Erp implermentation

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ERP Implementation in China:
Tales from Two Chinese Mid-sized Companies

Yi Xiang
Manchester Business School
The University of Manchester
Mike Newman
Manchester Business School
The University of Manchester
Norwegian School of Economics,
and Business Administration, Bergen


We perceive ERP implementation to be a socio-technical (S-T) change process. In this research, we develop and use an S-T process model (Lyytinen and Newman 2008), to analyse and compare ERP implementation cases in two Chinese mid-sized companies. We aim to investigate the utility of using a parallel process model in the analysis and explanation of complex IS implementation cases.Meanwhile, this research also focuses on identifying the significance of BPR and vendor selection in the ERP implementation process.

By implementing modern information systems, organizations are supposed to gain or sustain competitive advantages in the globalized marketplace (Avison and Malaurent, 2007). As a multi-module transactional-based information system which integrates most standard processes tomanage almost all aspects of the business operations of an enterprise (Kumar and Hillegersberg, 2000), an Enterprise Resource Planning (ERP) system is considered as the best solution for those fast growing organizations which seek to improve productivity, provide competitive power and satisfy customer demands.

Mainstream ERP research emphasises studying western ERP package implementationslarge organizations (Davison, 2002). In contrast, our research focuses on two Chinese SMEs (Small Medium-sized Enterprises) and the implementation of Chinese ERP packages.

The reason we select our research site as China is that, firstly, the ERP industry has experienced a high growth in China in last decade. Being encouraged by Chinese government and threatened by overseas rivals after accession tothe World Trade Organization, more and more domestic enterprises selected ERP systems. According to Martinsons (2004), more than 1,000 Chinese companies had adopted ERP systems by the end of 2001. Ge and Voß (2009) report that in 2003, this number had increased by 200%. CCW Research[1] forecast that the Chinese ERP market, in manufacturing industry only, will have reached CNY434 billion by theend of 2009.

However, with this tremendous market expansion, the ERP successful implementation rate in China is reported as extremely low at around 10%, compared with the global average of 33% (Zhang et al., 2002). Particularly in Chinese small medium-sized enterprises (SMEs), which do not have sufficient money to pay for top consults or system customization, the failure rate is even higher(Scheer and Habermann, 2000).

Secondly, as smaller firms compared with their larger counterparts, SMEs are less likely to survive or recover quickly from a failed implementation of an expensive ERP system (Muscatello et al., 2003). Significantly, SMEs constitute 98% of China’s total industrial sector (Liang and Xue, 2004).

Therefore, there is need to collect, analyze and disseminate informationconcerning Chinese SMEs and their implementation of ERP systems. The outcome of this research is expected to be valuable regarding general advice to other SMEs concerning ERP implementation.

Studies focusing on Chinese ERP market in recent years identified some common obstacles in ERP implementation process, e.g. the misfits between an ERP system and organizational culture (Soh et al., 2000);the variety of ownership structures (including state-owned, private-held, joint-venture, foreign-owned etc.); the language barrier, etc. All the factors above can be summed up as the “difficulties in conducting business process reengineering (BPR) along with ERP implementation in Chinese organizations” (Martinsons, 2002; Zhang et al., 2002; Xue et al., 2005; Avison and Malaurent, 2007).