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Challenges in enterprise resource planning implementation: state-of-the-art


A. Momoh, R. Roy and E. Shehab
Decision Engineering Centre, Craneld University, Craneld, UK
Abstract
Purpose The purpose of this paper is to present an integrative and detailed review of the critical factors that cause enterprise resource planning (ERP) implementation failures, based on an in-depth literature review (1997-2009). Design/methodology/approach Keywords relating to the subject of this paper were dened, and used to search web engines and journal databases for papers on ERP implementation failures. These papers were further analysed and classied into various categories. Findings Nine factors are found to be critical in the failure of ERP implementations: excessive customisation, dilemma of internal integration, poor understanding of business implications and requirements, lack of change management, poor data quality, misalignment of IT with business, hidden costs, limited training and lack of top management support. Research limitations/implications The paper proposes the development of a framework to address each ERP implementation failure factor in its entirety based on the frequency of its occurrence in industry, as a topic for future research. Originality/value The paper contributes to research in the ERP domain by highlighting ERP implementation challenges from a critical failure perspective and proportion of the failures, as opposed to presenting critical success factors. Failure factors with examples provides a clearer visibility of the costly damages that can be introduced into organisations in the event that these failures are ignored. Keywords Manufacturing resource planning, Literature, Management failures, Critical success factors Paper type Literature review

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1. Introduction In the last decade, there has been a lot of clamour over enterprise resource planning (ERP). ERP is a software solution integrating the various functional spheres in an organisation a link through the entire supply chain, aimed at best industry and management practices for providing the right product at the right place, at the right time, at least cost (Rao, 2000a, b). ERP software is the backbone of many big enterprises in the world today (Alshawi et al., 2004). These commercial packages promise the seamless integration of all the information owing through a company nancial and accounting information, human resource information, supply chain information and customer information (Davenport, 1998; Hallikainen et al., 2006; Holland et al., 1999). One of the most important aspects of modern ERP systems lies in the integration that would be implicit in the design of the software and allows a considerable amount of integration between different elements of the business (Rao, 2000a, b). Hence, ERP systems have become one of todays largest IT investments (Chung and Snyder, 2000). The smart organisations today could anticipate and exceed customer expectations that are evaluated on the basis of quality, time, service, availability and efciency (Rao, 2000a, b). The one tool that innovative and progressive organisations have

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come to increasingly depend on in this endeavour is ERP solutions (Rao, 2000a, b). According to Chung and Snyder (2000), these systems have traditionally been used by capital-intensive industries, such as manufacturing, construction, aerospace and defense. Additionally, they have recently been introduced to the nance, education, insurance, retail and telecommunications sectors. Hence, the number of organisations going in for ERP systems is growing rapidly (Rao, 2000a, b). Enterprise systems appear to be a dream come true (Davenport, 1998). They should be looked upon as an asset, not as expenditure (Rao, 2000a, b). Themistocleus et al. (2001) outline some of the benets of ERP: . solutions to the problems of legacy systems; . reduced development risk; . increased global competitiveness; and . business efciency. Rao (2000a, b) states that the tangible benets that accrue due to ERP include: reduction of lead time by 60, 99 per cent on-time shipments, increased business, increase of inventory turns to over 30 per cent, cycle time cut to 80 per cent and work in progress reduced to 70 per cent. Other potential benets include: abundant information about customer wants and needs, breakthrough reductions in working capital, better customer satisfaction and the ability to view and manage the extended enterprise of suppliers, alliances and customers as an integrated whole (Muscatello et al., 2003). Many companies began installing ERP systems in order to eliminate patchwork of their legacy systems and improve the interactions and communications with their customers and suppliers (Kogetsidis et al., 2008). From a business standpoint, the benets that a properly selected and implemented ERP system can offer an organisation include time and cost reduction in business processes, faster transaction processing, improvement of operational performance, nancial management and customer service, web-based interfaces and more effective communication (Kogetsidis et al., 2008). ERP has attracted increasing attention from both practitioners across industry, and researchers (Momoh et al., 2007). Although ERP systems have been progressively developed over at least a decade, and all the extensive benets and gainful characteristics of ERP solutions could apply to the implementing organisations, the continual pace of change in organisations and their environments has resulted in complex technical organisational, cultural and political issues that have made the integration process a very challenging task (Huang et al., 2003). Furthermore, in todays dynamic and unpredictable business environment, companies face the tremendous challenge of expanding markets and rising customer expectations (Razmi et al., 2009). Hence, numerous research organisations have reported ERP implementations to be fraught with failures due to a variety of challenges, thereby impeding the integration process. Scott and Kaindl (2000) report that although ERP packages strive to integrate all the major processes of a rm, customers have discovered the lack of some essential functionality. Chen and Lin (2009) advise that an ERP system is a complex network composed of various business processes. Although ERP applications have been widely adopted by a variety of industries worldwide, the challenges faced during and post-implementation remain a growing concern (Momoh et al., 2008). The Standish Group

study (www.it-cortex.com/Stat_Failure_Rate.htm) reported that less than 10 per cent of ERP implementations succeed with full functionality, within forecast cost and timeframes: . cost overruns average 178 per cent; . schedule overruns average 230 per cent; and . implemented functionality averages 41 per cent of desired business requirements. Figure 1 shows the Standish Group statistics. Figure 2 shows the number of publications on critical failure factors in this paper, over a period of 13 years, from 1997 to 2009. There are 64 citations on critical failure factors. In 1997, very little was reported on ERP challenges. The publications increased in 1998, dropped slightly in 1999, and soared drastically in 2000. There was a reduction in reports of ERP challenges in 2001 and 2002. However, discussions on this topic increased again in 2003 and soared in 2004. A slight reduction in publication is reected by the bar chart in 2005, and these publications reduced further over the years until 2008 with minimal increase in 2009. This indicates that although problems do still exist in ERP implementations, they are being addressed with the passage of time. This paper aims to present an integrative and detailed review of these implementation challenges. The challenges detailed in this document are based on in-depth literature review (1997-2009) conducted on ERP implementation failures. These challenges, as well as factors that need to be applied in ERP implementations to avoid failures and ensure success, are presented. The remainder of this paper is organised as follows: in Section 2, the methodology of this research is presented. Section 3 discusses further statistics on ERP failures. Based on in-depth literature review, Section 4 presents the critical failure factors that should be addressed in order to avoid some of the challenges encountered in ERP implementations. Section 5 provides an analysis of the countries and industries that the critical factors in this paper concern, a brief report on the shortcomings that were observed in some of the papers that contribute to the literature review, and discusses the essence and implications of this study. Finally, Section 6 concludes this paper and discusses areas for future research in light of ERP implementation challenges.
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0 Cost Schedule Planned functionality

