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BPMJ
16,2 Managing enterprise resource
planning projects
Prasanta Kumar Dey, Benjamin Thomas Clegg and
282 David J. Bennett
Aston Business School, Aston University, Birmingham, UK

Abstract
Purpose – The purpose of this paper is to help managers to successfully plan, implement, and
operate enterprise resource planning (ERP) projects using a risk management framework.
Design/methodology/approach – This paper adopted a combined literature review and case study
method. Using literature review, the paper first identified major issues of managing ERP projects and
develops a risk management framework for managing those issues. The proposed risk management
framework was then applied to a ERP implementation project of a UK-based energy services group
and its effectiveness for managing ERP projects implementation had been demonstrated. Additionally,
the risk factors as identified from the case application are compared with the risk factors from the
previous researches so as to suggest mitigating measures.
Findings – All the risk factors are categorized into planning, implementation and operations phases
along with project processes, organizational transformation and information technology (IT) perspectives.
Project implementation phase is the most vulnerable to failure. The case study results reveal that the effect
of other projects on on-going ERP project, management of overall IT architecture and non-availability of
resources for organizational transformation are most critical from likelihood and impact perspectives.
Managing risk across various phases of project and equal emphasize to effective project management,
organizational transformation and IT adoption are the key to success in ERP implementation.
Practical implications – The risk factors, which were identified using literature review and the
case study, have great significance as mitigating measures of those risks may result successful
implementation of ERP projects in the industry. Additionally, proposed risk management framework
could be customized to implement ERP projects elsewhere.
Originality/value – ERP projects are risky as they are capital intensive, technically complex, and
call for organizational transformation. There are both success and failure stories. However, both
researchers and practitioners agree, that if it can be implemented and operated successfully and
benefits should be achievable. Although there are many studies on ERP implementation, little has been
discussed on managing risks of ERP projects. Therefore, this paper bridges the gap.
Keywords Manufacturing resource planning, Critical success factors, Risk management
Paper type Research paper

