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CRITICAL SUCCESS FACTORS OF ERP IMPLEMENTATION IN PAKISTAN.

(A Case of Telecom, Engineering, Oil and Government Sector Organizations)

Muhammad Jamil Anjum


MS Scholar (Finance)
Department of Management science
Shaheed Zulfikar Ali Bhutto Institute of Science and Technology (SZABIST)
Islamabad
Pakistan,
Email: Jamil_axiom@yahoo.com. Tel.: (+92)-(333)-(512-2435)
Ijaz-Ur-Rehman
MS Scholar (Finance), SZABIST) Islamabad-Pakistan

Abstract
Enterprise resource planning (ERP) plays a significant role in today’s enterprise management and is foundation to
be the spine of corporation. Although enterprise resource planning (ERP) has been renowned as a helpful tool, in
practice, there are several complexities in persuasive people to execute it efficiently. The Purpose of this was to find
out critical Success Factors of ERP implementation in Pakistan. In this research study six critical factors of ERP
implementation were selected on the bases of relevant literature that includes Perceived usefulness of ERP,
Perceived ease of Use, Top management commitment Support, Data Accuracy, training/Vendors Support and Trust
and that were considered as critical predictors of enterprise resources planning. The Survey of Oil sector, telecom
sector, Engineering sector and government sector was conducted concern with ERP implementation issues. Total
one hundred and ten (N= 110, 65%) questionnaire were distributed out of that 71 questionnaire were collected
back. The result of the analysis concludes that selected critical success factors (CSF’s) are very important to ERP
implementation. The study concludes that rest of the critical success factors has a positive and significant
association with ERP implementation except users training. The study further explore that top management supports
is deficient in government and in Oil sectors. The study concludes that critical success factors may keep the
accomplishment on time, within resources, acceptable to the user, and so on if adequate training and Top
management support exist.
Key Words: Critical successful factors (CSF’s); Enterprise resource planning (ERP); Pakistan.

Introduction
Enterprise Resource Planning System, more commonly known as ERP, integrates all the departments and functions
across onto a single computerized system. Organizations achieve enterprise resources planning (ERP) by integrating
various software applications that serve the needs of various departments like human resource management, finance,
billing and materials management. ERP connect all the departments together into single, integrated software
application from a single database. Users of this application see the akin information’s and can revise it in a
meticulous order. When one department finishes with a task, it is automatically retreated through the ERP system in
the next department in the order for operating their relevant tasks. The definition and measurement of enterprise
resources planning success are difficult issues. Firstly, enterprise resources planning success depends on the point of
view from which one measures it.
Even within a particular business people will have dissimilar thoughts. ERP Implementation experts often describe
success in terms of completing the job on time and within budget while the users lean to focus on the change from
old structure and stable process (jiang, 2005).
Enterprise Resource Planning (ERP) is conceivably one of most sophisticated softwares solution offer to clients
operating in different sector of the economy for complete automation of customer business processes. A number of
leading IT organizations in Pakistan, are providing ERP solutions.
Pakistan's Small and Medium Enterprises (S.M.Es) sector and other sectors like Oil and gas, engineering, telecom
and government sector are currently operating at weakness. This is primarily because a preponderance of the
industrialized and planning processes are either not programmed and automated, or, if automated, are not being
employed to their fullest budding and potentials.
In order to close this shortcoming and weakness which are currently exists in above- mentioned sectors of the
economy, Pakistan software export board automation of domestic industry on open source systems project is in
progress for mounting entire ERP solutions to mechanize and automate the route and procedures for the SMEs.
These open sources system are designed to help in Production, Inventory, HR & Payroll, finance, and sales in those
areas of the economy that have the maximum export prospective that can be a gateway to other sector of the
economy to operate at full potential. This research study intends to investigate the critical success factors of
enterprise resources planning implementation in Pakistani production and service industry confining the major
sector of the economy like Oil and gas sector, engineering sector, telecom sector and government sector on the bases
of major growth and issues these sectors are confronting in the enterprise resources implementation. This study is
unique has a unique aspects, firstly other studies on early critical success factors of ERP implementations have been
conducted in developed countries while this studies is particularly for developing country like Pakistan.