Figure 1. Standish Group statistics on implementation failures

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Figure 2. Publications on ERP challenges over time

2 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

2. Methodology The methodology used in this review focused primarily on ERP implementation issues. The rst stage of the methodology was to derive keywords that would be utilized in searching for topics related to ERP implementation challenges. These keywords are: ERP, implementation, challenges, issues, problems and projects. The second stage of the methodology was to conduct a search on journal articles, conference papers, books and web postings based on the above keywords. A variety of tools were used to search for these papers, as follows: internet search engines such as Googlescholar, and a series of journal databases; ScienceDirect, IEEE, SCOPUS and Inspec. Once the articles were presented, they were classied into different groups namely; data quality (DQ), business process re-engineering (BPR), critical success factors (CSFs), change management, implementation failures, customisation, ERP internal integration and implementation challenges in general. The papers that were shortlisted based on this classication, were used for the literature review. 3. Statistics on ERP implementation failures IT Cortex (2009) advise that prior to embarking on a strategic project, every organisation should be aware of its a priori chances of success. Statistics over ERP project failure rate provide a good measure of those chances. They are not illustrated to demoralise executives and to deter them from undertaking large projects. The purpose is to make them ponder over how to approach this endeavour in order to maximise the chances of success. In addition to the Standish Study Group ERP implementation failure statistics (IT Cortex, 2009) discussed in Section 1, this section briey touches on other ERP-related ndings produced by two research groups:

(1) the Robbins-Gioia survey; and (2) the Conference Board survey. Both surveys were conducted in 2001. 3.1 The perception of ERP implementation by multiple industries Robbins-Gioia (IT Cortex, 2009) provide management consulting services in Alexandria, Virginia. They made a study over how enterprises perceive their ERP implementations in 2001. Their survey constituted 232 respondents spanning multiple industries including government, information technology, communications, nancial institutions, utilities and healthcare. A total of 36 per cent of the companies surveyed had, or were in the process of implementing an ERP solution. The ndings of the survey indicate that 51 per cent of the respondents viewed their ERP implementation as unsuccessful, and 46 per cent of the participants felt that their organisations lacked understanding of how to use the system to improve their business operations. 3.2 ERP implementation from an executive perspective The Conference Board survey group (IT Cortex, 2009) interviewed executives at 117 companies that attempted ERP implementations. The ndings indicated that only 34 per cent of the respondents were satised with what they were provided with, and 40 per cent of the projects failed to achieve their business case within one year of going live. Implementation costs were found to average 25 per cent over budget. Additionally, support costs were underestimated for the year following implementation by an average of 20 per cent. The statistics presented so far indicate that an ERP implementation project is more likely to be unsuccessful than successful. Furthermore, the larger the ERP project, the higher the chances of failure. And nally, one out of ve ERP projects is likely to generate full satisfaction. This supports the analogy that ERP implementations are more likely to fail, be delayed, cost more than forecast or fail to deliver full functionality, than they are to succeed (Aitken, 2002). Aitken (2002) further advises that in order to implement ERP successfully, it is important to be aware of how ERP as a technology evolved, what its strengths and weaknesses are, and the nature of important implementation challenges. When considering and implementing an enterprise system, managers need to be careful that their enthusiasm about the benets does not blind them to the hazards (Davenport, 1998). 4. Critical failure factors The ERP industry has not been performing as originally expected (Tarn et al., 2002). ERP implementations are notorious for taking a longer time and costing more money than is projected (Davenport, 1998; Reda, 1998; Jacob and Wagner, 1999; Mabert et al., 2000; Ehie and Madsen, 2005). Hence, in the last decade, organisations have struggled to implement ERP effectively, despite all of the benets it offers. This is not because ERP solutions are poorly designed, but because there is inadequate understanding of the way that an ERP solution should be implemented. To this effect, companies have ended up exceeding their planned implementation budgets, and time to implement. Consequently, a large number of companies have cancelled their projects completely.

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Rao (2000a, b) estimates that 96.4 per cent of ERP implementations fail, whereas Themistocleus and Irani (2001) reports that 70 per cent of ERP implementations do not achieve their estimated benets. Table I is an illustration of the research conducted on each critical failure factor discussed in Sections 4.1-4.7. It further illustrates the number of citations for each critical failure factor. An indication of the size of the enterprise to which each failure factor applies, is also provided. It has been concluded from Table I that a lack of change management, excessive customisation, dilemma of internal integration, poor understanding of business implications and requirements and poor DQ have received the most attention from researchers. The challenges illustrated in this table apply mostly to large organisations. Figure 3 shows the percentage of each failure factor in relation to all the critical factors. There are 52 citations in total. Out of all the failure factors, 17 per cent apply to a lack of change management. This is the most popular citation. Excessive customisation, dilemma of internal integration, poor understanding of business implications and requirements and poor DQ, each make up 13 per cent of the failure factors. Lack of top management support constitutes 10 per cent of the failures cited. Hidden costs and misalignment of IT with the business each make up 6 per cent of the discussed challenges. And limited training constitutes 8 per cent of the critical failure factors. 4.1 Excessive customisation ERP systems are complex, and implementing a system can be a difcult, time-consuming and expensive project for a company (Shehab et al., 2004; Hallikainen et al., 2009). A complex system decreases usefulness, which also makes users reluctant to work (Chung et al., 2008). Wheatley (2000) estimates that the average ERP implementation takes 23 months. The target is to do the implementation within six months (Arindam and Bhattacharya, 2009). Some implementations have even exceeded three years. Chung and Snyder (2000) estimate that ERP adoption times typically take from a few months for rms accepting all default settings, to years for rms attempting to make major modications. During this long implementation period, software and user specication change and the technicians who are implementing the package must constantly adapt and make adjustments in order to accommodate these changes (Mendel, 1999; Ehie and Madsen, 2005). However, care must be taken particularly when modifying the system, as if a company alters an ERP package, it can impede the internal integration of ERP modules (Themistocleus and Irani, 2001; Shehab et al., 2004; McAdam and Galloway, 2005; Chung and Snyder 2000). Aloini et al. (2007) emphasise that often, packaged software is incompatible with the organisations needs and business processes. The consequence is either software modication, which is expensive and costs heavily in maintenance, or restructuring of the organisations business processes to t the software (Aloini et al., 2007). Verma (2007) suggests that completing any additional work which is out of scope, is known as scope creep and this may lead to a lot of customisation, which may in turn, lead to project failure. Aloini et al. (2007) stress that if not adequately planned, personalisation and adaptation of tools may cause trouble. Shehab et al. (2004), Davenport (1998) and Sumner (1999) also stress that organisations face numerous problems when customising ERP packages. Laukkanen et al. (2007) caution that ERP system implementations may last several years in large companies, particularly if the system is heavily customised. They conducted surveys on

