Journal of Enterprise Information ManagementFactors influencing ERP implementation in retail sector: an empirical study from IndiaPoonam Garg Atul Garg

Article information:To cite this document:Poonam Garg Atul Garg , (2014),"Factors influencing ERP implementation in retail sector: an empiricalstudy from India", Journal of Enterprise Information Management, Vol. 27 Iss 4 pp. 424 - 448Permanent link to this document:http://dx.doi.org/10.1108/JEIM-06-2012-0028

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Factors influencing ERPimplementation in retail sector:an empirical study from India

Poonam GargDepartment of Information Technology,

Institute of Management Technology, Ghaziabad, India, and

Atul GargTata Consultancy Services, Noida, India

Abstract

Purpose – The purpose of this paper is to explore the factors influencing the enterpriseresource planning (ERP) implementation success in Indian retail sector. Additionally, the study alsoaddresses the relationship between factors that influence ERP implementation and the success ofERP implementation empirically. Strategic, Technological, People and Project management are theexamined factors.Design/methodology/approach – Empirical data were collected through survey questionnairefrom practitioner like project sponsors, project managers, implementation consultants and teammembers who were involved in ERP implementation in retail sector.Findings – The results of the study has empirically verified that Strategic, Technological, People andProject management factors are positively influencing ERP implementation success. All fourhypotheses were supported by results of the study.Practical implications – This study will provide valuable insights to researchers, practicingmanagers and those who are planning to implement ERP in retail organization.Originality/value – Very few empirical studies have been performed to investigate the influencingfactor of ERP implementation and types of relationships between factors that influence ERPimplementation and the success of ERP implementation in Indian retail sector. This study examines howStrategic, Technological, People, and Project management factors are influencing ERP implementationsuccess in retail sector of India. Therefore, the research can make a useful contribution.

Keywords Enterprise resource planning (ERP), Retail, Cause-and-effect diagrams

Paper type Research paper

1. IntroductionEnterprise resource planning (ERP) has become a key business driver in today’sworld. An ERP system is a software architecture that connects information amongthe different functions of an enterprise, when implemented successfully. The differentorganizational silos (which often function separately irrespective of dependencies) arethen able to use the flow of seamless integration of information and utilize it topresent an enterprise-wide “big picture” to the decision makers. This enables thedecision-making process to be timely, consistent and reliable across organizationalunits and geographical locations. The hallmark of a successful ERP implementationlies in the long-term efficiencies (increased productivity and speed of execution) thatare gained due to information integration underpinned by elimination of redundantinformation and resulting cost savings. Over the past few years, firms around theworld have implemented ERP systems since the use of ERP has been considered asa major determinant to gain competitive advantage. ERP is a suite of applicationmodules that can link back-office operations to front-office operations as well as

The current issue and full text archive of this journal is available atwww.emeraldinsight.com/1741-0398.htm

Received 4 June 2012Revised 26 October 201216 January 201321 January 2013Accepted 24 January 2013

Journal of Enterprise InformationManagementVol. 27 No. 4, 2014pp. 424-448r Emerald Group Publishing Limited1741-0398DOI 10.1108/JEIM-06-2012-0028

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internal and external supply chains (Yang and Su, 2009). Considering the benefitsmentioned previously, it is easy to see why ERP systems are accepted to be one of themost significant developments in the world and also the most accepted standardbusiness software of the last decade (Muscatello and Chen, 2008). For effective businesscommunication with their customers, vendors and suppliers they need to adopt to thedata formats that the global organizations use. Also, they need to meet the compliancerequirement of their customers’ countries. This is possible if there is a seamless flow ofinformation across the organization (Soja, 2006). It has been observed that the effectiveimplementation of such a system in retail segment can bring about many benefits. Themost generalized ones being, cost reduction, productivity and quality improvement,better resource management, improved decision-making and planning, and organizationalempowerment (Federici, 2009; Kamhawi, 2008).

Market liberalization and changing consumer behavior have shown the seeds of aretail transformation. Indian retailing is growing fast and imparting the consumerpreferences across the country. The retail sector is the largest sector in India afteragriculture, accounting for over 10 percent of the country’s GDP and 8 percent ofemployment. Over the last few years, Indian retail industry is one of the rapidlygrowing industries in India. Unlike the initial phase, the retail industry was not veryorganized, however, with the changes of tastes and preferences of the consumers.These days, the industry is getting more popular and getting organized as well. Theretail industry in India is currently growing at a great pace and is expected to go up toUS$833 billion by the year 2013 (www.indiaretailing.com).

The importance of ERP implementation is more highlighted when it comes to retailsector. Retailers are also trying to reap in the benefits of the technology. Retailers areusing ERP for product planning, parts purchasing, maintaining inventories, interactingwith suppliers, providing customer service and tracking orders. With ERP, retailers cansave money in maintaining inventory, reduce the respondent time to the marketingdemand, and get competence. Retail organizations are increasingly implementing ERPsolutions to improve operations and provide faster customer response. ERP systems arehuge and complex, involve substantial investments of time and money and bring aboutconsiderable organizational change and thus, warrant careful planning and execution forsuccessful implementation (O’Leary, 2004). Moreover, they are not purely softwaresystem and neither is their implementation merely an IT project. An ERP system affectshow a business conducts itself and an organization’s business processes, people’s jobsand information flows (Somers and Nelson, 2001).

As can be seen successful ERP implementation is an expensive proposition. Theconsequences of failure would be disastrous. In spite of great advancements in softwaredevelopment, ERP failure is fairly common. There exist different stories regardingsuccess and failures of ERP implementation. Thavapragasam and Zhang mentionedthat 75 percent of the ERP systems are failed; Parr said that many ERP systemsimplementation were not completed on time, and within budget. The past studies reflectthat failure percentage of ERP systems is ranging from 40 to 90 percent (Zhang et al.,2003; Parr and Shanks, 2000; Thavapragasam, 2003). It is evident in the past researchthat 90 percent of ERP systems implementation was found behind schedule or overbudget whereas the success rate is approximately 33 percent. A survey of 117 companiesinvolved in ERP implementation lead to the finding that 25 percent ERP projects wereover budget, 20 percent were terminated before implementation and 40 percent ofthe respondents confirmed that ERP projects’ failed to achieve business objectives(Fitz-Gerald and Carroll, 2004).

