A practical model on controlling the ERP implementation risks

Amin Hakim
a,
, Hamid Hakim
b
a
Ph.D. Candidate on Systems Management, University of Tehran, Iran
b
IH University, Center of NSDS, Tehran, Iran
a r t i c l e i n f o
Article history:
Received 23 June 2009
Received in revised form
28 June 2009
Accepted 29 June 2009
Recommended by: D. Shasha
Keywords:
ERP
Decision-making model
Risk management
ERP selection model
a b s t r a c t
Although ERP systems were already introduced many years back and were implemented
in different organizations, there are still companies who hesitate to decide about
establishing ERP systems in their structure. This hesitation will itself result in the
projects to go in vain. On the other hand, taking into account the Iranian organizations,
the unfamiliarity with these systems is obviously comprehended, something that stems
from the lack of information in decision-makers and managers concerning the above-
mentioned issue, together with the feeling of fear and inconvenience with this novel
technology.
Taking into account the lack of successful prior experience of ERP implementation in
Iranian automotive industry, these failures have acted as obstacles for the decision-
makers to move towards establishment of the system.
Bearing in mind all the above, this article, through reviewing the intra- and extra-
organizational limitations, has tried to provide a suitable and practical model for
decision-makers to take precise steps in implementing ERP systems in Iran. This model
has been operationally tested and simulated in Bahman motor company. The overall
schema of the model and also the evaluation results in the aforementioned company
have been incorporated in the results of this essay with the intention to decrease the
decision-making risks and, therefore, success of these types of projects. This would per
se lead to further related investigations, and managers and decision-makers in
companies can take advantage of the results.
& 2009 Elsevier B.V. All rights reserved.
1. Introduction
Taking a closer look at the inception process of many
companies in Europe and the United States, it becomes
apparent that setting up a seamless IT infrastructure has
always taken precedence before any other manufacturing
or operational activities such as deployment of machi-
neries, production line, and or any other related industrial
or service activities. This strategy will allow the compa-
nies to dene their internal and external operational
processes based on a solid foundation, resulting in optimal
efciency and effectiveness in line with their strategic
policies [1].
IT as a new industry in Iran has not found its rightful
place within the organizations, as mangers are still
adamant and adhere to the traditional management
systems, and show resistance to the required organiza-
tional and infrastructural changes. Cultural and human
resource complexities within an organization are the two
main factors impacting the development of IT systems,
which need to be addressed with a new perspective [2].
Cultural changes are not apart from the people who have
created, so the starting point for the changes must come
from within the management system, the people who are
involved in dening and implementing corporate policies,
whose behavior and decisions have direct impact on the
Contents lists available at ScienceDirect
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Information Systems
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doi:10.1016/j.is.2009.06.002

Corresponding author.
E-mail address: aminhakime@yahoo.com (A. Hakim).
Information Systems 35 (2010) 204214
performance and attitude of the employees, and also their
supply chain partners [3]. Therefore, corporate culture not
only forms and impacts the internal operation but also
constitutes the type of relationship and services received
from the external partners.
The IT system, specically the ERP systems, provides
the right foundation for organizations to control and
exploit their internal and external operation and resources
in an effective and efcient manner [4]. Considering the
above-mentioned factors, this paper will try to outline the
roadmap for facilitating the decision-making process
involved in acceptance or rejection of an ERP system.
2. Research methodology and objects
About the research approach we follow a more
qualitative and scientic research approach. This kind of
research provides the understanding of a problem through
research instruments that are oriented towards searching/
determining/nding/analyzing the fact and giving signi-
cance to the context and usage.
The manner of the research method chosen for this
research project is of a qualitative [5] nature through an
interpretive case study [6,7], where data collection techni-
ques [5] consist of a thorough literature review, secondary
data review of documentation regarding the ERP Imple-
mentation Risks, observations and interviews.
In order to carry out the above-mentioned tasks, we
used a multi-channel survey combining various tools to
examine the hypothesized factors and research framework
and the questionnaire is adapted from prior literature.
3. Literature review and framework
Limited study has been conducted in the ERP Im-
plementation Risk area, with most research consisting of
Implementation case studies in individual organizations
(such as Motwani et al. [8], and Chateld and Bjrn-
Andersen [9]). A major problem with such ERP imple-
mentation studies is that very few threat and risk of
implementation failures are recorded in the literature,
perhaps because few companies wish to publicize their
implementation failures. Thus, the risks of implementa-
tion were not recorded in the literature, which motivates
us to conduct this research and explore the model.