Critical failure factors

Selected references

Excessive customisation Shehab et al. (2004) Wheatley (2000) Chung and Snyder (2000) Mendel (1999) Ehie and Madsen (2005) Sumner (1999) Rao (2000a, b) Kogetsidis et al. (2008) Verma (2007) Laukkanen et al. (2007) Aloini et al. (2007) Hallikainen et al. (2009) Helo (2008) Dilemma of internal Youngberg et al. (2009) integration Themistocleus and Irani (2001a) Shehab et al. (2004) Davenport (1998) McAdam and Galloway (2005) Chung and Snyder (2000) Soh et al. (2000) Aloini et al. (2007) Poor understanding Kogetsidis et al. (2008) of business implications Elbertsen et al. (2006) and requirements Davenport (1998) Themistocleus and Irani (2001a) Ndede-Amadi (2004) Ash and Burn (2003) Langenwalter (2000) Lack of change McAdam and Galloway (2005) management Yusuf et al. (2004) Hong and Kim (2002) Markus and Tanis (2000) Al-Mashari (2003) Cissna (1998) Worley et al. (2005) Huang et al (2003, 2004) Sumner (1999) Koh et al. (2006) Aloini et al. (2007) Kamhawi (2008) Poor DQ Bajgoric and Moon (2009) Youngberg et al. (2009) Vosburg and Kumar (2001) Strong et al. (1997) Hongjiang et al. (2002) Soh et al. (2000) Alshawi et al. (2004)

Number of Large SME organisation organisation citations p p 13 p p p p p p p p p p p p p p p p

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p p p p 8

p p

p p p p

p 12

p p

9 p p Table I. ERP critical factors citations

(continued )

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Table I.

Number of Large SME Critical failure factors Selected references organisation organisation citations p Park and Kusiak (2005) p Tsamantanis and Kojetsidis (2006) p Misalignment of IT Davenport (1998) 3 p with the business Soh et al. (2000) p Ho et al. (2004) p Hidden costs Al-Mashari (2003) 3 p Yusuf et al. (2004) Wheatley (2000) p Limited training Arindam and Bhattacharya (2009) 4 p Al-Mashari (2003) Worley et al. (2005) Huang et al. (2003) Lack of top management Cissna (1998) 5 support Nah and Lau (2001) p p Rao (2000a, b) p Al-Mashari (2003) Ehie and Madsen (2005)

Limited training Misalignment of IT with business Hidden cost


3% 3% 4% 12%

Lack of change management

Lack of top management support

5%

13%

Poor data quality

9%

Excessive customisation

7%

8%

Figure 3. Critical failure factors

Poor understanding of business implications & requirements

Dilemma of internal integration

44 organisations of various sizes in order to investigate the relationship of enterprise size to the objectives and constraints of ERP adoption. Kogetsidis et al. (2008) advise that an implementation approach issue that must be considered is the level of customisation that will be applied on an ERP solution, as customising the software will avoid the BPR

that might result in best practices. It is more benecial to t business processes to the ERP package rather than try to customise the package (Sumner, 1999). However, Helo (2008) argues that from a technical point of view, the key choice in ERP implementation is to nd an optimal strategy to balance between customisation of the ERP system versus changing the organisational procedure within the company. 4.2 Dilemma of internal integration ERP implementations are challenging due to cross-module integration, data standardisation, adoption of the underlying business model, compressed implementation schedule and the involvement of a large number of stakeholders (Soh et al., 2000). Elbertsen et al. (2006) advise that the strength of ERP systems lies in integrating modules by coupling them, but this strength can be considered its weakness; the close coupling of modules means less responsiveness to the local requirements in particular functional areas. By their very own nature, enterprise systems impose their own logic on a companys strategy, organisation and culture (Davenport, 1998). Themistocleus and Irani (2001) emphasizes that the non-exible nature of ERP solutions forces organisations to t the package and abandon their way of doing business. This problem affects companies and in some cases, has led organisations like FoxMayer drugs, to bankruptcy (Davenport, 1998; Muscatello et al., 2003). Furthermore, to highlight the fact that ERP solutions constitute cross-module integration, Ndede-Amadi (2004) argues that one key to a successful process redesign effort in an ERP implementation is to examine end-to-end processes, which are vital to the success of a company. End-to-end process design enables the strengthening of process integration. Davenport (1998) discusses the fact that ERP solutions are modular and in light of integration, the greater the modules selected, the greater the integration benets, but also, the greater the costs, risks and changes involved. Aloini et al. (2007) caution that the number of implementation modules increases project complexity. Although, internal integration can pose problems, when distorted, Ash and Burn (2003) in a global study of ERP implementation, found that an added complexity is the integration of ERP environments with non-ERP environments, which has complex management implications. Youngberg et al. (2009) reveal that for businesses, the ever-expanding amount of information that has to be managed leads to an increase in system integration and complexity. Koh et al. (2006) understudied the ERP adoption in six Greek manufacturing companies, and explored the effects of uncertainty on the performance of these systems and the methods used to cope with uncertainty. In the case study conducted by Koh et al. (2006), they discuss ERP Integration in the Literature Review section of their article. However, their focus is on intra-enterprise integration with other functions and inter-enterprise integration in a supply chain. These are the areas of integration that are most commonly discussed in ERP research. Laukkanen et al. (2007) also discuss these types of integration in their paper. The concept and importance of ERP internal (or module) integration is sparsely discussed. It is essential to educate practitioners on the impact of intra-enterprise integration with other functions, and module integration on one another. Owing to the fact that ERP modules have been dened based on best practice business processes, which are coherently linked to each other, it is imperative that implementing organizations business processes are correctly mapped to the ERP processes. Implementing these processes incorrectly may lead to very poor integration between the modules in the system. This challenge will in turn, affect the daily

