ERP Software in Pakistan: Market Overview and Final Strategy
Purpose – The aim of this paper is to (1) get an overview and provide consolidated figures of the existing ERP market in Pakistan, (2) To assess which Critical Success Factors (CSFs) are viewed more important in the ERP implementation process in Pakistan and (3) prepare a meaningful strategy, with main focus on the pre-implementation strategy, for Pakistani enterprises to practice in ERP projects based on the research information of the first two points.Without proper homework and extensive preplanning this exercise can cost any company a lot of capital and poor payback periods that subsequently create a difficult position for the management. ERP products are very expensive proposition and failures are likely without meticulous planning and effective project management.
Design/methodology/approach – The paper is based on 1) an exploratory study, which consists of discussions with the ERP consultants, Project Managers, 2) Literature review and case studies of Pakistan through questionnaire to establish effective guidelines for successful implementation of ERP project.Findings – The paper identifies the variance in company sizes as a major factor for selecting ERP products 2) main problems faced by the Pakistani companies during ERP implementations, 3) A rating of various critical success factors with the role of company’s top management as highest 4) Minimum pre-planning steps, 5) A strategy for successful / smooth implementation based on the above 4 points Originality/value- This paper provides an outlook ; consolidated figures for the present ERP scenario in Pakistan (the same have not been complied before nor are publically available), a structured methodology for the firms planning to implement ERP for the first time in Pakistan.Keywords: ERP, Pakistan, Market scenario, Implementation Strategy, CSFs. Article Type: Research paper 1. 0 Introduction Growing competition and a need to restructure the business processes by attempting to bring a more transparent approach, has made many manufacturing companies in Pakistan embark upon enterprise resource planning (ERP) implementation. An ERP system is an integrated software innovation that is aimed at enhancing organizational performance through providing end-to-end connectivity.
ERP software, which attempts to integrate all departments and functions across a company into a single computer system, is one of the most important developments in information technology in the last decade.It promises one database, one application, and a unified interface across the entire enterprise . The failure rates of these ERP implementations have been highly publicized in international magazines as evidenced by suggestions that: (1) more than 40% of large software projects fail, (2) 90% of ERP implementations end up late or over budget, and (3) 67% of enterprise application initiatives could be considered negative or unsuccessful [11, 12, 13, 14]. On the other hand this has not distracted companies from investing significant funds on ERP systems. ERP systems have, in recent years, begun to revolutionize best practice business processes and functions.
They automate core corporate activities such as manufacturing and the management of financial, and human resources and the supply chain, while eliminating complex, expensive links between systems and business functions that were performed across legacy systems . As shown by various researches and case studies, most ERP implementations unfortunately have not lived up to their market expectations [11, 12, 13, 14]. ERP implementations are notorious for taking a longer time and costing more money than is projected. Too often, the best-laid plans for full organization integration become mired by system incompatibility, legacy issues, cost overruns, and time extensions.This paper presents the results of an empirical study that surveyed a wide range of companies in Pakistan to determine the critical issues affecting ERP implementation.
The purpose of this paper is to (1) get an overview and provide consolidated figures of the existing ERP market in Pakistan, (2) To assess which Critical Success Factors (CSFs) are viewed more important in the ERP implementation process in Pakistan and (3) prepare a meaningful strategy for Pakistani enterprises to practice in ERP projects based on the information of the first two points. 2. 0 Research Methodology Little information is publically available for Pakistani enterprises who have implemented ERP solutions and their result. A two prong strategy was therefore adopted to carry out a meaningful study.In the first part structured interviews with two leading ERP consultants were carried out to obtain a reliable overview of ERP implementation in Pakistan. This not only provided consolidated and reliable figures for the present ERP market in Pakistan but also helped in getting the contact details of the project managers, team members and users of ERP solutions in these companies.