As we know, Enterprise Resource Planning systems
automate and integrate the core functionality of an
organization.
ERP facilitates the ow of information among the
different functions of an enterprise, while also permitting
information sharing across organizational units and
geographical locations [10]. According to Kalakota and
Robinson [11], the evolution of ERP systems can be
divided into 4 phases: Manufacturing Integration, Enter-
prise Integration, Customer-centric Integration, and Inter-
enterprise Integration.
Even though ERP system has been introduced for some
time, due to its implementation complexities and sur-
rounding risks, it has not found its place among many
organizations around the world. There is still much
hesitation among top-level managers and decision-ma-
kers to commit their organization to deployment of the
system [12].
Majority of the local companies in Iran are still
unfamiliar with the notion and concept of ERP systems,
which has been the hindering factor behind the imple-
mentation of the system. Lack of awareness of top-level
managers and decision-makers itself is a major barrier
preventing any successful implementation of ERP systems.
This has not been an exception among the auto industries
of Iran, as there has not been any successful implementa-
tion among the Auto companies in Iran.
Considering the constraining and hindering internal
and external factors surrounding an organization regard-
ing the implementation of the ERP system, this paper tries
to offer a decision-making model to help companies make
the right decisions on their approach to the implementa-
tion of ERP.
For the verication of the proposed model, this model
is implemented in the Bahman Motor (one of the huge
Iranian Automotive Company), and the results are pro-
vided in this document. The simulated model is supposed
to help the Bahman Motor management team to evaluate
their readiness and evaluate the risk involved in imple-
mentation of the system. Moreover, the results obtained
will help other researchers to base their future ERP
research studies on, and also facilitate the decision-
making process involved in, deployment of the system.
Considering the constraining and hindering internal
and external factors surrounding an organization regard-
ing the implementation of the ERP system, this paper tries
to offer a decision-making model to help companies make
the right decisions on their approach to the implementa-
tion of ERP.
4. Strategic modeling for evaluation and selection of the
ERP system
The proposed model will look at the decision-making
process involved in acceptance of ERP implementation
from 3 different perspectives: Strategic, Tactical and
Executive, each having its own modeling steps. This paper
will focus on pre-ERP decision-making and implementa-
tion activities. However, as most readers might be familiar
with pre-implementation activities, the paper will also
cover the implementation and post-implementation ac-
tivities (see Fig. 1). The ERP acceptance processes are
divided into the following four consecutive phases:
Phase 1: ERP as a strategic corporate objective.
Has ERP implementation been introduced as part of
corporate strategic objective?
Phase 2: ERP effectiveness on the organization. Is ERP
benecial for the organization?
Phase 3: Corporate Readiness. Is the organization ready
to adopt and adapt to ERP.
Phase 4: Evaluation of ERP success rate considering the
constraining factors and risks involved.
Each stage will be conceptually explained and an
example from Bahman Motor will be analyzed, as each
phase was simulated in this company.
ARTICLE IN PRESS
A. Hakim, H. Hakim / Information Systems 35 (2010) 204214 205
5. Phase 1: ERP as the corporate strategic objective
In this phase of the model, it will be determined
whether the company has taken steps towards ERP. The
main question that will set the stage for the next stage is:
Has ERP implementation been introduced as part of a
corporate strategic objective?
In order to nd the answer to the above question, the
following documents with regard to corporate strategy
and planning need to be examined:
Corporate Mission, Strategy, Objectives, and Planning
documents
IT Master Plan
Business Plan
Strategic Plan
Corporate policies
Other related documents
The appointed consultant must try to answer the
question by conducting library and eld research and
studies. The library study will allow thorough study of the
documents mentioned to pinpoint the key objectives, and
the eld study will reveal whether there is any discre-
pancy between the top management beliefs and what is
mentioned in the strategic plans. For example, the top
management might believe in the implementation of the
ERP system but somehow it is not mentioned as part of
the above-mentioned documents (the reasons could be
that that it did not receive the priority it needed while the
strategic plans were written, or due to management
structural changes, or lack of correct view of mangers
with regard to this kind of system). There is a possibility
that in some cases ERP has not been directly and clearly
dened as a core objective, though intended. This could be
claried during eld interview with top-level managers
and the results would be documented for future reference.
