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Managing ERP system risk in SMEs: a multiple case study

  • Research Article
  • Published:
Journal of Information Technology

Abstract

ERP systems are increasingly accessible to small and medium-sized enterprises (SMEs). If the potential benefits of these systems are significant, the same applies to the risk associated with their implementation. A number of authors emphasize that IS risk management is most effective when it is initiated at the earliest possible moment in the system's lifecycle, that is, at the adoption phase. But how do SMEs actually manage the risk of ERP implementation during the ERP adoption process? The research objectives are (1) to identify and describe the influence of the SMEs’ context on their implementation risk exposure, and (2) to understand whether and how, within the adoption process, SMEs actually manage the risk of implementing an ERP system supplied by an ERP vendor, with open source software, or through in-house development. In order to do so, four case studies of SMEs having implemented an ERP system were undertaken.The study shows that to manage risk at the adoption stage, SMEs can proceed in a rather intuitive, informal and unstructured manner, that is explicitly based however upon an architecture of basic principles, policies and practices.

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Notes

  1. The reference and number of phases for each of the seven adoption models are presented in Appendix A.

  2. This change in the ERP vendors’ strategy in order to access the SME market confirms the specific nature of these organizations when compared to large enterprises. For example, SAP used to offer the same R/3 software package to both large firms and SMEs. In 2002, SAP bought for 50 million dollars a small vendor specialized in the SME market, Top Manage (Datamonitor, 2005). SAP's new offer destined to the SME market was then built around the software developed by Top Manage.

  3. Fictitious names to preserve the anonymity of the four SMEs.

  4. The hierarchical nature of this architecture is illustrated in Appendix D.

  5. This contrasts with Marbert et al. (2003) results indicating that SMEs would have a greater tendency to adopt the ‘best practices’ embedded in ERP. It must be noted however that 60% of the firms’ surveyed by these authors had implemented an ERP system supplied by a large vendor.

  6. This preoccupation was underlined by Liang and Xue (2004) who, from an ERP vendor's perspective, reported that the requirements of SMEs vary in relation to their stage of growth.

  7. By adopting a standard ERP software package ‘as is’, with the ‘best practices’ that are embedded in it, the firm is seen to equal the leading enterprises in its sector or industry; however the universal applicability of such practices is questioned (Soh et al., 2000; Uwizeyemungu and Raymond, 2009).

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Authors and Affiliations

  1. HEC-Montréal, Montréal, QC, Canada

    Placide Poba-Nzaou

  2. Université du Québec à Trois-Rivières, Trois-Rivières, QC, Canada

    Louis Raymond

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Appendices

Appendix A

Table A1

Table A1 ERP adoption process models
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Appendix B

ERP solution alternatives

  • Large ERP vendor: These are the five industry leaders that, together, occupy more than 50% of the global ERP market (Gartner Dataquest, 2005), namely SAP, Oracle, Sage, Microsoft and SSA.

  • Small and medium-sized ERP vendor: All vendors other than the five large ones, such as Epicor, Mapics and many others (Helo et al., 2008).

  • Best-of-breed: As opposed to the two preceding alternatives that provide fully integrated ERP systems, the ERP system is assembled from functional modules that are provided from different suppliers (who may be ERP vendors or not), each module being considered the best in its category (Light et al., 2001).

  • Outsourcing: The organization delegates to an application service provider (ASP) all or part of the tasks of installing and operating the ERP system. As opposed to the previous alternatives in which the organization must acquire a software licence, the system is leased and is generally hosted by the ASP (Trimi et al., 2005; Olson, 2007).

  • Open source: There are no licensing fees for the ERP software and the organization uses the source code which it can freely copy, modify or even commercialize with or without conditions (Dreiling et al., 2005).

  • In-house development: As opposed to the previous alternatives in which the ERP system consists of a pre-existing software package or pre-existing modules developed by an ERP vendor or other suppliers, the organization develops the system itself, internally or with outside help, based on its own specifications (Olsen and Saetre, 2007a).

Appendix C

Table C1

Table C1 Example of the chain of evidence for Alpha
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Appendix D

Figure D1

Figure D1
figure 7

Architecture of the principles, policies and practices put in place by Alpha.

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Poba-Nzaou, P., Raymond, L. Managing ERP system risk in SMEs: a multiple case study. J Inf Technol 26, 170–192 (2011). https://doi.org/10.1057/jit.2010.34

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