Information Technology

ERP Selection Process In SMEs. Factor #6: Risk Attitude

<p>The sixth observation and discussion point as a result of this series of articles is the risk attitude of the interviewed SMEs who have opted for a Tier 1 ERP solution. As supported by literature, the larger organisations have a wider margin of error and can survive ERP failures (Levenburg&nbsp;<em>et al</em>., 2006; Yap, 1990), with an overall reportedly ERP failure rate greater than 50 percent (Barker and Frolick, 2003; Chen, 2001; Davenport, 1998; Donker and Patniak, 2014; Gargeya and Brady, 2005), and other studies such as Kraemer (2012) and Kwahk and Lee (2008), going to the extent of claiming that between 55 and 75 percent of implemented ERP systems fail to meet the original expectations. The participant SMEs in this research all agreed that their margin of error is thin, and unlike their bigger counterparts, they need to get it right at the first go. For these SMEs, adopting best industry practice was key, also to increase the possibilities of ERP success and achieve the expected objectives, thereby better of to modify their existing business processes and organisation structure to fit the new system rather than vice versa (Jarrar <em>et al</em>., 2000; Markus and Tanis, 2000; Newman and Zhao, 2008).&nbsp;</p><p>Within the perspective of risk mitigation, the participant SME also complained about the lack and consequently expensive IT resources, which they considered a risk. IT experts are known to be highly expensive to recruit and to retain, but when invested in, as per Aareni <em>et al.&nbsp;</em>(2015), these IT professionals are considered as a special group of employees within the organization who are often well protected and taken care of not to lose to other organizations, although several other studies have claimed that IT professionals rank as one of the highest group of professionals in the industry in relation to employee turnover (Von Hagel and Miller, 2011; Zhang and Jones, 2011). To mitigate this risk, it is identified that SMEs partner with external IT advisors who are well renowned and established in their country and in their industry. They value their opinion and they rope them in when capital investments in this domain is essential, as trusted advisors and subsequently outsource to them the running of the ERP system itself.&nbsp;</p><p>This study has uncovered two important aspects that will add a further contribution to literature and also assist industry stakeholders in their go-to-market strategies. Risk undertaken may have been considered as an obstacle for SMEs to opt for larger Tier 1 solution, whilst on the contrary for the selected SMEs of this study who represent similar-sized organizations who opt for the larger ERP systems, the risk factor indeed influenced their decision making in favour of such systems. This to the author came also as a surprise and a new discovery. Within the same aspect, from an IT resources risks point of view, rather than solely solution related aspects, the participant SMEs mitigated such limitation into outsourcing and rather than investing in expensive skills, kept their internal structures focussed on running the business and do what they do best.&nbsp;</p><p>They keep the internal IT department very lean, in certain cases even up to one resource who is more focussed on the strategic direction rather than operational and maintaining the relationship with the software vendors and implementers. This approach once again reaffirms the theory of focussing on running their business whilst outsourcing the rest. Indeed, in line to literature around this domain, external ICT support has been identified since early days to be a very important determinant towards ICT adoption (Danone, 1998; Frank 1998; Raymond 1985), and with the popularity of outsourcing, companies are now more willing to adopt new ICT solutions with peace of mind that they can revert to third-party&rsquo;s support (Ramdani <em>et al</em>., 2013). Indeed, external vendors and consultant support ranks as one of the most cited influential factors within academic literature.&nbsp;</p>
KR Expert - Kevin Attard

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