Also, it is possible that IT is mentioned in the corporate
strategic plan; however, no specic solution such as ERP is
specied. Highlighting this point in the strategic plan and
giving it a specic direction to ERP could be the subject of
discussion with the managers during the eld study.
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Org.
Level
Steps Model Phases Tasks ( Activities) Tools
O
r
i
e
n
t
a
t
i
o
n
Examining the existing Org. strategic
objectives and plans
Examining the deviation from the main
objectives
Org. Internal Study at
management level.
Interview &
Questionnaire
Identifying key Org. problems/Issues
Evaluation of Problem mitigation
considering ERP capabilities
Is ERP able to resolve the issues or is
there a need for other systems?
Using Pareto Chart,
Defect Analysis
Capability Analysis
Audit & Check List
Reasons for moving towards ERP
Financial feasibility study
Management feasibility study
Feasibility (Finance
& Budget) vensim
/CompareII
S
t
r
a
t
e
g
i
c
D
e
c
i
s
i
o
n
Major risks (organization, Technology,
Human, Management, ) involved in
ERP implementation are evaluated by
considering the collected data from
questionnaire
Questionnaire
F
e
a
s
i
b
i
l
i
t
y
Conduct technical feasibility studies for
ERP implementation including
Hardware, Software, Network,
technical staff assessment
Field Study and
Survey from
Specialists
I
n
f
r
a
s
t
r
u
c
t
u
r
e Technical requirements (Hw, Soft.,
Network, Consultant, ) for
implementation are identified.
Expert Team
Request for Information from different
ERP vendors
T
a
c
t
i
c
S
e
l
e
c
t
i
o
n
RFP for Vendors are prepared and
sent.
Contract
Management.
Tender Management
O
p
e
r
a
t
i
o
n
a
l
I
m
p
l
e
m
e
n
t
a
t
i
o
n
System implementation and
deployment
User Training and usage
I: Is ERP implementation
part of the Org. Strategic
Plans?
II- Is ERP beneficial to the
company?
Effectiveness of ERP ?
III Is the company ready
to accept ERP
IV- Evaluating ERP
Success considering the
risk factors
ERP technical and
implementation feasibility
plan
ERP Requirement Planning
Preparation of RFI, and
Identifying Vendor List
RFP and Vendor Selection
IF
Yes
Yes
Yes
System Implementation &
Deployment
No
Fig. 1. Modeling plan for evaluation and selection of ERP.
A. Hakim, H. Hakim / Information Systems 35 (2010) 204214 206
However, before that, the reason behind mentioning IT as
a strategic plan could be further explored during inter-
view with top managers and used as a base to provide a
direction towards ERP.
Companies who have included IT in their strategic plan
not only have set ERP as their long-term goal but also have
opened their company doors to other IT systems such as
ofce automation, portal, CRM, and others [13].
After identifying corporate IT objectives, the following
items need to be considered as each requires its own
specic measures:
(1) ERP has been clearly specied in the corporate objectives.
In this case, we can directly jump to Phase 4, and try
to evaluate the success or failure rate of ERP by
considering the risk factors involved.
(2) There is no direct indication of ERP in the corporate
objectives.
There are two cases to be considered in this case.
Case 1: There is no direct reference of ERP; however,
reference to other related systems and concepts such as
application of modern systems, application of IT systems,
knowledge-based systems is found in the documents. In
order to reach a more conclusive result in phases 2 and 3,
we assume such implications have no bearing or have set
no foundation for future implementation of ERP.
Case 2: There is no reference to ERP or other related
concepts and systems. After nal afrmation of the above
two case, we are ready to move to Phase 2. Fig. 2 depicts
the factors that could have direct impact on Phase 1.
5.1. Phase 1 in Bahman Motors
As mentioned, we need to examine Bahman Motors
corporate strategic documents to nd out whether there is
a direct reference to ERP or not.