This significantly reduced the possibility of dubious responses. Based on literature survey and input from the ERP consultants and two ERP project managers a questionnaire was prepared which was split in two parts. The first part constituted a set of 30 questions targeting responses under following categories: Company Business/Size * Project Initiator * Product selection * Problems Faced * Benefits achieved Second part of the questionnaire sought rating by the respondent for more than 20 Critical Success Factors (CSFs) gathered and consolidated from world wide studies conducted by various researchers. The list of critical success factors was prepared keeping in mind the various stages of ERP implementation. 3.
0 Survey Findings The survey was carried out in July-August 2009 period. In all the questionnaire was sent to 30 ERP project managers and 20 team members/ERP users in various companies to seek there opinion and replies from 18 were received.The industries that participated in this survey varied vastly in their businesses and a table showing the number of participant companies against nature of their business is given in the Table 1: Table 1: Participating Companies Business Business| Number of Responding companies| Consumer Products| 3| Oil ; Gas| 3| Chemical| 4| Manufacturing| 3| Financial Services| 2| Pharma| 1| Media| 1| Telecommunication| 1| ERP consultants| 2| 3. 1 General ERP Scenario in Pakistan 3. 1.
1Project Initiation 90% of the respondents indicated that it was because of top management’s initiative that an ERP solution was adopted in the company. However, the multinational companies operating in Pakistan indicated the reason of global standardization for adopting ERP solution for this region of the world. 3. 1. Selection of ERP Product It was identified that company size in Pakistan is a key factor in categorizing ERP product selections / implementations.
Figures collected from the ERP consultants revealed that based on numbers of implementation, Oracle Applications is the overall market leader in Pakistan with a 50% share followed by SAP (40% market share) as shown in Table 2. Table 2: ERP Companies in Pakistan ERP Solution| %age Share (No. of Implementations)| Oracle| 50%| SAP| 40%| Maximo| 3%| People Soft| 2%| Others| 5%| 85% of respondents from small & medium enterprises stated that there companies preferred Oracle Applications as it offered separate modular licenses.However, for large companies with revenue of more than Rs. 1-2 billion per year SAP is the first choice with 65% of these companies opting for SAP solutions and 25% opting for Oracle Applications as shown in Table 3.
Table 3: ERP companies share based on revenue ERP Solution| %age Share (By Revenue)| SAP| 65%| Oracle| 25%| Maximo| 3%| People Soft| 1. 5%| Others| 5. 5%| 77% respondents form large companies who opted for SAP solutions indicated their preference for SAP because as a policy it offers all the modules in its package and is an enterprise solution which targets the business process with minimum integration issues amongst the modules.Amongst all the companies who have partly or fully implemented ERP and the consultant who were interviewed, the choice of modules adopted is presented in Table 4. Table 4: ERP Modules implementation Module| ERP Consultant| ERP User| Financial & Accounting| 100| 100| Sales & Order| 75| 80| Human Resources| 45| 60| Plant Operation| 55| 20| Network life cycle & material management| 90| 80| Operations & logistics| 50| 10| Marketing| 20| 5| Production & Manufacturing| 60| 40| Quality Management| 60| 25| The above table gave a clear trend of companies with preferred modules of Financial & Accounting, Network life cycle & material management, Sales & Order and Human Resources.
5 % of the large companies opted for a phase wise ERP implementation with selection of 3-4 modules in each phase. The small and medium enterprises mostly opt for stand alone implementation, selecting best of the breed modules. 3. 1. 3Problems Faced in ERP implementation 85% of the respondents indicated conflict with existing business processes as the top most problem they faced in ERP implementation. This was followed by 60% respondents who indicated employee’s resistance to change as the biggest problem.
Conflicts with vendors and consultants were rated as the foremost problem by 20% respondents. Respondents also rated internal conflicts and integration issues as secondary problems in ERP implementation. 3. 1. Benefits achieved 85% of the respondents indicated achieving higher level of transparency, tighter control of business processes, paperless environment and real time management as the biggest benefits achieved with ERP implementation.