Introduction
Globalization has made today’s business more challenging with increasing competition,
rising customer expectations, and expanding markets. This places pressure on
companies to reduce cost across the supply chain, reduce inventory, improve logistics
operations, expand product variety, improve delivery schedules, improve quality, and
reduce material flow time. Companies have realized that these challenges can only be met
Business Process Management and the necessary changes made when they share information among their suppliers,
Journal distributors, and customers. In order to remain competitive, organizations are
Vol. 16 No. 2, 2010
pp. 282-296 increasingly developing collaboration and/or strategic partnerships with their suppliers
q Emerald Group Publishing Limited to share common goal in the business. To accomplish these objectives, companies are
1463-7154
DOI 10.1108/14637151011035606 increasingly adopting enterprise resource planning (ERP) systems.
ERP systems are designed to provide seamless integration of processes across Managing ERP
functional areas with improved workflow, standardisation of business practice, and projects
access to real-time, up-to-date data. ERP systems are complex and implementing them
can be a challenging, time consuming, and expensive project for any company
(Davenport, 1998).
The term “ERP” was conceived and coined in the 1970s but its true benefits to the
business world were only realized in the early 1990s. Nah et al. (2001) describe ERP as a 283
packaged business software system that enables a company to manage the efficient
and effective use of resources (materials, human resource (HR), finance, etc.) by
providing a total integrated solution for the organization’s information processing
needs. According to Arif et al. (2005), ERP can integrate the planning and management
all major business processes with a single client/server architecture in real time,
including contacts with business partners and with customers.
The potential benefits of ERP include dramatic declines in inventory, breakthrough
reductions in working capital, abundant information about customer wants and
needs, along with the ability to view and manage the extended enterprise of suppliers,
alliances, and customers as an integrated whole (Chen, 2001; Binder and Clegg, 2007;
Clegg, 2008). Most important attributes of ERP are its abilities to automate and
integrate business processes across organizational functions and locations, enable
implementation of all variations of best business practices with a view towards
enhancing productivity, share common data and practices across the entire enterprise in
order to reduce errors, produce and access information in a real-time environment to
facilitate rapid and better decisions and cost reductions (Nah et al., 2001; Soh et al., 2000).
ERP systems provide firms with a transaction processing function, allowing for the
integrated management of data throughout the entire company, and a workflow
management function controlling the numerous process flows. ERP facilitates the flow
of information between all the processes in an organization. ERP systems can also be
an instrument for transforming functional organizations into process-oriented ones.
When properly integrated, ERP supports process-oriented businesses effectively
(Al-Mashari and Zairi, 2000).
An important feature of ERP is that it is the first approach that integrally
combines business management and information technology (IT) concepts (Slooten
and Yap, 1999). ERP’s strength stems from its ability to provide comprehensive
business functionality in an integrated way using a state-of-the-art IT infrastructure
(Waston et al., 1999). Another significant feature of ERP software is that core corporate
activities, such as manufacturing, HRs, finance, and supply chain management have
been automated and improved considerably by incorporating best practices, so as to
facilitate greater managerial control, speedy decision making, and huge reduction of
business operational cost (Bancroft et al., 1998; Holland and Light, 1999).
ERP systems help to solve the problem of fragmentation of information in large
corporate organizations and to integrate all the information flows within the
organization. The standardisation of business processes, ensuring integrity of data,
and removing the number, complexity, and expense surrounding the independent
legacy systems are all major benefits to be achieved by implementing ERP systems.
Researchers pointed out that although ERP systems can bring competitive
advantage to organizations, the high failure rate in implementing such systems is a
major concern (Kim et al., 2005). There have been a number of prominently publicized
BPMJ failures and they have underscored the frustrations and even total meltdowns that
16,2 enterprises go through in implementing ERP systems. For instance, Allied Waste
Industries, Inc. decided to pull the plug on a $130 million system built around SAP R/3,
while another trash hauler, Waste Management, Inc., called off an SAP installation
after spending about $45 million of an expected $250 million on the project. Hershey
Food Corporation has also held SAP accountable for order processing problems that
284 hampered its ability to ship candy and other products to retailers around the peak
Halloween season (Boudette, 1999).
Despite the large installed base of ERP systems, academic research in this area is
relatively new (Mabert et al., 2003). The initial literature in ERP consists of case studies
of successful and unsuccessful implementation (Deutsch, 1998; Diederich, 1998; Nelson
and Ramstad, 1999), which were mostly published in the trade and professional
journals and magazines. Several authors (Piturro, 1999; Trunk, 1999; Zuckerman, 1999)
report on application of ERP as a business change enabler in order to achieve
competitive advantage.
Davenport (1998) demonstrated the challenges of ERP implementation, while
McAfee (1998) looked into its operations; they argued that a firm’s ERP competence
must be used effectively in order to truly harness the capabilities of an ERP system for
competitive advantage. Van Everdingen et al. (2000) and Mabert et al. (2000, 2001)
surveyed European and US manufacturing sectors, respectively, to study motivation
for ERP implementation, implementation strategies, modules and functions, and
operational benefits. Mabert et al. (2003) empirically investigated whether there are
key differences in the approaches by companies that managed their implementations
within schedule and budget. While there are studies on various aspects of ERP
implementations in industry, little has been reported on managing risks and uncertainties
of ERP projects. The purpose of this paper is to demonstrate the effectiveness of
risk management using the previous works discussed above and a new case study which
is discussed below.
The remainder of the paper is classified into methodology, literature review, generic
risk factors, proposed risk management framework, case application, discussion, and
conclusion.

Methodology
Using literature review of critical success factors and issues of ERP implementation,
this paper first identifies risk factors that do not allow ERP projects to achieve
time, cost, and quality, and subsequently develop a framework for risk management.
The proposed framework was then applied to a UK-based energy utility company to
demonstrate its effectiveness. A case study approach was adopted for the application of
the proposed risk management and a focus group was conducted to identify the risk
factors. The identified risk factors were then compared with the generic risk factors that
were identified from the previous researches and mitigating measures were suggested.