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As failure rate of ERP implementation is so high and the consequent impacts are sodamaging to business, there is a compelling reason for investigating the factors whichmay influence the success of ERP implementation in organizations (Somers andNelson, 2001; Singh and Wesson, 2009). It is imperative for organization to study theexperiences of others and learn from their practices and influencing factors. With thisin mind, an empirical study was undertaken to provide some insight into those factorsthat may influence the ERP implementation success. Specifically, the research objectivesof the study are:

. identify the factors that influence the ERP implementation in Indian retailsector; and

. the relationship between factors that influence ERP implementation and thesuccess of ERP implementation in Indian retail sector.

This paper is organized as follows. Section 2 describes the theoretical backgroundand literature review on factor influencing ERP implementation. The third and fourthsection of the paper describe the research model and hypothesis and methodologyadopted for this paper. The fifth section presents the data analysis and results.The next section presents the result discussion and recommendations. Conclusion,limitation and further direction of research are presented in the last section.

2. Theoretical background and literature reviewIn retail-based business, integration of the various business functions is an essentialprerequisite. A numbers of retail chains in India have already invested in ERP systemto improve their businesses. Retail chain in India heavily rely on ERP to track thesupply chain, financial process, inventory, sales and distribution, overall visibility ofthe consumer across every channel and take customer centricity to a new level.However, many retailers in India are still using various islands of automation whichare not integrated with each other to manage their core business functions. Thisstrategy can results in somewhat lower levels of effectiveness and efficiency.Implementation of ERP systems is a highly complex process which is influenced notonly by technical, but also by many other factors. Hence, in order to safeguard thesuccess of ERP implementation it becomes imperative for the retailers to get a deeperinsight into the factors which influence the ERP implementation.

To assist the understanding of influential factor of ERP implementation, cause-and-effect diagram was constructed. A cause-and-effect diagram is a tool that can be used torepresent the relationship between some effect that could be measured and the set ofpossible causes that produce the effect (Berenson and Levine, 1996). The technique wasoriginally developed by Kaoru Ishikawa in the 1960s and is also called an Ishikawadiagram (Ishikawa, 1985). Other names used to refer to the tool include Fishbonediagram (because of the way various causes are arranged on the diagram) and a rootcause analysis diagram (because of the ability to identify possible root causes for aspecific effect or problem). Cause-and-effect diagram was constructed by showing theeffect or problem on the right hand side of the diagram and the major causes listed on theleft hand side. The causes are often subdivided into a few major categories depending onthe problem under investigation. Berenson and Levine (1996) referred to examples ofcategories such as manpower, methods, materials and machinery that can be used.Within each major category, specific causes are listed as branches or sub-branches.Cause-and-effect diagrams offer a number of advantages and are often used when there is

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a need to understand certain processes, determine root causes to specific problems, oridentifying areas for data collection, etc. (Chang and Lin, 2006; Suwignjo et al., 2000).

The nature of the problem in this study can be summarized by any one of thefollowing statements: “what factors influence the ERP implementation?” Cause-and-effect diagram seems to be an appropriate option to analyze the factors influencingERP implementation. The problem was simply formulated as “factor influencing ERPimplementation.” The next step was to identify the main possible causes for theseproblems (the effect to be investigated) in order to complete the branches of the diagram.The establishment of causes was based on items identified from the literature survey andgroupings were obtained through factor analysis performed during the pilot studies.

A consolidated list of influencing factors that are most cited in literatures, byvarious authors is shown in Table I.

Subsequent to literature survey, for identifying the causes of “factor influencingERP implementation” a pilot study was conducted with a small sample size tounderstand the possible items of causes which may influence the ERP implementationin Indian retail sector. For pilot study, an initial draft questionnaire was developedcontaining the 29 items (questions) identified from the literature. These 29 items wereincorporated into a survey questionnaire, it asked the respondents to indicate thedegree they considered each item a critical failure factor by using a five-pointLikert-type scale, with 1 being “strongly disagree” and 5 being “strongly agree.”Dornyei (2007) believed that in questionnaire construction process “some externalfeedback is indispensable when we have prepared an initial item pool.” At this point,the questionnaire with 29 items was sent to the five ERP experts to get externalfeedback for the content of items and as well as wording of questions, made sense andalso to verify that the web application operated correctly. Dornyei alleged that“question that have been used frequently before must have been through extensivepiloting.” As an integral part of the questionnaire construction, field testing is used topilot the questionnaire at various stage of its development on a sample of people whoare similar to the target samples for which the instrument has been designed (Dornyei,2007). The questionnaire was piloted with 15 ERP consultants. The data gatheredthrough the questionnaire were processed through a statistical software program,SPSS 17, for the factor analysis. Factor analysis is “designed to see whether each itemmeasured the subscale it was supposed to measure to look at construct validity” (Muijs,2004) and is particularly suited to reduce the numbers of variables to a few values thatstill contain most of the information found in the original variables (Kim and Mueller,1978). Kaiser (1974) recommends accepting values 40.5 as acceptable (values below thisshould lead you to either collect more data or rethink which variable to include). SPSSlists “Eigen values associated with each linear component before extraction, afterextraction and after rotation” (Field, 2005). As a result of first factor analysis, four itemswere removed because their factor levels were not as high as required as Kaiser (1974)mentioned. Later, the five experts were asked to get their further suggestion on the25 items. On the basis of suggestion made, the 25 items were administered by 35consultants. However, further four items that did not work as a result of the second factoranalysis were removed. As a consequence of a meticulous study, total eight items wereremoved from the questionnaire. Following several iterations of refinement, four causeswith 21 items were identified for the factor influencing ERP implementation.