Only 5% respondents indicated increase in sales/revenue or production due to ERP implementation. Efficiency improvement received a mixed response as 30% agreed to having evidenced efficiency improvement whereas 70% did not evidence much change. 3. 2 The Critical Success Factors A list of 22 critical success factors (CSFs) was circulated amongst the respondents with a request to rate each factor on a likert scale of 1 to 5.Table 5 exhibits ‘means’ and ‘standard deviations’ obtained from responses in descending order of importance (5=most important and 1=lowest in importance). Top management support was viewed as most important by our respondents.
Table 5: Rating of Critical Success Factors (CSFs) CSF Description| Mean| Std DEV| Strong commitment and support of the top management| 4. 30| 0. 80| Inter-departmental communication| 4. 20| 0. 70| Establishing clear goals ; objectives in pre-project phase| 4.
15| 0. 81| Training of Employees| 4. 15| 0. 67| Dedicated Project Team| 4. 10| 0.
72| Project management| 4. 10| 0. 55| Handling Change Management Issues | 4. 10| 0. 72| Competence of in-house project team| 3. 90| 0.
4| ERP Software selection| 3. 70| 0. 98| Gap Analysis| 3. 65| 0. 49| Vendor (selection, support)| 3.
65| 0. 75| Post implementation maintenance of ERP system| 3. 65| 0. 59| Role of consultant| 3. 55| 0.
94| Organizational readiness / internal resistance | 3. 50| 0. 89| IT Infrastructure | 3. 25| 0. 97| Professional Project Manager| 3. 10| 1.
21| Conflicts with vendors ; consultants | 3. 05| 1. 10| Contract terms ; conditions| 2. 85| 0. 93| Determining Return on Investment (ROI) | 2. 50| 1.
43| ERP software customization| 2. 45| 1. 36| Hiring of people experienced in ERP projects| 2. 35| 1. 09| Security situation in the country| 2. 30| 1.
38|Likewise, among the top ten important CFSs are: Inter-departmental communication, Establishing clear goals ; objectives in pre-project phase, Training of Employees, Dedicated Project Team, Project management, Handling Change Management Issues, Project team competence, ERP Software selection, Gap Analysis, Vendor (selection, support). Surprisingly, role of consultant was not amongst the top ten critical factors. Even more surprising is that return on investment determination is not even in first 15 critical factors. 4. 0Strategy for Pakistan The biggest problem in Pakistani enterprises is conflict of ERP solution with existing business strategy as indicated by 60% of our respondents.
Interestingly major gain indicated by most of our respondents (85%) is openness in their processes once ERP has been implemented. This suggests that customization of ERP solution should be avoided to maximum extent in order to have the maximum benefits of ERP. As indicated by our research the initiative in Pakistani enterprises for an ERP solution is generally top down. Although this approach is alright for Pakistani enterprises but it should be coupled with taking into confidence all employees to minimize their resistance to change which is the second most common problem highlighted by 60% of our respondents. Arranging company wide workshops/lectures on ERP with the help of competent consultants/ERP solution providers can be helpful to overcome this problem.
We have seen that tangible benefits have not been received by companies and most of the respondents also do not consider determination of ROI as a critical factor for successful implementation of ERP. In our opinion this should be an important criterion for large enterprises which can only be ascertained with a proper GAP analysis and clear pre-defined objectives. Whereas the intangible benefits of ERP can result in tangible benefits due to efficiency improvement in small companies, this can not be true for large enterprises. Large Pakistani enterprises generally do not layoff employees as a result of efficiency improvement due to political reasons.Accordingly, clear goals ; objectives should be established in pre-project phase to utilize the manpower which has been foreseen to be off loaded because of ERP implementation.
Moreover, all other avenues where improvement in system, like supply chain management etc. , should be identified in pre-project phase and linked to tangible benefits to calculate ROI.