European Journal of Operational Research 146 (2003) 352–364

www.elsevier.com/locate/dsw

Enterprise resource planning: A taxonomy of critical factors

a,*
Majed Al-Mashari , Abdullah Al-Mudimigh a, Mohamed Zairi b

a
Department of Information Systems, College of Computer and Information Sciences, King Saud University,
P.O. Box 51178, Riyadh 11543, Saudi Arabia
b
ECTQM, University of Bradford, Emm Lane, Bradford B094JL, West Yorkshire, UK
Received 27 June 2002; accepted 27 June 2002

Abstract

This paper presents a novel taxonomy of the critical success factors in enterprise resource planning (ERP) imple-
mentation process. ERP benefits cannot be fully realised unless a strong alignment and reconciliation mechanism is
established between technical and organisational imperatives based on the principles of process orientation. It is
suggested in the taxonomy that measurement takes place in a balanced perspective, and for the purpose of providing
useful information that can enable the decision making process and, which can help deliver the corporate objectives and
therefore lead the business competitively forward. Upon this premise, the taxonomy is based on a comprehensive
analysis of ERP literature combining research studies and organisational experiences. The taxonomy reflects the es-
sential features of ERP systems, as being built based on the principles of business process management. Furthermore, it
illustrates that ERP benefits are realised when a tight link is established between implementation approach and business
process performance measures.

2002 Elsevier Science B.V. All rights reserved.

Keywords: ERP; Critical success factors; Taxonomy; Deployment; Evaluation

1. Introduction system in-house, more and more companies are

turning to off-the-shelf ERP solutions to plan their
Today, one of the major sources of competitive IT resources more effectively and manage their
advantage has been the ability to speed up the legacy systems (Holland and Light, 1999). Various
supply-chain process (Gumaer, 1996). This de- figures have pointed to the fact that ERP systems
mand led to a significant development in infor- have become one of the largest IT investment in
mation systems (IS) known as enterprise resource the 1990s (Chung and Snyder, 1999). In fact, the
planning (ERP) systems. Instead of developing IT implementation of an ERP system can be consid-
ered as one of the most effective ways towards
traceability, since it facilitates integration between
* modules, data storing/retrieving processes and
Corresponding author.
E-mail addresses: malmashari@yahoo.com (M. Al-Mas- management and analysis functionalities, com-
hari), almudimigh@yahoo.com (A. Al-Mudimigh), m.zairi@ bined with the typical functionalities of stand-
bradford.ac.uk (M. Zairi). alone applications (Rizzi and Zamboni, 1999). The

0377-2217/03/$ - see front matter
2002 Elsevier Science B.V. All rights reserved.
PII: S 0 3 7 7 - 2 2 1 7 ( 0 2 ) 0 0 5 5 4 - 4
 M. Al-Mashari et al. / European Journal of Operational Research 146 (2003) 352–364 353