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operations of the business. Furthermore, it would be useful if practitioners understood the kinds of operational challenges that they may be faced with should their system lack proper module integration. Additionally, Koh et al. (2006) have not discussed the impact of customization on module integration. 4.3 Poor understanding of ERP business implications and requirements A number of companies that implement ERP do not realise the full benets that the solution offers because most organisations are not organised in the correct fashion to achieve the benets (Yusuf et al., 2004; Ehie and Madsen, 2005). Langenwalter (2000) stipulates that many companies that attempt to implement ERP solutions run into difculty because the organisation is not ready for integration and the various departments within it have their own agendas and objectives that conict with each other. The critical challenge in ERP implementation has been to rst identify the gaps between the ERP generic functionality and the specic organisational requirements (Soh et al., 2000). According to Davenport (1998), even though some of the causes of ERP failures lie with technical challenges, these are not the main reason enterprise systems fail. He stresses that the biggest challenges are business problems in the sense that companies fail to reconcile the technological imperatives of the enterprise system with the business needs of the enterprise. One of the biggest sins in the implementation of an ERP system is not to understand the true signicance of what you have taken on and, therefore, not commit the right resources to the project (Kogetsidis et al., 2008). Kogetsidis et al. (2008) reached this conclusion by conducting a case study on a large Cypriot retail company, where the CSFs of their SAP implementation were examined. Thus, if a company rushes to install an enterprise system without rst understanding the business implications, the dream of integration can quickly turn into a nightmare (Davenport, 1998). 4.4 Lack of change management In a case study on a large manufacturing organisation carried out by McAdam and Galloway (2005), they observed that a lack of change management was one of the major causes of implementation failures. The manufacturing company, known as GUDV NI, is multinational and employs 10,000 employees across Ireland, UK, Europe and the USA. They implemented SAP. The essence of the case study was to explore the organisational issues involved in implementing an ERP solution as the main approach to change management. Two change management failings that became apparent early on and were rectied during the ERP project were the lack of communication with the employees, and an apparent failure to recognise the impact and complexity that such a change project would have on the entire business (McAdam and Galloway, 2005). Hence, it is essential to manage successful ERP implementations as a program of wide-ranging organisational change initiatives rather than as a software installation effort (Yusuf et al., 2004). This approach involves intertwining technology, task, people, structure and culture. Consequently, the implementation process is transparent and enables the easy identication, avoidance and mitigation of risks. Additionally, as all the relevant areas are addressed as part of the implementation, resistance to change is reduced and in some cases, eliminated. Thus, organisational resistance to change is identied as a CSF (Hong and Kim, 2002), and cultural readiness for an ERP implementation must be carefully planned (McAdam and Galloway, 2005). Aloini et al. (2007) advise that to

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underestimate the effort involved in change management may result in project failure. Moreover, conict arising due to the differing needs of stakeholders must be addressed as and when it arises, rather than in a summative manner. The congruence between ERP systems and organisational culture is the prerequisite to successful ERP implementation (Hong and Kim, 2002; Markus and Tanis, 2000). There are several common problems associated with ERP implementation (Al-Mashari, 2003; Kamhawi, 2008). Among these is the resistance to change. Factors relating to top management support, assignment of best people to implementation teams, and strong involvement of people from the eld are important in reducing the resistance to changes involved in ERP implementation (Cissna, 1998). Another problem is related to unplanned cost associated with new requirements emerging after the freezing stage. A third problem is poor training of end-users, who, when the system is up and running, do not know how to use it and maintain it continually. Koh et al. (2006) illustrates this fact amongst other premises by conducting a case study on six manufacturing organisations of all sizes. They report that human factors constituted a major problem, particularly for small- and medium-sized companies. Their ndings highlighted the fact that many employees were not trained to use the systems and many were unfamiliar with computers. Consequently, a number of issues arose, such as erroneous data input, poor use of the systems, increasing costs of training services offered by the vendors, employee resistance to integration of the ERP system into the business process and the need to hire information technology personnel. Implementation requires extensive employee training (Arindam and Bhattacharya, 2009). Although an extensive training and education is considered as a CSF by most authors, Worley et al. (2005) state that the appropriation of the system postimplementation does not only depend on training; it also requires to dene how the information system and the actor will be mutually adapted to the other, not only at the level of the position of a person within the company, but also with reference to his knowledge and competencies. In this context, an unsatisfactory operation of the system may cause irreversible drifts like demotivation, partial use of the system or the introduction of local information systems (e.g. Excel sheets) in order to mitigate the supposed deciencies of the ERP system (Worley et al., 2005). Worley et al. (2005) arrived at this inference through a university case study. Peoplesoft was implemented at the university. The essence of the case study was to illustrate how ERP is optimised by adapting business processes to human actors by explicitly taking into account, the role, competence and knowledge of human resources. 4.5 Poor data quality The integrity of the data used to operate and make decisions about a business affects the relative efciency of operations and quality of decisions made; protecting data integrity is a challenging task (Vosburg and Kumar, 2001). One of the issues in information management is getting the right information to the right person at the right time and in a usable form (Youngberg et al., 2009). Information research has demonstrated that inaccurate and incomplete data may severely affect the competitive success of an organisation (Hongjiang et al., 2002). Poor quality information can have signicant social and business impacts (Strong et al., 1997). Hongjiang et al. (2002) discuss DQ problems. They advise that in order to ensure DQ in implementing ERP, it is important to

