ERP implementation strategies and critical success factors in Thai manufacturing SMEs

ERP Implementation

Thailand has hundreds of vendors that qualify as SMEs, according to the criteria discussed earlier in this study. The research identified four providers of ERP in Thailand. The names and locations of the companies will not be revealed for legal purposes. All four of the companies requested that their identities be kept confidential. The reason for the request was that the interview and the questionnaire would touch on company sensitive information and they were afraid, that although they were assured that company information would be kept confidential, they still preferred to remain anonymous as a condition of their participation. The findings will be analyzed qualitatively and compared, using the critical decisions found in Malhorra & Temponi (2010). These factors are team structure, implementation strategy, transition technique, database conversion strategy, risk management strategy, and change management strategy.

Case #1

The company that will be used in case #1 offers ERP software solutions specifically designed for clients engaged in manufacturing processes. They have approximately 240 employees and are owned by a sole proprietor. The proprietor serves as the key decision-maker in the company. The owner was asked a series of interview questions to help determine what they considered to be the most important critical factors in the implementation of ERP. The manager asked that certain information be omitted, such as exact costs and trade secrets. The following summarizes the interview with this manager.

The manager informed the researcher that SMEs use ERP in their companies on a regular basis. Many of their customers are SMEs. In terms of providing a cost estimate of ERP implementation, the respondent felt that this question was difficult to answer, as the needs, sizes and business processes of every customer are different. There are simply too many variables to determine an average cost. They are a small provider and have the advantage of being able to customize the packages that they offer to meet the needs of a diverse customer base. They have had small, partial implementations cost an equivalent of £5,000 and they have had larger project go well over £50,000, It all depends on the customer and their needs. They have a choice in the services that they choose and how they are implemented. The cost for implementing ERP in a small company is often smaller in terms of overall cost, but the cost is relevant to the size of the company. SME's can afford less than larger companies. The respondent was willing to talk about cost in general terms, but unwilling to reveal exact numbers or specific cases due to confidentiality issues.

When discussing infrastructure needs, the respondent felt that here too, the needs of the company differed. The factors that made the key differences were what the companies needs were and what business they operated. He gave the example that the ERP needs of banking would be different from those who made paper. His clients were localized in the manufacturing industries, therefore were production oriented. Whether the company had to spend and upgrade their infrastructure depended on what they already had on site. Some companies were already modernized in terms of hardware and infrastructure. Others needed to make considerable changes. For instance, some had to simply add in a few routers and network cables. Others had to upgrade every PC and hard drive in the company. It all depended on what they had. This was something that had to be discussed with the client before the purchase and plans were made for implementation.

The need to upgrade systems depends on the type and purpose of the software to be installed. Their company does not take a one-size-fits-all approach. One of the key competitive advantages is their ability to suit the needs of a small niche market and to provide software solutions that are specifically designed for that market. They also provide a system that will work across multiple platforms. The ability to adjust to the client's needs was a key advantage to their system over those of the competition. This was all he was willing to reveal on this topic. However, he did comment that although they could work with a number of different customers, they could not install any of their products on Windows 95 or older.

When asked about the importance of an outside technical consultant, the respondent said that too depends on the needs of the company. However, he did add that many times companies feel that at the beginning of the project, they do not need a technical consultant. For those that have a large internal IT department, this if often true, They often have someone who can work directly with our staff from the beginning of the project, through the end of the project and understand the process and needs of the process with clarity. We have found that this is the rare case and that most of the time, customers try to go it alone in the beginning and only after considerable wasted time, money and effort, they hire an outside consultant.

These are lessons from the trenches and customers must see the need for outside consultants before they see their necessity. This is especially the case in small companies where they have only one IT person who has limited knowledge. The integrated approach to ERP is a different approach than they are used to. This is the real reason why consultants are valuable, as they are familiar with the software and can often foresee problems before they occur that could not have been seen by an inhouse person.