notion of ‘‘integration’’ can be traced back to the dard software packages, enterprise systems, enter-
early days of computing in organisations, when prise wide-systems, enterprise business-systems,
Blumenthal (1969) developed a framework and integrated vendor software, and enterprise appli-
integrated architecture for organizational IS cation systems (Gable, 1998; Holsapple and Sena,
(Kumar and Hillegersberg, 2000). 1999; Rosemann, 1999), has been defined by
Even if an organization could, over a short pe- various authors but with not much differences.
riod of time, confirm final success of implementa- Rosemann (1999) defines ERP system as a cus-
tion of ERP, the real business value may not be tomizable, standard application software which
realised as quick. The realisation of a lasting com- includes integrated business solutions for the core
mitment has begun to dawn upon many organisa- processes (e.g. production planning and control,
tions. For instance, some of the early implementers warehouse management) and the main adminis-
of SAP who installed the R/2 system version face a trative functions (e.g., accounting, human resource
costly, time-consuming upgrade process to R/3 management) of an enterprise. Slight differently,
(Davenport, 1998a,b). The complexity of ERP and Gable (1998), however, defines it as a compre-
its associated high costs and implementation prob- hensive package software solutions seek to inte-
lems are forcing many organisations to rethink their grate the complete range of a business processes
plans for acquiring and implementing such enter- and functions in order to present a holistic view of
prise systems (Kumar and Hillegersberg, 2000). the business from a single information and IT ar-
Despite the significant benefits that ERP soft- chitecture.
ware packages provide in managing and integrat- Since the focus of manufacturing systems in the
ing cross-functional business processes, they often 1960s was on traditional inventory control con-
cost millions of dollars to buy, several time as cepts, most of the software packages were limited
much to install, and, more importantly, they result generally to inventory based on traditional inven-
in disruptive organizational changes (Volkoff, 1999). tory processes (Gumaer, 1996; S, 2000). Due to the
It is on this basis that some companies have enjoyed need for software designed specifically for manu-
considerable improvements whilst others have had facturing operations, the focus of manufactur-
to scale back their initiatives and to accept mini- ing systems have moved to material requirement
mum payoffs, or even decide to give up on ERP planning (MRP) systems which translated the
implementation (Soh et al., 2000). Master Schedule built for the end items into time-
This paper discusses the theoretical basis of phased net requirements for the sub-assemblies,
ERP systems in relation to the benefits realization components and raw materials planning and pro-
process. A theoretically and practically grounded curement (Gumaer, 1996; S, 2000). Since 1975, the
taxonomy of ERP critical success factors is there- MRP system has been extended from a simple
fore developed. The taxonomy demonstrates the MRP tool to become the standard manufacturing
linkages between ERP critical factors of success, resource planning (MRPII) (Chung and Snyder,
ERP success and ERP benefits. It should therefore 1999). In addition, Shtub (1999) states that the
contribute to an enhanced process of ERP benefits MRP systems, which trade with resource capaci-
realization, where critical factors bridge the link ties, are known as MRPII systems. However, the
between ERP implementation and improvement in shortcomings of MRPII in managing a production
business performance across strategy, business facilityÕs orders, production plans, and inventories,
processes, IT, structure, culture and management and the need to integrate these new techniques led
systems. together to the development of a rather more in-
tegrated solution called ERP (Chung and Snyder,
1999). ERP systems work essentially at integrating
2. ERP definitions and drivers inventory data with financial, sales, and human
resources data, allowing organisations to price
Like many newer fields in IS, the definition of their products, produce financial statements, and
ERP software, synonyms are integrated stan- manage effectively their resources of people,
354 M. Al-Mashari et al. / European Journal of Operational Research 146 (2003) 352–364

materials, and money (Markus et al., 2000). The greater managerial control, speedy decision-
emergence of ERP in the early 1990s led to the making and huge reduction of business opera-
inclusion of other functions such as accounting tional cost (Bancroft et al., 1998; Holland and
and sales management (Gupta, 2000). In fact, ERP Light, 1999).
advocates believe that ERP could combine both The basic architecture of an ERP system builds
business processes in the organization and IT into upon one database, one application, and a unified
one integrated solution, which MRP and MRP II interface across the entire enterprise. An entire
were not able to provide (Chung and Snyder, organisation is therefore able to operate under one
1999). application standard where all applications serving
In recent years, while the rise of the Internet has human resources, accounting, sales, manufactur-
been the subject of most of the mediaÕs attention, ing, distribution, and supply-chain management
the business worldÕs focus on enterprise systems aspects are firmly integrated. An ERP software is
may in fact be the most significant shift in the also beneficial in that it can speed decision-making,
organisational use of IT in the 1990s (Davenport, reduce costs and give managers control over a
1998a,b; Holsapple and Sena, 1999). In the soft- globally distributed business operations (Gibson
ware market, the ERP software is the fastest et al., 1999; Holsapple and Sena, 1999). A study by
growing market, as its growth is expected to in- Benchmarking Partners for Deloitte & Touche
crease from $15 billion to $50 billion in the coming Consulting (Computer Technology Research
five years (Bingi et al., 1999). By the year 2002, Corporation, 1999) classifies companiesÕ motiva-
AMR Research expects the ERP systems market tions for ERP implementation into two groups,
to jump from $15.68 billion (in 1997) to $72.63 technological and operational. Technological driv-
billion (Holland and Light, 1999). This is compa- ers relate mainly to the Year 2000 (Y2K) compli-
rable to the predication of some industry analysts ance requirements, replacement of disparate
that the worldwide ERP systems market is ex- system, improvement of quality and visibility of
pected to reach $50 billion by 2002 (Computer information, integration of business processes and
Technology Research Corporation, 1990). systems, simplification of integration of business
An important feature of ERP is that it is the acquisitions into the existing technology infra-
first approach that integrally combines business structure, replacement of older, obsolete systems,
management and IT concepts. (Slooten and Yap, and the acquirement of system that can support
1999). Its strength stems from its ability to provide business growth. Operational drivers, on the other
a comprehensive business functionality in an in- hand, are related to improving inadequate busi-
tegrated way using a state-of-the-art IT infra- ness performance, reducing high-cost structures,
structure (Waston et al., 1999). In one example, improving responsiveness to customers, simplifying
SAPÕs client/server software package, R/3, offers ineffective, complex business processes, supporting
the potential to integrate the complete range of new business strategies, expanding business glob-
an organisationÕs operations in order to present a ally, and standardising business process through-
holistic view of the business functions from a sin- out the enterprise.
gle information and IT architecture perspective
(Gable et al., 1998). Indeed, enterprise systems
have improved the organisational information 3. ERP cost and impact
flow through the supply chain to such a degree
that they have become an effective operating The contribution that ERP packages, including
standard (Davenport, 1998a,b). One significant those from SAP AG, PeopleSoft, Oracle, and
feature of an ERP software is that core corporate Baan, have made to the business world has been
activities, such as manufacturing, human re- remarkable. ERP systems have increased the effi-
sources, finance, and supply chain management ciency of a wide range of businesses by providing
are automated and improved considerably by them with seamless access to much of the infor-
incorporating best practices, so as to facilitate mation they need (Li, 1999). An ERP system can
 M. Al-Mashari et al. / European Journal of Operational Research 146 (2003) 352–364 355