Literature review on issues of ERP implementation


As with any form of technology, there are certain pitfalls associated with the ERP
systems. ERP systems have huge storage needs, massive networking requirements,
and potential training overheads and are costly and difficult to implement (Adel, 2001).
Many of small- and medium-sized enterprises refrain from implementing ERP
solutions because of the cost involved. If an ERP system needs to be customized for an Managing ERP
individual organization, it can turn out to be a very costly and time-consuming projects
process. Moreover, organizations can spend three to seven times more money on
implementation than the original estimate of the software. Training costs also can run
into millions after the system has been installed. There is also a large amount of
organizational change required to conform to the vendor’s best practices.
There also might be different types of “misfits” associated with ERP. These ERP 285
misfits have been presented by Soh et al. (2000) and are classified into three broad
categories – data, process, and output. FoxMeyer, a bankrupt drug company, argued that
major problems were generated by a failed ERP system, which created excess shipments
resulting from incorrect orders and costing FoxMeyer millions of dollars (Bicknell, 1998;
Boudette, 1999). Dell Computer spent tens of millions of dollars on an ERP system only to
scrap it because the system was too rigid for their expanding global operations. Recent
ERP failures also include Boeing, Dow Chemical, Mobil Europe, Applied Materials,
Hershey, and Kellogg’s. One study indicates that 40 percent of all ERP installations only
achieve partial implementation and 20 percent of attempted ERP adoptions are scrapped
as total failures (Trunick, 1999). Ptak and Schragenbeim (1999) also report that between
60 and 90 percent of ERP implementations do not achieve the return on investment
identified in the project approval phase.
There is a growing consensus that planning issues are a major barrier to employing
these systems effectively. The technical capabilities of ERP systems are relatively well
proven. However, looking at the failure rate of ERP projects, some companies have
found that by forgoing an ERP system they can actually gain a cost advantage over
competitors that are embracing the system. Justification of ERP systems, therefore,
needs to encompass not only economic but also strategic benefits. While ERP systems
may have the “magic touch” to dramatically enhance the performance of many
companies’ business operations, they are also expensive, profoundly complex, and
notoriously difficult to implement. The chance of failure has always been high and in
order to reap the potential benefits and avoid serious pitfalls, firms must truly
understand and address the planning issues. For instance, Davenport (1998) describes
the complex upgrading process of an ERP system from SAP R/2 to R/3 as a costly,
time-consuming process.
The complexity of ERP implementation is forcing many organizations to rethink
their plans for acquiring and implementing them (Kumar and Hillegersberg, 2000).
Despite the significant benefits that ERP software packages provide in managing and
integrating cross-functional business processes, they often cost millions of dollars to
buy, several time as much to install, and, more importantly, they result in disruptive
organizational changes (Volkoff, 1999; Soh et al., 2000). In fact, 65 percent of executives
believe that ERP systems have at least a moderate chance of hurting their businesses
because of the potential for implementation problems.
From a financial perspective the Standish group’s research shows that 90 percent of
ERP implementations end up late or over budget. Although it has been estimated that
the payback period for an ERP system typically ranges from one to three years, the
evidence is mixed. Meta group recently surveyed 63 companies (ranging in size from
$12 million to $43 billion in corporate revenue) to quantify the payback firms got from
their ERP investments; their findings showed that the average implementation cost
$10.6 million and took 23 months to complete. In addition, an average of $2.1 million
BPMJ was spent on maintenance over a two-year period. Ultimately, their research indicated
16,2 that companies showed an average loss on their investment of $1.5 million over a
six-year period.
Abdinnour-Helm et al. (2003) and Kirkpatrick (1998) also report that implementing
an ERP system is very expensive and time consuming. It costs the average Fortune 500
company $30 million in license fees and $200 million in consulting fees (not to mention
286 additional millions in computers and networks) and can take three years or more before
the system yields its maximum benefit. According to Deloitte Consulting’s global
director for aerospace and defence, some aerospace companies are spending much
more than the projected $30 million. The cost of software licenses and installation can
range between $300 and 400 million with installation typically running 2.5 times the
value of the licenses. This can put a financial drain on companies for at least two years
before they realize a return on their investment (Hughes, 1999).
Problems in implementing ERP systems have led to some spectacular failures
(Bailey, 1999; Boudette, 1999). Whirlpool experienced delays in shipments of
appliances to many distributors and retailers. Allied Waste Industries, Incorporated
found SAP too expensive and too complicated to operate. Waste Management
Incorporated aborted its SAP implementation after it had spent $45 million of the
estimated $250 million needed.
Unfortunately, many chief executives view ERP as purely a software system and
the implementation of it as a technological challenge. They do not understand that ERP
may fundamentally change the way in which the organization operates. This is one of
the problematic issues facing current ERP systems. The ultimate goal should be
to improve the business and not the implementation of the software per se. The
implementation should be business driven and directed by business requirements and
not the IT department. Marina and Neil (2001) quote a Standish Group report about the
statistics in terms of cost and proposed benefits of ERP projects which reported on
ERP implementation projects being on average, 178 percent over budget, taking 2.5
times as long as intended and delivered only 30 percent of promised benefit. It has been
estimated that 50-75 percent of US firms experience some degree of failure in
implementing advanced manufacturing technology (Umble et al., 2003). There are
many further horror stories about implementations that have gone wrong (Laughlin,
1999; Bancroft et al., 1998).
Many researchers suggested critical success factors for ERP implementation. Umble
et al. (2003) identify clear understanding of strategic goals, commitment by top
management, excellent project management, organizational change management, need
for a great implementation team, data accuracy, extensive education and training,
focused performance measures, and multi-site issues as critical success factors for ERP
implementation. Al-Mashari et al. (2003) develop a taxonomy for ERP critical factors.
They identify management and leadership, and visioning and planning as the
major critical factors in the ERP setting up stage; ERP package selection, training
and education, system integration, communication, project management, system
testing, process management, legacy systems management, cultural, and structural
changes as the critical factors in the implementation stage; and performance evaluation
and management as the critical factors in the evaluation phase. Mandal and
Gunasekaran (2003) emphasize effective change management for successful ERP
implementation: which comprises of change strategy, ERP implementation competency,
project management competency, and IT-based business process reengineering Managing ERP
(BPR) competency. However, Kuruppuarachchi et al. (2002) emphasize the need for projects
organizational requirements, project organization structure, a supporting team,
training, and project information systems for effective change management. Mabert
et al. (2003) identify planning and implementation variables that affect ERP
implementation as: clearly defined outcomes, performance matrices, strong executive
sponsorship, strong executive involvement, an empowered ERP steering committee, and 287
an implementation team with a clear organizational change strategy, a clear education
and training strategy, and an ERP plan that addresses data conversion and integrity.

