Investigating And Analyzing Opportunities And Challenges Of Implementing Erp Solution Projects In Sm

By Author: Henry Ford
Total Articles: 189
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1 Literature Review
The integration of Enterprise Resource Planning (ERP) solutions in the contemporary business systems is considered as one of the most significant contribution from the Information Technology industry (Marnewick and Labuschagne, 2005). ERP solution system can be seen as an opportunity for business entities to use software applications that are specifically designed to upgrade the various business functions and achieve best business practices (Markus and Tanis, 2000). Effective implementation of ERP software applications ensures that the primary functional parts of a business enterprise are linked together in a common amalgamated software system (Sandoe et al, 2001). This process makes it possible for the business activities to be initiated more efficiently and collaboration among the workers becomes more effective through the interactive information system. Before the innovation of ERP systems, organizations largely depended on Material Requirement Planning (MRP) networks whose infrastructure was only feasible for large businesses. The intensive research and development on ERP systems’ software has ...
... greatly reduced the hardware requirements a fact that effectively brought down the cost making it viable for Small and Medium size businesses (SMBs). The opportunity for SMBs to implement ERP solutions has however been largely influenced by the successful use of the system by the larger corporations. The implementation of the system in smaller entities therefore requires fresh evaluation due to the unique challenges associated to the characteristics of the operations of small business enterprises such as financial limitations, low reliance on technological systems and limited skills on the usage of advanced information technology. Though the study on the implementation of ERP solution projects in SMBs has been rare, it is very essential for the exercise to be based on informed research because inappropriate integration can yield negative results on the business performance. Success in the implementation of ERP solutions in Large Scale Businesses is by itself not a guarantee for the success of the system in SMBs because the success of the system is driven and guided by the master plan of the business that may depend on the actual size of the enterprise.
1.1 Small and Medium Businesses
The definition of SMBs varies from one region to another with most of the countries basing the definition by the number of employees in an organization. For example, among the EU nations companies with less than 250 employees are categorized as medium while those with less than 50 employees are referred to as small. In US medium businesses are those with less than 500 employees with small businesses being those companies with less than 100 workers (Marnewick and Labuschagne, 2005). In most of the economies around the world SMBs contribute significantly in the GDP and the sector offers employment for the majority of the workers in every economy. SMBs are more flexible and ready to try new ways in their operations and therefore they are considered to be the main initiators of competition in the global market that brings about more innovations in the business environment. Whereas the large businesses are known for their intensive capital bases the SMBs are advantageous due to their readiness and flexibility to embrace new innovations. Though the capacity to invest in advanced technologies is low in SMBs many of such organizations are positioning themselves strategically to derive benefits from the intensive investments in information technology that has been done in the recent past. Due to the large budgets and risks involved in implementation of ERP solution in SMBs it is imperative that such decisions be supported by informed studies to ensure that such measures are sustainable in the long run and enhances the realization of the company’s business objectives. Therefore, to ensure that the SMBs’ efficiency is sustained and their competitive advantage in the market especially in adoption of innovative information technology is enhanced, it is important to closely evaluate the opportunities and challenges that SMBs face in adopting and implementing ERP systems (Markus and Tanis (2000).
Unlike in large companies, the senior management team of the SMBs is normally part of the daily business operations. The management team in most cases lacks in in-depth knowledge and skills necessary to have cohesive long term plans for the business. The SMBs are therefore characterized by informal systems that encourage inter-functional collaboration among the small team of workers resulting to effective idea generation mechanism. Low capital base and trained personnel have however remains as a major setback in the running of the functions of SMBs. Whereas training is a major requirement among the workers, lack of sufficient funds to sustain such training and engage quality consultants is a great challenge. These challenges in upgrading the skills of the workers can at times lead to stoppages of production processes due to lapses in adequate skilled workers leading to big losses (Rao, 2000).
Many SMBs lack dedicated IT staff a fact that leaves major business operations to be exposed to unnecessary risks. The exposure to such risks makes the SMBs vulnerable making it difficult to access funding from financial institutions. This may further result to the SMBs abandoning important business projects or having major delays in the ongoing projects. Within internal functions of a SMB organizational changes that would give room for adoption of technology is in most cases limited due to lark of spare resources. For this reason therefore, the SMBs would pay higher for adoption and implementation of ERP system solution when compared to a large business firm. In the same way the impact of unsuccessful implementation of ERP solution to a SMB would be greater to the entire operations of the business enterprise and so is the success of wisely implemented ERP system; it would drive the business to greater heights of efficiency and effectiveness that would guarantee profitability in the business ventures (Markus and Tanis, 2000).
1.2 Enterprise Resource Planning (ERP)
ERP system is an integrated set-up of business software applications that links the various business functions together through an information channel through which important data can be exchanged and accessed easily by all the departments (Marnewick and Labuschagne, 2005). The system enables various business processes to be networked across all business domains in a customized information integration that avails automated, standardized, and integrated business and management practices with the use of shared database and information technology structural design that allows real time streaming of data. ERP aims at the integration of all the business’s data and related systems into a single software package that would offer guidance for best business practices at all levels of production and in all units within a given business set up. Therefore an ERP offers an information platform that is guided by the best business practices that are accessible and compatible by all business units. The system ensures that the resources of the business are readily availed to the line managers in an accurate and qualitative format to facilitate improvement on timely and informed decision making that are useful in the planning process. Companies like SAP and Oracle have been in the frontline in the design of ERP software systems whose demand is increasing in the modern businesses partly because of the intense global competition.

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