IEEE TRANSACTIONS ON ENGINEERING MANAGEMENT, VOL. 56, NO. 1, FEBRUARY2009 157 Managing ERP Implementation Failure: A Project Management Perspective Charlie C. Chen, Chuck C. H. Law, and Samuel C. Yang, Member, IEEE Abstract—Information technology (IT) projects are susceptible to changes in the business environment, and the increasing veloc- ity of change in global business is challenging the management of enterprise systems such as enterprise resource planning (ERP). At the same time, system success depends on the rigor of the project management processes. Scope creep, poor risk management, in- adequate allocation of human resources over time, and vendor management are some common problems associated with the im- plementation of an enterprise system. These issues pose threats to the success of a large-scale software project such as ERP. This re- search adopts a case study approach to examine how poor project management can imperil the implementation of an ERP system. Having learned the lessons from the failure of its first ERP im- plementation, the company in this case reengineered its project management practices to successfully carry out its second ERP implementation. Many critical project management factors con- tributed to the failure and success of this company’s ERP system. This study explores and identifies critical elements of project man- agement that contributed to the success of the second ERP im- plementation. For those organizations adopting ERP, the findings provide a roadmap to follow in order to avoid making critical, but often underestimated, project management mistakes. Index Terms—Enterprise resource planning (ERP) system devel- opment life cycle (SDLC), information system (IS) management, project management, stage model. I. INTRODUCTION A N ENTERPRISE resource planning (ERP) system is an information system (IS) that supports and integrates many facets of a business, including planning, manufacturing, sales, and marketing [23]. An enterprise system such as ERP often requires years of implementation and postimplementation; it becomes part of the business and supports its tactical move- ments and strategic direction. A successfully integrated ERP system can enhance operational efficiency by supporting a firm’s business processes as well as create competitive advantages by enabling innovative practices [1]. Indeed, the adoption of ERP systems has become a global phenomenon. The market for ERP grew at a rate of 14% in 2004 to become a $23.6 billion market globally [48]. Despite the popularity of ERP, the failure rate of ERP imple- mentation remains high. According to a survey of 117 organiza- tions conducted by the Conference Board, 40% of ERP projects Manuscript received November 1, 2006; revised June 1, 2007, November 1, 2007, and May 1, 2008. Current version published January 21, 2009. Review of this manuscript was arranged by Department Editor J. K. Pinto. C. C. Chen is with the Department of Computer Information Systems, Appalachian State University, Boone, NC 28608 USA. C. C. H. Law is with the Department of Management and Marketing, Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong, SAR. S. C. Yang is with the Department of Information Systems and Decision Sciences, California State University, Fullerton, CA 92834-9480 USA (e-mail: syang@fullerton.edu). Digital Object Identifier 10.1109/TEM.2008.2009802 failed to meet the business case [12]. This result is corroborated by another study done by information technology (IT) manage- ment consultancy Robbins-Gioia LLC, which found that 51% of companies across a wide range of industries stated that their ERP implementations were unsuccessful [50]. Thus, it is criti- cal for executives and managers to fully understand and manage project management issues so that effective approaches can be devised to address project management problems, mitigate in- terruptions to daily operations, extend the life of an ERP system, and realize the benefits of enormous investments made [41]. A business needs to manage its ERP system as an ongo- ing project involving requirements and change management, user support, and maintenance and upgrades. As such, manag- ing an ERP project has been described as a “lifelong journey” [2, p. 193]. For several years, a California-based multinational company experienced project management lessons in both failed and successful ERP implementations. These lessons are invalu- able to any organization that is planning to adopt and manage an ERP system. Capturing the precious experience of this com- pany and sharing it with newcomers to ERP endeavors could be a significant contribution to the Management Information Sys- tem (MIS) discipline; such a contribution might include helping organizations to avoid mistakes and adopt proper project man- agement strategies and practices. In order to shed light on project management strategies, chal- lenges, and practices in ERP implementation, this research car- ries out a case study of a multinational company and approaches the issue of ERP implementation from a project management perspective. Accordingly, the study is structured as follows: we provide a review of the literature on contemporary project man- agement challenges and best practices in the management of large-scale IT and non-IT projects, but with focus on ERP sys- tems. Nolan’s [42] stage model is used to present the results of the case study of this company’s ERP implementation ex- periences with a particular emphasis on project management activities. Successful and failed project lessons are explained within each stage of the stage model, and successful project lessons are further discussed using the IT engagement model. In the context of ERP implementation, these lessons derive impor- tant project management themes based on the process-oriented, project management knowledge areas. The findings are expected to have theoretical and practical implications for academics and practitioners. II. BACKGROUND A. Contemporary IT Project Management Challenges The estimate is that about 74% of IT projects cannot de- liver the promised functionality on time and on budget [27]. 0018-9391/$25.00 © 2009 IEEE