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European, Mediterranean & Middle Eastern Conference on Information Systems 2010 ( )

April 12-13 2010, Abu Dhabi, UAE



Abdelghaffar, H. and Abdel Azim, R. H.
Significant factors influencing ERP implementation in large organizations: Evidence from Egypt


1
SIGNIFICANT FACTORS INFLUENCING ERP
IMPLEMENTATION IN LARGE ORGANIZATIONS: EVIDENCE
FROM EGYPT

Hany Abdelghaffar, Information Systems Department,
Faculty of Management Technology, The German University in Cairo, Egypt.
hany.ismail@guc.edu.eg
Reem Hamdy Abdel Azim, Information Systems Department,
Faculty of Management Technology, The German University in Cairo, Egypt.
riem.hamdi@guc.edu.eg

Abstract
Although many companies in developing countries may have implemented ERP systems to capture its
benefits, there is a lack of examining their actual influence on ERP systems. In this paper, we adopted a
framework covering both the national and organizational factors to assess the influence of these CSFs on
the implementation of ERP systems on large companies in Egypt. Data collection is done using a survey
and interviews with major players of the large companies working in the Egyptian market. Findings show
that certain factors have more significance in these organizations and their influences vary on the ERP
successful implementation. Furthermore, the success of the ERP implementation was found to have a
significant impact on achieving competitive edge for these organizations affected by both the national and
the organizational factors.

Keywords: ERP implementation, large companies, Critical Success Factors, developing countries, Egypt

1 INTRODUCTION

Enterprise Resource Planning (ERP) systems are widely used to extract and process data from different
functional areas across the enterprise (Gore, 2008). ERP systems are therefore called Cross-functional
systems as they integrate business processes across different functional areas of an organization. These
systems are sought after to improve the visibility of information across the organization and to allow a
better access to information in a borderless environment (Ignatiadis and Nandhakumar . ence,
ERP systems are used by large scale companies as well as Small- and Medium-Enterprises (SMEs).

The challenges accompanied by the implementation of ERP systems are not limited to the size of the
organization, but go further to where the organization is implementing its ERP systems. Developed
countries are widely accepting and applying ERP systems in their organizations in comparison with
developing countries. Statistics show that 88% of ERP market is in North American and European
countries while the rest of market goes to the rest of the world (AMR, 2008). This gap in ERP adoption
and implementation is directly related to the economic and technological status of each respective country.
Developing countries are facing many challenges in applying Information Systems/Information
Technology projects due to the poor and unstable economic status which is reflected in the delay of the
ERP implementation (Huang and Palvia, 2001).

European, Mediterranean & Middle Eastern Conference on Information Systems 2010 ( )
April 12-13 2010, Abu Dhabi, UAE

Abdelghaffar, H. and Abdel Azim, R. H.
Significant factors influencing ERP implementation in large organizations: Evidence from Egypt


2
There are a number of factors affecting the ERP implementation in organizations covered in the literature.
In many cases, it is found that successful ERP implementations are for multinational organizations
working in both developed and developing countries (Molla and Arjun, 2006). It is here, where the
transfer of knowledge and proper internal systems' integration is a must. The organizations working under
stable conditions of economic growth and strong IT infrastructure in developed countries need to establish
the same environment of business functionality in developing countries. As such, the critical success
factors in organizations basically affected by the size of the organization and moves further to the place
where these organizations have to function.

In this paper we examine some of these CSFs that are stated in the adopted theoretical framework in an
attempt to answer our research question: Which factors have significant impact on the successful ERP
implementation in large organizations working in Egypt? We assume that the different CSFs have
different weights of influence over organizations functioning in developing countries, example of which is
Egypt. It is perceived that this diverse of influence over the organizations eventually affect the successful
ERP implementation in such context. Furthermore, we try to understand how these specified significant
factors help organizations to achieve their competitive advantage over their competitors in such a
developing market like the Egyptian market backed up by their healthy functionality in developed
countries.

The paper starts by discussing the literature of ERP in developing countries, followed by describing the
adopted framework for assessing the factors influencing the ERP implementation. This is followed by the
research methodology, analysis of the empirical data collected together with discussion and finalized by
our research contribution and statement of the limitations.

