Among the core areas of information management is Enterprise Resource Planning, which is a concept that was first embraced during the early 80s. It was used to merge the functions of finance, manufacturing and business logistics, and was mostly implemented with a sole objective of facilitating the execution of business level strategies such as purchasing, production and sales (Effy, 2008). This means that the adoption of Enterprise-Wide Resource planning influences the business functions and strategies that an organization uses. Business enterprises are increasing their reliance on information technology systems to facilitate the execution of the business processes in this competitive era. Information technologies systems can used merge the functions of finance, manufacturing, supply chain, and business logistics. IT systems can be integrated as a whole as in the case of ERPs or deployed independently in order to meet the specific requirements of the business functional unit.
Despite the fact that the adoption of ERP systems is increasingly becoming a common concept in the modern business world, its successful implementation is a significant constraint that poses as a challenge to many organizations in the present business context irrespective of the high costs associated with implementation that sum up to approximately 3 percent of the entire revenue. Alexis ( 2007) argues that most of this failures during ERP implementation cannot be attributed to software malfunction or bad coding, rather organizations have failed significantly in matching their needs and business requirements with the deployed business solutions. Alexis further gives an breakdown analysis of the costs of ERP implemetation and argues that 40 percent of the implementation costs are system-based while 60 percent of the implementation costs are usually associated with employee training and provision of other proffessional services in the course of system usage. The software module for ERP implementation costs only 15 percent of the implementation costs. An inference that can be made from this observation is that ERP implementation in most cases is influenced by software selection, which poses a significant risk of cost overruns for organizations that do not take into consideration the actual ERP implementation. This is because ERP information management systems are not a one-size-fits-all. This means that ERP systems do not meet all of the information needs within an organization (Aloini & Ricardo, 2006). Good ERP systems are particularly developed for the industry that it will be used. This is vital because an organization risks having an ERP system that is entirely useless if it is not compatible with the business needs. This can be eliminated by an accurate needs analysis in order to eliminate the potential of an organization falling into this risk (Alexis, 2007).
Aloini & Ricardo (2006) also notes that irrespective of the high investments during ERP project implementation, they are usually constrained by cost and planning overuns, employee resistance towards a change in the business process and organizational culture, inadequate skills regarding the use of IT systems and a perceived less Return on Investment with regard the benefits associated with ERP implementation (Aloini & Ricardo, 2006).
A potential risk associated with the implementation of ERP systems within an organization is software stability issues. This usually occurs when there is inadequate needs assessment prior to the implementation of the ERP information management systems (Aloini & Ricardo, 2006). In addition, the business needs and scope of operation are likely to change, and so does the need of information technology frameworks implemented within the organization, this means that ERP systems are likely to become less functional as the business needs, goals and objectives changes over time. In addition, this can result to an inadequate BPR, because an incompatible ERP system implementation may not be compatible with the needs of the organization and the business processes. This poses the need for software module modification, which is costly in terms of maintenance and restructuring of the organizational processes according to the functionality of the software module. Failure to take into consideration the business requirements and processes is a potential risk to the organization. Another significant risk associated with the implementation of ERP is that that people are somewhat connected to the present information management frameworks and they are more used to the present state of affairs, initiating change is therefore bound to cause tension within the organization and will instill an element of resistance towards the implementation of change of any perspective (Aloini & Ricardo, 2006).
Past research studies have attempted to identify critical success factors associated with the implementation of ERP systems within business organizations. Gary et al (2002) identifies a comprehensive needs analysis as a CSF during the implementation of an ERP system within an organization. This is because needs analysis offers an important meaning to the adoption of ERP system through facilitating the identification of critical organizational processes that require the implementation of knowledge management. Therefore, an ERP system implementation strategy requires recognizing the core performance indicators of the organizational success factors in order to serve as a framework for measuring the performance of the ERP system. Another important consideration is that employee involvement vital in ensuring the successful implementation of a ERP system (Aloini & Ricardo, 2006).
The commitment of the top management is also critical in guaranteeing a successful implementation of ERP systems in an organization. With this respect, the commitment from the top management of the organization plays an integral role in ensuring that the ERP system being adopted receives a positive response from the organizational members (Aloini & Ricardo, 2006). Performance measurement is also important during the implementation of ERP systems within an organization. Performance measurement primarily entails gathering relevant data regarding the productivity and efficiency of the people within an organization, functional units and the entire organization. Research studies have reported a positive correlation between performance measurement and the successful implementation of ERP systems, implying that it is vital to incorporate performance measurement as a core requirement during the implementation of ERP systems. Other significant consideration during adoption of ERP systems include elimination of organizational constraints, benchmarking and the establishment of information systems that meet business needs, goals and objectives (Aloini & Ricardo, 2006).
References
Alexis, L. (2007). Enterprise Resource Planning. New Delhi: Tata McGraw-Hill Education.
Aloini, D., & Ricardo, D. (2006). Risk management in ERP project introduction: Review of the Literature. Information and management , 549-558.
Effy, O. (2008). Management Information Systems. New York: Cengage Learning.
Gary, S., Goguen, A., & Alexis, F. (2002). Risk Management Guide for Information Technology systems. Washington: National Instutute of Standards and Technology.