ERP Issue: Stakeholders

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Table of Contents

Abstract
Introduction
ERP Project Stakeholder Analysis
Challenges Faced by Each Stakeholder
The Impact of an ERP System on the Stakeholders
Conclusion
References

Abstract

The actions of an ERP project stakeholder determine whether a project will succeed or fail. In particular, their interactions influence each other’s role and determine the final project outcome. This paper identifies the different stakeholders involved in an ERP project selection and implementation process, the challenges they face and the impact a project has on the roles of the stakeholders.

The analysis reveals that the business owners/CEOs, the project managers, the system administrators, the vendors, the sales team and the system users are the key stakeholders of ERP projects. In addition, the analysis of their specific roles and relational ties shows that ERP implementations have positive and negative impacts on all stakeholders.

Introduction

Enterprise Resource Planning (ERP) systems provide information technology solutions for large and small firms. To attain operational excellence in the modern business environment, firms have been compelled to replace the existing systems with new ERP systems. However, ERP projects are not only costly but also complex to implement. This explains why successful ERP projects are rare.

Most ERP projects turn out to be unsuccessful because of poor planning and resistance to the new change. Research focusing on ERP project success factors indicate that management support and stakeholder collaboration contribute to successful ERP projects.

The individuals involved in business management, company management and project planning make up the ERP project stakeholders. They create a network of relationships, influence one another and make decisions that affect the final outcome of a project (Wallace & Krezmar, 2001).

From an organizational perspective, ERP projects are not only comprehensive but also require the integration of company-wide systems and processes. They normally involve many stakeholders and affect all departments of the organization. This paper examines the different ERP project stakeholders, their roles, their relations and the impact of an ERP implementation project on each stakeholder.

ERP Project Stakeholder Analysis

Stakeholders are the people who play different roles at various implementation stages of an ERP project. According to Wallace and Krezmar (2001), the attitudes and actions of the stakeholders predict the outcome of the project. The number of ERP project professionals varies depending on the nature of the enterprise (size and industry).

ERP projects involve both internal and external stakeholders who play different roles in project planning, business management and company management. In most ERP projects, the stakeholders include; the project manager, the management team, the finance department, the vendor, the system users and the procurement manager. Each stakeholder plays a role in the choice and implementation of the ERP system.

The business owner/CEO is the leader of the business. He or she formulates the strategic goals of the company and thus, needs the ERP system to generate data that would help him to determine the firm’s capacity to meet the set goals (Wallace & Krezmar, 2001).

The CEO, besides being a leader, is a stakeholder because he or she uses the information produced by the new ERP system to make strategic decisions. Even though the CEO may not play an active role in ERP software choice, his or her support influences the participation of the other stakeholders during an ERP system selection and implementation.

The project manager is another important stakeholder of an ERP project. The project manager guides the company through the ERP system selection and implementation process (Akkermans & Van Helden, 2002). He or she identifies the specific tasks, assigns roles and responsibilities and ensures that the project progresses in a timely manner.

For ERP projects, the CEO can delegate some of his or her roles to the project manager, who has the responsibility of assigning duties and overseeing the project.

Soja (2006) attributes the failure of most ERP projects to the lack of a clear chain of command, which encourages reluctance and “foot-dragging” on the part of the other stakeholders. This can be avoided by delegating some roles to a senior manager who then reports to the project manager.

For an ERP accounting system, the chief finance officer (CFO) is an important internal stakeholder. He or she initiates the idea of investing in an ERP system/software and leads the other stakeholders through the selection process.

The CFO, in some organizations, acts as the project manager, whereby he or she educates the other stakeholders about the benefits of the new system over the existing one. Wallace and Krezmar (2001) observe that although the CFO is a key stakeholder, he or she may not be conversant with all functionalities of an ERP accounting system.

Financial statement generation accounts for only 15 percent of an ERP accounting system’s functions with business intelligence, process management and CRM accounting for the remaining 85 percent (Soja, 2006).

Therefore, a CFO may not fully understand the capabilities of an ERP software, which may lead to under-utilization of the software. The project manager plays a critical role during the software selection stage. However, after launching the project, it is the CFO who enlightens the system users about the software.

Another key ERP stakeholder is the vendor who sells the software to the firm. The vendor (analyst or consultant) is an external stakeholder who designs the system and includes the specific functionalities based on a firm’s size and industry (Soja, 2006).

The vendor also provides regular upgrades and ensures that the system is compatible with the existing infrastructure. The system manager is another important stakeholder, who, by virtue of being knowledgeable about a firm’s software/hardware needs, makes decisions about the type of system and the network infrastructure that the company needs.

Therefore, system managers must be knowledgeable of the ERP software needs of a firm and the type of infrastructure the system would run on to eliminate any knowledge deficit that may arise.

Unlike in the past where the network only supported on-site software installations, in recent times, providers offer other alternatives including cloud computing and hosting services (Soja, 2006). The systems manager must consider all these alternatives before choosing the best network infrastructure for the new ERP system.

The sales/marketing manager is another key stakeholder of an ERP project. The sales/marketing manager designs a customer relationship management (CRM) system that is capable of integrating with the new ERP software. Therefore, when selecting an ERP system, they must be allowed to give their views.

This will make sure that the new ERP system supports customer relationship management. The system users belong to another category of stakeholders who directly interact with the system. Wallace and Krezmar (2001) state that a bottom-up approach and a top-down approach are the two approaches that are applicable in the implementation an ERP system.

