Application of FMEA to Study the Risk Perception of SMEs Throughout the ERP Adoption Life Cycle

Abstract

In this paper, the authors have tried to validate the risk perception of ERP adoption in SMEs using Failure Modes and Effects Analysis (FMEA). The work significantly contributes to the existing body of ERP adoption knowledge to the SMEs. Foremost, an ERP adoption life cycle addressed to SMES comprising of five distinct phases is proposed. Second, a well-laid out inventory of risk factors have been identified. Third, FMEA is applied to understand, validate the risk perception of respondents on ERP adoption in SMEs. Exploiting the ERP System, Inadequate financial management, Lack of Owners' Commitment, Ineffective communication with users and change in project scope are the top five highest perceived risks based on the risk perception number (RPN). The process centric approach to system implementation through FMEA also prescribes pertinent recommendations to the stakeholder ecosystem to proactively defend against vulnerabilities during the ERP adoption life cycle.