and conflicts often arise during the process; how to deal with these unexpected conditions is also important to the ERP implementation.

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5.2 The impact of size and industry type on CSFs

Table 5.1 The Difference between Companies

LS vs. LM SME Service vs. SME Manufacturing

Industry type

Project tracking Project tracking

Enterprise system selection Project team competence

Vendor Organizational experience of major change Education and training

Enterprise system

User involvement

SME Service vs. LS SME Manufacturing vs. LM

Size

Change management Change management Education and training Enterprise system

User involvement Enterprise system selection

Project team competence Organizational experience of major change Vendor

SME Service vs. LM LS vs. SME Manufacturing

Industry type & Size

Enterprise system selection Vendor

Project team competence Education and training

Enterprise system Organizational experience of major change User involvement

Table 5.1 above shows the differences between CSFs after making a comparison between companies classified by their industry type or size or both industry type and size. Each comparison includes two groups of companies. The CSFs become dependent factors only when the CSFs are mentioned by both of the two groups. Otherwise, the CSFs are relatively independent factors by the classification. Consequently, project tracking and change management are the two CSFS significantly affected by industry type and company size separately; all the other CSFs are more independent of the classification of companies. The result of this study cannot reveal which factors influence these relatively independent CSFs, company size or industry type or both of them. However, all of them will be discussed in following part.

5.11 Dependent CSFs on industry type or company size

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According to the result of literature study, project tracking is more important to service companies compared to manufacturing companies, regardless of the scale of the company. Project tracking is driven by the total quality management approach, interdepartmental communication, interdepartmental coordination and so forth. The internal allows more communication between employees through new systems, which can increase the level of project tracking. Project tracking mainly consists of interdepartmental communication and coordination of the enterprise. Compared to service companies, manufacturing companies have the physical product, which makes the employees inside the companies much more easily to communicate each other. Therefore the project tracking is much more important to service companies.

Change management

As stated in the result of the literature study, change management is a factor more important for large companies than smaller ones, no matter which industry type they belong to. Change management includes the change management program, understanding the political structure and understanding the organizational culture. Smaller businesses generally have fewer layers of management than larger businesses, which makes their decision making and communication relatively easy. In contrast, a larger business has a complex political structure, which needs to be given more consideration when adapting to change. Furthermore, organizational culture has been considered a powerful and stable force in organizations (Schein, 1985), and viewed as a source of sustained competitive advantage (Fiol, 1991). The culture in small organizations was perceived to be significantly more supportive, innovative, competitive, performance oriented, and more prepared to take on greater social responsibility than the cultures in larger organizations (Gray, Densten & Sarror, 2003), which means that culture in small organizations typically offers more advantages compared to larger organizations. These two aspects make the change management important for large companies.

5.22 Relatively independent CSFs on industry type or company size

Enterprise system & Enterprise system selection

The enterprise system selection and enterprise system are the two factors related to the ERP system. Enterprise system selection has to do with the selection of ERP software package, fitting between the ERP system and business process. This factor is mentioned less often in large manufacturing enterprises compared to the other three kinds of companies, which means that it may be influenced by company size, industry type, or possibly both of them. As far as is known, service organizations were not the initial target customers for ERP software vendors (Botta-Genulaz et al., 206). Almost all the ERP software products are designed for manufacturing industries, especially large sized companies, for their resource planning. Therefore, when a service company or smaller sized company wants to apply an ERP system, choosing the right software is very important. Actually, there is no ‘right’ or ‘wrong’ software in the world; the right software in this context means that the ERP software is suitable for the organization, fitting to the organizational environment, the objectives of change and so on (Barki, Rivard & Talbot, 1993). A wrong decision in system selection can mark the start of the failure of the new ERP implementation.

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companies, it plays a more important role in large sized manufacturing companies. As mentioned above, the ERP systems were invented for manufacturing companies, so it is vital to decide what level of customization is needed when companies want to apply an ERP system. In addition, as large organizations with complex layouts of department, the organizational integration is important.

Vendor

The vendor is critical for large service enterprises compared with others. It mainly represents the vendor’s characteristics and support. ERP software were developed for manufacturing companies, so sometimes for service companies the ERP systems need to be customized; this depends on the support of the ERP vendor.