Literature Review
In literature evaluation section the only confining point is on the critical success factors in ERP implementation.
Most literature combines the critical success factors (CSF’s) with different ERP characteristics. Larsen and Myers
(1997) found that ERP understanding and practicing could be an early achievement and later failure. This finding is
supported by a case study in which they stated that business process re-engineering project implicated redesigning
the main accounting progression within single organization in the financial services business. Larsen and Myers
(1997) concluded that two factors leads to ERP failures that are; improperly cutting project scope and end-user
training. Davenport, (1998) stated that , the complexities and high collapse rate in mounting ERP systems have been
extensively cited in the literature but, investigation on critical success factors (CSFs) in ERP execution competence
is still uneven.
Bancroft et al. (1998) interviewed twenty practitioners of enterprise resource planning applications and from study
of three multinational ventures implementation projects and concluded that, critical success factors for ERP
implementation include presence of a supporter, top management support, high-quality communication with
shareholders, and successful project management. He further added that before implementing enterprise resources
planning applications it is vital to develop key IT capabilities of the end users trainings.
Willcocks and Sykes, (2000) projected several situations and utilization cases to prove these situations, In contrast to
the development and enhancing of new effortless software function the main target of Enterprise resources planning
is to execute business process re-engineering. Much business failed on this aspect of ERP implementation. This
failure and collapse was determined by the requirement for major amendment in culture, human, and organizational
relationships. The success model of enterprise resources planning includes six dimensions of information systems
success: system eminence, information eminence, use, end user contentment, person impact, and managerial impact.
While this approach has some drawbacks, when use of the systems is compulsory, the evaluation of system
eminence, information eminence, and use become less functional. Conclusion about personal impact and managerial
impact are also hard to establish (Delone & McLean, 1992).
Duchessi et al, (1989) concludes that top management commitment and adequate end user training is critical success
factors for efficient implementation. Rao (2000) choose five criteria important for selecting an enterprise resource
package including supplier’s domain knowledge, affordability, local support level, latest technology usage and ease
of software upgrades. Elisabeth et al, (2003) classified critical success factors in ten categories that included clear
perceptive of strategic goals, data accuracy, education and training, competent implementation team, efficient
project management, capability of technical issues troubleshooting, top management commitment, organizational
change commitment, performance focused measures and multisite issued resolving abilities. Literature cited user
involvement and training as in important and significant critical success factors of enterprise resources
implementation. Zhang et al, (2002) stated that user involvement refers to contribution of the user in the process of
enterprise resources planning (ERP) implementation. The functions of the ERP system depends on the user to use
the system after going live, but the user is also an important factor in the implementation. ERP implementation
process fails in the end in spite of millions of dollars due to lack of suitable training. In the majority cases, expert are
included during implementation course, and while all the features of the system should be enlightened and
transferred the end-users, the main goal of ERP training is that the users comprehend variety of business processes
following the ERP application (Mashari, et al 2002).
In the light of above context and literature review, researcher adopted the idea of Jiang Yingjie (2005) “Critical
Success Factors in Implementation of ERP in Finland” by including data accuracy during conversion phases and
after the project implementation variable considering importance based on literature. After analyzing the mentioned
critical success factors, this research study will help organizations to design and implement ERP project successfully
for their business promotions.
Conceptual framework of Study
Conceptual Model
The below visual model is based on the ideas of Yingjie (2005). The model shows six critical factors of enterprise
resources planning implementation, these success factors includes perceived usefulness, ease of use, trust on
software and hardware, end user trainings and vendors supporting during and after implementation of enterprise
resources planning projects data accuracy and Top management Supports, while user involvement/ Intension to use
is considered as outcome.

