Holmes Institute: HS2041 - ERP Implementation Failure at Comp Group

This report provides a comprehensive analysis of the ERP implementation failure at Comp Group, a network of four companies that attempted to revamp its IT infrastructure by implementing SAP R/3. The report investigates the purpose and scope of ERP, evaluating the implementation approach and analyzing change management strategies. It examines the strategic, tactical, and operational benefits Comp Group aimed to achieve. The analysis delves into the design and implementation stages, emphasizing the importance of process adaptation, organizational resistance, and ERP adaptation. Furthermore, the report addresses the critical role of change management, highlighting the challenges faced by Comp Group and proposing strategies to mitigate resistance and ensure successful ERP implementation. The conclusion reiterates the importance of ERP in supporting decision-making and achieving competitive advantages, summarizing the key factors that contributed to the project's failure and the lessons learned.

ERP implementation failure at Comp Group
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Table of Contents
Introduction...............................................................................................................................................3
First: Purpose and scope of ERP..............................................................................................................4
Second: Evaluation of the implementation approach.............................................................................4
Third: Analysis of change management...................................................................................................5
Conclusion..................................................................................................................................................6
References..................................................................................................................................................7

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Introduction
The enterprise resource planning (ERP) is considered a useful tool that businesses are switching to in
order to create strong capabilities, make better decisions, enhance their performance and achieve a
competitive advantage. Therefore the IT re-engineering processes are incorporated to fulfill the goal of
dramatic improvement in their business processes (Al-Mashari & Al-Mudimigh 2003).
The problem of Comp Group is represented in the failure of SAP R/3 implementation despite the
reengineering efforts. Comp Group is a network of 4 companies that faced strong changes in its business
that required revamping its IT infrastructure. Comp realized the necessity of adopting a flexible
application system to create an effective supply chain and enable more responsive actions to customer
needs. Therefore the management decision was to implement a new enterprise-wide information system
(EIS), with a re-engineering effort based on the leading consultant company (ConsCo) advice. The EIS is
likely to simplify the information flow across the organization departments and support timely access to
information (Al-Mashari & Al-Mudimigh 2003). The following section investigates Comb Group purpose
and scope of ERP, evaluation of the implementation approach and analysis of change management.

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First: Purpose and scope of ERP
Enterprise resource planning (ERP) is a tool that enables organizations to create an integrated structure
when implemented in their business process development (Hwang & Min 2015). The ERP system
consists of sub-systems that work in harmony on a process-based approach. It fulfills the management
needs of information through the integration functions of the sophisticated information systems of the
organization. It is advantaged for its ability to create a healthy communication process, increase flexibility
and productivity, decrease the operating costs, enhance revenues and yields high-profit margins and
shortens the cycle time. Its strategic role depends on employing information systems (IS) and technology
in developing products and services in order to gain a competitive advantage and support business
strategies. Managers prefer the ERP systems for its high and flexible support to decision-making
processes. ERP allows information in reports according to different managerial levels in case a problem
occurs (Ucakturk & Villard 2013).
1.1 Comp interest in ERP
Comp Group faced increasing challenges that made its implementation to the ERP system a must. It faced
intense competition, threats and opportunities of globalization, desired to become more customer focused
with the required changes in the organizational structure, needed to improve product quality and
shortening the response time to the market needs. Also, being in the industry for 13 years that resulted in
outdated functions and procedures required to be radically changed. Therefore, ERP system
implementation represented the best fit for its decision to decentralize its activities to become most
effectively implemented (Al-Mashari & Al-Mudimigh 2003).
1.2 Comp's business benefits of an ERP system
ERP benefits to Comp could be classified into three major categories, according to Elmeziane, Chuanmin
& Elmeziane (2011), as follows:

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1. Strategic benefits: ERP implementation within the business process of any organization is a decision
made by the organization top-management for its strategic role in fulfilling the organization strategic
goals.
2. Tactical benefits: It supports the implementation of effective project planning and management
along the project life cycle. The process of re-engineering business processes requires a full
understanding of the current business processes to be able to change it in compliance with the ERP.
Moreover, the management should select the best fit ERP package, including, hardware and operating
systems.
3. Operational benefits: It requires employees training to use the new system, its logic, concepts and
functions.
Second: Evaluation of the implementation approach
2.1 ERP system design and implementation
Every organization looks to gain benefits of implementing ERP system; they tend to enhance the flow of
business processes, conduct data analysis in a high-quality manner to enhance their decision-making
process, achieve agility and service their customers according to their preferences. Therefore, ERP
implementation is considered a big project that needs a high volume of resources, management
commitment and organizational change. The critical role that the ERP plays as a system of subsystems
integrated to fulfill the organizational goals requires devoting care and cautious in its implementation.
The failed implementation incidents could result in fatal disasters that can also lead to processes failure.
This implied that good planning should take place before implementing ERP (Tenkorang & Helo 2011).
The Comp Group launched the Comp Operations Reengineering (CORE) project. The reengineering team
conducted a conceptual detailed design to provide detailed plans that supports ERP implementation.
These plans involved the business process re-engineering in Comp2 and the newly developed IT
infrastructure.