(1) Only few documents such as strategic and objective
plans were found that had some subtle reference to
ERP, or showed some inclination towards such
systems. No ICT Master plan or documents of such
types have been drafted to directly address future IT
plans. It is also noticeable that even in the strategic
and objective plans, the direct benets of such
systems are not precisely specied, only few bullets
justifying having such systems are mentioned as
follows:
Improving the utilization of the existing capitals
Expanding scope of activities
Seizing new opportunities
Connecting to other local and foreign companies
Strengthening trade relationship
Identifying and connecting to new markets
Gaining leading edge over competitors
The above-mentioned objectives are not consid-
ered as a whole, which could stem from the ERP
system; however, it could form a base to move
Bahman Motors towards ERP.
ARTICLE IN PRESS
Indirect undocumented objectives Documented Direct Objectives
Parent Company Policies
Government Policies
Top Management Views
Indirect corporate objectives
Undocumented objectives
Unplanned and spontaneous
strategic decisions
ICTMP
Business Plan
Strategic Plan
Goals & Mission
Business Policy
Phase I
Orientation
ERP as
Corporate
Objective
Phase IV
Decision
Phase II
Effectiveness of ERP
Fig. 2. Factors impacting Phase I.
A. Hakim, H. Hakim / Information Systems 35 (2010) 204214 207
(2) As we considered and analyzed the Bahman Group
structure, we found out that the group is not totally
unfamiliar with the IT concepts and systems. Indeed,
they have taken serious steps towards improving IT
activities within the group and it has become part of
the corporate agenda. The Group has established an IT
company (FanAva), as a subsidiary to provide IT
support services to its other subsidiaries and afliated
bodies.
(3) As mentioned in Item 2, special attention has been
given to IT within Bahman Group 3-tier organizational
structure. IT has been identied as an autonomous
group within the structure, and has received special
attention, which is an indication of the company
interest and readiness for further IT development.
It can be concluded from the above-mentioned three
items that there is no indication of ERP as an objective in
the strategic plans of the company; however, the company
has a clear intention of developing its IT foundation and
improving its IT services to its departments and sub-
sidiaries.
Clearly ERP is not mentioned in any of the Bahmans
Motor strategic plans, and as such, we shall move on to
Phase II, evaluating the effectiveness of ERP in such
company.
6. Phase II: evaluating the effectiveness
of ERP in the organization
In this phase of the modeling, we will analyze and
evaluate the effectiveness of deploying an ERP system in
such an organization, whether the ERP system would be
able to bring about the desired operational efciency, and
what benets it brings along.
To proceed further, we need to carefully address the
following questions:
(1) Is ERP deployment benecial to the company?
It is important to carefully answer such a critical
question, as it will decide the next phase of the
operation. A negative answer would mean the project
would remain suspended for a while but a yes will
take us to the next phase of modeling.
The output of this phase is the reason for justifying a
move towards ERP and would further help top
managers to make a decision for such moves. Now,
we will consider each step that needs to be carried out
as depicted in Fig. 3.
(2) Identifying organizational problems
By setting up a problem-identication framework
plan, top managers and employees with key roles
are interviewed in order to identify key organizational
issues. Surveys and interviews are deemed to be the
best scientic approach for problem-identication, as
the practical experience of the key people would
provide a guideline for quick identication of existing
and potential problems. In this stage, different
techniques of problem analysis can be tapped on, for
example causeeffect modeling.
The problems are then prioritized at the end of this
stage for further analysis.
(3) How ERP would tackle the organizational problems
As part of this stage, the key problems identied as part
of step 1 are cross-referenced with one or more features
of ERP that can effectively remove the problem. A
simple check list could be created to accomplish this
task. Along with this, a relevant questionnaire can be
drafted to be lled by people familiar with ERP inside
the organization. They will be asked to identify the
existing problems and the features of ERP that can
remove the problem or lessen the degree of its severity.
In addition to surveys and interviews, other methods
such as Capability Analysis, which might be offered by
company consultants, could be used.
After taking the required above steps, we would be able
to say whether ERP would be benecial to the company or
not. The output of this phase would be a comprehensive
report providing concrete reasons for managers to
base their decision on as for their next move to ERP. The
resulting document from this phase should facilitate
the decision-making process of the managers based on
scientic reasons and actual facts for accepting or rejecting
ERP. If enough reasons have been given for effectiveness of
the ERP system on the organizational operation, then we
can move on to the next phase to evaluate the ERP
readiness of the organization; if not, the project must be
suspended and requires going back to step 1.