Theoretical model of critical Success factors of ERP implementation

The above first generation relationship model explain the relationship between user intentions /user involvement
with perceived usefulness of ERP, Ease of use , Trust on software and hardware, end users training, Data accuracy
and Top management commitment. These are the critical success factors indentified in theoretical underpinning
phase. Davis (1989) investigated the relative effects of extrinsic and intrinsic motivation source on intention to use,
and usage of, the computer in the workplace and, they dined perceived usefulness as an extrinsic source of
motivation and perceived enjoyment as an intrinsic source of motivation he defined perceived usefulness as the
extent to which a person’s consider that using a meticulous system would augment his or her work performance and
defined perceived ease of use as the extent to which an individual consider that using a meticulous system would
be free of stabs.
David et al, (2004) stated that to a high degree, trust decides probable utility resulting from business contact where
the trusting party is reliant upon others, but lack power over them. In many cases, this epitomizes the association
between customers and an enterprise resource planning (ERP) customization vendor. User training is defined as the
degree to which a company has instructed employees in using the ERP, both in terms of quality and quantity. The
notion of data quality was first proposed by DeLone and McLean (1992) argued that the data accuracy quality is a
significant construct to build successful information systems. Later, Lin and Lu (2000) further developed the data
accuracy as part of a determinant of system quality and found that the data accuracy variables is useful predictors of
the perceived ease of use and the perceived usefulness. Training users to effectively apply information technology
for specific work problems is a major prerequisite for usage. ERP training programs will reduce ambiguity and help
develop knowledge for future effective usage.
Wu et al, (2006) stated that the deprived accuracy of the implementation data is often seen as a frequent indication
of ineffective enterprise resources planning (ERP) implementation. Zairi and Sinclair (1995) ranked leadership
facilitator of large transformation efforts. ERP implementation can only be accomplished when senior management
is totally committed to the initiative. Management commitment and support is the ultimate strategy that will secure
the necessary conditions for successfully introducing the change brought by ERP into the organization. The
commitment of top management should be emphasized throughout an organization. This is the first step of ERP
implementation.
Significance of study
The Significance of the study extends to broad aspects of ERP implementations and Critical success factors.
The Study investigates the influencing factors and critical factors of ERP implementation. These critical factors
are critically examined in this study in order to draw a meaning full conclusion and recommendations for the
practitioner of ERP applications in service and production industry in Pakistan.
Objectives of the Study
Following are the main objectives of the study.
1. To find out level of failure of ERP implementation – Partial Failure and Fully Failure.
2. To find out which Critical factors are hindrances in ERP Implementation.
3. To find out, what factors should be considered of great importance for successful implementation
of ERP.
Hypotheses
Following hypotheses are formulated for the research study.
1. H1: Perceived usefulness is positively correlated with ERP usage/Intention to Use ERP.
2. Top management commitment is positively correlated with ERP usage
3. End user training is positively correlated with ERP usage/user involvement.
Data Collection and Research methods.
This research study is based on survey instrument. The instrument is adopted from the study of Jiang Yingjie
(2005) “Critical success factors of ERP implementations in Finland”, While the necessary amendments in
independent variables and questions are made according to the culture of organizations. Instrument consists of
three sections, Section incorporate demographic information of respondents, Section two consists of predictors
of ERP usage /user involvement and Section three consists of outcome (User involvement /ERP usage). The
questions asked in instrument centered on theoretical arguments discussed in literature review and theoretical
model to maintain the contents and construct validity of instruments. The study throughout employee
conventional likert’s Scale to indicate the degree of acceptance as one indicates strongly disagree onto five for
strongly agree. The questionnaire does not include questions which could identify the company. Extra care has
been taken to protect the anonymity while developing the Instruments.
Total 110 questionnaires in respective organization that use diversified ERP applications in their organizations
were distributed. Out of total 150, 80 questionnaires were collected back; Out of 80 responses 71 valid
questionnaires were selected for data analysis concluding the response rate to 65%. SPSS 17.0 is used for data
analysis.

Data Reliability and Normality


For better results and generalizations to wider population data normality is consider important in academic research.
In this research study normality and distributions of data was crossed checked by means of multiple methods like
kurtosis, Skewness, Q-Q Plots and Kolmogorove-Smirnov test and outliers detection techniques were employed and
only one case was identified which was replaced by using “mean of nearby point” technique. Over all the data was
found normal. Likewise consistency of response was checked by means of Cronbach alpha. On the bases the
cronbach alpha results, internal consistencies of the response were found satisfactory.
Results ,Analysis and Discussion
The mean and Standard deviation of each element/ critical success factor of ERP is tabulated in table 1.
Table -1 Descriptive Statistics of Critical success factors of ERP Implementation