Generic risk factors for ERP implementation


The above literature review reveals a list of risk factors that are expected to occur in
ERP implementations. The risk factors are categorized both project phase wise and as
per their characteristics (i.e. whether they are related to project management processes,
organizational transformation and IT). Table I shows the risk factors in accordance to
project phases and risk categories.

Risk categories
Project management Organizational
Project phases processes transformation IT

Planning Inaccurate business case Lack of management/ Lack of communication


Unclear objectives executive commitments with the end-users
Weak implementation and leadership Inadequate training plan
team Lack of synergy between for the users
IT strategy and
organizational
competitive strategy
Unclear change strategy
Implementation Inappropriate Inappropriate change BPR incompetence
management of scope management ERP installation
Lack of communication Inappropriate incompetence
among ERP management of culture Inappropriate selection of
implementation team, and structure ERP software
ERP provider and ERP Inappropriate system
users integration
Poor contract Lack of data accuracy
management Inappropriate training
and education of
operating people
Hand-over, Inappropriate contract Inadequate Inappropriate system
evaluation and closeout organizational readiness testing and
operations Resistance to change commissioning
Lack of user training Multi-site issues
Lack of clarity on
inspection and
maintenance
Inaccurate performance Table I.
measurement and Project phase
management framework wise risk factors
BPMJ Proposed risk management framework
16,2 Figure 1 shows an overview of the proposed risk management framework. The risk
management framework has five steps – identifying risk, logging risk, reviewing risk,
managing risk, and closing risk. The following sections describe each step.

Identifying risk
288 The stakeholders “risk” can be defined as a problem that may occur in the future, that
has a scale of impact and a probability of occurrence, that needs to be managed by a
mitigation strategy or a contingency action, and its occurrence has a potentially
adverse effect on the programme or the quality of its deliverables. There are many
qualitative and quantitative tools that can be used for identifying risk (Dey, 2002).
Involvement of the concerned stakeholders and coming to consensus are the key to
appropriate identification of risk in projects.

Logging risk
Each identified risk needs to be logged into a register in order to capture data against each,
which needs to be updated and reported to various levels as per project team’s plan.

Reviewing risk
The report needs to be reviewed by various concerned stakeholders before acceptance
for detailed analysis (likelihood and impact).