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2.2 Comp stages for ERP implementation
The stages of ERP implementation goes through four steps, they are discussed according to Ziemba &
Obłąk (2013), Al-Mashari & Al-Mudimigh (2003) and Chen, Chen & Tsai (2009), as follows:
 Process adaptation: Analysing the ERP requirements is essential to guide the managers towards the
required processes and behaviours. Achieving the business process reengineering support the
organization in redesigning its processes depending on a well-analysed fundamentals. The CORE
project and limited its scope to cover Comp2 only. It represented a model of how the company
wished to conduct its business.
 Organizational resistance: Implementing the ERP and business process reengineering results in
major changes in the nature of the employees work. Therefore, they might resist the new changes for
the caused problems, inadaptability, fear of losing benefits and security-related issues. Accordingly,
preparing the floor for the implementation by changing the employee's mindsets is vital for the
successful implementation of the ERP.
 ERP implementation: The suitability of the ERP to the business process is important. The ERP
system is flexible enough to be tailored according to the organizational desired reengineering process.
The matter that leads to the implementation success. The recommended Comp Group IT strategies
were based on the assessment of the current situation of the existing systems, data structure,
application and the business model that the reengineering team developed. The implementation was
planned to involve new systems installation, documentation and training. The ERP implementation
was classified into 3 phases, the team started with phase 1 to ensure its success and altered phases 2
and 3 to be made in a more efficient manner after successfully completing phase 1. Classifying the
implementation process into 3 phases represents an excellent strategy that solves any problem that
might occur, limits their impact and allow the team to control the initial impact of the change process.
Phase 1 resulted in that SAP R/3 and Triton (BAAN) represented the more likely software to support
Comp’s requirements on the medium and long-term.

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 ERP adaptation: The ERP designers consider it to be the optimal application that could be applied
within any organization type. This means that organizations can adapt to ERP requirements and
added features.
Third: Analysis of change management
Change management involves the tools, processes, principles and activities that influence the employees
to support the organizational decision to transform from the current state to a new desired state. The
success of the change process required employees awareness of the need for change and the necessity of
implementing radical changes represented in business process reengineering and ERP implementation.
The high resistance of the employees and in some cases the leaders and managers might lead to never
change that makes the organization stick to its current status and never be able to change (Altamony et al.
2016; Aberdeen Group 2014; Star Garden 2018).
3.1 Change management at Comp
The problem at Comp is that only few employees considered the importance of success, including
managers who were involved in the CORE project. Also, the major complexity occurred due to the top
management resistance to change; the president considered the reengineering process to be a failure that
did not worth investing $2.8 million. The employees had a highly negative feeling that increased their
sensitivity towards the change efforts either in phase 1 or the two other phases. The result led to a loss in
money, time and efforts of the CORE project team due to the resistance of the major stakeholders
represented in the top management and the employees (Al-Mashari & Al-Mudimigh 2003).
3.2 The proposed strategy for change management
Therefore, the top management, leaders and change agents play a critical role in influencing the
employees towards the importance, benefits and necessity of change through implementing the new ERP
system (Dezdar & Ainin 2011).

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The management success to impact the organizational culture and the key stakeholders through effective
communication is likely to lead the ERP implementation to success (Ravichandran & Piramuthu 2012).
Conclusion
Managers prefer the ERP systems for its high and flexible support to decision-making processes. ERP
allows information in reports according to different managerial levels in case a problem occurs . Comp
Group faced intense competition, threats and opportunities of globalization, desired to become more
customer focused with the required changes in the organizational structure, needed to improve product
quality and shortening the response time to the market needs.
The recommended Comp Group IT strategies were based on the assessment of the current situation of the
existing systems, data structure, application and the business model that the reengineering team
developed.
The problem at Comp is that only few employees considered the importance of success, including
managers who were involved in the CORE project. Also, the major complexity occurred due to the top
management resistance to change.

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References
Aberdeen Group 2014, 'The value of upgrading ERP: Maintaining modern technology', Aberdeen Group ,
USA.
Al-Mashari, M & Al-Mudimigh, A 2003, 'ERP implementation: lessons from a case study', Information
Technology & People, vol 16, no. 1, pp. 21-33.
Altamony, H, Tarhini, A, Al-Salti, Z, Gharaibeh, A & Elyas, T 2016, 'The relationship between change
management strategy and successful enterprise resource planning (ERP) implementations: A theoretical
perspective', International Journal of Business Management and Economic Research , vol 7, no. 4, pp.
690-703.
Chen, H, Chen, S & Tsai, L 2009, 'A study of successful ERP- from organization fit perspective',
Systemic, Cybernitics and Informatics, vol 7, no. 4, pp. 8-16.
Dezdar, S & Ainin, S 2011, 'The influence of organizational factors on successful ERP implementation',
Management Decision, vol 49, no. 6, pp. 911-926.
Elmeziane, K, Chuanmin, S & Elmeziane, M 2011, 'The importance of critical success factors of
enterprise resources planning implementation in China', Business Management Dynamics, vol 1, no. 6,
pp. 1-10.
Hwang, D & Min, H 2015, 'Identifying the drivers of enterprise resource planning and assessing its
impacts on supply chain performances', Industrial Management & Data Systems, vol 115, no. 3, pp. 541 –
569.
Ravichandran, K & Piramuthu, R 2012, 'Change management: challenge to transformation in public
sector organization', Far East Journal of Psychology and Business, vol 7, no. 1, pp. 22-28.
Star Garden 2018, The true cost of ERP system, viewed 26 April 2019,
<https://cdn2.hubspot.net/hubfs/425286/ebook/stargarden_pain_out_of_upgrading_5.pdf>.

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Tenkorang, R & Helo, P 2011, 'Enterprise resource planning (ERP): A review literature review',
Proceedings of the World Congress on Engineering and Computer Science, San Francisco, USA.
Ucakturk, A & Villard, M 2013, 'The effects of management information and ERP systems on strategic
knowledge management and decision making', Science Direct, vol 99, pp. 1035-1043.
Ziemba, E & Obłąk, I 2013, 'Critical success factors for ERP systems implementation in public
administration', Interdisciplinary Journal of Information, Knowledge, and Management, vol 8, pp. 1-19.