As per factor analysis output the total items can be grouped into four categories:Strategic, Technological, People and Project management related factors which mayinfluence the ERP implementation in Indian retail sector. Figure 1 shows the final

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Sl. No. Critical factors Literature references

1. Business plan andvision

Nah et al. (2003), Holland et al. (1999), Rosario (2000), Wee (2000),Davenport (2000), Buckhout et al. (1999), Robert and Willcocks (2007),Mandal and Gunasekaran (2003), Somers and Nelson (2001), Jafariet al. (2006), Zhang et al. (2003), Ngai et al. (2008), Kumar et al. (2002)

2. IT legacy system Holland et al. (1999), Robert and Willcocks (2007), Al-Mashari (2002),Al-Mudimigh et al. (2001), Siriginidi (2000), Nah et al. (2007), Zhanget al. (2003)

3. Top managementsupport

Slevin and Pinto (1987), Aladwani (2001), Ngai et al. (2008), Hollandet al. (1999), Davenport (2000), Bingi et al. (1999), Buckhout et al. (1999),Robert and Willcocks (2007), Sumner (1999), Wee (2000), Yusuf et al.(2006), Nah et al. (2007), Garg (2010), Liang et al. (2007), Huang (2010),Kotter (1997), Mabert et al. (2003), Laughlin (1999), Brown and Vessey(2003), Bhatti (2005), Keil (1995), Woo (2007), Zhang et al. (2003),Almahdi et al. (2008), Jafari et al. (2006)

4. Business processreengineering

Hammer and Champy (1993), Somers and Nelson (2001), Holland et al.(1999), Robert and Willcocks (2007), Bingi et al. (1999), Rosario (2000),Sumner (1999), Wee (2000), Al-Mashari et al. (2006), Nah and Lau(2001), Soh et al. (2000), Bajwa et al. (2004), Aladwani (2001), Davenport(2000), Wood and Caldas (2001), Zhang et al. (2003), Singh and Wesson(2009), Markus and Tanis (2000), Ngai et al. (2008), Gattiker andGoodhue (2002), Mabert et al. (2003), Hein (2008), Garg (2010), Koch(2001), Huang et al. (2004)

5. Organizationalstructure

Hein (2008), Jha et al. (2008)

6. Knowledgeintegration

Soh et al. (2000), Jha et al. (2008)

7. Managing culturalchange

Shanks et al. (2000), Zhang et al. (2003), Kumar et al. (2002),Anderson et al. (2003), Densley (1999), Xin and Wenjie (2006),Bingi et al. (1999), Holland et al. (1999), Robert and Willcocks (2007),Rosario (2000), Somers and Nelson (2001), Wee (2000), Aladwani (2001),Stebel (1992)

8. User involvement Esteves and Pastor (2001, 2003), Zhang et al. (2003), Roseman et al.(2001), Al-Mashari et al. (2003), Hong and Kim (2002)

9. Data conversion andaccuracy

Sum et al. (1997), Markus and Tanis (2000), Xin and Wenjie (2006),Bajwa et al. (2004), Somers and Nelson (2001), Yusuf et al. (2006),Jha et al. (2008), Soh et al. (2000), Umble and Umble (2002)

10. Client consultation Holland et al. (1999), Al-Mashari et al. (2003), Al-Mudimigh et al.(2001), Mandal and Gunasekaran (2003)

11. Enterprise widechange management

Somers and Nelson (2001), Sumner (1999), Zhang et al. (2003), Ngaiet al. (2008), Stebel (1992), Nah et al. (2007), Siriginidi (2000), Wood andCaldas (2001), Bingi et al. (1999), Holland et al. (1999), Robert andWillcocks (2007), Rosario (2000), Stefanou (1999), Wee (2000),Shanks et al. (2000), Mandal and Gunasekaran (2003), Aladwani (2001),Boudreau and Robey (1999), Baskerville et al. (2000), Edwards andPanagiotidis (2000)

12. Enterprise widecommunication

Mandal and Gunasekaran (2003), Grant (2003), Holland et al. (1999),Ngai et al. (2008), Yusuf et al. (2004), Kumar et al. (2002), Rosario (2000),Sumner (1999), Wee (2000)

13. Education andtraining

Sum et al. (1997), Jha et al. (2008), Heikki et al. (2005), Esteves et al.(2003), Kumar et al. (2002), Mandal and Gunasekaran (2003),Bingi et al. (1999), Aladwani (2001), Siriginidi (2000)

(continued)

Table I.Influencing factorERP implementation

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cause-and-effect diagram for the factor influencing ERP implementation with the finalgrouping of causes in specific categories. During the rest of the paper, these four causesand their related items will be used for further hypotheses, questionnaire developmentand validation.

Sl. No. Critical factors Literature references

14. Team composition Buckhout et al. (1999), Bingi et al. (1999), Rosario (2000), Wee (2000),Sumner (1999), Robert and Willcocks (2007), Stefanou (1999), Somersand Nelson (2004), Shanks et al., (2000), Mandal and Gunasekaran(2003), Holland et al. (1999), Akkermans and Helden (2002), Loh andKoh (2004)

15. Project management Akkermans and Helden (2002), Somers and Nelson (2001), Rosario(2000), Holland et al. (1999), Wee (2000), Sumner (1999), Nah et al.(2007), Soh et al. (2000), Shanks et al. (2000), Zhang et al. (2003)

16. Scope management Parr and Shanks (2000), Suganthalakshmi and Mothuvelayuthan (2012),Holland et al. (1999), Nah et al. (2003), Jafari et al. (2006), Zhang et al.(2005), Ngai et al. (2008), Kumar et al. (2002), Rosario (2000)

17. Project champion Rosario (2000), Sumner (1999), Stefanou (1999), Mandal andGunasekaran (2003), Nah and Lau (2001), Somers and Nelson (2004),Siriginidi (2000), Shanks et al. (2000), Bajwa et al. (2004)

18. Standardization/flexibility/scalability

Colmenares (2009), Krumbholz et al. (2000), Newell et al. (2003),Sandoe et al. (2001), Fitzgerald (1998), Mabert et al. (2003)

19. Selection ofconsultant/vendors

Zhang et al. (2003, 2005), Bingi et al. (1999), Somers and Nelson (2001),Sumner (1999), Sedera and Dey (2006), Nah and Lau (2001),Shanks et al. (2000)