be thought of as a business-wide integration human resources needed to work full time on the
mechanism of all organisational IS (Bingi et al., implementation project. Additionally, an organi-
1999). This integration makes organisations able sation may need to install new hardware to run
(Bingi et al., 1999) to take quick reaction to the ERP software, and a new database to store
competitive pressures and market opportunities, the ERP data. Furthermore, integrating the ERP
be more flexible product configurations, achieve system with other types of applications is usually a
reduced inventory, and maintain tightened supply- necessity. It is also important that end-user train-
chain links. The study also identifies the various ing and change management costs are considered
benefits of ERP implementation as perceived by in the equation (Computer Technology Research
the companies surveyed. ERP benefits can be Corporation, 1999). In fact, every company that
classified into tangible and intangible. According implements an ERP system is faced with its cost
to the Deloitte & ToucheÕs survey (Computer and complexity. However, the disastrous problems
Technology Research Corporation, 1999), tangible are usually those which relate to implementing
benefits refer to inventory reduction, reduction of an ERP system without thinking through its full
personnel, increased productivity, improvements business implications (Davenport, 1998a,b).
in order management, more rapid closing of fi-
nancial cycles, reduction in IT and procurement
costs, improvement of cash flow management, in- 4. Taxonomy of critical factors
crease of revenue and profits, reduction in trans-
portation and logistics costs, reduction in the need One major benefit of ERP comes from its en-
for system maintenance, and improvement in on- abling role in reengineering the companyÕs existing
time delivery performance. Intangibles refer to the way of doing business. All the processes in a
increased visibility of corporate data, new or im- company must conform to the ERP model. Or-
proved business processes, improved responsive- ganisations that do not adopt this philosophy are
ness to customers, unanticipated reduction in cost, likely to face major difficulties (Gibson et al.,
tighter integration between systems, standardiza- 1999). This entails that the costs of aligning with
tion of computing platforms, increased flexibility, an ERP model could be very high, especially when
global sharing of information, Y2K compliance, a company plans to roll out the system worldwide.
improved business performance, and improved However, ERP implementation results in signifi-
visibility into SCM process. However, a study cant benefits engendered from the integrated na-
of 63 companies shows that it took eight months ture of the system as well as from reengineering
after the new system was in to see any bene- business processes and the change in business
fits. However, the median annual savings from the culture (Bingi et al., 1999). This however results in
new ERP system was $1.6 million (Koch et al., the scale of business process reengineering (BPR)
1999). and customisation tasks involved in the software
Despite these significant benefits that ERP sys- implementation process being the major reasons
tems can provide, they are very expensive even for ERP dissatisfaction (Scheer and Habermann,
under ideal circumstances. The cost of an ERP 2000).
software itself can range from hundreds of thou- One useful approach to adopt when trying to
sands of dollars to several million dollars. This answer the question on whether/how ERP systems
cost can further be escalated when considering implementation impact on business performance is
hiring consultants to help in the selection, config- to consider the levels of ambition of the organi-
uration, and implementation of the system. Ac- sations concerned and what it is that they aspire to
cording to an IT research firm, Gartner Group, achieve in terms of competitive results (Al-
companies may spend up to three times as much Mashari et al., 2001). It is often the case that well
money on consultants as they do on the ERP deployed visions and missions are the ones that are
system itself (Computer Technology Research translated into critical factors of success that get
Corporation, 1999). Other costs may include the communicated at all levels within the organisation.
356 M. Al-Mashari et al. / European Journal of Operational Research 146 (2003) 352–364