Fig. 4 depicts the information and resources that have
signicant impact on the outcome of this phase.
Needless to say, there other methods of evaluating ERP
effectiveness in an organization, which is not mentioned in
the above gure, and which can be utilized if deemed
ARTICLE IN PRESS
Identifying
Company
Problems
Prioritizing the
problems
Matching
problems with
ERP capabilities
Degree of
problem
resolution by
ERP
Implementation
Identifying company major
problems
ERP Capabilities for removing problems
Reasons
for
moving
towards
ERP
Fig. 3. Implementation steps of Phase II.
A. Hakim, H. Hakim / Information Systems 35 (2010) 204214 208
necessary. In the next section, we will consider the
implementation of Phase 2 by the researcher in Bahman
Motor. The researcher has formulated his research methods
by considering the existing research and studies carried out
by Bahman Motor in order to reach more realistic results.
6.1. Phase 2 in Bahman Motor
Based on the special structure and operational view of
Bahman Motor, using questionnaire was deemed to be the
best practical method for obtaining information from the
qualied or knowledgeable internal and external re-
sources. The items mentioned below are just some of
the reasons why this approach was used:
Lack of Iranian Managers awareness on IT and ERP
concepts
Lack of Bahman Motor management awareness on IT
and ERP
Lack of organizational awareness on ERP as the concept
is new in Iran
Lack of ERP experts
Lack of decision-makers awareness on ERP acceptance
or rejection process
Using several techniques in the questionnaire, we were
able to collect information on the organization, its
outstanding problems and how the ERP could remove or
improve the problem. The targeted community for the
questionnaire was as follows:
Top Management of other Auto companies
ERP experts and teachers
Managers and Experts of companies that have already
implemented ERP or are in process of implementing it
Bahman Motor management team and decision-ma-
kers
The reliability and degree of correctness of the outcome
of this phase are considered high as the sampling and
survey techniques used are of high quality. Hence, we can
rely on the data to proceed further with the next phases of
the ERP implementation process with high degree of
condence.
The factors considered in the questionnaire are listed
below.
6.1.1. Organizational factors
1. The need for accurate, precise, and quick information
for management decision-making
2. Improving standards of activities within the organiza-
tion
3. Improving control systems and its effectiveness
4. Reducing costs
5. Correct allocation of resources
6. Increasing organizational exibility
7. Increasing productivity
8. Organizational Strategic Plan
9. Improving organizational structure
10. Re-Engineering organizational processes
6.1.2. Business factors
1. Market Status/Competitors Status
2. Better understanding of supplier and customer needs.
3. Improving Customer Service
4. Readiness to enter global market
5. Supporting e-Business
ARTICLE IN PRESS
Phase II
The Effectiveness of ERP
in the Company
Internal Information &
Analysis Resources
Past Documents on
Problem Tracing & Audit
Interview with Top
Manager
Survey on Executive
Managers
(Questionairres)
Root Cause Analysis
External Information &
Analysis Resources
Survey on Industry
specialist & Experts
Past ERP Experience by
other similar companies
Using External Consultants
Referring to international
reports on ERP
Fig. 4. Factors impacting Phase II.
A. Hakim, H. Hakim / Information Systems 35 (2010) 204214 209
6.1.3. Technological factors
1. Eliminating legacy systems
2. Improving internet services
3. Up-to-date IT Systems
4. E-commerce capability
5. Up-to-date information in the organization
6. Eliminating physical distances
The following table shows the results of the survey
obtained from Bahman Group for each of the three
categories mentioned.
Organizational factors
Access to correct information for management decision-making
Business factors
Improving services to clients
Technology factors
Removing legacy systems
Access to updated information
For resolution of major issues surrounding the organi-
zation and attaining Bahman Group strategic objectives,
the company drafted a questionnaire that contains the
following sections.
6.1.4. Creating/adding value-added propositions to the
framework of companys strategic objectives
Production/assembling various kinds of Autos and
other relevant industrial activities
Diversity in product line
Optimizing and increasing the utilization of the capital
Seizing new opportunities
Improving export management system/process
Improving engineering and technical services with
regard to design and production of Industrial Machineries,
and production of spare parts needed by other industrial
sectors.
