What Do We Know about ERP in SMEs? Identifying Gaps in Research

23 RD INTERNATIONAL CONFERENCE ON INFORMATION SYSTEMS DEVELOPMENT (ISD2014 CROATIA) What Do We Know about ERP in SMEs? Identifying Gaps in Research Victoria Tulivaye Hasheela Lappeenranta University of Technology Lappeenranta, Finland Kari Smolander Lappeenranta University of Technology Lappeenranta, Finland victoria.hasheela@lut.fi kari.smolander@lut.fi Abstract Enterprise Resource Planning (ERP) was originally meant for large enterprises (LEs), hence most attention on ERP research focuses on LEs. However, ERP vendors have diverted their attention also to small and medium sized enterprises (SMEs) in order to cater for their needs. This paper presents a systematic mapping study of ERP in the context of SMEs. The study concentrated on the ERP adoption and implementation issues that have already been studied and identified gaps where further research is needed. It also investigated what research methodologies have been employed in the studies. Keywords: SME, ERP, Enterprise Resource Planning, Systematic Mapping, Small and medium-sized Enterprises. 1. Introduction ERP systems are developed to integrate business processes in enterprises, resulting in effective management of the whole enterprise [20]. Even though ERP has proved to have many advantages, it has mostly been utilized by large organizations (LEs). The decision to adopt ERP is usually accompanied by investments such as time, financial and human resources [23]. LEs usually have these capabilities, in addition to defined business processes which makes the implementation process easier when compared to small and medium enterprises (SMEs) [13]. While SMEs continue to be productive drivers of economic growth, they often face numerous challenges in implementing technologies such as ERP systems [1]. They are usually core business focused, they lack human and financial resources and technical knowhow to support such initiatives. They also operate their businesses manually, without standardized procedures [15]. However, ERP vendors have diverted to developing ERP software packages to suit the needs of SMEs, considering costs and functional scopes that go into the implementation process [38]. Over the years, many studies have focused on ERP implementation success factors in SMEs, but there are still reports of failures in SME ERP implementations. Therefore there is still a need to research on best practices that will lead to simplified ERP implementations in SMEs. The purpose of this study is to analyze the existing literature on ERP implementation in SMEs, in order to identify what areas have already been covered and establish a gap for future research. The next section discusses the research method. Section 3 explains the procedure used for searching for primary studies. Section 4 discusses the inclusion and exclusion of papers. Section 5 gives an overview of relevant papers. Section 6 presents the findings. Finally in section 7, we discuss the results and conclude the paper.

HASHEELA & SMOLANDER WHAT DO WE KNOW ABOUT ERP IN SMES?... 2. Research Method The research method used followed the procedure suggested by Peterson et al. [31] as shown in Figure 1. Fig. 1. A systematic study process By following this process, first the research questions were defined, and then the appropriate keywords were identified. Then the search was conducted using those keywords in order to find the relevant papers. After the papers were found, they were screened using the inclusion and exclusion process in order to filter out papers that do not contribute to answering the defined research questions. The remaining papers were then categorized according to keywords used in abstracts. Data is then extracted from those papers and presented as a systematic map. With this systematic mapping study, we intend to get an overview of the results that have been published in this research area, and to establish an overview of what still needs to be investigated. Our research questions are the following: RQ1. What main issues have already been addressed in studies of ERP in SMEs? RQ2. What research methods have been used in studies of ERP in SMEs and how have they changed over time? RQ3. What areas of ERP in SMEs need further research? 3. Search for Primary Studies We chose to search from the relevant and appropriate digital databases that target conferences and journals in information systems and software engineering. Five databases have been identified, namely: ACM, IEEEXplore, Science Direct, Springer, and EBSCO. We believe that these databases cover most of the essential studies of the topic. The search was limited to papers published between 2004 and 2014. Table 1. Number of relevant publications out of the publications found ACM IEEEXplore Science Direct EBSCO Springer 109/312 9/23 34/95 21/61 7/14 180/505 The combination of the search terms ERP Adoption, Enterprise Resource Planning, SME, Small and Medium Enterprises as well as ERP implementation were used in the search. Table 1 shows the results of the search, including the number of the relevant papers out of the total number of publications found. In cases when a publication was already chosen in one database as relevant, it is regarded irrelevant in the rest of the databases, hence some databases yielded fewer relevant publications.