Project team competence

Project team competence is a less important CSF in small-medium service enterprises; meanwhile other companies believe it is important. Usually, ERP implementations in large organizations are more complex and thus need more time (Laukkanen, Sarpola & Hallikainen, 2005). ERP implementation in small-medium sized enterprises is the other way around. Therefore, small service companies need few ERP implementation teams to apply the new ERP system. The balance and cooperation across these functional teams is not a problem if there are few teams. In addition, service enterprises always need the help of consults or vendor support, which can reduce the importance of the project team competence of their own companies. All the reasons above may make project team competence a relatively unimportant factor to a small-medium sized service company.

Education and training

Only few organizations have the experience in-house to run a large-scale integrated solution such as ERP implementation (Shual et al., 2013). Most companies need to be well-trained to obtain knowledge on how the new systems work. However, education and training is the factor with lowest appearance frequency in small-medium sized companies and does not even appear in the top CSFs in large service companies. The education level of labor is the most important reason to cause this status. There is a demand in large service companies, such as public administration, consulting company, for employees with higher education and skills for the job. Meanwhile the labor needed in manufacturing companies mainly consists of workers for production lines, which generally does not need too much knowledge. Therefore, when changes happen, such as new ERP systems being applied, employees in manufacturing companies need more training compared to service companies.

Organizational experience of major change

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enterprise. Therefore the former experience of change is not as important for service enterprises. Organizational experience of major change is one important CSF for small-medium manufacturing enterprises, but not crucial to small-medium service enterprises. The company size and industry make this factor of particular significance for small-medium sized companies only.

User involvement

Small-medium service enterprises need to pay attention to user involvement while large manufacturing enterprises do not. User involvement represents users’ participation in the overall process, whether the user uses the system according to guidance, enhancing users’ trust and using ERP to fulfill cross-functional areas. In large manufacturing companies, there are always new technologies that need to be applied and employees are used to adopting new technologies compared to employees in small-medium companies. Very often, users are afraid that ERP implementation will change their ease of use, job status, importance, responsibilities and access to valuable information and eventually job security (Shual et al., 2013). User participation can influence user involvement and the more in-depth the user involvement, the more information he will know about ERP implementation. Therefore, employees in small-medium sized companies need pay more attention to involving people in the change.

On the basis of discussion made above, it is clear that industry type can affect the factor project tracking; meanwhile, company size influences the factor change management. For the other factors, there may be many other elements that have an impact on them. The result of the literature study cannot significantly prove that the different CSFs for various kinds of enterprise are caused by company size, industry type or both of them. However, the possible reasons that may lead to this result have been discussed.

5.3 Relation

The result of the second part of the literature study has verified the positive relationship between these CSFs and ERP implementation success. The following parts will discuss how these factors influence the implementation.

Support of top management

The decision to implement an ERP system comes from the top management (Woo, 2007). In addition, the commitment of the leadership at the top management level is necessary for change in organizations. The support of top manager form each department, such as the finial department can help with the cost plan of new project. However, if the level cooperation between the top management and employees is poor, the company cannot achieve its goals of ERP implementation (Somers et al. 2001).

Implementation strategy

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project governance to assure that investment in ERP systems achieved business goals (Sumner, 2009).

Project management

Project management is extremely critical to the implementation of ERP systems. The top management raises the idea of applying a new system and discusses the implementation strategy, but the managers in charge of project management are the ones who actually make the detailed plan for implementing new systems (Shual et al., 2013). If the scope of the project is too broad or ambitious, it can lead to the system being unable to reach the goals. During the process of applying ERP systems, many expected and unexpected problems or complications may arise, and how the project managers manage and cover these challenges will influence the implementation result (Woo, 2007).

Enterprise system selection process & Enterprise system

Morton and Hu (2008) submit that the integration and standardization imposed by most ERP systems may not be suitable for all types of organizations and thus the ‘‘ﬁt’’ between the characteristics of the adopting organization and the standardized business process designs embedded in the adopted ERP system affects the likelihood of implementation success or failure. Furthermore, system integration means ‘capability to integrate a variety of different system functionalities’ (Lee et al., 2003). A tightly-integrated ERP system can make the information highly visible and improve the decision making, which can improve the operations and lead to better control of costs and other resources; thus, the result of ERP implementation will be better (Ram et al. 2013).