The respondent commented on the change process. He said that change is always difficult for any company. The introduction of ERP represents a new way of doing business. People have to learn to communicate in new ways. The process for the implementation of ERP follows the same steps as any business process change or software installation. First, one of our representatives goes to the company and meets with key personnel to get an idea of what they want and to learn about their business. Next, our company representative meets with the customer to determine what goals the customer has for the project. They try to gain a vision of that the customer wants the project to look like in the end. Sometimes this can be harder than it would seem. The customers is not always sure what they want, they just know that they want and need an improvement. Next our employee meets with any consultants that have been hired to discuss resources and needs.

After the existing resources and needs have been analyzed, our team determines a project plan and flow, taking into account the customer's needs, resources and liabilities. One of the key concerns is continuity of business during the change process. Businesses often have to continue with business as the process is taking place. This can sometimes be a logistical nightmare. Once the proposed plan in laid out, a meeting is held with all concerned parties and the plan is presented. The customer, their consultants and professionals have a chance to address any changes or ask questions. The planning stage is the longest, but the most important to the success of the project.

The next phase is where the actual work begins. Sometimes a guerilla approach is used where the entire operation is suspended, the software and new system is installed, employees are trained on the new system and operations are begun. Our staff stays with the company to address any concerns or problems that arise once the new system begins to be used. Next the system is live tested and any performance issues are addressed. When the customer is satisfied with the new system, we pull out. However, we offer continual support for the life of the system. At this time, this interviewee indicated that he had no more time and had to end the interview.

Case #3

The third ERP installation company that was interviewed had around 900 employees and by Thai standards was considered medium range supplier. The person whom I was able to talk to was form the Installation department, as he was the only one free at the time. The company offered a proprietary software that it had developed to be cross-platform and highly customizable to the customer's needs. It could be made suitable for small to large corporations and could support up to 50 users. This means that they were more suitable for SME's than the product offered by case #2. The costs of the software package depended on the customer's needs and whether their base system was ready to go, or whether changes needed to be made there as well. They said that their costs could range from thousands to hundreds of thousands, depending on the need of the customer.

They did not perform installation and upgrading of the customer's system, as that constituted too much liability by the way of data loss and potential problems that were beyond the scope of the project. They do not engage in activities related to the installation that are actually in the realm of doing the customer's job. The scope of their work ends with purring the software into place. The customer is responsible for backup and migration of the data and system to the new software. Their company would be there support and to offer advice where needed, but they would not perform this process for the customer. The parameters of where their business obligation began and ended was very clearly defined in the contract that they signed with the customer.

I asked about what constitutes fixed costs and variable costs in the installation process. The IT manager indicated that the only real fixed costs were the prices of the system that the customers would purchase from them, That was a variable that depended on the number of units that they needed to install the system. Once this was determined, it was a known quantity. However, installation was an additional cost to the customer that could not be determined at the outset of he project. There were many variables that could affect the final cost of the project, such as any problems or delays that might occur during the process. He felt that it was important for SME's to control costs as much as possible, because they have less room to play with than larger corporations. His company did not do installs for extremely large corporations, therefore, it was important for the customer's sake, to control their costs as much as possible during the installation process.

Regarding the use of consultants, the respondent felt that they were essential to the success of the installation, particularly for SMEs who might not have the technical staff necessary for the successful installation and understanding of the process. He felt that one of the most important roles of the consultant was to help align the goals of the company with the products that they company offered. The most common reason for project failure was miscommunication and unrealistic expectations about the software and its capabilities. Of course, he felt that they were excited about the product and felt that it was an excellent product. However, sometimes customers are looking for a "magic pill" that will fix all of their problems. Of course, we know that this does not exist, but the customer cited this as a key reasons for project failure.

As far as hardware and software specifications were concerned, the respondent indicated that his company offered a wide selection of products and that the customer was certain to find one that would suit their needs. In terms of cross-platform compatibility, they had some problems in the past with clients that had proprietary software, but for the most part, their developers had taken that into consideration and designed systems that would be compatible with the greatest number of client systems and software. The type of hardware, RAM and other parameters depended on the size of system being installed. There was not pandemic answer that would serve every customer need and application.

He said that for the most part, the system had to be the latest version. However, it had been able to be installed with some elements of the system as old as Windows 97, but this was not recommended. They recommended updating all customer components to reflect the latest software versions, best available process speed and the best that could be found. However, they have had customers insist on installation onto older systems. This is where they have had problems in the past. He did indicate that their installers were able to build work arounds in many of these cases.

