The risk analysis of system selection and business process re-engineering towards the success of enterprise resource planning project for small and medium enterprise

Abstract

This study contributes to the discussion on Enterprise Resource Planning (ERP) implementations in the context of small and medium size enterprise (SME). Ignorance of ERP implementation risks would seem to be the major challenge for SMEs. Several risk factors have been identified to help enterprises better manage their ERP projects; hence this study seeks to assess the impact of risks in the ERP implementation phase. The implementation of an ERP software package involves a mix of business process changes and software configuration to align the software with the business processes. Small and medium enterprises (SMEs) have restricted resources, budgets, and great sensitivity to costs; thus, ERP implementation is such a huge concern for a small enterprise. An SME needs to contemplate numerous details; primarily the cost factors of implementation before taking the first step in implementation of an enterprise resource planning (ERP) system. One of the important factors influencing success or failure of an ERP project is the cost factor and it is critical to find ERP implementation cost factors which are designed especially for SMEs. Risk is a problem that has not yet occurred, but which could result in some loss or threaten the success of the project if it did. This study chooses the critical adequate system selection risk and business process re-engineering risk of the ERP implementation projects which have been identified and designed for the framework. The purpose of this study is to identify and assess relations among these risk factors of ERP through the SMEs that impact upon cost reduction in general, as well as cost reduction on the project’s success. The instrument used for data collection is a questionnaire. The questionnaires were distributed in the I.M.D Company (an SME) in Iran. Respondents are staff members who have knowledge of the ERP and data from questionnaires have been previously analysed with SmartPLS software.