Change management

Change management is an essential factor that affects the implementation from the very beginning and throughout the entire life cycle (Fui-Hoon Nah et al., 2003). Organizational culture, as part of change management, affects the knowledge creation, storage, transfer and application in the ERP implementation (Palanisamy, 2007). For instance, creating an open environment by accepting new ideas enables the employees to be more informed and efficient. Furthermore, a better change management can reduce the resistance to change (Sumner et al., 2009). If these two aspects are successfully combined, the result of ERP implementation will be improved.

Education and training

Education and training in ERP implementation refers to the process of providing management and employees with the logic and overall knowledge of ERP systems (Zhang et al., 2002), which helps the employees have a better understanding of the new systems. In addition, education and training should be a priority from the beginning of the project (Fui-Hoon Nah et al., 2003). If the users lack training or do not fully understand the new business processes after change, the ERP implementations may face failure (Somers et al. 2001).

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User involvement usually represents the participation of user groups during the implementation process (Zhang et al., 2002). There are two kinds of user involvement. One is the involvement in the decision-making stage of the company’s ERP system needs, and the other is participation during the implementation process of ERP systems (Zhang et al., 2002). Both types of involvement lead the employees to feel they are the person who chose and made the decision, which can reduce resistance to change, and improve the possibility of ERP implementation success.

As the result of both two steps of literature study (Figure 5.1), project tracking is only influenced by industry type; meanwhile, change management is only affected by company size. Furthermore, project management, implementation strategy and support of top management are three important factors to all kinds of companies, which are not affected by industry type or company size. The other factors may be influenced by either the size or the industry type, or even both of them. All these factors are positively related to the ERP implementation success.

Company size

Industry type

Support of top management Implementation strategy

Project management

Change management Project tracking

Project team competence Change management

Vendor Enterprise system Enterprise system selection

User involvement Education and training

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6. Conclusion

6.1 Conclusion

ERP systems are increasingly used because of the two major benefits they bring to a company: (1) a unified enterprise view of the business that encompasses all functions and departments; and (2) an enterprise database where all business transactions are entered, recorded, processed, monitored, and reported (Dillon, 1999). The research question of this paper is what are the CSFs based on company size and industry type, and what is the relation between these CSFs and ERP implementation success. Relevant literature was reviewed to find the factors that will influence on the successful implementation of ERP systems. There are 94 CSFs which can be divided into 16 fields. In the first part literature study, the appearance frequency of these 16 CSFs has been checked in several cases. The result shows that depending on company size and company industry type, these CSFs have different levels of importance. The three most important factors, implementation strategy, support of top management and project management, are not affected by the company size and industry type. The factor of project tracking is strongly influenced by industry type, whereas the company size is significant in affecting the factor of change management. Other factors are possibly impacted by the size and industry or both of them. All these CSFs with high appearance frequency positively influence ERP systems implementation success.

6.2 Theoretical and Managerial Implications

The findings of this paper have several theoretical implications. Firstly, this paper fills the gap of existing literature by studying CSFs of ERP implementation from a new demission— combination of company size and industry type. Second, this paper summarizes the positive relationship between the CSFs and ERP implementation success from publications delivered in recent 15 years.

The primary managerial implication of this paper is that it provides managers a overview of CSFs for different kinds of companies. If the managers know their company type, they can insight into what CSFs influence their companies and how these CSFs affect the ERP implementation success, and thus pay more attention on these factors to improve the ERP implementation success rate.

6.3 Limitations

Firstly, the limitation of time for this study, only 4-months is not enough to study several ERP implantation cases from the beginning stage to the end result in real life. Only literature study can help with this situation. So the information got is only based on the literature, not real life case. Therefore, the reasons for causing such kind of result cannot be clearly interpreted.

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found, which is too few compared with other kinds of companies. This directly makes result of the CSFs for small-medium service enterprise not good.

6.4 Suggestions for Further Research

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The Analysis of Critical Success Factors of ERP Implementation Based on Company Size and Industry Type: a Literature Review