20. Testing andtroubleshooting

Wee (2000), Holland et al. (1999), Rosario (2000), Bingi et al. (1999), Nahand Lau (2001), Al-Mashari et al. (2006), Yusuf et al. (2006)

21. Monitoring andevaluation ofperformance

Holland et al. (1999), Al-Mashari et al. (2003), Al-Mudimigh et al.(2001), Robert and Willcocks (2007), Rosario (2000), Mandal andGunasekaran (2003), Nah et al. (2007)

22. Project teamcompetence

Loh and Koh (2004), Nah et al. (2003)

23. Minimalcustomization

Holland et al. (1999), Somers and Nelson (2001), Nah and Lau (2001),Parr and Shanks (2000), McCredie and Updegrove (1999),McConachie (2001)

24. ERP productselection

Wei and Wang (2004), Shehab et al. (2004), Everdingen et al. (2000),Sprott (2000), Umble and Umble (2002), Kraemmergaard and Rose(2002), Yusuf et al. (2006), Al-Mashari et al. (2003), Somers and Nelson(2001, 2004)

25. Expectationmanagement

Wee (2000), Somers and Nelson (2001), Colmenares (2009)

26. Implementationstrategy

O’Leary (2004), Suganthalakshmi and Mothuvelayuthan (2012),Gibson and Mann (1997), Brown and Vessey (1999), Markus and Tanis(2000), Parr and Shanks (2000), Robey et al. (2002), Umble and Umble(2002), Mandal and Gunasekaran (2003), Scott and Vessey (2000), Cliffe(1999), Gupta (2000), Motwani et al. (2002), Ngai et al. (2008), Hollandet al. (1999), Kraemmerand et al. (2003), Wenrich and Ahmad (2009),Allen et al. (2002)

27. Communicationwithin project team

Falkowski et al. (1998), Nah et al. (2003), Sarker and Lee (2003), Hollandet al. (1999), Wee (2000), Muscatello and Chen (2008)

28. Budget control Palaniswamy and Frank (2002), Ribbers and Schoo (2002), Rosario(2000), Holland et al. (1999), Wee (2000)

29. Adequate ITinfrastructure

Al-Mashari (2002), Yasser (2000), Jafari et al. (2006), Yusuf et al. (2006),Kumar et al. (2002), Holland et al. (1999) Table I.

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3. Research model and hypothesisAccording to the purpose of this study and factors identified from cause-and-effectdiagram (Figure 1), the following theoretical research framework and hypotheses wasdeveloped and shown in Figure 2.

3.1 StrategicBusiness plan and vision, top management support has been consistently identified asthe most important and crucial success factor in ERP system implementation projects(Somers and Nelson, 2001). A clear business plan and vision is needed to guide theproject throughout the ERP life cycle (Loh and Koh, 2004). Project managementidentifies three competing and interrelated constraints namely; scope, time and costgoals (Schwalbe, 2000). The primary stage of any project should begin with aconceptualization of the goals and possible ways to achieve these goals. Additionally,goals should be explained so they are specific and operational, and to indicate thegeneral directions of the project (Somers and Nelson, 2004). Nah et al. (2003) statedthat one of the biggest problems ERP project leaders face comes not from theimplementation itself, but from expectations of board members, senior staff, and otherkey stakeholders. It is important to set the goals of the project before even seeking topmanagement support. Many ERP implementations have failed as a result of lackingclear plans (Somers and Nelson, 2004). Top management support is the level ofcommitment by the senior management in the organization to the project in termsof their own involvement and the willingness to allocate valuable organizationalresources (Slevin and Pinto, 1987). They must be willing to allow for a mindset changeby accepting that a lot of learning has to be done at all levels, including themselves(Rao, 2000). Business process re-engineering (BPR) has emerged as one of the most forbest practices. BPR can be defined as the fundamental rethinking and radical redesignof business process to achieve dramatic improvement in critical, contemporarymeasures of performance, such as cost, quality, service and speed approaches (Koch,2001; Huang et al., 2004). To increase the chance of success, management must chooseappropriate software that most closely suits its requirements and due to this ERPsystems per se received a lot of attention in the last years; there are many ERP systemsresearch instances and quite a lot of reviews (e.g. Esteves and Pastor, 2001; Shehabet al., 2004). Proper package selection plays a crucial role in successful implementationof ERP Normally the organization selects a package which is most users friendly, hasadequate scope for scalability and covers an array of business processes whereorganization experiences problem. The selection of the specific ERP package is onethat requires careful attention (Kraemmergaard and Rose, 2002; Yusuf et al., 2006;Al-Mashari et al., 2003; Somers and Nelson, 2001, 2004). An essential part of the ERP

Strategic

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Figure 2.Conceptual model of

factors influencing theERP implementation

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selection process is the selection of the vendor who will supply the ERP system. Somecritical factors related to vendors include their skills and knowledge of their system,understanding of the requirements, constraints and concerns of the organization andits industry, vendors’ longevity and ability to meet future needs, and to support andassist in the implementation process (Verville and Halingten, 2003). Vendors should beevaluated on the basis of providing support ranging from technical assistance totraining. The ERP implementer-vendor partnership is a key success factor influencingERP implementation success (Nah and Lau, 2001; Zhang et al., 2005; Somers andNelson, 2001). Effective enterprise communication is critical to ERP implementation(Falkowski et al., 1998). Middle managers need to communicate its importance (Wee,2000). Employees should be told in advance the scope, objectives, activities andupdates, and admit change will occur (Sumner, 1999). Muscatello and Chen (2008)argued that suitable communication plans should be set up to keep senior managementinformed on the subject of ERP project impact, challenges, risks, and progress:

H1. Strategic related items are positively influencing the ERP implementation success.