Managing risk
With the involvement of the concerned stakeholders, the likelihood and impact of each risk
are determined along with development of mitigating strategies. These may call for
additional resources for which management commitment from various levels is required.

• Project reports
1. Identifying risk 2. Logging risk
• Project plans
• Brainstorm Risks • Capture data
• Minutes of project
• Come to consensus • Update log
• Review meetings

• Risk log entries


• Risk reports

Input to other
project reports
3. Reviewing risk
• Analyse
• Discuss

Figure 1. 4. Managing risk


Risk management 5. Closing risk • Analyse likelihood • Acceptable
• Mitigating strategies
framework for the group’s • Confirm and impact of risks risk report
• Containment actions
ERP implementation • Notify • Suggest mitigating
projects
measures
Closing risk Managing ERP
All the risks need to be followed up closely in a very regular basis and should be projects
integrated with project monitoring and control reporting. The occurrences and impact
of these risks need to be reported not only to follow up but also archiving it for learning
for forthcoming project management. All the risks needs to be closed at the appropriate
time and reported back to all the concerned stakeholders.
289
Case application
The proposed risk management framework was applied to a UK-based energy services
group. The group was formed following the privatisation of the gas energy market in
the UK and a subsequent de-merger of part of the business in 1997. It has since
developed into an international business with a total group turnover of £13.4 billion.
The group employs over 30,000 people and has expanded globally through a strategy
of acquisitions and partnerships in both Canada and the USA. More recently, the
company has focused on entrance into the deregulating European markets.
As the group had grown by acquisition and mergers, it now possesses an IT
landscape consisting of disparate IT systems and disconnected processes. Accordingly,
it has embarked on an ERP implementation and re-implementation strategy with SAP
as the chosen ERP solution. The group already had a sub-optimal SAP implementation
in parts of the business.
The group adopted a phased approach focusing on the highest priority process
areas first and gradually increasing the ERP modular footprint over a timescale of
several years. The first two immediate priorities on its roadmap were on different
process areas and these had different strategic drivers and business case models.
However, there were several areas of commonality such as a common ERP platform
(i.e. SAP), a common implementation methodology and approach, and a common
approach to the project management team structure and management processes.
The project that is the subject of this case study was a ten-month business
transformation initiative consisting of the implementation of a SAP ERP platform for
finance, procurement and HR processes with 1,500 system users and 35,000 payroll
records involved. To support its vision, The group undertook this business
transformation project to radically overhaul its back office systems and to reduce cost.
The objectives were to achieve simplification, automation, standardisation, and
integration across the three functions. To have the three back office functions working
in a fully integrated and largely automated way would provide an invaluable platform
upon which the group could begin to develop much wider improvements based on a
common and flexible backbone.
The project involved implementing SAP’s “mySAP” ERP application suite
(to support the HR and finance), e-procurement and business warehouse (BW).
Additionally, the new solution provided the platform from which the functions would
transform their partnership with the rest of the group’s businesses. The overall solution
was based on the SAP “Netweaver” open platform, allowing legacy SAP and non-SAP
applications to be fully integrated.
The project resulted in the migration of significant volumes of complex legacy data
(250-metre transactions with a £1.53 trillion value); the solution was successfully
implemented and achieved its objectives to provide simplified and standardised
BPMJ processes across the back-office. The SAP ERP suite provided automated and
16,2 integrated support for these processes.
The proposed risk management framework was applied to the above ERP
implementation case. The following paragraphs demonstrate the application of each
step of the framework. The project organization structure has been shown in Figure 2.
The UK-based energy services group (the client) employed a multinational consultant
290 to facilitate ERP implementation and SAP was ERP vendor. The client formed its
project team in matrix structure with representative from both functional and IT
group. The consultant and the vendor deployed their project teams to implement ERP
successfully in client’s premises. Therefore, ERP core project team consisted of client’s
project team, consultant’s project team and ERP vendor’s project team. They had
applied the proposed risk management framework in order to manage risk in
implementing ERP for improving energy service group’s performance. The following
paragraphs demonstrate the application of the proposed risk management framework.

Identifying risk
A formal workshop was held in project planning phase to review risks that are likely to
occur. This involved representatives of ERP core project team, client’s functional group
and IT group along with management representatives. Project plans, various reports
and minutes of the meetings were reviewed by the members prior to the workshop.
Additionally, the participants used their experience to identify risks.