2. ERP LITERATURE REVIEW

2.1 ERP adoption in developing countries

ERP adoption is the first step for having ERP in organizations. Successful ERP adoption is affected by
several drivers. These drivers are discussed in the literature as reasons where and when
companies/organizations adopt ERP systems. They include major three categories: infrastructure, capacity
and performance (Ross and Vitale, 2000). Similarly, Parr and Shanks (2000) group drivers in three
categories and sub-categories including: technological, operational and strategic. At the early stages of
ERP systems adoption, technology driven organizations realized the opportunities accompanied by the
deployment of ERP systems. Organizations used ERP systems to integrate their operations between
different functional areas and focus on having their data accomplished in one place to extract information
and enhance their decisions (Markus and Tanis, 2000). This step helps organizations to improve
productivity and to enhance performance.

The enhancement in the performance leads to the reduction in costs which eventually leads organizations
to achieve competitive advantage. Even more, the organizations vision recently is focusing on how to
sustain competitiveness via implementing ERP systems (Gore, 2008). These organizations find sustaining
the competitive advantage over their competitors as a major motive for ERP adoption and implementation
(Adhikari, 2007) and (Heeks, 2007). Porters Model for the five Competitive Forces on any
organization; identifies technology as a driving factor for competency in Enterprise organizations.
Also, Porters Competitive Advantage Theory identifies four main determinants affecting a companys
competitiveness in its business field. Heeks (2007) uses the Porters Competitive Advantage Theory as a
tool to analyze the IT sector in developing countries and explained how ERP systems can gear up the
competitive advantages for organizations functioning in such countries. As for an organization to obtain a
European, Mediterranean & Middle Eastern Conference on Information Systems 2010 ( )
April 12-13 2010, Abu Dhabi, UAE

Abdelghaffar, H. and Abdel Azim, R. H.
Significant factors influencing ERP implementation in large organizations: Evidence from Egypt


3
sustained competitive advantage states that an ERP system implementation has to be of value creating
strategy where no other competitors are using as an advantage of their independent strategies.

ERP adoption and implementation was not deployed by large scale companies alone, but also many SMEs
have started the process of adopting and implementing ERP systems to have a competitive advantage in
their respective market share. SMEs seek to reorganize and streamline their internal and external
operations via implementing ERP systems. SMEs were, in many cases, enforced by large scale companies
to adopt ERP systems in order to be linked with external organizations and being able to continue working
with them. This is done as part of the Supply Chain Management (SCM) systems or Customer
Relationship Management (CRM) systems. Although the importance of applying ERP systems in both
SMEs and large organizations, SMEs normally face challenges in terms of limited resources and lack of
appropriate infrastructure (Seethamraju and Seethamraju, 2008).

Adopting ERP in developing countries is faced by several obstacles that delay adoption compared with
developed countries. The challenges faced by developing countries vary. On the organizational level,
organizations working in developing countries find the ERP cost is a major barrier for implementing ERP
systems especially for SMEs. Thus, most of the implementation done in ERP is for large scale companies
which can afford the costs. This includes multinational organizations (Seethamraju and Seethamraju,
2008). Another barrier for ERP implementation is related to the IT maturity in both national and
organizational levels. In developing countries, IT infrastructure has many weak issues related to the IT
penetration such as internet and computer penetration in organizations and social levels. This is in addition
to the lack of number of computer and internet users on both national and organizational levels. Other
factors which lead to lack of adoption are related to cultural factors and lack of knowledge of ERP
systems (Seethamraju and Seethamraju, 2008).

ERP systems can never be considered as stand-alone systems where they could be implemented inside the
enterprise boundaries without being connected to the external world of the organization. Therefore, the
national factors of a country have a great impact on the ERP adoption. In the case of developing countries,
ERP adoption is affected by the Information and Communications Technology (ICT) infrastructure of the
country. For example, the SCM system that connects the organization with its suppliers might fail due to a
weak the ICT infrastructure. The functionality is interchangeably dependent; ERP in need of a sound ICT
and organizations with strong ICT infrastructure are most likely ready for enterprise IS applications.