3.2 TechnologicalThere are two distinctive implementation strategy of ERP implementation is foundin the literature. These strategy are termed the “phased” implementation and the“big bang” implementation (O’Leary, 2004). Depending on the organizational structure,the complexity of the organization, economical issues, strategic partners, timeconstraints and geographical locations (Markus and Tanis, 2000), the appropriateimplementation strategy should be selected. The big bang approach requiressimultaneous implementation of multiple modules of an ERP package, while a phasedimplementation consists of designing, developing, testing and installing differentmodules of the same ERP package. There should be an adequate IT infrastructure,hardware and networking are crucial for an ERP system’s success. It is clear that ERPimplementation involves a complex transition from legacy information systems andbusiness processes to an integrated IT infrastructure and common business processthroughout the organization. Hardware selection is driven by the firm’s choice of anERP software package. The ERP software vendor generally certifies which hardware(and hardware configurations) must be used to run the ERP system (Al-Mashari, 2002;Yasser, 2000). This factor has been considered critical by the practitioners and as wellas by the researchers (Bhatti, 2005). The “Vanilla” implementation approach is anotherimplementation approach that focusses on minimal customization of the ERP package(Holland et al., 1999) and has been found to be a common implementation approach(McCredie and Updegrove, 1999; McConachie, 2001). Mabert et al. (2003) findingsindicate that the most important motivations for implementing an ERP system are toreplace legacy systems and to standardize systems. Al-Mashari et al. (2006) examinesa company who approached the ERP implementation as a re-engineering initiativeto change the IT infrastructure because consultants suggested that the companyneeded to standardize information systems to take advantage of the re-engineeringeffort. The project ERP systems modules are intricately linked to one another,inaccurate data input into one module will adversely affect the functioning of othermodule (Sum et al., 1997; Markus and Tanis, 2000):

H2. Technological related items are positively influencing the ERP implementationsuccess.

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3.3 PeopleEducation and training provides (Ehie and Madsen, 2005; Sum et al., 1997)management and employees with the logic and overall concepts of ERP systems. Theusers should be trained through all stages of implementation and additional trainingshould be provided for new employees and those who take job rotations. The potentialimpact of providing training is less frustrated users with a clear understanding ofsystem usage which will save organization time and money ( Jha et al., 2008). ERPProject must be looked upon as change management initiative not an IT initiative andorganization should focus on change management strategies for effectiveimplementation (Wood and Caldas, 2001; Ngai et al., 2008; Robert and Willcocks,2007). Change management should be the effective balancing of forces in favor of achange over forces of resistance (Stebel, 1992; Siriginidi, 2000). In order to avoid theresistance of change, training is must. ERP requires changing management programsand culture. If the employees are open to sharing common values and goals and acceptthe change, it will be likely successful (Bingi et al., 1999; Somers and Nelson, 2001;Sumner, 1999; Zhang et al., 2003). The best practices innovative behavior of employeesmay be important an important measurement of ERP success (Lee and Lee, 2000).There have been strong indications that the benefits from an ERP implementationis actually derived from the change in the organization and that the ERP system is justan enabler for these changes (Martin, 1998). Some ERP literature has attemptedto investigate how organizational change can be best managed through an ERPimplementation (Boudreau and Robey, 1999; Baskerville et al., 2000; Edwards andPanagiotidis, 2000; Aladwani, 2001). User involvement is essential because it improvesperceived control through participating in the whole project plan. User involvement isone of the most cited critical success factors in ERP implementation projects (Zhanget al., 2005). User involvement increase user satisfaction and acceptance by developingrealistic expectations about system capabilities (Esteves and Casanovas, 2003):

H3. People related items are positively influencing the ERP implementation success.

3.4 Project managementERP teamwork and composition is important throughout the ERP life cycle. The ERPteam should consist of the best people in the organization (Buckhout et al., 1999; Bingiet al., 1999; Rosario, 2000; Wee, 2000; Loh and Koh, 2004). The team should have a mixof consultants and internal staff so the internal staff can develop the necessarytechnical skills for design and implementation (Sumner, 1999). The success of projectsis related to the knowledge, skills, abilities and experiences of the project manageras well as the selection of the right team members. Functional team consisting ofmix of consultants familiar with business processes and internal staff to definingCommunication (Mandal and Gunasekaran, 2003; Holland et al., 1999; Akkermans andHelden, 2002) among various functions/levels and specifically between business andIT personnel. Both business and technical knowledge are essential for success (Bingiet al., 1999; Sumner, 1999). Project schedule/plans are the formal definition of theproject in terms of milestones, critical paths and a clear view of the boundary of theproject. Effective project management allows companies to plan, coordinate andmonitor various activities in the different stages of implementation (Akkermans andHelden, 2002; Somers and Nelson, 2001). According to Rosario individual or groupshould be given responsibility to drive success in project management and the scope ofproject management should be established and controlled. The scope must be clearly

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defined and be limited. It is also important to focus on results and constant tracking ofschedulers and budgets against targets (Rosario, 2000; Holland et al., 1999; Wee, 2000).Expectations at every level need to be communicated. Management of communication,education and expectations are critical throughout the organization (Wee, 2000).Communication includes the formal promotion of project teams and the advertisementof project progress to the rest of the organization (Holland et al., 1999). Troubleshootingerrors is critical (Holland et al., 1999). The organization implementing ERP shouldwork well with vendors and consultants to resolve software problems. Quick response,patience, perseverance, problem solving and firefighting capabilities are important.Vigorous and sophisticated software testing eases implementation (Rosario, 2000):

H4. Project management related items are positively influencing the ERPimplementation success.

4. Research methodologyThis investigation is a theory-building exploratory study to identify and validate therelationship between factors that influence ERP implementation and the success ofERP implementation in Indian retail sector. The study used survey technique in orderto understand the influencing factors of ERP implementation in this sector. This studywas based on empirical data collected through a survey from practitioner like projectsponsors, project managers, implementation consultants and team members who wereinvolved in ERP implementation in retail sector. To facilitate the distribution ofthe questionnaire, a small web application was developed to make the questionnaireavailable and to capture responses. The key reasons for using a web-based systemwere the fact that it was the easiest way for both surveyors (us) to engage experts andthe experts to respond quickly. The other reason was it was low cost technique. Thequestionnaire URL and a letter on sampled subjects were e-mailed. The experts wereasked to respond via e-mail or fax within two weeks. An auto generated remindere-mail was sent to the non-respondents two weeks after the questionnaires weree-mailed. After constant reminder, 215 questionnaires were received. The filledquestionnaires were reviewed and 40 questionnaires were omitted due to incompletedetails. Therefore 175 questionnaires were used for analysis. Before the distribution ofthe questionnaire, pilot study was conducted to ensure its reliability. The data weretested using the SPSS software 17.0.