6.1.5. Creating an economic power house
1. Growth and expansion of market share
2. Improvement of quality
3. Exploiting cost-effective systems based on experience
4. Creating the right synergy by increasing business
activities
5. Strengthening partnership programs (with suppliers,
customers, etc.)
6. Creating and strengthening relationship with key
economic centers
7. Identifying and penetrating new markets
8. Maintaining continuous relationship with Chambers
of Commerce, Cooperatives, etc.
9. Improving Technical systems and knowledge for
improving export activities
10. Creating local branches and granting/accepting
agency to/from local and foreign companies
6.1.6. Improving personnel systems
1. Training qualied and competent staff and develop-
ment of a Competency Culture within the organiza-
tion
2. Improving employee organization culture and team
work
This questionnaire was completed by top-tier managers
of Bahman Group and the results are summarized in
Table 1.
Table 1 shows the sampled peoples view on the
percentage of accomplishment of the corporate objectives.
By examining the table, the following objectives have
been achieved under each category.
Category 1: Creating/adding economic value-added
proposition in the framework of the companys strategic
objectives:
1. Production/Assembling various kinds of Autos and
other relevant industrial activities
2. Optimizing and increasing the utilization of the capital
Category 2: Creating an economic power house
1. Strengthening partnership programs (with suppliers,
customers, etc.)
2. Improvement of quality
Category: Improving Personnel Systems
1. Training qualied and competent staff and develop-
ment of a Competency Culture within the organiza-
tion
2. Improving employee organization culture and team
work
The degree of accomplishment of the above-mentioned
two objectives has been up to 60%.
7. Phase III organizational readiness
After conrming that ERP could effectively improve
company operation (Phase II), now, we are ready to move
to Phase III, to evaluate company readiness for accepting
ERP, nding out whether the company has the right
resources, technology and overall foundation (culture,
management team), for such a movement.
The key question raised in this section is Is the
company ready to accept ERP?
The afrmative answer to this question means that we
are ready to move to Phase 4 of operation, which evaluates
the risks surrounding the implementation of ERP. How-
ever, before that, we must check the readiness of the
company for implementation of such a project. By
readiness, we mean companys budget, resource, and
management capability for such a project. Basically, the
evaluation process will take place on two fronts, the
management and the economic, looking at management
capability to carry out such projects considering the
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A. Hakim, H. Hakim / Information Systems 35 (2010) 204214 210
constraining factors, and nancial aspect of the company,
meaning the readiness of the company to commit the
required budget.
The right ERP system can be chosen by considering the
size of the company and other relevant organizational
information. We can also tap on ERP consultant with vast
organizational experience to select the right ERP system.
In addition, feasibility study on the management of ERP
within the company will be conducted to determine the
awareness and knowledge level of the management team
and employees, the required and available resources in the
organization, and other factors required for successful
implementation of ERP, of which some are identied and
evaluated as part of Phase II and the rest are done as part
of Phase 4. In this phase, we only evaluate the readiness of
the organization and proceed to the next phase if only the
answer is yes; otherwise, the project is suspended and the
previous steps are repeated.
With a series of an internal investigation and study, the
shortcomings of an organization with regard to its lack of
readiness can be identied; however, such process
requires a budget by itself. If this budget is not allocated
for the resolution of the problem, considering the urgency
of the implementation of the project, which was deter-
mined in Phase II of the project, some delay is expected to
be seen in continuation of this modeling process.
During this phase, an in-depth nancial analysis for
deployment of such a system might be required by the
management system to justify the investment and also to
give an estimation of return on investment (ROI), which
allows the company to allocate the required budget. To
simplify the process, it is assumed that the answer to the
main question raised in this phase is Yes, meaning the
company has all the necessary means and resources to
deploy ERP. Now, we are ready to proceed to the nal stage of
this, meaning evaluating the success rate of ERP implemen-
tation considering the risk and constraining factors involved.
Fig. 5 is relative with respect to organizational changes
through time; as such, the changes can be reected in the
gure to facilitate decision-making in the future.
