Erp Implementation

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Information & Management 40 (2002) 25±40

The critical success factors for ERP implementation: an organizational ®t perspective Kyung-Kwon Hong, Young-Gul Kim*
Graduate School of Management, Korea Advanced Institute of Science and Technology (KAIST), 207-43 Cheongryangri-Dong, Dongdaemun-Gu, Seoul 130-012, South Korea Received 20 May 2001; accepted 1 September 2001

Abstract Since early 1990s, many ®rms around the world have shifted their information technology (IT) strategy from developing information systems in-house to purchasing application software such as enterprise resource planning (ERP) systems. IT managers responsible for managing their organization's ERP implementation view their ERP systems as their organizations' most strategic computing platform. However, despite such strategic importance, ERP projects report an unusually high failure rate, sometimes jeopardizing the core operations of the implementing organization. This study explores the root of such high failure rate from an ``organizational ®t of ERP'' perspective. Based on the relevant literature, we de®ne the concept of organizational ®t of ERP and examine its impact on ERP implementation, together with ERP implementation contingencies. The results from our ®eld survey of 34 organizations show that ERP implementation success signi®cantly depends on the organizational ®t of ERP and certain implementation contingencies. # 2002 Elsevier Science B.V. All rights reserved. Keywords: ERP implementation; Organizational ®t; ERP adaptation; Process adaptation; Organizational resistance

1. Introduction Under the pressure to proactively deal with the radically changing external environment, many ®rms have changed their information system (IS) strategies by adopting application software packages rather than in-house development [12,25]. An application package such as enterprise resource planning (ERP) system is one solution to the information technology (IT) industry's chronic problems of custom system design: reduced cost, rapid implementation, and high system * Corresponding author. Tel.: ‡82-2-958-3614; fax: ‡82-2-958-3604. E-mail addresses: kyungkh@kgsm.kaist.ac.kr (K.-K. Hong), domino2@unitel.co.kr (Y.-G. Kim).

quality [28]. Although application packages have these bene®ts over custom design of applications, packaged software has problems of their own: uncertainty in acquisition [14] and hidden costs in implementation [29]. In a survey of the IT managers responsible for managing their organization's ERP projects, twothirds of the respondents viewed their ERP systems as their organizations' most strategic computing platform [47]. Despite such perceived importance, it was reported that three quarters of the ERP projects were judged to be unsuccessful by the ERP implementing ®rms [13]. What makes ERP implementation so unsuccessful? Swan et al. [46] argued that the root of such high failure rate is the difference in interests between customer organizations who desire unique business solutions and ERP vendors who prefer a

0378-7206/02/$ ± see front matter # 2002 Elsevier Science B.V. All rights reserved. PII: S 0 3 7 8 - 7 2 0 6 ( 0 1 ) 0 0 1 3 4 - 3

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K.-K. Hong, Y.-G. Kim / Information & Management 40 (2002) 25±40

generic solution applicable to a broad market. Such con¯icting interests led us to explore an organizational ®t perspective of ERP implementation. An important criterion used in selecting an ERP system is the ERP ®t with the current business processes [9]. Although the ®t between ERP and the organizational context is believed to be critical for successful ERP implementation, few examined the organizational ®t issues of ERP empirically. Soh et al. [44] suggested that the organizational ®t of ERP might be worse in Asia, because the reference process model underlying most ERP systems is in¯uenced by European or US industry/business practices, which are different from Asian business practices. The relative invisibility of the ERP...
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