ISD2014 CROATIA 4. Inclusion & Exclusion of Papers We have only included papers that are relevant for answering the research questions. Another crucial condition that has to be met for a paper to be selected is that, it has to have been published in either a peer reviewed journal or conference proceedings. A total of 505 articles were identified. The search from different databases however yielded duplicates, therefore these duplicates were removed. After a thorough reading of abstracts of the papers, we identified those whose context does not contribute to the purpose of the research and excluded them. These papers concentrated on topics such as whether other software is more appropriate for SMEs than ERP. Other papers that were also excluded were those written in languages other than English. The study also excluded papers that did not include any empirical evidence, but were only presenting discussions, opinions and ideas. Some papers also focused on Information Systems (IS) generally and only included ERP as an example. Such papers were also excluded. In total, 180 out of 505 papers were regarded as relevant. The papers were screened further, and more papers were rejected because of the following reasons: 1. The paper focused only on the technical aspects of implementation. 2. The paper focused on a specific line of business such as banking, and did not produce any evidence on ERP and SMEs in general. After this round of screening, 42 papers were found to be relevant, and these were read thoroughly. 5. Relevant Articles Overview The publication year was considered in order to examine the trend of how the area has been studied. Figure 2 shows the publication trend from 2004 to date. 8 6 4 2 0 2004 2006 2008 2010 2012 2014 Fig. 2. Number of publications per year The research methodologies used also varied amongst the publications as shown in Figure 3. The main used is a survey methodology. 25 20 15 10 5 0 12 2 2 1 2 Exploratory Field Study Grounded Case Study theory Literature Review Process Theory 20 Survey 3 Unspecified Fig. 3. Research Methodologies used

HASHEELA & SMOLANDER WHAT DO WE KNOW ABOUT ERP IN SMES?... The publications covered a range of research themes (Table 2). We have categorized them according to the phases of the ERP life cycle framework proposed by Esteves and Pastor [10]. This framework structures the ERP system life cycle into six stages that enable the allocation of different research issues in different stages. The stages are: Adoption Decision, Acquisition, Implementation, Use and Maintenance, Evolution and Retirement. In the Adoption Decision phase, the managers agree upon acquiring an ERP system and also define the system requirements. In the Acquisition phase, the ERP system deemed best to fit the requirements is selected. The implementation costs as well as maintenance services are also defined and analyzed. In the Implementation phase, the selected ERP system is customized and adapted into the organization. Whereas, in the Use and Maintenance phase, the implemented system is maintained in order to keep the expected benefits returning. In the Evolution phase, new capabilities are added in order to advance the system and to provide additional benefits. The Retirement phase takes place when managers decide to replace the ERP system with a new system for any given reason. The authors have selected this framework in order to make it possible to see which area has received a lot of research attention, as well as to identify areas that have been abandoned. Table 2. A summary of the relevant papers Life Cycle Phase Focus Area Methodology References Adoption Decision Acquisition Implementation Use & Maintenance Evolution Retirement Project Management Survey [4], [10],[12],[14],[37] Field Study [12] Adoption decision Survey [3] Best Practices Survey [28] Adoption Indicators Survey [22],[44] Perception on Factors Exploratory Case Study [34] Costs Survey [19],[44] Exploratory Case Study [18],[32] Field Study [35] Success Factors Survey [1],[2],[38],[42] Process Theory [26] Exploratory Case Study [13],[17], [18], [21],[36] Contextual Issues Exploratory Case Study [25] Risk Management Process Theory [31] Customization Impact of Consultants Case Study [43] Process Theory [31] Survey [4] Ground Theory [21] Strategies Exploratory Case Study [5],[11],[15] Exploratory Case Study [23],[26] Challenges Survey [24] Unspecified [7] Methods Literature Review [40] Influence Exploratory Case Study [29] Performance evaluation Survey [8],[20],[36],[33] Benefits Field Study [9],[10] Determinants of Use Survey [16],[27]