7.1. Phase III in Bahman Motor
By comparing Bahman Motor ERP strategic moves with
its competitors such as IranKhodro, and other industry
participants, we can place the company at the rst place,
and consider it as a leading company. Also by considering
the budget allocation for different departments of the
company, the budget allocated for ERP systems has also
been placed at the top of the list, which itself is an
indication of company readiness towards such a move. In
addition, other factors such as being a multi-national
company with 1000+ employees, sales of more than one
billion dollars, and vast scope of local and overseas
operation, have further persuaded the company to
become ERP oriented.
Needless to say, similar moves by competitors such as
IranKhodro have further impacted the decision-making
process of Bahman towards ERP implementation, and
without any doubt have made the company ready to move
to Phase IV for evaluation of risk and success factors.
8. Phase IV: evaluation of ERP risk and success factor
In this phase, we will take into account the risks
surrounding the ERP implementation at an organizational
level to evaluate the ERP success rate. As the nancial and
resource investment is quite considerable for implemen-
tation of such system, it is important to analyze the risks
involved and to be able to minimize them during the
implementation process, if deciding to proceed.
For efcient assessment and minimization of the risks,
they are divided into different categories as follows.
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Table 1
Success rate of Bahman Motor corporate objectives.
No. Objectives No. samples Average Deviation
Creating value-added economic objectives within the Corporate Strategic Plans
1 Assembly of Various Autos, and other relevant industrial activities 10 80/20 20/67
2 Diversity in product line 10 65 23/21
3 Optimizing and increasing the utilization of the capital 10 65/50 18/02
4 Seizing new opportunities 8 47/50 22/52
5 Improving export management system/process (Auto, Spare Parts, Technical Services, etc.) 5 9 Jul-42
6 Providing technical and Engineering Services with regard to Industrial Machineries and Parts 6 11/67 14/38
Creating an economic power house
7 Growth and expansion of market share 10 44 24/13
8 Improvement of quality 10 57 24/52
9 Exploiting cost-effective systems based on experience 8 46/25 26/69
10 Creating the right synergy by increasing business activities 10 51/50 20/56
11 Strengthening partnership programs (with suppliers, customers, etc.) 10 62/50 30/12
12 Creating and strengthening relationship with key local and overseas economic centers 9 49/44 24/30
13 Identifying and penetrating to new markets 9 45 15/81
14 Maintaining continuous relationship with Chambers of Commerce, Cooperatives, etc. 8 47/50 20/53
15 Improving Technical systems and knowledge for improving export activities 7 34/29 31/02
16 Creating local branches and granting/accepting agency to/from local and foreign companies 8 40/63 29/33
Improving Personnel Systems
17 Training qualied and competent staff and development of a Competency Culture within the organization 10 66 18/97
18 Improving employee organization culture and team work 10 60 22/11
A. Hakim, H. Hakim / Information Systems 35 (2010) 204214 211
8.1. Organizational risks
Sufcient Resources
The degree of required Changes
Capabilities in Process Re-Engineering
The degree of Ofce Automation
The stability of corporate objectives
The stability of project objectives and scopes
8.2. Technical skills risks
Ability to attract and maintain qualied staff
Existence of experienced experts
Optimal utilization of internal employees
Having business and technical analysts
Cross technical training and exchange of knowledge
between internal and external resources/groups
8.3. Project management risks
General consensus on objectives
Support and commitment of top-tier managers
Structure and composition of the project team
Effective project management method
No change in Project Manager throughout the project
8.4. System risks
Identifying and understanding the changes required
Effective project management method
Suitable hardware and software
Legal Software systems
Adopting standards supported by ERP
8.5. User risks
System comprehension by the users
Coordination among departments
Obtaining user supports
Providing sufcient training to power users (end-users)
Low resistance to changes by the users
8.6. Technology risks
Existing technical infrastructure
Degree of ERP awareness
Readiness to make changes in the current systems
Degree of familiarity with ERP vendors
Purchase/production of software
In this phase, a questionnaire will be drafted to assess
the risks involved on the following three areas:
1. Examination of different factors impacting ERP im-
plementation
2. Evaluation of AS-IS status of the company entities
(internal and external) that have direct impact on the
implementation
3. Evaluation of AS-IS status of other companies, and the
involved entities (internal and external) with regard to
ERP implementation
The framework of the questionnaire and its variables
are based on the information collected by eld and library
studies and other information collected from the ERP
experts. The SWOT
1
analysis conducted in this phase will
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Phase III
Organization
Readiness
Company Budget Plan
Company and Sales
Information
No. of Employees
Type of Activity
Competitors and
Partners ERP System
Selection
Tapping on Experts &
Specialists Experience
Country Development
Plan and Market Trend
Company Development
Trend
External information and
factors
Internal information and
factors
Fig. 5. Factors impacting Phase III.