Logging risk
All risks were then updated on the risk log and communicated to the concerned
stakeholders. Management and the client’s project team identified the more general
project wide risks and check specifics for each function with the various functional
teams. The functional teams were responsible for the identification of risks specific to
their operations.

Client ERP
vendor
ERP
consultant
ERP core
project team

Management
(CEO and board of directors) Consultant’s
project team

Information Client’s ERP vendor’s


technology project team project team
group
Figure 2.
ERP project governance
structure Functional
group
Reviewing risk Managing ERP
Following this, on an ongoing basis, risks were monitored on a weekly basis, with the projects
risk log being updated and key risks being documented in weekly functional reports.
This was the responsibility of each functional team. The client project team played an
active role in policing this process by attending weekly meetings with functional team
to check status, action dates, and to review if new risks were being missed.
291
Managing risk
The likelihood and impact of each risk on project outcome were then determined
with the involvement of the representatives of client project team, management
and functional teams. They derived consensus-mitigating strategies through
brainstorming sessions using their experience. This was formalized by a weekly
review between work package leaders, management, and the client project team. The
client project team had overall responsibility for managing all risks, which include for
discussing closing actions, due dates, priorities, and risk impacts with the leaders to
ensure that risks were being actively managed. High probability and high impact risks
were given escalated up the governance structure to be analysed and discussed within
the weekly management meetings and they would also be detailed on the weekly
management reports. Should a risk be out of the control of the project management
team it would be escalated further up the governance structure to the Executive
Steering Committee (chief executive officer and the board of directors) that provided
the executive sponsorship for the projects.

Closing risk
Each risk was updated with respect to its likelihood and impact along with the
mitigating strategy. Every risk was closed out with completion of related project
activities and lesson learned was transferred to the project evaluation report.
Tables II-IV show risk analysis results of the case study project just before
implementation.

Discussion
The case study organization had adopted a risk-based project management framework
to implement ERP projects. All the possible risks were identified in the planning
phase with the involvement of the concerned stakeholders and categorized to
implementation, handing over and operations as per the time of their occurrence.
Further the risks were classified into IT, organizational transformation, and project
management processes related risks. It had been observed that the most of the risks
were likely to occur during the implementation phase of the project. In the
implementation phase of the project “non-availability of business resources,” “delay in
making changes in legacy system,” “effect of other projects on ERP implementation,”
“mismanagement of overall IT architecture” risks had high probability and high
impact. Only “delay in handing over sign-off” had high probability and high impact
in the handing over phase.
In implementing ERP projects issues related to organizational transformation, IT,
and project management processes are equally important. In the organizational
transformation, category risks of “non-availability of business resources” and “delay
in making changes in legacy system” had high probability and high impact. In the
BPMJ
Risk Impact Likelihood Category
16,2
Project resources required not available, e.g. for training H M Project management
The project execution deviates from design/principles M L process
“Quality” at risk due to time/cost drivers M H
Risk that sponsor cancels the project H L
292 Other projects that are happening in parallel within the
business impact the ERP project
H H

