Failure of the Enterprise Resource Planning Software System - Case Study Example

Failure of the ERP Software system Institution: Student name: Students ID: Unit code: Date: Table of contents Introduction 3 Failure of ERP system in BC Company 3 Stakeholders in the ERP system 4 Factors contributing to failure of ERP System 5 CIO’s recommendation 5 Conclusion 6 Reference list Introduction The ERP, Enterprise Resource Planning, is a software system that is based on computers. It was designed to facilitate real-time planning, the response of customers and their productions, facilitate integration as well as processing transactions of organizations. Many IT companies preferred to use ERP for maximum profit. This was due to its capability to integrate both the external and internal information management smoothly over any organization that implemented it despite the fact that almost all teams that used ERP ended up failing in its objectives. The reasons behind the failure of ERP in Business Communication Company could be as a result of poor implementation of the software, the software’s code didn’t match that of the BC Company thus was not fit for the firm to adopt. Reporting, evaluation, and data registration are the ERP's processes. Data evaluation entails the review of the quality of data, data reporting being a data output process carried out by certain criteria while data registration is the entry of data into a database. (Finney, 2007, pp. 334) The ERP works towards unifying all department's systems into a standard software program which is integrated to base on one database thus various departments can easily communicate and share information. This integrated approach is lucky to companies if software is well installed. The BC, Business Communication is a company in Australia whose deals are based on IT. After a records depreciation in its profit from 1.2 to 1.15 Australian million dollars, the management, CEO, CIO and the CFO, agreed to adopt the ERP Software after being convinced and assured by the ERP’s vector of its success. It was an assurance that the ERP would provide automatic redesigning processes thus an improvement in the system’s performance. The senior management had hope that the system would solve the inefficiencies of processes carried out by the business. After a year, the ERP’s cost escalated from 8.5 to 11 Australian million dollars, thus increasing the employees work drastically. This made them see the ERP as a failure to the company. Failure of ERP system in BC Company When the expectations of the senior management are not met, this characterizes the failure of IT system basing on correspondence. This communication failure is the deviation between the actual impact and the estimated impact from the senior management's point of view. (Nourz, 2013, pp. 107) These failures can be evaded through the senior management formulating their expectations from the system once it has been implemented.in addition, the senior management is required to express expectations which are more attainable as a way of avoiding correspondence failure. At times the project of IT system exceeds the company’s estimated time and budget thus characterizing the type of process bringing about the failure of an IT system. This occurs when complex and extensive ITS system projects fail. Besides the project can be entirely withdrawn or not utilized efficiently. This happens when the users, who are that BC's employees are unable to interact comfortably with the system. This could be as a result of increased work brought about by the system in the wrong interface. Several factors are a reason to the multiple ways for the IT system failure. The stakeholder's viewpoints lead to varied notion of IT failure. Also, there is not a precise definition on the constitutions of IT system failure. Besides, a project can be considered as a failure by the management if its schedule, time and budget exceed that of the institution. Even if the customer is satisfied by the information offered by the system and consider the system a success from the perspective of the use, the management will see it as a failure. (PabedinSkaite, 2010, pp. 50) To evade the failure process of IT system, the organization has to follow the appropriate management practices per the project, use correct techniques of estimation, control the project scope substantially as the senior management is required to provide the adequate resources. A 3-D sphere model best represents a naturally predictive it system framework which is a natural predictive method of the IT systems outcomes, whether a success or a failure will result. Stakeholders in the ERP system A stakeholder is a party that has an interest in a company and can either affect or be affected by the business as defined in (www.investopedia.com/terms/s/stakeholder.asp). There are several stakeholders in the BC IT company classified as external and internal stakeholders. The internal stakeholders participate in the publication, coordination, resourcing and funding the partnership and the company's success. On the other hand, external stakeholders or only engaged in the contribution of their experience and views addressing the important issues to them as customers to the company. There are several private interested parties in the BC IT company which include the IT development team and the IT Manager, The managing director, and the procurement manager while the external stakeholders are the suppliers and the end-users who are the staff of acquisition. The Procurement Manager didn’t conduct a proper identification analysis to the stakeholders thus a great contribution to the failure of the ERP system. His reasons behind not performing the task were the high business hype which was there as a promising factor to the electronic commerce technologies. Besides, the trend among other companies to adopt the system influenced him not to conduct analysis to the ERP stakeholders. (Yu, 2005, pp. 133) He assumed the importance of the suppliers as stakeholders since he underestimated the collective influencing role by providers to the project and viewed them as outsiders. The providers as external stakeholders contributed to the failure of the project. The formed a coalition with similar objectives for the opposition of the project. (Yu, 2005, pp. 120-129). Their collective efforts got to be crucial when they successfully overcame other stakeholders’ decisions. This coalition was after the