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understand the underlying factors that inuence DQ and the underlying problems with old systems need to be investigated. Hongjiang et al. (2002) conducted a case study in two large Australian organisations in both the transport and mining industries, where they applied the framework, which they developed for the understanding of DQ issues in implementing ERP. Data mists arise from incompatibilities between organisational requirements and ERP package in terms of data format; resolving these mists is cumbersome, since this requires changing the structure and relationship of the table objects, which are viewed as prohibitive core changes to the ERP packages (Soh et al., 2000). Poor DQ at the operational level increases operational cost because time and other resources are spent detecting and correcting errors (Park and Kusiak, 2005). Alshawi et al. (2004) argue that data accuracy is an issue in the sense that if the data that goes into a system is not accurate or immediately accessible, the whole system becomes suspect. Tsamantanis and Kojetsidis (2006) conducted a case study on two medium sized manufacturing companies in Greece in order to examine how both companies introduced ERP in their effort to increase competitive advantage and market share. They concluded from their ndings that in order to function properly, an ERP system has increased demand for information input. Additionally, since ERP integrates different functions of the company and uses data from several departments, delays in the system by one department have a direct impact on the operations of the others. To be truly competitive in todays information era, the business should be able to operate continuously, maintain data availability all the time, and be agile in accessing available data (Bajgoric and Moon, 2009). 4.6 Misalignment of IT with the business Ho et al. (2004) argue that system implementation is a challenging management issue and is no less important than system research and development. They further emphasise that owing to the rapidly changing business environment, ERP implementation is seldom a simple matter of realising a plan; instead, it is often a dynamic process of mutual adaptation between IT and the surrounding environment. Given the slim possibility of achieving a perfect match between technology and organisation, misalignment can occur which can be rectied through technological measures, organisational measures or a combination of both. A case study was conducted by Ho et al. (2004) to examine three dimensions of alignment between organisation and ERP systems, by employing a technology adaptation perspective and case research methodology. They adopt the Leonard-Barton model as a research framework. This framework addresses critical issues according to the dimension into which they fall. There are three dimensions in this framework; technology, delivery system and performance criteria. The technology dimension issues are; adequacy for specication, users maturity for the application of new technology, and evaluation and integration for legacy system. As regards the delivery system, its issues are: role of the MIS department in organisation, process adaptation, harmonious implementation, system establishment, project management, employee education and training, external partner support and internal staff involvement. Finally, the issue for performance criteria is performance evaluation. Ho et al. (2004) advise that during implementation, all three dimensions inuence each other. A successful implementation will benet from the application of all three dimensions, and not a single one. To this effect, and based on the results of their case study surveys, they develop an adaptation framework for ERP implementations as shown in Figure 4.

ERP system * System specification * Solution for integrating legacy systems * Suggested management mechanism Process reengineering * * * * Change management MIS role Top management support Training of staff

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Process integration * IT-enabled process integration * Change management approach Performance

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Figure 4. Adaptation framework of ERP

Source: Adopted from Ho et al. (2004)

4.7 Hidden costs in ERP implementations Yusuf et al. (2004) report that an ERP system has problems of uncertainty in acquisition and hidden costs in implementation. Tarn et al. (2002) argue that cost is a critical part of an ERP implementation for both large and small businesses alike. They further emphasise that companies that install ERP solutions may underestimate cost that is hidden. An ERP system has an average total cost of ownership of $15 million but rewards the business with an average negative net present value of $1.5 million (Wheatley, 2000). The following types of common hidden cost may increase implementation cost dramatically (Slater, 1998; Soh et al., 2000): . training is the most underrated hidden cost the cost to train an entire staff on a new system is enormous and often taken for granted; . integration and implementation are often overlooked; . the cost of data conversion is hidden companies often do not recognise the cost associated with transferring data from the old system to the new package; included in this cost is the need to modify the data to t into the new system and the need to hire professionals can send this type of cost higher certain date; . high-consulting cost becomes inevitable as a consequence of many companies not budgeting consulting fees properly; and . a cost often overlooked is the notion that the project will end on a certain date. 4.8 Organisational, management and technical challenges McAdam and Galloway (2005) report that key organisational issues were teamwork, change management, top management support, plan and vision, business process management and development, project management, monitoring and review, effective communication, software development and testing, the role of the project champion and appropriate business and IT legacy systems. The results of their study indicate that the complex organisational change issues must be comprehensively addressed. These issues cannot be resolved solely with technical solutions. To support these results, Huang et al. (2003, 2004) suggest that in addition to developing the technical aspects of ERP, more effort is required in understanding the more complex organisational issues involved. 4.8.1 Organisational issues within a large organisation. A case-based research approach was used by McAdam and Galloway (2005) to explore the organisational

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issues involved in implementing an ERP system within a large global organisation where SAP R/3 was implemented. They report the key implementation issues based on their interview data as follows: . Roles and responsibilities. Although some managers perceived they faced a challenge due to process change and enriched roles, there were also concerns that the ERP package removes duplicity, replaces or removes manual and decentralised common tasks and results in many back ofces being consolidated into one, with employee redundancy implications. Therefore, some roles could potentially disappear. Clearer communication of the business drivers for the change and reassurance on this issue could have increased management commitment (Nah and Lau, 2001). . Management capability. One common outcome from the interview data were that ability, experience and communication capabilities were all prerequisites for good ERP implementations and adopting changed processes (Huang, 2002; Stijn and Wensley, 2001). Where any manager had evidence that their staff had these qualities in relation to ERP, then the change became more effective. Many of the problems associated with the SAP R/3 delivery in the case organisation highlighted a lack of these prerequisites as a common denominator among many managers. . Management behaviours. The interview data also showed that there were no guarantees that being more mature in years or with more managerial experience made managers better at adapting to innovation or process changes. The ability to effectively manage ERP change was found to be either as a consequence of previous training or the preferred style or behaviour of individual managers (Huang et al., 2003). There was evidence to suggest that training along with practical awareness of the change drivers regarding ERP implementation could help managers and staff to understand the issues and therefore become more comfortable in working with the SAP R/3 driven changes. Many managers frequently went back to the most accomplished SAP or IT-literate members of their teams and tended to ignore the other staff, leading to bottlenecks. . Training and development. Limited training in SAP R/3 skills was a concern for most of the managers, as also found by Huang et al. (2003). However, there was a desire to know more about SAP and to learn how to use it more effectively. There is a need for a more systematic SAP training and development approach, which should include exposing managers to the practical examples of SAP and major business process changes implementation. 4.8.2 Types of managerial and technical issues. Themistocleus et al. (2001) conducted a survey to identify, analyse and present the problems of ERP systems. Their ndings of their survey highlight two types of ERP implementation problems: (1) managerial; and (2) technical. The surveys conducted by Themistocleus et al. (2001) demonstrates that project cost overruns and delays were signicant problems and affected seriously, the implementation phase and the whole project (Themistocleus et al., 2001). Other kinds