Finally, statistical methods like correlation analysis and regression analysis wereused to validate the relationship between influencing factor of ERP implementationand the success of ERP implementation in Indian retail sector.

5. Data analysis and results5.1 Instrument development and validationThe development of a cause-and-effect diagram is typically followed by a datagathering process to determine those causes that have a more significant impact on theproblem and how they may be addressed. The causes identified from Figure 1 weretherefore converted into a questionnaire. An initial draft questionnaire was developedcontaining the 21 items (questions) identified with the cause-and-effect diagrams.These items had to be answered on a five-point Likert-type scale, with 1 being“strongly disagree” and 5 being “strongly agree.” As the final measuring exercise wasplanned to be conducted with project sponsors, project managers, implementationconsultants and team members who had been involved/implementing/using ERP in

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retail sector. E-mail messages were sent to four different class groups, ranging projectsponsors, project managers, implementation consultants and team members, requestingthey visit the web site where the questionnaire was located and to complete it. Only 175complete questionnaires were used for validation purposes. The validation was performedalong guidelines suggested by Straub and included content validation, reliability tests andconstruct validation (Straub, 1989).

The types of respondents who completed the questionnaire in our survey are shownin Figure 3.

5.2 Content validationContent validation is a process whereby test items are studied and weighted for theirrepresentativeness (Kerlinger, 1986). In this study content validity was establishedthrough relevant literature sources, two initial pilot studies and the use of basic statisticaltests. Reliability refers to the accuracy or precision of a measuring instrument; i.e. if thesame set of objects is measured again and again with the same instrument, will similarresults be obtained? One way to assess consistency is to calculate a Cronbach’s acoefficient (Kerlinger, 1986). Nunnally (1978) suggests that a Cronbach’s a value largerthan 0.7 suggests good internal consistency.

Table II shows the reliability statistics of input variables. Reliability of eachconstruct was tested through Cronbach’s a. A value of 6 to 7 for Cronbach’s a isconsidered as a proper degree of reliability, and values above 7 are considered as a gooddegree of reliability (Sekaran, 2003). Therefore, we can contend that all constructsobtained a good level of reliability as the Cronbach’s a for construct “Strategic” is 0.866,for “Technological” is 0.925, for “People” is 0.922, for “Project management” is 0.933and for ERP implementation Success is 0.924. Thus, these measures are relevant andcan be used for correlations and regressions tests.

5.3 Construct validityConstruct validity primarily answers questions such as what factors or constructsaccount for variance in test performance (Kerlinger, 1986). To identify possible constructs

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Figure 3.Types of respondents

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underlying the measuring instrument, exploratory factor analysis was employed. Thefactor analysis, where factors were extracted by means of the principle componentmethod, followed by varimax rotation, yielded four factors for influencing ERPimplementation. The results are shown in Table II. The Kaiser-Meyer-Olkin (KMO)measure for the combined items of the independent variables show a value of 0.824,indicating that the sampling adequacy was 40.5 and therefore satisfactory. Barlett’stest showed a w2 of 1,724.580 with a significance level of 1 percent, where the totalvariance explained was 74.316 out of four components. On the other hand, KMO for thedependent variable depicts a value of 0.820 which tells us that the sampling wassatisfactory. Barlett’s test also found to be significant at 1 percent significance level.

Table II shows the result of factor analysis. Factor 1 could be labeled as “Strategic,”factor 2 could be labeled as “Technological,” factor 3 could be labeled as “People” andwhile last factor could be labeled as “Project management.”

Construct Items DescriptionFactorloading

Cronbach’sa

% ofvarianceexplained

Independent variablesStrategic SF1 Business plan and vision 0.731 0.866 31.101

SF2 Top management support 0.734SF3 Business process reengineering 0.803SF4 ERP product selection 0.64SF5 Selection of external

consultant/vendors0.604

SF6 Enterprise wide communication plan 0.789Technological TM1 Implementation strategy 0.845 0.925 18.757

TM2 Adequate IT infrastructure 0.765TM3 Minimal customization 0.831TM4 Standardization 0.851TM5 Data conversion and accuracy 0.789

People PMI Education and training 0.786 0.922 14.466PM2 Enterprise wide change

management plan0.637

PM3 Users involvement 0.738Project management PMP1 Team composition 0.854 0.933 9.992

PMP2 Project team competence 0.84PMP3 Scope management 0.86PMP4 Expectation management 0.848PMP5 Communication within project team 0.811PMP6 Budget control 0.789PMF7 Testing and troubleshooting 0.674

Dependent variablesERP implementationsuccess

EIS1 The ERP system can help me makeeffective decisions

0.885 0.924 79.654

EIS2 With the ERP system organizationsaves operating costs

0.864

EIS3 The ERP system can help me makeeffective decisions

0.858

EIS4 ERP system increases customerservice/satisfaction

0.886

EIS5 ERP system allows for better use oforganizational data resource

0.829

Table II.Factor loadings – factorinfluencing ERPimplementation

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5.4 Hypothesis testingBased on the regression analysis, results of correlations, coefficients, mean and standarddeviation of all constructs are considered. Table III present the results of the correlationanalysis of all variables of this research. According to the results, average response ratefor all variables are between 3.6 and 4.2. Technological with mean equal to 3.639 got thelowest rate and Strategic with the mean 4.134 obtained the highest average rate fromrespondents. Technological construct has the lowest standard deviation equal to 0.409and Project management with 0.626 have the highest standard deviation.

As shown in Table III, it is reported that all the independent variables werepositively influencing the ERP Implementation Success. Strategic was positivelyinfluencing the ERP Implementation Success at 0.000 significance level (r¼ 0.876).Similarly, Technological factors is positively influencing the ERP ImplementationSuccess at 0.000 significance level (r¼ 0.609). In addition, People was positivelyinfluencing the ERP Implementation Success at 0.000 significance level (r¼ 0.760).Project management was positively related to Success of ERP Implementation at 0.000significance level (r¼ 0.583).