In a sense, one major condition for ERP systems ity, integration, process orientation and synergy
to yield to the desired benefits is how well they building. These very often-unexpected benefits can
serve the delivery of CFs. In light of Lyytinen and therefore provide organisations with added capa-
HirschheimÕs (1987) definition of failure, success in bility and will ultimately enhance the latterÕs
IT projects can be seen as: strategic planning efforts and can boost future
competitive results.
• Correspondence success, where there is a match The taxonomy represented in Fig. 1 is a means
between IT systems and the specific planned ob- for illustrating on the one hand the inter-rela-
jectives. tionship between core business strategy aspects,
• Process success, when IT project is completed and on the other, the role of IT and associ-
within time and budget. ated systems can play in supporting the effective
• Interaction success, when usersÕ attitudes to- deployment of key business imperatives through
wards IT are positive. process improvement and management and through
• Expectation success, where IT systems match regular performance monitoring and review.
usersÕ expectations.

The link between ERP benefits and strategic 5. Setting-up

goals, objectives or CFs is therefore a relative one
rather than absolute in terms of what specifically 5.1. Management and leadership
can be expected. Shang and Seddon (2000) classify
ERP benefits into five groups as follows: A review of successful ERP implementations
has shown that leadership and top management
• Operational, relating to cost reduction, cycle commitment are the most critical factors in orga-
time reduction, productivity improvement, nizations embarking on ERP implementation, as
quality improvement, and customer services im- they ensure a smooth change management and
provement. system rollout (Bingi et al., 1999). Not only is the
• Managerial, relating to better resource manage- requirement for setting the vision and the direc-
ment, improved decision making and planning, tion for the business, it is also for harnessing the
and performance improvement. energy and creativity of employees, for enabling
• Strategic, concerning supporting business growth, the business to perform, for implementing modern
supporting business alliance, building business concepts such as BPM and for exploiting the
innovations, building cost leadership, generat- technology capabilities of an ERP system. Fur-
ing product differentiation, and building exter- thermore, leadership is a propagated approach of
nal linkages. individuals and champions who can effectively
• IT infrastructure, involving building business implement change programs such as ERP systems
flexibility, IT cost reduction, and increased IT and who are not averse to modern ideas, learning
infrastructure capability. and growing the business through innovation and
• Organisational, relating to supporting organiza- best practices (Al-Mashari et al., 2001).
tional changes, facilitating business learning, The experience of Microsoft highlights the im-
empowering, and building common visions. portance of having top management directly in-
volved in planning and implementing an ERP
In a sense, a balanced strategy will have CFs of system. MicrosoftÕs top management was instru-
a strategic, organisational and operational nature. mental in overseeing its ERP project, and the
The implementation of ERP systems will therefore entire board reviewed and approved the plans
be carried out to serve that particular purpose and (Deloitte Consulting, 2000). At ALEVO, the de-
to support the accomplishment of the various, cision to implement an ERP system was also made
multi-level CFs. Furthermore, ERP systems can at the board level, and the senior management
yield to many intangible benefits such as flexibil- team input was very important when selecting a
 M. Al-Mashari et al. / European Journal of Operational Research 146 (2003) 352–364 357

Fig. 1. Taxonomy for ERP critical factors.