of problems encountered during implementation were conicts with external entities such as consultants and ERP vendors, as well as internal conicts. These conicts were instrumental to project delays and cost overruns. Approximately, 42 per cent of the surveyed companies faced severe problems with their business strategies (Themistocleus et al., 2001) as the ERP system imposed its own way of doing business (Davenport, 1998). Additionally, these surveys conducted by Themistocleus et al. (2001) indicates that ERP solutions caused organisational restructuring, and consequently led to employees resistance to change, which in turn, led to project delays experienced by 58 per cent of the surveyed companies. This supports Sumners (1999) argument that there is a major resistance to change after an organisation rolls out ERP. The surveys further indicate that serious customisation problems encountered by 72 per cent of the companies surveyed, were caused during and post-implementation. Customisation also led to integration problems. Furthermore, according to 82 per cent of the companies that participated in the surveys, integration problems were experienced in an attempt to tie up the ERP systems with a number of existing applications. Ehie and Madsen (2005) suggests that unfortunately, many organisations equate successful ERP implementations with the choice of ERP software. While it is imperative that the choice of the software should be carefully considered, ERP software should not drive the business decision-making process. Implementing an ERP solution requires thorough strategic thinking that allows companies to gain a better understanding of their business processes. It is imperative for companies to be aware of critical issues affecting ERP implementation and give careful considerations to the issues which would lend themselves to streamlined rollouts and timely implementation of ERP systems. 5. Discussions The papers that were studied in this literature review examined ERP implementations in various countries, regions and continents. These countries are; the USA, the UK, Germany, Cyprus, India, France, Canada, Japan, Australia, Ireland, Taiwan, Mexico, Greece and Bahrain. Some of these countries belong to some of the continents and regions, which were part of the literature review; Asia, The Netherlands, and the Middle East. The number of citations for each country is illustrated in Table II. Table II indicates that most of the study in this paper was conducted in the USA, which reports 36 citations. Then the UK presents 13 citations, indicating a substantial gap with studies done in the USA. Cyprus follows this estimate closely with nine citations. The other citations by country range from six, which is for Ireland, to one being the lowest for Bahrain. These numbers indicate that the majority of the implementation challenges have been encountered in the USA because it holds the highest number of implementations. However, this emphasizes the need to address implementation challenges in less cited countries, so that experiences are not as unpleasant as that of the USA. It is imperative to educate both organisations that have implemented ERP and those that have not, on ERP failure factors. A number of the literature reviewed in this study are based on case studies, whilst others are based on either literature review or research. Some ERP applications have been used in some of the literature in order to achieve its objectives. Table III illustrates the ERP system that has been used in the specied study. The applications that were referenced the most in this study are SAP, Oracle and Baan. Peoplesoft and J.D. Edwards were also referred to in literature, but very sparsely.

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Country/region USA Cyprus UK Germany India France Canada Japan Australia Ireland Asia The Netherlands Middle East and Africa Taiwan Mexico Finland Greece Bahrain

Number of citations 36 9 13 3 6 3 3 3 4 6 4 2 2 3 2 5 4 1

552

Table II. Number of citations by country

There were other ERP products used in some case, but the most popular and mostly used solutions were selected by the author. Most of the papers studied in this literature review are journal articles. These are shown in Table IV by selected reference, as well as the number of citations made in each literature paper. The table also indicates the industry for which the citations were made. It is illustrated in Table IV that the manufacturing industry has implemented ERP more than other industries cited in this paper. Some of the other industries are retail, banking and nance, telecommunications, energy, brewery, transport and services. This is an indication that this literature review covers a wide range of industries, and as such, its failure factors must be addressed very seriously since they apply to a multitude of industries. Furthermore, the fact that multiple industries were referenced is an indication of the reliability of the sources of this review. In addition to, the critical factors that have been highlighted in this paper for consideration in ERP implementations, it was observed during the review that some of the papers studied lack depth. Some of these papers are discussed in this section for future research. Woo (2007) conducted a case study to examine the ERP implementation experiences of a leading Chinese enterprise. The objective of this study was to provide Chinese enterprises implementing ERP with knowledge about ERP implementation CSFs. Based on the ndings of Woos (2007) case study, Woo (2007) stresses the importance of using the best people in an organization, on an ERP implementation project. These people will make up the project team composition. This critical factor was suggested as a consequence of the case study organization not releasing their best people onto their ERP project. However, Woo (2007) has not clearly stated what value the team will contribute to the project. Additionally, the paper does not highlight the ramications of not using the right project team at the initial stage of the project.

Selected reference Shehab et al. (2004) Chung and Snyder (2000) Mendel (1999) Ehie and Madsen (2005) Sumner (1999) Rao (2000a, b) Youngberg et al. (2009) Themistocleus and Irani (2001a) Davenport (1998) McAdam and Galloway (2005) Soh et al. (2000) Kogetsidis et al. (2008) Elbertsen et al. (2006) Ndede-Amadi (2004) Ash and Burn (2003) Langenwalter (2000) Hong and Kim (2002) Markus and Tanis (2000) Cissna (1998) Huang et al. (2003, 2004) Bajgoric and Moon (2009) Vosburg and Kumar (2001) Strong et al. (1997) Hongjiang et al. (2002) Alshawi et al. (2004) Ho et al. (2004) Al-Mashari (2003) Yusuf et al. (2004) Wheatley (2000) Arindam and Bhattacharya (2009) Worley et al. (2005) Nah and Lau (2001) Kogetsidis et al. (2008) Verma (2007) Laukkanen et al. (2007) Hallikainen et al. (2009) Helo (2008) Aloini et al. (2007) Koh et al. (2006) Kamhawi (2008) Park and Kusiak (2005) Tsamantanis and Kojetsidis (2006)