ISD2014 CROATIA 6. Findings Buonanno et al. [3] in their study found that SMEs do not regard financial constraints as the main reason for not adopting ERP systems, but suggested structural and organizational reasons as the major cause. Shahawai and Idrus [35] proposed a strategy for determining specifications in adopting an ERP system successfully. Chang and Hung [4] also developed a theoretical model of ERP adoption. They found the CEO s attitude towards IT adoption, and his IT knowledge as well as the ERP system cost, complexity and compatibility to be the main determinants in ERP adoption for SMEs [4]. Chien et al. [6] concluded that a balance of centrifugal and centripetal forces promotes successful ERP implementation. Centripetal forces refer to centralizing decision making in the organization, a use of a formal defined procedure with a clear guidance and clear project goals, whereas centrifugal forces refer to free flow of information within an organization, communication with end users and awareness of information not necessarily related to project goals [6]. Tasevka et al. [38] argued that project planning practices are crucial in the success of an ERP implementation, and likewise Chien et al. [6] recommended a procedural plan clearly defining all activities that have to be executed for the implementation team to follow. Huin [16] and Xu et al. [41] in their studies found that one main challenge in implementing ERP in SMEs is that, the decision making usually lies with one person, usually a Chief Executive Officer or a Chief Financial Officer, who does not necessarily have project management nor technical background. They are usually concerned with costs and due dates and hence their sole decision making does not always lead to feasible implementation. Several papers have identified critical success factors in ERP implementation, and the top ten are summarized in Table 3. Different implementation methods have also been studied [40], as well as implementation issues [7], [24], [25], [26]. Due to lack of knowledge on requirement specifications, SMEs are usually at the mercy of ERP vendors, and due to the fact that SME owners often withhold important information. This leads to a misfit between the system and the organization [30]. Vilpola and Kouri [39] have proposed a new method for SMEs requirement specifications whereby key personnel from major business functions are interviewed in order to analyze and collect the main business processes, the needs and problems experienced in current processes. As a result of these interviews, the discrepancies between standard ERP operations and the existing company processes will be identified. Table 3: CSFs for Successful ERP Implementation CSFs References Top Management Support [12],[13],[17],[26],[35], [36] Organizational Culture [36],[41] Effective Communication [5], [13],[26] Team Work [26],[28],[35],[36] Central Decision Making [5],[6],[41] Use of consultants [5],[13],[26],[35] Risk Management [5],[28],[31] Training [7],[13],[17],[21],[35] Change Management [3],[7],[13],[35] User Involvement [7],[21],[35]

HASHEELA & SMOLANDER WHAT DO WE KNOW ABOUT ERP IN SMES?... In the Use and Maintenance phase, Federici [11] and Ruivo [34] have analyzed the effects ERP systems have in organizations, while Equey and Fragnière [8]; Kale [32] carried out a study to evaluate the organizational performance and benefits after implementation. In our search, we did not find publications that cover areas under the evolution and retirement phases. 7. Discussions and conclusions After a thorough search for publications from relevant databases, it was unexpected to discover that only few papers were available on the topic. Considering the amount of research that has been done in the ERP research area, 42 papers is not a good number. It clearly shows that a lot of attention still focuses on ERP implementation in LEs. Based on the ERP lifecycle framework developed by Esteves [10], many publications have addressed issues in the Adoption decision, Acquisition and Implementation phases. Adoption decision factors have been well covered and several adoption models have been proposed. Critical success factors for successful adoption and a successful implementation have also been discussed. However failure factors have not been well covered. This is necessary in order to avoid repeated failures in SME ERP implementations. Several papers also covered implementation issues such as challenges, strategies as well as other general issues, but there is still a need for further research about different implementation methods and how they have worked for SMEs. The literature also lacks focus on the effects of implementation in SMEs, as well as evaluation of post implementation performance. In addition, no publications were found on the evolution nor the retirement phase, and considering that the ERP has been adopted by many SMEs around the world, there is a need for research in this area to discover how ERP systems can be expanded in order to maintain organizational satisfaction. There is also a need for research on the effects, challenges and methods of replacing ERP systems in case of retirement. Considering that SMEs vary in sizes, there is also a need to explore further whether small- size enterprises experience challenges or benefits of ERP more in comparison to medium-sized companies or vice versa. Furthermore, since many SMEs are opting for ondemand solutions [44], research is needed to compare the benefits and constraints experienced from implementing standard ERP and implementing CloudERP. From the perspective of the first author of the paper, another gap realized in research in this mapping study is that most studies have been done in Asia, America, Australia, and Europe, but no study has been done in African SMEs. There is a need to understand whether there is a difference between developed and developing countries in relation to ERP and SMEs, therefore studies in African SMEs are recommended. References 1. Achanga, P., Shehab, E., Roy, R., Nelder, G.: Critical success factors for lean implementation within SMEs. J. Manuf. Technol. Manag. 17 (4), 460 471 (2006) 2. Ahmad, M.M., Pinedo Cuenca, R.: Critical success factors for ERP implementation in SMEs. Robot. Comput.-Integr. Manuf. 29 (3), 104 111 (2013) 3. Buonanno, G., Faverio, P., Pigni, F., Ravarini, A., Sciuto, D., Tagliavini, M.: Factors affecting ERP system adoption: A comparative analysis between SMEs and large companies. J. Enterp. Inf. Manag. 18 (4), 384 426 (2005) 4. Chang, S.-I., Hung, S.-Y., Yen, D.C., Lee, P.-J.: Critical Factors of ERP Adoption for Small- and Medium- Sized Enterprises: An Empirical Study. J. Glob. Inf. Manag. 18 (3), 82 106 (2010) 5. Chen, R.-S., Sun, C.-M., Helms, M.M., Jih, W.-J. (Kenny): Role Negotiation and Interaction: An Exploratory Case Study of the Impact of Management Consultants on

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