The most important element to the success of the project was found to be clear, realistic goals and the ability to communicate these goals clearly. In his opinion, this was the key reason for project failure in many cases. Attention to this element in the planning stage was the most important element to the success of the project.

When pressed about the technical specifications needed for ERP to be installed, the respondent did not prefer to answer for feat of giving out confidential details about their own customers. The respondent felt that the most important technical factor was compatibility with existing systems that the customer has in place. The more common applications, for the most part, cause very little problem, but those that are unusual or custom for a specific application in a specific industry can be problematic. I asked for some examples. The customer said that the one that sticks out in his mind is programs designed to perform automobile diagnostics.

This respondent also felt that issues of change management, risk management and other problems that were not related to the installation of the software were beyond the scope of their company and that the customer was responsible for getting the proper assistance with these problems. The respondent made it very clear that they were not responsible for operating the client's business, they were only responsible for putting the software in place that would help them to manager it better. The rest was still up to the customer and how they wished to manage their business after the software was installed.

Case #4

The fourth case involved a company that provided ERP solutions specifically for the banking industry. They were a company of 525 employees and were based in Thailand. All of their customers were Thai banks. I asked if they felt that ERP was appropriate for SMEs, in costs, the desired effects that were achieved and in the benefits that they would receive from it. The person that I talked to was upper management, but not at the uppermost level. The costs for their particular software solutions was higher than the average for the type of package that they offered. However, their software was highly specialized and suitable for the specifications of only their clientele and related businesses.

I wanted to know more about this. The respondent said that unlike a manufacturing company, that produced a widget for sale, their business depended on accounting and report generating more than other industries. He remarked that their industry was highly regulated and their software had to meet the specifications of government laws and requirements, or their business would suffer as a result. They were under much stricter rules than other software developers in other fields.

In addition to these differences, the software that they developed had to be able to pull data from many different source and to present it real-time so that the recipients could adjust to rapid changes. Security was a key issue that was of particular importance to software in the banking industry. It was important to make certain that the wrong people did not have access to personal account information. The needs of the banking industry differed significantly from those in other fields. This is a key example of specialization in the area of ERP software.

I asked about the suitability for ERP for SMEs. The respondent could only address the issue as far as the banking industry is concerned. SMEs in the banking industry have had to add ERP in order to keep up with regulatory changes and competition. ERP has become an industry standard, perhaps more so than in any other industry. The respondent felt that this was partially due to the need to perform incredible data and the need to do so accurately and quickly. As soon as it was available. The respondent felt that the industry was the key factor in the adoption of ERP by both SMEs and larger institutions. He felt that ERP was not only helpful to SMEs, but a necessity if they wished to remain competitive.

I asked about system requirements and was told that the banking industry meets state of the art in technology as soon as it is available. They use many programs and software that is developed specifically to meet their unique demands. System and hardware requirements in the banking industry typically do not present a problem, as they tend to have the best systems and equipment available. The situation in the banking industry was found to the most unique among the cases, as they were specifically designed to meet the needs of the banking industry.

The respondent also agreed with the other four companies that change management, risk management, and risk management were beyond the scope of their relationship as a software installer. This line seemed clear among all of the survey respondents. He agreed that project management was essential and also added that without proper project management, the installation and its adoption was not likely to work. One of key obstacles in the installation of the software was the disruption of business and the migration of databases. The banking industry is highly standardized with few examples of proprietary software available. Installing the software package specifically designed for that industry, is relatively easy, as it is designed to work well with other existing software packages. Like the other companies, this software companies has well-defined teams, each of which plays a specific role at a specific place in the process.

5.1 Analysis of the Interview

The case summaries contain the key content that was derived from the interview process. This content brings out several themes that were consistent throughout all four cases. These will be analyzed according to the six factors discussed earlier in the study.

All of the organizations that were interviewed reported that they had similar team structures, regardless of structure or team organization. Rather than having a single group of persons who oversaw the process from beginning to the end, performing all necessary tasks needed for the job, they divided the teams into units, all of which knew their jobs and did them well. The one exception to this was Case #1, which was the smallest company in the study.