5.5 Multiple regression analysisIn this study, multiple regressions were adopted to examine the relationships betweenindependent variables and dependent variable to test our research hypotheses. Toidentify whether the factors including: Strategic, Technological, People and Projectmanagement factors are influencing the Success of ERP implementation (H1, H2, H3,H4), which is one of this research purposes. The result of multiple regression analysisfor factor influencing the ERP Implementation Success is shown in Table IV.

H1 postulates “Strategic” related items are positively influencing the ERPimplementation success. Results in Table IV indicate that there is a positive influence

Mean SD Strategic Technological PeopleProject

management

ERPimplementation

Success

StrategicPearson correlation 1sig. (2-tailed) 4.134 0.58n 175TechnologicalPearson correlation 0.512 1sig. (2-tailed) 3.6399 0.409 0n 175 175PeoplePearson correlation 0.608 0.763 1sig. (2-tailed) 4.0483 0.572 0 0n 175 175 175Project managementPearson correlation 0.632 0.683 0.57 1sig. (2-tailed) 3.7734 0.626 0 0 0n 175 175 175 175ERP implementation successPearson correlation 0.876 0.609 0.760 0.583 1sig. (2-tailed) 3.975 0.525 0 0 0 0n 175 175 175 175 175

Table III.Mean, standard deviation

and correlation results

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of strategic related item on ERP implementation success (b¼ 0.852, t-value¼ 22.266,p-value¼ 0.000), demonstrating support for H1. H2 postulates “Technological” relateditems are positively influencing the ERP implementation success. Results clearlyindicate that there is a positive influence of technological related item on ERPimplementation success (b¼ 0.829, t-value¼ 20.299, p-value¼ 0.000), confirming thesupport for H2. H3 explains that “People” related items are positively influencingthe ERP implementation success. Results also confirms that there is a positiveinfluence of “People” related item on ERP implementation success (b¼ 0.843,t-value¼ 21.422, p-value¼ 0.004), confirming the support for H3. The results of thisresearch support the suggested hypothesis (H4) that there is positive influencebetween “Project management” related items on ERP implementation success(b¼ 0.788, t-value¼ 17.521, p-value¼ 0.007).

Table IV also reports the R2. The R2 was 0.797 indicating that 79.7 percent of thevariation in ERP implementation success could be explained by the four independentvariables and the F-value of 84.304 was significant at 0.01 significance level.

6. Result, discussion and recommendationsThe findings from this study shows that the four factors, namely Strategic,Technological, People and Project management together explained 79.7 percent of thevariance in the ERP implementation success in Indian retail sector.

From Figure 4 it is clear that “Strategic” related items had the major influenceon ERP implementation success with the highest b coefficient of 0.852 and weresignificant. The “People” related item was found to be statistically significant witha beta coefficient of 0.843 and ranked second in terms of relative importance.

Strategic

Technological

People

ProjectManagement

0.788

0.843

0.829

0.852

ERP implementationSuccessR2 = 79.7

Figure 4.The analyzedresearch model

Variable Standardize b t-value p-value

Strategic 0.852 22.266 0Technological 0.829 20.299 0People 0.843 21.422 0.004Project management 0.788 17.521 0.007F-value 84.304(0.000)R2 0.797Adjusted R2 0.762

Table IV.Multiple regressionanalysis

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“Technological” and “Project management” related items have also significant influencein the ERP implementation success in Indian retail sector.

The results of this study lead to several management implications for differentparties of interest are explained below. Researchers, practicing managers and thoseseeking to implement ERP in retail organization can also use the findings in this studyas a vehicle for improving ERP implementation success in Indian retail sector:

. It is recommended that top management should clearly define the businessplan and vision so that it can set the direction of ERP project. There should bea justification for the ERP investment and the change should be tied directlyto the strategic alignment of the company. A business plan that outlinesproposed strategic and tangible benefits, resources, costs, risks and timeline iscritical. Once the vision is approved by top management, broadcast the vision tothe entire company.

. Once the business plan and vision are in place, the commitment of top managementis recognized as one of the most influential items for ERP implementation success.So it recommended that top management of the retail organization should providesufficient financial support and adequate resources for building successful system.

. The retail organizations want to achieve performance improvements such asimprove customer service, cut operational costs and become world-classcompetitors. It is recommended for an Indian retail organization that theyshould do reengineering business processes during implementation of ERP.This option offers a world-class efficient and effective process with built inmeasures and controls.

. Selection of the right product for the organizations is the fundamentalprerequisite to implement ERP system successfully. If the wrong choices aremade, the organization faces either a misfit between package and businessprocesses and strategy, or a need for major modification, which are time-consuming, costly and risky. So it is recommended for the managers of retailorganization to conduct a careful preliminary analysis and develop a plan forselecting the right ERP product for their organization.

. Implementing an ERP package is a complex and costly undertaking, so vendorselection is one of major influencing factor. ERP vendor should be good enoughto understand the business process and able to match with the new integratedsoftware. So it is recommended for retail organizations to select the right ERPvendor and implementer consultants who have prior experience in implementingthe software with similar companies.

. Enterprise wide effective communication is one of the most influential items forERP implementation success. So it is recommended for mangers of retailorganization to have a strong and effective communication throughout thevarious stages of the ERP implementation. Open and honest communicationacross the organization is of paramount importance to satisfy the informationneeds of users, and to prevent the circulation of unfounded rumors.

. Clearly define the implementation strategy in advance so that it gives a strategicdirection which should favorably influence the project execution. There aretwo type of Implementation strategy – first “big bang” approach where ona scheduled cut-off date, entire system is installed throughout the organization in

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one go. All users move to the new system and manual/legacy systems arediscontinued. On the flip side, risk element is much higher and resources fortraining, testing and hand holding are needed at a much higher level, albeit for ashorter period of time. Second “phased implementation,” where roll out is doneover a time period. This method is less focussed, prolonged and necessitatesmaintenance of legacy system over a period of time. But, phased implementationis less risky, provides time for user’s acquaintance and fall back scenariosare less complicated.