suitable vendor (Welti, 1999). Top management to constantly monitor the progress of the pro-
support and commitment does not end with initi- ject and provide direction to the implementation
ation and facilitation, but must extend to the full teams.
implementation of an ERP system. HP noted
that ERP implementation is about people, not 5.2. Visioning and planning
processes or technology. The organisation went
through a major transformation, and the man- ERP systems are essentially considered as pro-
agement of this change was carefully planned cess-oriented IT tools for improving business per-
(from a strategic viewpoint) and meticulously im- formance. One of the most fundamental elements
plemented. All the case studies analysed have in business improvement is having a clearly defined
shown that the key to a smooth rollout is the ef- vision/mission and the formulation of the right
fective change management from top. Intervention policies/strategies that can serve as the blue-
from management has been necessary to crucial print for any organisational success (Mitchell and
for the adequate resourcing of the project, to Zmud, 1995). It is also important to emphasise at
taking fast and effective decisions, resolve con- this juncture that successful visions/missions are
flicts and bring everybody to the same thinking, those that are translated into measurable goals and
to promote company-wide acceptance of the pro- targets. The visioning and planning stage can then
ject, and to build co-operation among the diverse serve as Ôthe precursorÕ for putting in place an
groups in the organisation, and in many times enabling IT strategy, based on mapping and de-
across national borders. Top management needs termining the key requirements that can support
358 M. Al-Mashari et al. / European Journal of Operational Research 146 (2003) 352–364

the effective deployment and delivery of the key initiative can suffer a huge failure (Deloitte Con-
business imperatives (Al-Mashari et al., 2001). In sulting, 2000). Well-defined strategic targets help
fact, an IT vision/mission process is developed as a to keep the project team on track throughout the
sub-set of the business strategic formulation pro- entire implementation process (Welti, 1999). Pro-
cess (Henderson and Venkatraman, 1993). It ad- ject frameworking through planning is important
dresses similar issues that are considered from a as it identifies the extent and type of benefits that
technical, enabling and supporting perspective (Al- can be derived from an ERP systems (Markus
Mashari et al., 2001), and be shaped through a et al., 2000). In reality, the logic of an ERP system
comprehensive gap analysis as well as capturing may conflict with the logic of the business, and
leading practices form similar competent organi- either of two results will come out, an implemen-
zations (Al-Mashari and Zairi, 1999). tation failure, or a weakened competitive position
Luftman and Brier (1999) point out that IT (Davenport, 1998a,b). In the past, ERP projectsÕ
managers must be knowledgeable about how new failures are found to be the result of inadequately
technologies (such as ERP systems) can be inte- defined business goals and the lack of strong
grated into every component of their business, and adequate sponsorship (Deloitte Consulting,
including tactical and strategic plans, management 2000).
systems, culture, human resources, organisational
structure, current technologies and business ar-
chitecture. It is therefore imperative that business 6. Deployment
strategy formulation process be conducted with
the presence of both IT and business executives. This group of factors concerns moving from the
Alignment of IT strategy with the organizationÕs what to the how issue of implementation, and
business strategy is also considered a fundamental converting the ÔblueprintsÕ into real actions that
principle that has been advocated for over a de- focus on the value chain aspects. From a busi-
cade (Rockart et al., 1996). Luftman and Brier ness perspective, the deployment stage includes
(1999) find out that the IT/Business strategic the definition of the documentation, analysis, im-
alignment process is enabled by senior executive provement, control and redesign/reengineering
support for IT, involvement of IT people in opportunities of all the most critical processes and
strategy development and the level of IT peopleÕs core activities. These activities are coupled with
understanding of the business. He also recom- the management of the people (skills, competen-
mends that maximizing the role of alignment cies, etc.); the change management (preparing the
enablers can be achieved through setting clear organisation for change, dealing with resistance,
goals and establishing strong teams, establishing for putting in communication, awareness, etc.);
strong communication plans, understanding the teambuilding (training briefing, reward, recogni-
business–IT linkage, analysing and prioritising tion, etc.); the use of tools and techniques (problem-
performance gaps, specifying actions and defining solving tools, measurement tools, need analysis
project-management infrastructure, choosing and tools, etc.); and project-management competencies
evaluating success criteria, and sustaining align- (Al-Mashari et al., 2001).
ment through continuous improvement. In ERP In fact, ERP systems are a natural progression
implementation, the same principles of IT strategic from the logic described hitherto (Al-Mashari
alignment apply. If an organization strives to in- et al., 2001). They are derived from a true business
stall a system without establishing a clear vision need and requirement, their purpose is clearly de-
and understanding of the business propositions, fined through the IT vision/mission, their role is
the integration efforts can quickly turn into a dis- fundamentally to support all aspects of process
aster, no matter how competent is the software management. The role itself is very encompassing
package selected (Davenport, 1998a,b). and will cover strategic, tactical and operational
Indeed, without a clear direction and meticu- aspects and the benefits to be accrued will there-
lous strategic planning, the ERP implementation fore be very diverse.
 M. Al-Mashari et al. / European Journal of Operational Research 146 (2003) 352–364 359