The implementation strategy of all four companies was the same. The first step was to perform a needs assessment to find out what the needs of the customer and to define the goals and parameters of the study. The second portion of the implementation process is the actual installation of the system. All of the companies had differences that were based on the needs of the project and the client. It was the final stage of the implementation process where the most differences were seen. Some of the companies provided testing and support for the new system, others ended their contract as soon as the system was installed. However, these differences reflect company preferences, rather than trends in ERP installation

The transition technique was focused on the installation of the software. All of the companies interview agreed that they were not responsible for change management, or risk management. This was the customer's responsibility and they felt that it was not in their project scope toe manage these factors for their customers.

Data base conversion methods differed. In some cases, the company was responsible for database conversion. Two types of database conversion are considered. The first is to convert the file manually. However, it is suspected that this method of conversion is not used often. First, it is time consuming and there is a high probability for mistakes due to human error. Secondly, security was a concern, particularly in the banking industry. They need to avoid as many eyes as possible when entering the data. For these reasons, all data is now entered electronically.

Risk management strategy is largely associated with the project itself. Identifying risks was a key part of the planning stage of the project. These risks were found to include the need to provide business continuity, Custom software packages and other site specific conditions are identified as key factoring in the ability to mange risk during the project. All of the companies indicated that they feel that managing risk stops once the software is in.

Change management was the final factor that was important to the implementation process. The interview respondents indicated that they offered various levels and training and support for their customers. They largely felt that their responsibilities in this case were limited to the installation process. Change management with organization as a whole depended on the individual need of the company. They felt their obligations ended when the project was complete.

Crucial success factors found

Several themes echoed through the four case studies that were examined. The first is that the planning stage is the most important factor in successful project implementation. Time spent in the planning stage allowed the company to understand what their client's expectations were and how best to serve their needs. Clients who had realistic expectations about what the software could and could not do were less likely to be dissatisfied with the installation. Literature agrees with he interviews that ERP is suitable for every business (Gargeya and Bradii, 2005).

Another key success factor was the provision of training and support once the installation is complete. Those that have support will be more likely to be able to work through any problems that they might be having and will be able to make the most of the system. Several factors emerged that were consistent with the findings of literature on the topic. The firs is that However, SMEs often find it more difficult to adopt ERP software than larger companies (Malhotra & Temponi, 2010:35). Matching the benefits of an ERP system with the expectations for that system is important in determining the benefits of the software (O'Leary, 2004: 68). ERP is an essential part of the infrastructure in B2B systems (Bendoly and Schoenherr, 2005:17). Harney (2007) found that the integrated operation provided by ERP improved both front and back end processes.

Critical success factors depend on the stage of the project and on the perceptions of those factors (Plant and Wilcocks, 2007). Monitoring of he project was essential to the success of the project (Wong, Chau, & Scarborough, 2005; Yingje, 2005). Although this was not stated explicitly by the case studies, the structure of the companies reflected reliance on project manager. The most important critical success factors found by Kalbasi (2007) was to test the software before it went live, troubleshooting, and have a plan for cleaning up data. Surprisingly, none of the interviewees mentioned these factors.

Companies are adopting ERP for purposes of uniformity and ease of training employees, greater transparency, and the ability to standardize business functions (Kimberling, 2010), as was seen in the case with the banking industry. Murphy and Simon (2002:319), found that the implementation of ERP has become longer, more complicated and more cost intensive. This was also supported by the findings. Olson and Zhao (2007:136) agree with these authors on the importance of these factors to the success of an ERP implementation process.

5.2 ERP Implementation Life Cycle

The implementation strategy for ERP was found to be the same as for any other software installation. The is to assess client needs and plan the project. The next is the actual installation of the system and migration of data to the new system. The final stage is follow up and support. Various companies and theorists further subdivide these steps in various manners, but these three key steps are essentially the same.

5.3 ERP Implementation Procedure

The most important factor that came out in the interviews regarding the implementation procedure is that every case and every client is different. This was a common theme that emerged in the interviews.