To support the strategic needs of a firm, the managers usually set the strategic goals (business intelligence) of the organization. This forms the top-down approach. In contrast, in a bottom-up approach, employees’ actions determine the business processes the firm engages in as it pursues its strategic goals.

ERP system users are the people involved in various business transactions of the firm. They are the people who interact with the system. If the users are not consulted, the new software may meet resistance, which may hinder its implementation (Wallace & Krezmar, 2001).

Therefore, the system users should be involved in the ERP software design and implementation. Incorporating their opinions in the design and the choice of the system would facilitate a successful implementation of the new ERP project. Often, the growth of a firm comes with an increase in size and complexity of its operations. Thus, a firm may need to upgrade its systems to improve its business processes.

However, a software sold by a vendor may not suit a firm’s future business processes. Moreover, the software may meet a firm’s CRM and business intelligence requirements but fail to address the needs of the system users. Therefore, the system users must be allowed to take part in the design and purchase of a new system to avoid resistance during the implementation step.

Challenges Faced by Each Stakeholder

Any person who plays a role in the design, choice and implementation of the new system is a project stakeholder. Thus, the stakeholders stand a good chance of influencing the design process and the choice of a new ERP system. They, however, face various challenges during the ERP selection process, which, if not dealt with, would affect the usage of the ERP system after it has been launched.

The CEO, being the leader of the company, faces many challenges when handling ERP projects. Although he may not be familiar with the project technical details, he is expected to approve the project, convince the other stakeholders that the project is a profitable venture and offer his full support for the project.

CEOs also face the challenge of setting strategic goals for the company and handling possible project resistance during the implementation step. They also must take full responsibility for any project failures. To overcome these challenges, a CEO often delegates some of his roles to the project managers, who are more knowledgeable of the project’s details.

The project manager has the task of making sure that the system design and selection process is successful. Their biggest challenge may come from the other stakeholders who may oppose the new project. To overcome this challenge a project manager often reports to the CEO, who has the overall power to influence the others to support the project.

The CFO, on his part, has the responsibility of making sure that the financial management process of the system is operational. He faces the challenge of identifying the ERP system’s range of possibilities based on the software’s functionalities. They have to make sure that the new software is utilized to its fullest potential.

Liaison with the software vendor enables the CFO to identify the system’s future potentials and beneficial functionalities. The vendor’s main challenge is to develop a software with functionalities that suit a firm’s current and future software needs.

Growth of a firm’s size and complexity means that a vendor has to provide regular software upgrades. Cloud computing and hosting are some of the ways vendors overcome this challenge.

The systems manager of a firm assesses the software/hardware needs of a firm and suggests the best system deployment option (Barki, Oktamis, & Pinsonneault, 2005). They do not directly participate in the choice of a new ERP software. However, they must make sure that the new system runs efficiently on the current infrastructure.

Liaison with the project manager who participates directly in the design and selection of the system helps system managers to successfully implement the new system. The sales manager determines the nature of a firm’s relationship with its potential customers (Barki, Oktamis, & Pinsonneault, 2005). He or she has the challenge of choosing a CRM tool that is compatible with the new ERP software.

Thus, the sales manager must understand the needs of the target market. On the other hand, the system users, as the end users of the new system, are the ones who make the new system operational. Thus, a demanding or complex system may affect their ability to use the system effectively and efficiently.

The project manager should evaluate the new system to determine its potential impact on the users before implementing it. Also, educating the users about the new system’s functionalities, benefits and potential applications will help avert resistance during the implementation step.

The Impact of an ERP System on the Stakeholders

An ERP project affects the chain of command in an organization as the project manager takes over the leadership role while the CEO becomes the de facto leader of the project (Barki, Oktamis, & Pinsonneault, 2005). However, it is the CEO who uses the ERP system output to make resource planning decisions.

On the other hand, the implementation of the new project gives project managers an opportunity to learn how to organize and oversee ERP projects. A new ERP system also helps CFOs to learn the different system functionalities that would help a firm meet its strategic goals.

The systems manager, as the person responsible for deploying the system, learns how to integrate the new system into the existing infrastructure at minimal costs. In addition, the regular system upgrades reflect the vendor’s need to design systems that meet current and future business processes. A new ERP system also affects the users’ efficiency and effectiveness, which, ultimately, translate into improved performance.

Conclusion

An ERP project has many stakeholders who participate in project planning, company management and business planning. The CEO and the project manager participate in project planning and management, while the vendor, the chief finance officer, the system administrator and the systems users are the stakeholders who are directly affected by the new system.

On the other hand, the CEO and the project manager have high stakes in the project and depend on project outcomes to make strategic decisions. Thus, a new ERP system affects all stakeholders involved in the project either at operational level or business level.

References

Akkermans, H., & Van Helden, K. (2002). Vicious and Virtuous Cycles in ERP Implementation: A Case study of interrelations between Critical Success factors. European Journal of Information Systems, 11(1), 35-46.

Barki, H., Oktamis, S., & Pinsonneault, A. (2005). Dimensions of ERP Implementations and their impact on ERP project outcomes. Journal of Information Technology Management, 16(1), 1-9.

Soja, P. (2006). Success factors in ERP systems implementations: lessons from practice. Journal of Enterprise Information Management, 19(6), 646-661.

Wallace, T., & Krezmar, M. (2001). ERP: Making it happen. New York: John Wiley and Sons Publications.

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