The results of our sample exhibit almost all factors implementation tends towards the degree of agreement except
Variable Mean SD
Perceived Usefulness 3.619 0.961
Perceived ease of use 3.521 0.842
Trust 3.070 0.798
Top Management Commitment 3.549 0.841

Training 3.267 1.055


Data Accuracy 3.619 0.961
Intention to use ERP 4.028 0.970
the trust and end user training. End users training depict more variations in response relative to trust. The above
table 1 indicate that perceived usefulness have mean value of ( 71, 3.619) with standard deviation of (0.961),
perceived ease of use have mean value of ( 71,3.521) with standard deviation of (0.842), trust have mean value of
( 71,3.070) with standard deviation of (0.798) indicated the degree of neutrality , top management commitment have
mean of ( 71 ,3.549) with standard deviation of (0.841), end user training have a mean value of ( 71 , 3.267) with the
standard deviation of (1.005) indicting the degree of neutrality with somehow high variations in responses, likewise
data accuracy have mean value of ( 71 ,3.619) with standard deviation of (0.961) indicating degree of agreement and
intention to use ERP have mean value of ( 71 ,4.028) with standard deviation of (0.970) indicating the degree of
agreement towards the use of ERP applications in futures. Over the descriptive statistics have encouraged results
except end user training and trust on hardware and software.
Table 2 indicate analysis of variance of critical success factors of ERP across different sectors of the economy
namely oil sector, government sectors, engineering sector and telecom sector for the purpose of exploring mean
variations and difference with the assumptions that that there is no significant mean difference in critical success
factors in any group of the economy . The results of table 2 indicate that perceived usefulness, perceived ease of use,
trust, top management commitment, training and data accuracy have significance mean difference across different
sectors of the economy as (FPU; 70, 3 =12.877), (P<0.05) ;(FPEU; 70, 3 =3.121), (P<0.05);(F trust; 70, 3 =6.756), (P<0.05); (F
TMC; 70, 3 =5.795), (P<0.05); (F Training; 70, 3 =3.042), (P<0.05); (F DA; 70, 3 =16.541), (P<0.05) respectively. The table 2
further reveals that government sector accounted low mean value representing degree of disagreement with
perceived usefulness and trust on hardware of software. However top management in government sector is
commitment to successful implementation of “enterprise resources applications” compared to other sector top
management commitment. The results of table 2 further illustrate that telecom sector is more committed to end user
training compared to other sectors of the economy.
Table-2.Analysis of Variance (ANOVA) of Critical Success factors of ERP Implementation with respect to
different Sectors

Analysis of variance Means and Standard Deviation

Variables Govt. Oil Telecom Engg.


SS df MS F Sig. Sectors
PU Between Groups 23.674 3 7.891 12.877 .000 Mean 2.82 4.00 3.55 4.24
Within Groups 41.059 67 .613 SD 0.96 0.55 0.93 0.66
Total 64.732 70
PEU Between Groups 6.096 3 2.032 3.121 .032 Mean 3.091 3.714 3.818 3.647
Within Groups 43.623 67 .651 SD 0.811 0.644 1.079 0.786
Total 49.718 70
TMC Between Groups 10.215 3 3.405 5.795 .001 Mean 3.546 2.952 3.182 2.529
Within Groups 39.363 67 .588 SD 0.963 0.498 0.751 0.515
Total 49.577 70
Trust Between Groups 10.369 3 3.456 6.756 .000 Mean 2.818 3.191 3.727 3.647
Within Groups 34.279 67 .512 SD 1.296 1.123 0.467 0.606
Total 44.648 70
Training Between Groups 9.340 3 3.113 3.042 .035 Mean 3.191 3.727 3.647 2.727
Within Groups 68.575 67 1.024 SD 1.123 0.467 0.606 0.935
Total 77.915 70
DA Between Groups 27.543 3 9.181 16.541 .000 Mean 2.818 4.095 3.636 4.177
Within Groups 37.189 67 .555 SD1.296 0.436 0.924 0.636
Total 64.732 70
Table 3 illustrates the correlation matrix among different critical success factor and outcome variable that is
intentions to use ERP/ ERP usage with significance value at 0.05 and 0.01 level of significance. This correlation
matrix is produces for the purpose of checking the correlation among different variable which were discussed in
hypothesis formulation phases. The results of correlation analysis are described in context of different formulated
hypotheses.