1
Strength, Weakness, Opportunity, Threat
A. Hakim, H. Hakim / Information Systems 35 (2010) 204214 212
help to identify the organizational strength and weakness
of the company with regard to implementation of ERP,
which in turn helps the company to draft a Risk Project
Plan for successful implementation of such systems.
Therefore, in this stage, the following two objectives
are attained:
1. Identifying and evaluating the risk factors surrounding
ERP implementation for improving and expediting the
decision-masking process
2. Identifying and evaluating the risks involved in
removing or improving the weak points and maintain-
ing and reinforcing the strengths of an organization
8.7. Phase IV in Bahman Motor
The main objective of this research was to reach this
phase, and all the previous phases constituted the road-
map to this phase.
As part of the implementation of this phase in Bahman
Motor, the researcher drafted and provided the internal
and external managers and specialists with the relevant
questionnaires. In order to conduct an inferential statis-
tics, and testing the assumptions behind the question-
naire, various testing techniques such as t test, k test
(Friedman test), and Variance of Random Variable test are
used. For example, the t test is used to categorize
different factors that have impact on ERP implementation,
and the k test is used to prioritize the factors.
Considering the selected survey and statistical meth-
ods, the output of this phase, which is the focal outcome
of this research, is obtained with 5% error, with the results
summarized in the table below Table 2:
As pointed out above, the major hindering and risk
factors are the inefcient utilization of existing resources
and not being able to effectively maintain the required
resources within a highly competitive environment.
However, this weakness could be controlled and improved
by the ERP system.
9. Conclusion
In this paper, we tried to introduce a strategic
modeling plan, and its roadmap process, for evaluation
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Table 2
Categorizing the risks involved in ERP implementation from three perspectives: Experts, The selected/targeted organization, other organizations
Factors Experts Comments Selected Org. Comments Other Org. Comments
Factors related to Org. Risks 1. Consultants capabilities
in organizational
re-engineering
2. Sufcient Resources
3. Stability of the
Org. objectives
1. Extent of the
changes required
1. Extent of the changes
required
2. Consultants capabilities
in organizational
Re-engineering
Factors related to
Specialized Skills
1. Use of available experts
2. Use of Business and
Technology analysts
1. Availability and usage
of experienced Experts
1. Availability and usage of
experienced Experts
Factors related to
Project Management Risks
1. Support and commitment
of the top managers
2. Effective Project
Management
3. Project Team Members and
its composition
1. Support and commitment
of the top managers
1. Support and commitment of
the top managers
2. Project Team Members and
its composition
System Risks 1. Identifying and
understanding the
changes required
1. Identifying and
understanding the changes
required
2. Suitable Hardware and
Software
1. Identifying and
understanding the changes
required
2. Suitable Hardware &
Software
User Risks 1. Providing sufcient training
to end-users
2. Support by System Users
3. Coordination among various
Departments
1. Providing sufcient training
to end-users
1. Providing sufcient training
to end-users
2. Support by System Users
Technology Risks 1. Sufcient info on
ERP Vendors.
2. Technology being new
1. Sufcient info on
ERP Vendors
1. Sufcient info on
ERP Vendors
2. The new technology &
purchase/production
of software
A. Hakim, H. Hakim / Information Systems 35 (2010) 204214 213
and selection of the ERP system in Iranian companies. The
model was implemented in Bahman Motors, one of the
most prominent auto companies in Iran, which could be
used as a perfect example for implementation of the ERP
system. After in-depth analysis of each phase, and its
corresponding implementation phase in Bahman, it was
concluded that it is absolutely essential for Bahman to
implement the ERP system in the long run in order to
remain competitive in the Auto Industry, and also to be
able to tackle its internal and external threat.
In this paper, the decision-making process for ERP
implementation from three perspectives, strategic, tech-
nical, and executive, was examined. It is hoped that this
model could become a reference decision-making guide-
lines for companies as a roadmap towards ERP imple-
mentation.
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