Project team “burns out” M M


Lack of resources available from within the business to M H
fill specific roles
Scope creep H L
Hardware procurement process too long H M
Project team turn-over M M
Plans is not achievable because of insufficient capacity H L
and parallelism
Communication risk between the project and the M L
business
Testing team under-resourced L L
Business resources required not available – business H H Organizational
resource may “overlap” transformation
Legacy system change impact interfaces H M
Legacy systems require changes which would be likely to H H
delay the project
Business inadequately prepared to take on new solution M L
Fail to transfer knowledge (consultant to the business H M
project resources)
The business suffers “change fatigue” L H
IT quality gates (project review checkpoints) prevent the H L IT
projects making progress
Mismanagement of overall IT architecture’ H H
Lack of resources in new technology areas being H L
implemented due to their specialist nature
Insufficient servers “horse power” H L
Insufficient data base capacity within SAP for the H M
volume of transactions being migrated across from the
legacy systems
Data cleansing is not as per requirement M H
Risk that telecommunication links with outsourcing H L
partners fails, resulting in a lack of access to SAP by the
offshore team
Individual role profiles (SAP) fail to match “real” H L
organization roles
Fail to develop a reliable solutions using IT to all the H M
functional issues
Decisions with respect to the system architecture M L
configuration are not taken on time
The project end-user infrastructure fails to support L M
deployment
Insufficient training facilities available M M
Failure to move towards Sarbanes-Oxley Act1 H L
Table II. compliance
Risks in the
implementation phase Notes: H, high; M, medium; and L, low
IT category, “mismanagement of overall IT architecture” had high probability and Managing ERP
high impact. In the project management processes category, “effect of other projects on projects
ERP implementation” and “delay in handing over sign-off” had high probability and
high impact. Proactive actions and contingency plans helped the ERP projects
achieving their desired time, cost, and quality.
The risks as identified in this case studies in the organizational transformation and
project management process categories have strong synergy with the risks that were 293
identified from the literature reviews. However, IT-related risks were unique for the
project under study.
ERP systems have received much attention lately for their potential to enable more
effective decision-making. Many companies are implementing ERP packages as a
means of reducing operating costs, increasing productivity and improving customer
services, ERP systems help to solve the problem of fragmentation of information in
large corporate organizations and to integrate all the information flows within the
organization. The standardisation of business processes, ensuring integrity of data,
and removing the number, complexity, and expense surrounding the independent
legacy systems are all major benefits to be achieved by implementing ERP systems.
Many organizations realize that they need to form alliances with their customers,
partners, and suppliers over the internet, e-business integration with ERP systems
becomes a critical issue. ERP has diminished the internal and external boundaries of
the organization and provided a more open environment. Many small- and
medium-sized organizations are also beginning to realize the importance of ERP.
This study could be extended by empirically studying risk management practices of
other organizations and understanding the pros and cons of each framework.
Additionally, risk factors in every phase of projects could be identified and their

Risk Impact Likelihood Risk category

Decisions/sign-off does not occur in a timely manner H H Project management


processes
Business fails to adopt change L L Organizational
transformation
Fail to properly reconcile business information into the H L IT
new system Table III.
Risks in the
Notes: H, high; M, medium; and L, low handing-over phase

Risk Impact Likelihood Risk category

Fail to deliver benefits as outlined in the business case M L Organizational


transformation
Insufficient training H M
Solution fails to be scalable M L IT
Lack of disaster recovery arrangements M M
Solution fails to provide financial control H M Table IV.
Solution fails to comply with Data Protection Act H L Risks in the
Issues arise post-go-live with a lack of time to fix them L L operations phase
BPMJ characteristics could be studied so as to develop effective project management
16,2 framework for successful ERP implementation.

Conclusions
The main objective of this paper was to help managers to successfully plan, implement
and operate ERP systems using risk management framework. Since the early 1990s
294 ERP has been deployed by many organizations to transform entire business process in
order to improve performance. On one hand, ERP has brought success to many
organizations, whereas, on the other hand, it has sometimes resulted in significant
failures. The main problems associated with an ERP system are its cost, the burden of
implementation, and delay in accruing benefits. However, it is general agreed, that if
it can be implemented and operated successfully and benefits should be achievable.
A literature review helped identify generic risks of ERP projects. Some of the success
factors are commitment from top management, reengineering of the existing processes,
selecting the right system, integrating ERP with other business information systems.
These items were illustrated with a new case study based in a world leading energy
supplier. The case study shows that nature and characteristics of risks depends on the
sizes and complexities. Effective management of those risks helps achieve project
success but the appropriate identification of risks is a major challenge. Thus, project
risk management comprises of the identification, analysis, response development,
and controlling of risk-mitigating measures and contingency plan with the involvement
of the concerned stakeholders. In other words, effective project management of ERP
projects requires integration of risk management with scope, time and cost management.
Therefore, appropriate identification of risks during early project planning phase,
and monitoring and controlling them throughout the subsequent phases with the
involvement of the concerned stakeholders helps achieve desired time, cost, and quality of
ERP projects.

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Further reading
Davenport, T.H. (2000), Mission Critical: Realizing the Promise of Enterprise Systems,
Harvard Business School Press, Boston, MA.
Umble, E.J. and Umble, M.M. (2002), “Avoiding ERP implementation failure”, Industrial
Management, Vol. 44 No. 1, pp. 25-33.

Corresponding author
Prasanta Kumar Dey can be contacted at: p.k.dey@aston.ac.uk

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