6.1. ERP package selection ment of contact points (Bancroft et al., 1998).
Communication has to cover the scope, objectives,
Companies often fail to consider whether the and tasks of an ERP implementation project
system they are evaluating will match their overall (Sumner, 1999). In a way to avoid the various
business strategy (Davenport, 1998a,b). It is communication failures, an open information
therefore prudent that the characteristics of an policy has to be maintained for the project. For
ERP software are matching the criteria used by an example, a good e-mailer system can help promote
organisation to select an IS. The results of a survey this policy, but serious problems need to be dis-
of the criteria used by organisations in selecting cussed by telephone or, preferably, face to face
their current IS shows that the best fit with cur- (Welti, 1999).
rent business procedures is the most important one
(Everdingen et al., 2000). Clarkston Potomac
6.3. Process management
(Computer Technology Research Corporation,
1999) suggests several practices to ensure a suc-
To take full advantage of an ERP soft-
cessful ERP selection process, including staying on
ware, business process redesign is a prerequi-
schedule, including human resources representa-
site (Holland and Light, 1999). Because ERP
tives in the assessment of IT capabilities, not
systems are essentially developed as instruments
allowing vendors to drive the presentations of
for improving business processes such as manu-
demos, entering product presentations or demos
facturing, purchasing, or distribution, ERP im-
with a clear agenda and communicate that agenda
plementation and BPR activities should be closely
to the providers, ensuring that test scenarios rep-
connected (Al-Mashari and Zairi, 1999). This is
resent a variety of departments, building test sce-
achieved through an exhaustive analysis of cur-
narios that represent current and future processes,
rent business processes to identify the poten-
documenting assumptions about what the ERP
tial chances of reengineering, rather than designing
system will accomplish, recording all conclusions
an application system that makes only the best
reached about each vendor and system, respecting
of bad processes (Scheer and Habermann,
dissenting options, scheduling breaks between
2000).
product reviews, resisting the temptation to rank
candidates, eliminating clear losers immediately,
using experienced negotiators, and maintaining 6.4. Training and education
site of original plans. On the other hand, Rao
(2000a,b) believes that small and medium enter- Inadequate training has been one of the sig-
prises should check for five important criteria nificant reasons of many ERP systems failure
when selecting an ERP package. These are affor- (Gupta, 2000). In ERP implementation pro-
dability, domain knowledge of suppliers, level of jects, despite millions of dollars and hundreds of
local support, software upgradability and use of deployment hours, many projects fail because
latest technology. of the lack of adequate training (Kelley et al.,
1999). A particular challenge in ERP imple-
6.2. Communication mentation is to select an appropriate plan for
end-user training and education. It is however
Indeed, communication is one of most chal- important to stress that the main goal of ERP
lenging and difficult tasks in any ERP project training should be the effective understanding of
(Welti, 1999). The communication plan has to the various business processes behind the ERP
detail several areas including the rationale for applications (Gupta, 2000). ERP training should
the ERP implementation, details of the business address all aspects of the system, be continuous
process management change, demonstration of ap- and based on knowledge transfer principles
plicable software modules, briefings of change wherever consultants are involved (Davenport,
management strategies and tactics and establish- 1998a,b).
360 M. Al-Mashari et al. / European Journal of Operational Research 146 (2003) 352–364

