ERP adoption cost factors identification and classification: a study in SMEs

Abstract

Enterprise resource planning (ERP) systems adoptions require substantial resources and investments. The majority of businesses around the globe can be considered to be small and medium sized enterprises (SMEs). Thus, SMEs are seen to be typical companies that are the cornerstone of most economies. Compared with large enterprises, an SME-context contains several characteristics, and scarcity of resources is among the top of them. For SMEs, unplanned costs escalation could pose a serious threat to their stability and survival in the market. Frequently, ERP projects have crossed their estimated budgets and schedules. Researchers and practitioners state that a prevailing number of ERP adoption projects fail due to inaccurate or to too optimistic budgets/schedules. In addition, many organizations face difficulties in identifying the potential cost factors that could occur during their ERP adoption lifecycle. While focusing on the SMEcontext, this research attempts to identify potential costs that could occur in ERP adoptions. The research method employed in this study targeted diverse stakeholders and experts involved in ERP projects in Egypt. This research provides a list of cost factors and their classifications that could aid adopting organizations to better estimate their needed ERP project budgets. In particular, this research explores the direct and indirect cost factors that occur in ERP adoptions in Egyptian SMEs. Also, this study investigates the influence of some SME-specific contextual factors on costs. Moreover, the paper provides a ranking of cost factors according to their impact on total adoption costs.