. The most influencing factor for the ERP implementation success is an adequateinfrastructure to support the complexity of ERP system and with betterperformance. So it’s essential to choose the appropriate IT infrastructuredepending on the size and structure of an organization.

. It is recommended that retail organization should adopt minimum customizationor no customization strategy. Customization is costly and not good for scalabilityand future upgrades in any ERP project. Little bit customization is ok, but toomuch customization will affect your ERP project. It will increase your projectduration, budget, and increase the risk of implementation failure. ERP permitorganizational standardization across different locations among the retail chainsat different location. This is possible when there is a minimal customization inthe ERP system.

. ERP implementation success is highly dependent on success of data conversionand accuracy. The data residing in the legacy systems needs to be migrated toERP system. Inaccurate data input into one module will adversely affect thefunctioning of other modules. So it is recommended that data should be checkedand tested after conversion by the project members and key users before it isreleased into production server.

. Success of ERP implementation depends on successful training and education. Itis recommended that all the users must be trained in the ERP basics, overview ofthe system and its working, how an action by an employee triggers a host ofevents throughout the organization, how automation will help, what processesare changed and so on. Training and education helps to improve the quality ofERP project results and to meet user’s expectations. It is also advisable to theconsultants that they should create a knowledge base and train the people so thatthe knowledge stays in the organization when the consultants leave the project.

. The enterprise wide change management is the key influential factor for ERPimplementation success. It is recommended that during the change managementinitiatives, employees should be involved, carefully address the employeesconcerns, and making available the support group to mitigate the effect ofresistance to change and enhance implementation success. Support groupcomprised of business and change specialists who can develop a plan of how thechanges will be communicated with the business.

. User involvement is one of the most influential factors in ERP implementationprojects. It is recommended that user should be involved during the entireERP implementation process. This will deliver a better fit in relation to businessprocesses and acceptance between the end users and the ERP system withless resistance.

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. ERP teamwork and composition is most important throughout the ERP lifecycle. It is recommended that team should consist of the best people in theorganization and the team should be cross-functional team consisting of mix ofconsultants and internal staff.

. The competence of the project team is another key influential factor for thesuccess of ERP implementations because the more experienced and skilledrecourse would be able to understand and explain new concepts and businessprocesses easily and quickly. This will ensure the smooth implementation androllouts with minimal errors.

. The scope of ERP project should be clearly defined. It is recommended that retailorganizations should clearly define the scope, timeline and cost. Also it isextremely important to set the right expectations with all the project stakeholdersso that there should not be any scope creep at the time of user acceptance test.

. The success of ERP implementation depends on effective projectcommunication. It is recommended that communication within the projectteam should be done in timely and effectively manner so that there should not beany communication gap within the project team.

. It is recommended that organizations must have effective project management tocontrol and monitor ERP implementation process and budget. ERP projectshould be periodically monitored by project team members in order to explorelong term benefits of the organization.

. Testing and troubleshooting of the ERP implementation process is importantdue to ERP’s critical role and complexity. It is recommended that the testingshould be executed by functional end user personnel – not just a couple of ITpeople running through the process by themselves. Functional testing ensuresthat all business features are tested, including the software and hardwareinvolved in running the ERP system.

7. Conclusion, limitations and further direction of researchThis study has succeeded to examine the influence of factors (identified from cause-and-effect diagram) on the ERP implementation success. This research presentsseveral interesting findings. First of all, this study has contributed to academicresearch by producing the empirical evidence to support the theories of influencingfactor and ERP implementation success. The research has empirically verified thatStrategic, Technological, People and Project management factors are positivelyinfluencing ERP implementation success. Second, the results are largely consistentwith prior studies conducted in other developed countries. Despite the useful findingsof this empirical study, it has some limitations that need to be highlighted:

. The finding of this study may not be generalized for other geographic areas.

. Although we have considered widely accepted factors drawn from literature,which may influence the ERP implementation in Indian context. There mightbe possibility that there are some factors which are less important were notincluded in the research.

These limitations pave the way to future studies. To enhance the generalization of thefindings, future studies could be conducted using similar parameters in other retailorganization in different geographic areas.

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Further reading

Laukkanen, S., Sarpola, S. and Hallikainen, P. (2007), “Enterprise size matters: objectives andconstraints of ERP adoption”, Journal of Enterprise Information Management, Vol. 20No. 3, pp. 319-334.

Shan, L.P., Newell, S., Huang, J.C. and Cheung, A.W.K. (2000), “Knowledge integration asa key problem in an ERP implementation”, Proceeding of Twenty-Second InternationalConference on Information Systems, pp. 321-327.

About the authors

Professor Poonam Garg is a PhD (Computer Science). She has 20þ years of experience inteaching, research and consulting. Presently she is working as a Professor with Institute ofManagement Technology, Ghaziabad, India. Her current research interests are in the areas ofenterprise resource planning, developing heuristics and meta-heuristics particularly geneticalgorithm, Tabu search and simulated annealing-based meta-heuristic for various optimizationproblem such as cryptanalysis of various encryption algorithms and project management. Herteaching interests are in enterprise resource planning, software project management, cryptologyand network security, information security, networking concepts and planning. She haspublished many papers in different international/national journals and has ten edited books. Shehas served many international conferences as a Conference Co Chair, Conference Track Chair andmember of program committee. Professor Poonam Garg is the corresponding author and can becontacted at: pgarg@imt.edu

Atul Garg is a BTech MBA. He is pursuing his PhD in Management from the BanasthaliUniversity India. He has over 21þ years of combined experience in domain, IT and businessconsulting. He has 12 years of domain experience in manufacturing, materials management,quality, product development and plant maintenance with hi-tech and continuous processindustry. Since last ten years he is working in big Indian IT company. During this tenure he hasworked on 05 E2E ERP implementation projects, managed business consulting projects, supplychain programs, end to end IT rollouts in the ERP and SCM domains for large manufacturingcompanies. He has expertise in implementation of supply chain planning, manufacturingexecution, materials management and sales and distribution in a variety of industry sectorsincluding semiconductor, retail and real estate sector.

To purchase reprints of this article please e-mail: reprints@emeraldinsight.comOr visit our web site for further details: www.emeraldinsight.com/reprints

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