The Adoption of ERP Software in India: A Brief Overview

Issues and Problems

The first ERP systems were adopted in India in the mid 1990's. According to figures published by the National Association for Software Companies, which is a body that analyzes and directs the growth and competence areas of the Indian software industry, the Indian ERP market grew at an average rate of 70 percent over the years 1995 to 2001. As of 2001, about 800 companies had implemented ERP software. The key ERP vendors in the Indian industry include SAP, Peoplesoft, Oracle and Baan. The ERP growth trend, and the market shares of the different vendors have been described in Tables 1 and 2.

Table 1: The growth of the ERP market in India
 

Size of the RP market in India ($ million)

Year

1995–1996

1996–1997

1997–1998

1998–1999

1999–2000

2000–2001

2001–2002

Size

25

56

129

279

521

958

1324

Table 2: Market share of ERP vendors in India for the year 1998–1999
 

Size of the market ($billion)

Percentage Share

SAP

2.95

16.9

People soft

1

5.7

Oracle

.92

5.3

McKesson

.85

4.9

J D Edwards

.62

3.5

Baan

.48

2.7

Others

10.2

58.9

Total

17

100

The growth was fuelled by a variety of factors. The dominant one was to standardize and simplify the IT architecture, and replace the patchwork of incompatible legacy systems that most Indian companies had, with integrated software. Another reason was to enhance the efficiency of data acquisition and make accurate and timely information available to everyone in the organization. A third was to achieve Y2K consistency. Many companies had planned to overhaul existing mainframe based systems and replace them with Y2K compatible systems, and ERP had emerged as a state of art client/server-based solution that could address this problem as well.

The implementation process of ERP in many Indian organizations has been fraught with problems. These relate to time and money overruns and inadequate planning (Connor, 1999). Organizations have been particularly frustrated with the time and effort involved in the customization of the package (Natarajan, 1998). A study conducted by the Gartner Group reveals that there is a 230 percent cost overrun and a 178 percent schedule overrun for ERP projects in India. In some cases, organizations have gained considerable benefits from enterprise systems. This has been by way of better internal co-ordination, automated processes, reduced transaction time, and better data storage and retrieval capabilities. However in many other cases the results have been, endless implementation cycles, futile re-engineering efforts not accepted by line managers, and rejection of the software as just another technological innovation and not very useful for the business. Many CIO's believe that "these packages cost the earth, take ages to implement and deliver nothing" (Chattopadhyay, 2000). The move towards ERP is a project of huge scope and managers have found it very difficult to estimate budgets with regard to the infrastructure and the human expertise. Another major concern has been to get employees and managers to accept the process changes and re-engineering entailed in ERP implementation. Additionally there are hidden costs of training, customization, integration and testing, data conversion, and consulting. Indeed, many Indian companies have abandoned ERP projects midway when they realized that some critical processes that they could not change could not be supported by the ERP software.

Research Problem and Research Design

Existing reports of ERP adoption by Indian companies, mostly journalistic literature, broadly describe the experiences of individual companies. The reports do not draw upon each other: they mention the different aspects of ERP adoption in a fragmented and isolated manner. Clearly, a systematic approach is required for managing different issues that are associated with the adoption of ERP software by Indian companies. Managers need to plan for, and address the requirements of different aspects of the implementation process. In order to do this, they require having access to research findings that analyze ERP adoption in a holistic manner, that can provide the big picture, and that are based on empirical studies.

In this research, we have used empirical studies, to understand in an integrated manner, the factors that characterize the ERP adoption process in Indian companies. We first use the literature to develop the different tracks along which ERP adoption has been studied. We then attempt to understand the process in the Indian context, in the light of these tracks. Finally, we present our research findings in the form of an overarching framework that draws together the different concepts and tracks from literature, and integrates them with the empirical results from our study. Our investigation has four aspects to it. First, we attempted to analyze the characteristics of the company's business such as the industry, the number of facilities and products, the critical success factors for the business, and the kind of information processing tools required or used by the company. Second, we tried to understand why the use of ERP was considered, what goals it was expected to achieve, and what role it was expected to play. Third, we studied the characteristic features of the implementation process, such as the sequence in which the different modules were implemented, the allocation of manpower for the purpose, and the role of the consultants involved. Finally, we analyzed the operational and strategic impact of the ERP software, and the changes instituted because of implementation of the software.

We studied the ERP adoption processes of 25 companies from 10 different industries in the manufacturing and service sectors, which had implemented ERP software. We adopted an exploratory survey method (Kerlinger, 1994) in order to generate process descriptions of the phenomenon.



Managing Globally with Information Technology
Managing Globally with Information Technology
ISBN: 193177742X
EAN: 2147483647
Year: 2002
Pages: 224

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