6.5. Project management existing legacy systems have to be carefully defined

and evaluated to determine the nature and scale of
Approximately 90% of ERP implementations problems that an organisation may encounter
are late or over budget (Martin, 1998), which may during implementation (Holland and Light, 1999).
be due to poor cost and schedule estimations As it is important that an adequate infrastructure
or changes in project scope, rather than project- should be planned for so that it becomes reliably
management failure (Holland et al., 1998). Slevin available and well in time (Rao, 2000a,b); Holland
and Pinto (1987) argue that in order to manage a and Light (1999) stress the need to carefully
project successfully, project managers must be manage legacy systems in ERP implementation.
capable both in strategic and tactical project- They suggest that if organizational legacy systems
management activities. They propose ten project- are very complex (with multiple platforms and a
management critical success factors that fall in variety of procedures to manage processes), then
either the strategic or tactical phases of a project. the amount of technical and organisational chan-
The strategic factors are: project mission, top ges required is likely to be high, and vise versa.
management support and project schedule/plan; Indeed, the problem of legacy systems centers on
while tactical factors are: client consultation, per- the fact that in most companies, data are not kept
sonnel recruitment, technical task, client accep- in a single repository, but rather spread across
tance, monitoring and feedback, communication, dozens or even hundreds of separate computer
and troubleshooting (Slevin and Pinto, 1987). systems, each housed in an individual function,
With new technology, it is often critical to ac- business unit, region, factory, or office. Each of
quire external expertise, including vendor support, these legacy systems may provide valuable support
to facilitate successful implementation. (Sumner, for a particular business task. However, when they
1999). Hundreds of companies provide ERP ser- are considered in combination, they represent one
vices, which may include all or some combination of the heaviest hindrances on business productivity
of ERP selection, business process planning or and performance (Davenport, 1998a,b). It is im-
reengineering, ERP implementation, End-user portant, therefore, that an organisation approaches
training and ERP maintenance and support. With the transition of legacy system carefully and with
the growth of the ERP market being fast and huge, a comprehensive plan.
there has been a lack of competent consultants.
One of the challenges with ERP implementation is 6.7. System integration
that it demands multiple skills covering functional,
technical, and inter-personal areas. If these skills One of the complexities associated with ERP
are found in a consulting firm, it is another chal- implementation is related to the cross-module in-
lenge for an organisation to manage such a con- tegration nature of the system (Soh et al., 2000).
sultant (Bingi et al., 1999). However, an important Though there are middleware technologies that
success factor here is for the organisation to es- can be used to integrate software applications
tablish a knowledge transfer mechanism by which from several vendors to the ERP backbone, they
consultantsÕ role is defined clearly and their skills are not available for all ERP systems (Bingi et al.,
and expertise are acquired and transferred ade- 1999). Moreover, middleware vendors often tend
quately. to focus on the technical aspects of application
inter-operability rather than linking business pro-
6.6. Legacy systems management cesses together, and, in many times, organisations
have to develop their own interfaces for commer-
Roberts and Barrar (1992) and Adolph (1996) cial software applications. Even maintaining the
note that legacy systems include the existing in- integration mix requires an excessive and ongoing
formation technology infrastructure (hardware and expenditure of resources (Bingi et al., 1999). It is
software), business processes, organisational found that organisations spend up to 50 percent of
structure and culture. In ERP implementation, their IT budgets on application integration (Rad-
 M. Al-Mashari et al. / European Journal of Operational Research 146 (2003) 352–364 361

ding, 1998). When it comes to maintaining the Therefore, it is important that an organisation
system, IS personnel are faced with the challenge goes through a carefully planned transformation
of managing and keeping it integrated with other that is based on adequate strategy and well-defined
organizational systems (Bingi et al., 1999). methodology of implementation (Bingi et al.,
1999).
6.8. System testing

As the implementation of any application sys- 7. Evaluation

tem cannot be realised in a single step, the new
functionalities are better tested both alone and in For the purpose of measuring and improving
conjunction with the existing functionalities (Ap- business performance, several costing techniques
perlrath and Ritter, 2000). In ERP implementa- have been developed to provide more accurate cost
tion, going live on the system without adequate information, primarily by cutting the link between
and planned testing is a recipe for an organisa- internal management reporting and the demands
tional disaster (Computer Technology Research of external regulations (Dixon et al., 1990). How-
Corporation, 1999). The testing and validation of ever, several authors such as McKinnon and Bruns
an ERP system is important to ensure that the (1992) suggest that management accountants must
software works technically and that the business pass responsibility for performance measurement
process configurations are practical. When busi- to those responsible for achieving the performance
ness processes are up and running, an impor- (i.e., process owners). This led to the develop-
tant test is of whether the processes described ment of non-financial measures of performance
and represented in the application system actually to achieve a balanced between both financial
match with the processes taking place in the or- and operational measures. Grady (1991) supports
ganisation (Apperlrath and Ritter, 2000). In the this balanced perspective and Kaplan and Norton
case of Guilbert, testing was considered important (1992) propose a ‘‘Balanced Scorecard’’ of mea-
because the new system were found not working in sures along five perspectives, namely strategic
parallel with the companyÕs old systems. A testing planning, financial, customer, internal business,
process was undertaken as the system was config- and innovation and learning. This approach ap-
ured, and then the entire system was tested by user pears to become more popular as its applicability
trials (Gibson et al., 1999). continues to spread across different fields.