SAP X X X X X X X X X X X X X X X X X X X X X X X X X

Oracle X X X X X X X X X X X X X X X X X

Baan X X X X X X X X X

Peoplesoft X X X X X X X X X X X

J.D. Edwards X X X X X X X

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Table III. ERP Application referenced in literature reviewed

Releasing the best people onto ERP projects is one of the least discussed critical factors in literature. Besides, companies still struggle to fully understand the importance of this factor. Second, even when companies have some understanding of its essence, management still struggle to release the people because of fear that their normal daily activities will suffer, should other people be used to replace the former staff. For this reason, it is absolutely imperative to clearly highlight the consequences of not applying the CSF of not releasing the right people onto projects. These consequences

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Selected reference 3 4 1 1 6 Journal Journal Journal Journal Journal Business Process Management Journal International Journal of Agile Management Systems Journal of Computing in Civil Engineering Infoworld Computers in Industry

Shehab et al. (2004) Chung and Snyder (2000) Chung et al. (2008) Mendel (1999) Ehie and Madsen (2005)

Sumner (1999) Rao (2000a, b) Rao (2000a, b) Youngberg et al. (2009) 3 Conference Paper

Themistocleus and Irani (2001)

Davenport (1998) McAdam and Galloway (2005) Soh et al. (2000) Kogetsidis et al. (2008) 1 1 1 2 1 Journal Journal Journal Book Journal White Paper

Elbertsen et al. (2006)

Ndede-Amadi (2004) Ash and Burn (2003) Langen-Walter (2000) Hong and Kim (2002) Markus and Tanis (2000)

Table IV. Number of citations by selected reference


Number of citations Paper type Source Industry referred 3 5 3 1 Conference Paper Journal Journal Journal Proceedings of the SIGCPR Business Process Management Journal Industrial Management & Data Systems International Journal of Information Management IEEE Proceedings of the 34th Hawaii International Conference on System Sciences Manufacturing Energy Construction Manufacturing Comunications Manufacturing Manufacturing Retail Banking and nance Computer Wholesale and distribution Communications Services Food, beverage and tobacco Manufacturing Retail Logistics Information Management Industrial Management & Data Systems Communication of the ACM Journal of International Business & Entrepreneurship Development Industrial Management & Data Systems Business Process Management Journal European Journal of Operational Research St Lucia Press Information & Management Internet Retail Electrical, engineering and metal industry Manufacturing Manufacturing (continued ) 11 6 4 4 Journal Journal Journal Journal

Selected reference 1 4 1 1 1 1 3 2 3 1 3 2 2 1 4 5 2 1 5 4 1 1 1 Journal Journal Journal Journal Journal Journal Journal Journal Journal Journal Journal Journal Journal Journal Journal Journal Journal Journal Journal Journal Industrial Management & Data Systems Industrial Management & Data Systems Data Quality in Context Industrial Management & Data Systems Journal Journal Journal Electric Light and Power Journal of Business & Management Industrial Management & Data Systems Energy Manufacturing Finance Manufacturing

Number of citations Paper type Source Industry referred

Cissna (1998) Huang et al. (2003) Huang et al. (2004)

Bajgoric and Moon (2009) Vosburg and Kumar (2001) Strong et al. (1997) Hongjiang et al. (2002)

Alshawi et al. (2004) Ho et al. (2004) Al-Mashari (2003) Yusuf et al. (2004) Wheatley (2000) Arindam and Bhattacharya (2009) Worley et al. (2005) Nah and Lau (2001) Kogetsidis et al. (2008)

Verma (2007) Laukkanen et al. (2007)

Hallikainen et al. (2009) Helo (2008) Aloini et al. (2007) Koh et al. (2006) Kamhawi (2008) Park and Kusiak (2005) Tsamantanis and Kojetsidis (2006)

Transport Mining The Journal of Enterprise Information Management Telecommunications Industrial Management & Data Systems Manufacturing Industrial Management & Data Systems International Journal of Production Economics Manufacturing CIO Business Strategy Series Manufacturing Computers in Industry Education Business Process Management Journal Journal of International Business and Entrepreneurship Development Journal of Enterprise Information Management Retail Manufacturing Logistics International Journal of Production Economics Manufacturing Industrial Management & Data Systems Manufacturing Information & Management Journal of Manufacturing Technology Management Manufacturing Journal of Enterprise Information Management International Journal of Production Research Manufacturing British Food Journal Brewery Energy Telecommunications Manufacturing

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Table IV.

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should be drawn from case studies, where business problems were actually experienced after neglecting to apply a critical factor. It would be most useful to highlight the exact business issues that were encountered in terms of loss of revenue or inefcient operations. This true business scenario will force managers to release their best people. Woo (2007) also stressed the importance of ERP training. Training users to use ERP is important because ERP is not easy to use even for highly educated managers with good IT skills (Woo, 2007). Woo (2007) proceeds to discuss the reasons for providing ERP users with proper training. However, Woo (2007) did not offer any insight on the consequences of not training ERP users. Woo (2007) discussed other CSFs on communication and process change that were experienced as challenges by the case study organization at the onset of the project. However, the ramications that were encountered by the business in not applying these critical factors, were not discussed. Kamwahi (2008) carried out some research to provide a better understanding of ERP systems adoption, as well as non-adoption practices in a less developed country setting, namely Bahrain. It is inferred in this study that the main challenges to ERP implementations are simply high start-up costs and long implementation periods. These were rated highly on the Likert scale used to measure the severity of the challenges. One of the other challenges highlighted in this study is change management. However, this is grouped under the third level of challenges. In comparison to the failure factors cited in this literature review, the latter reports that a lack of change management is the most cited failure factor. This stands to reason because if the change being introduced by the ERP system is not properly managed, then the users will not appreciate the system. Consequently, the system will not be properly used and this could lead to a barrage of problems for the organization. Therefore, the fact that change management has not been recognized in Bahrain based on Kamwahis (2008) study, simply implies that more education on the impact of change management on an ERP implementation, should be conducted for practitioners in Bahrain. Laukkanen et al. (2007) contributed to the discussion on ERP system adoption, by investigating the relationship of enterprise size to the objectives and constraints of ERP adoption. In their paper, they focus their discussions on small, medium and large organizations. They begin by dening each organization size. However, these denitions provided are not concretely and widely supported by literature or other ratied paper. Furthermore, Laukkanen et al. (2007) did not categorise their denitions by country. The size factor in relation to a company may differ in different countries, depending on the population of the country. Also, various constitutions may dene size differently. Laukkanen et al. (2007) proceed to discuss their ndings on the correlations between various risk factors and the size of an ERP implementing company. However, some of the risk factors (e.g. schedule and budget overruns) are rather vague. What constitutes a budget overrun for a small company in one country may not be what constitutes the same for another small company in a different country. Besides, one of the risk factors; criticality of the changes imposed by the ERP system is documented as a risk factor, but could contribute to budget or schedule overruns. These risk factors should have been broken down further into failure factors which are discussed in this literature review.