suppliers, as stakeholders, saw their interests threatened. Due to the failure of the procurement manager to identify the existence of supplier’s coalition, he was unfamiliar to the belief and common objectives of the group. The ERP's goal differed from the vendors' aim of maintaining their current position in the business. Besides, the procurement manager failed to ease the doubts of the suppliers or even encourage them on participating and adopting the ERP system. As a result, the IT manager and the users withdrew from supporting the ERP project after the change of the stakeholders with the change of time. As documented in Wong, 2005, pp. 40, the managing director, who fully supported the system’s project withdrew later. Factors contributing to failure of ERP System Lack of involvement of the executive contributed to ERP system’s failure. The management needs to be involved in every implementation step taken of the system. This will make them keep in touch with the relevant updates to the system. Management is ultimately a firm hold for bringing on board other employees. These employees are likely the ones supposed to have decided to buy the ERP Software first. Lack of New system’s training also contributes to the failure of the ERP’s software system. The customers need to know how to operate the software before deciding to purchase it. Therefore it’s useless if the users are not informed on how to use it. The ERP vendors need to hold training sections to the employees as well as the users and have them do the training to the rest. This is one of the remedies to the factor. Secondly, uploading video clips on social media and advertisements on the international television stations can be a cheaper and first way of acknowledging the ordinary users and employees on the functionality of the system. The management of ERP software system had unrealistic expectations over the rapid functioning of the scheme. It assumed that the system would function first and at a low cost. As in the BC IT company in Australia, a year was gone before its target was reached. This is due to the high marks made to be accomplished within minimal time. Enough testing was not done to the software. The reason for testing is to accurately investigate if the system meets the needs of the business and the output required by the company. The testing at times enables new discoveries for the implementation and adjustment of the software. Lack of the testing left the ERP system with numerous important functions missing. Therefore it was not readily acceptable to the users. (Larsen, 2009, pp. 399-405) Lack of clear destination by the users and companies that have adopted the ERP system lead to ERP's failure. Before the adoption of the system, the users are expected to have reasonable expectations from the system, outcomes desired and the project's economic justification. These factors were never considered by the BI IT company and other users thus the failure of ERP Software system effectively to their organizations. CIO’s recommendation As the CIO of BC IT company, I recommend that thorough testing is done by the ERP's vendors pertaining the client, the respective company interested in adopting their software system and project the project to the clients. This leads to the minimal error in the estimated result regarding profitability and time to be taken. There should be many trainers from the ERP Software system to offer training, do the advertisement and others manage the clients. The management of the clients should be handled by an employee with sufficient potencies in convincing the clients as well as being persuasive. Conclusion In conclusion, detailed plans for successful implementation of the system in necessary. For any project to succeed, a high-level plan should be made. At times the plans made are unrealistic, unspecific and of few details. Companies at times formulate assumptions which are broad and plans with high underestimation of the changes involved. (Besilj, 2005, pp.17) For real plans, identification of all requirements and the people to work on the plans is a necessity. Sometimes, the resources projected on are blundered. General understanding of external and internal resources required for completion of the project is critical. Relevance to the time commitment needed for business users in internal resources, typically in human resource departments, accounting or financing, is an area which is underestimated commonly. During the project's critical phases, an introduction of temporal resources is necessary as a way of backfilling the employee's transactions. Therefore the users have freed to the easily access the newly implemented system and have adequate time to train and implement the system on their projects. This is as documented by Amoako, 2006, pp. 179. Besides, the external resources, having an up-front agreement with the contractors and the consultants about the exact time, qualifications, and skills of needed resources is critical. Reference list Amoako-Gyampah, K., 2006. ERP implementation factors: A comparison of managerial and end-user perspectives. Business Process Management Journal, 10(2), pp.171-183. Bosilj-Vukšić, V. and Spremić, M., 2005. ERP System Implementation and Business Process Change: the Case study of a pharmaceutical company. CIT. Journal of computing and information technology, 13(1), pp.11-24. Finney, S. and Corbett, M., 2007. ERP implementation: a compilation and analysis of critical success factors. Business Process Management Journal, 13(3), pp.329-347. Larsen, M.A. and Myers, M.D., 2009. When success turns into failure: a package-driven business process re-engineering project in the financial services industry. The Journal of Strategic Information Systems, 8(4), pp.395-417. Nour, M.A. and Mouakket, S., 2013. A classification framework of critical success factors for ERP systems implementation: A multi-stakeholder perspective. In Competition, Strategy, and Modern Enterprise Information Systems (pp. 98-113). IGI Global. Pabedinskaitė, A., 2010. FACTORS OF SUCCESSFUL IMPLEMENTATION OF ERP SYSTEMS. Economics & Management. Wong, A., Scarbrough, H., Chau, P. and Davison, R., 2005. Critical failure factors in ERP implementation. PACIS 2005 Proceedings, p.40. Yu, C.S., 2005. Causes influencing the effectiveness of the post-implementation ERP system. Industrial Management & Data Systems, 105(1), pp.115-132. (www.investopedia.com/terms/s/stakeholder.asp). Read More