6.9. Cultural and structural changes 7.1. Performance evaluation and management

It is estimated that about half of enterprise Measuring and evaluating performance is a

system projects fail to achieve hoped-for benefits, very critical factor for ensuring the success of any
because managers significantly underestimate business organisation and indeed for making IT
the efforts required to manage effectively the systems such as ERP pay back. Performance
wide range of changes involved (Pawlowsiki and management in this context is therefore an inte-
Boudreau, 1999). ERP systems are designed such grated holistic concept. It has to embody the whole
that they support a variety of logical organisa- organisation and capture tangible and intangible
tional structures. Consequently, customising and aspects, cover soft and hard elements and include
configuring an ERP software involves creating a aspects of synergy through integration. Sinclair
logical structure that in turn involves one or more and Zairi (2000) argue that such measurement is
financial entities and one or more operational en- not widely pervasive as an integrated practice and
tities (manufacturing and/or sales and distribution its implementation is not a straightforward pro-
units) (Markus et al., 2000). This requires a mas- cess. It is suggested in the taxonomy that mea-
sive change in an organizationÕs structure and af- surement takes place in a balanced perspective and
fects the way people use to do work and interact. for the purpose of providing useful information
362 M. Al-Mashari et al. / European Journal of Operational Research 146 (2003) 352–364

that can enable the decision making process and, ment of ERP systems. To this end, a several crit-
which can help deliver the corporate objectives and ical factors have been identified and have been
therefore lead the business competitively forward. eluded to individually, within the paper.
In ERP contexts, the performance management The taxonomy presented in this paper empha-
has got to reflect a holistic and balanced perspec- sizes that a clear vision and business director is
tive. In addition to technical performance such as fundamental for the success of ERP system im-
reliability of the system, other aspects on flexibil- plementation. It also considers IT strategic process
ity, speed, timeliness, costs, etc. can also be added a sub-set of the business strategy planning process
on. The value-added contribution is in the form where it sets the architecture and requirement for
of the tangible and intangible benefits, covering the short, medium and long-term requirements.
the strategic and operational aspects of business The taxonomy also focuses on the business process
organizations (Al-Mashari, 2000). Furthermore, management as a core requirement for business
competitive measurement could cover the added success in the creation of a value chain approach.
capability provided by ERP systems to the busi- The ERP system strategic is then become out of a
ness for ÔstretchingÕ the competitive and strategic clear IT strategy, which in turn, is supporting the
agenda. core business strategy.
To complement this system, it is advisable that A stage of performance review and evaluation
regular auditing and benchmarking are considered is based on the premise that the evaluation and
for optimisation of the potential available to performance monitoring of ERP systemÕs imple-
businesses in all aspects. Furthermore, external mentation can in turn lead to the achievement of
benchmarking can bring in new ideas, knowledge all the business desired goal and objectives. The
and best practices on dealing with deficiencies in proposed taxonomy puts forward the idea that
ERP systems, de-bottlenecking, streamlining pro- regular audits and benchmarking exercise can
cess, optimising and redesigning for more exten- bring with them new leering, idea, and innovation
sive benefits (Al-Mashari, 2002). Such audits can that will make the organisation more adaptable to
take advantage of an array of existing tools that change programs and will also, provide them with
can be applied to ÔscanÕ both the organisational, the opportunity to derive maximum benefits from
managerial and technical sides of the business. investing in complex system such as ERP. Finally,
the taxonomy has also suggested that the most
essential element of successes and the pre-requisite
8. Conclusion for successful and effective ERP implementation is
leadership and commitment.
This paper has presented a novel taxonomy of
realising and maximising ERP benefits though a
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