In light of the study conducted in this literature review, this paper seeks to contribute to research by addressing ERP implementation challenges from a failure perspective. This motive gives a better visibility of the problems encountered in the process of implementing an ERP solution in an organisation, and as such, stresses the need to urgently counter the failures. The practical implications of the failure factors discussed in this paper are targeted at ERP implementing organisations. These companies will use these factors as a guide for future implementations, in order to aid them in avoiding the failures that have been experienced in other implementations. The authenticity of the failures with corresponding examples provides the implementers with the reality of their existence and the potential damage they could cause in terms of both nancial and human resources. As opposed to CSFs that are interpreted as the factors that should be applied in an implementation in order to attain success, critical failure factors present the actual failures that would occur in an implementation if the factors are ignored. The former does not critically guarantee a failure if all the CSFs are not adhered to. The latter has a more imminent sense of urgency and reality about it. The proportion of the failure factors guides the ERP implementers in prioritising the critical factor that must be avoided during implementation. Future research should focus on creating a framework to address and correct each failure factor in its entirety, for use by implementing organisations in future implementations. 6. Conclusions and implications for future research ERP solutions are appropriate when a company is seeking the benets of integration and best practices in its information system, and looking for a full range of functionality across its organisation. Thus, there is an increasing number of organisations implementing ERP today. However, it has been reported that implementing ERP mostly results in failures. A number of studies have been conducted on these implementations, and the results have led to the conclusion that less than 10 per cent of ERP implementations are successful due to a variety of challenges. This paper presented a number of critical failure factors based on a comprehensive literature review. Whilst, the papers that were studied provided a good insight into the factors that lead to both the successes and failures of ERP implementations, the lack of certain content in some of these papers indicates some degree of incompleteness of the various studies. A citation which lacks correlation with this paper is that of Ehie and Madsen (2005), where they reported the results of an empirical research on the critical issues affecting successful ERP implementation. Through the study, eight factors were identied that attempts to explain 86 per cent of the variances that impact ERP implementation. Six of these critical factors were correlated with the success of the respective ERP implementations. However, of the eight factors, only human resource development bears any relationship with the failure factors discussed in this paper, with respect to training. Even more amazing, is the fact that the failure factor, lack of change management, which is amongst the top cited in this literature review, was not discussed by Ehie and Madsen (2005). This means that these failure factors have not been taken into consideration in the study carried out by Ehie and Madsen (2005). Therefore, the results of their study is very limited, and clearly does not cover a wide spectrum of critical factors that affect an ERP

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implementation. Hence, it is impractical for only these eight success factors to be used to guide a practitioner in their ERP implementation. Similarly, the eight factors do not provide a wide enough spectrum for further research to be based upon. The review of all the literature in this study, as well as the shortcomings above, emphasises the need to present the critical factors that challenge ERP implementations, from a failure perspective. This stresses the urgency to address and correct these factors, from both a research and industry perspective. The challenges discussed in this paper are: . a lack of change management; . lack of commitment from top management; . a substantial amount of customisation thereby leading to problems with internal integration and misalignment with the ERP underlying business model; . misalignment of business strategy with the ERP solution; . lack of adequate training at all levels for both management and employees to ensure that there is a good understanding of the impact of implementing ERP as well as what it is and is not; and . inadequate understanding of business requirements and the implication of ERP before implementation. All these issues lead to large cost overruns and sometimes, project cancellations. In light of the above highlighted failures, for future research, it is imperative to conduct a detailed research on each failure factor in its entirety. This brings about an in-depth focus for each critical factor. Furthermore, a methodology to disable the studied failure factor should be developed.

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Further reading Adam, F. and Sammon, D. (2004), The Enterprise Resource Planning Decade: Lessons Learned and Issues for the Future, Idea Group Publishing, London.

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R. Roy is the Head of the Decision Engineering Centre. He is a leading Cost Engineering research at Craneld and is known for his qualitative cost modelling and design optimisation research and has published over 20 journal and 100 conference papers. He is the Principal Investigator of an IMRC funded Network of Excellence in Affordability Engineering. He is also leading an IMRC project on Whole Life Cost of technical PSS. Roy is leading the PSS Futures Lab Development at Craneld and the PSS-design project within the Craneld IMRC. As recognition of his contribution in Cost Engineering and Design, he was elected as the President of the Association of Cost Engineers (ACostE) and an Associate Member of the CIRP. E. Shehab is a Senior Lecturer in Decision Engineering at Craneld University. He has a strong academic, research and industrial background in ERP, knowledge-based systems, cost engineering and design for manufacturing. His main industrial collaborators are Airbus, Rolls-Royce, Lockheed Martin and Cosworth. Furthermore, he is active in product-service systems research. Shehab is the Principal Investigator of a knowledge transfer partnership project and several EPSRC/industry studentships for PhD. He is co-investigator of three Craneld IMRC projects on PSS and one EC FP7 project. He is also the course director for the MSc in knowledge management for innovation. He has worked for a number of years in industry before he joined academia. Having a PhD in the cost engineering area, He has published over 50 journal and conference papers in his areas of expertise. Shehab is a fellow of the Higher Education Academy and a member of both the Institute of Engineering and Technology and the ACostE.

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