Hypothesis-1 :Perceived usefulness is positively correlated with intention to use ERP.


Table 3 illustrates the correlation between perceived usefulness and user involvement indicates that perceived
usefulness and intension to use ERP have moderate positive and significant correlation (39.4%). The results or
closely matched with the results of Zviran et al, (2005) and Gyampah (2005) studied the influence that perceived
usefulness, user involvement, argument for change, prior usage and ease of use have on the behavioral intention to
use an ERP system. Their results indicate that users perception of the perceived usefulness, ease of use of the
technology, and the users’ level of intrinsic involvement all affect their intention to use the technology are
significant predictors of ERP implementations. Likewise in the study of Jiang Yingjie (2005) same conclusion was
derived.
Table-3 Correlation analysis of Critical Success factors of ERP implement ion with User intention to Use ERP
Variables PU PEU Trust TMC Training DA UI Alpha
PU 1 0.873

PEU .195 1 0.808


.103
Trust -.392** .051 1 0.856
.001 .674
TMC .209 .880** .069 1 0.878
.080 .000 .567
Training .243* .194 .113 .299* 1 0.77
.042 .104 .348 .011
Data Accuracy .892** .266* -.392** .350** .271* 1 0.9230
(DA)
.000 .025 .001 .003 .022
Intention to use .394** .226 .445** .191 -.063 .394** 1 0.967
ERP
.001 .048 .000 .111 .000 .001
**. Correlation is significant at the 0.01 level (2-tailed).
*. Correlation is significant at the 0.05 level (2-tailed).
Hypotheses 2: Top management commitment is positively correlated with ERP usage
The above table 3 illustrate that Top management commitment and User intention are insignificant positive
correlation with each other (19.1%). The results indicate that top management commitment is lacking in either
sector of the economy. Comparing the previous studies, most studies have found the significant positive correlation
like Zairi and Sinclair (1995) ranked leadership facilitator of large transformation efforts. ERP implementation can
only be accomplished when senior management is totally committed to the initiative. Management commitment and
support is the ultimate strategy that will secure the necessary conditions for successfully introducing the change
brought by ERP into the organizations.

Hypotheses 3: End user training is positively correlated with intention to Use ERP.
Table 3 further reveals the correlation with end user training and intention to use ERP. The results reveal that there
is significant negative correlation between end user training and intentions to use ERP indicating that end users
training lack in either sector of the economy. Comparing with previous studies, the study like Larsen and Myers
(1997) in which they concluded that two factors lead to ERP failure that are; improperly cutting project scope and
end-user training and Duchessi, et al. (1989) concludes that top management commitment and adequate end user
training is critical success factors for efficient implementation.
Conclusions and Recommendations
A total of 6 critical success factors for ERP implementation have been identified based on are review of the related
literature. Different analytical techniques were used to study critical success extensively. The results of statistical
analysis concludes that though top management commitment is positively associated with intention to use ERP and
end user training is negatively related with intention to use ERP, thus causing hindrance in ERP applications
implementation. All other critical factors were found significant predictors of Intentions to use and thus ERP
implementation. Based on the Findings and conclusions of this research study it is recommended Top management
support and end user training are most serious factor which is obstacles in ERP implementation in Pakistan. Hence,
it is recommended that all those organizations who are interested for High growth through increasing reliable
business solution must pay attention on user/employee ERP training and top management support.
Limitations of the study and Further Research
This study have several limitations, firstly this study was limited to four sectors of economy that oil and gas sector,
government sector, Engineering sector and telecom sectors. These sectors were selected particularly due
Implementations issues emerging in those sectors, although other sectors might have the ERP applications
implementation issues but do to time and resources constraints these sectors were selected. This study is conducted
in Pakistan and recommendations have been given for organizations while implementing ERP applications in their
respective organization. Further research can be carried out by including the contents of payback from
implementation of ERP, Pre-implementation business process performance and Post business performance.

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