Some researchers found factors that have more effect on the ERP implementation in developing countries
than others. For example, Koh, et al., (2006) conduct an ERP adoption research and identified a more
comprehensive list of factors affecting the adoption of ERP systems in developing countries. Quite
literally, the authors developed an adoption taxonomy which includes Critical Success Factors (CSF).
These factors focused mainly on the organization level and include: getting the right type of systems for
the right type of business and the right size of enterprise; ensuring excellent project management, change
management, risk management and people management programs are in place. Nevertheless, the
taxonomy ignored the impact of the national factors on the organizational factors.

2.2 ERP implementation in developing countries

Implementing successful ERP systems is investigated by many researchers. Their general focus was on
identifying CSF that need to exist in any organization to have successful ERP implementation. These
factors have been tested in different organizations in many developed and developing countries by many
researcher; (Al-Mashari et al., 2003), (Akkermans and Helden, 2002), (Bancroft et al., 2001), (Bradford
and Florin, 2003), (Holland and Light, 1999), (Jarrar et al., 2000), (Mabert, 2003), (Parr and Shanks,
European, Mediterranean & Middle Eastern Conference on Information Systems 2010 ( )
April 12-13 2010, Abu Dhabi, UAE

Abdelghaffar, H. and Abdel Azim, R. H.
Significant factors influencing ERP implementation in large organizations: Evidence from Egypt


4
2000), (Skok and Legge, 2002), (Somers and Nelson, 2003), (Umble et al., 2002), (Welti, 1999), and
(Zhang et.al., 2002). These factors include, but not limited to, clear objectives, user involvement, effective
communications, change management, project team, project champion, consultants, architecture choices,
minimal customization, excellent project management, top management support, data analysis and
conversion, business process reengineering and user training and education.

Doom and Milis (2008) grouped these CSF factors in five categories in order to test their importance for
ERP implementation and included: (1) vision, scope and goals (2) culture, communication and support (3)
infrastructure (4) approach and (5) project management. These group factors and their sub-factors were
considered as a core part of any successful ERP implementation in organizations (Raymond et al., 2005).

In addition, Khaled et al., (2008) in their research have emphasis that top management's support and the
selection of the appropriate ERP system are major success factors for the implementation of successful
ERP systems. That is to say obtaining an ERP system alone does not sustain or grantee the
competitiveness of an organization unless the managers in charge are really welcoming to use these
systems and the selection of the most appropriate type of ERP is deployed. Koh et al.,(2006) mention that
there are two main drivers for ERP implementation in organizations; increase demand for real-time
information and the need for information for decision making. So, Chief Information Officers (CIO) and
IT managers seek ERP systems to support their decision making process for better business processes and
performance must consider ERP systems as part of their strategic plan (Adhikari, 2007). Managers are
seeking better performance and more effective decision making techniques should not rely only on ERP
systems to manage their businesses as other tools for decision making are needed to help them excel
efficiently (Koh et al., 2006).

Although there are many studies investigate the impact of implementing ERP in developed countries, few
studies evaluated the ERP success in large organizations in developing countries. Furthermore, the studies
done are mainly focusing on the organizational factors and ignoring the impact of the national factors
which is a major factor for implementing successful ERP in developing countries. A framework is
introduced by both Huang and Palvia (2001) and Koh et al., (2006) to examine the ERP success in
developing countries. The framework categorizes into two major factors categories; organizational and
national.

The National factors consist of the factors that affect implementing ERP in the country from the macro
level. These include IT infrastructure, economical status of the country, manufacturing industry strength,
the regional location and the governmental regulatory. In China, for example Huang and Palvia (2001)
argue that the implementation of the ERP systems in China - as a developing country- is affected by both
national and organizational factors. However, the national factors have higher influence on the ERP
implementation rather than the organizational factors because national factors are beyond the organization
control and China are lacking appropriate ICT infrastructure, in many locations that support ERP projects
(figure 1).

The Organizational factors, on the other hand, include factors within the organization control. These
factors include: benefits, risk management, project management, change management, people
management, business process reengineering, system implementation and customization, the right type of
system, the right size of enterprise, the right type of business and the drivers (Huang and Palvia, 2001).

Although the classification of ERP implementation factors to national and organizational factors, national
factors are found that they have a great impact on organizational factors. This is because developing
countries are facing many challenges in the ICT sector that negatively affect organizations when they
European, Mediterranean & Middle Eastern Conference on Information Systems 2010 ( )
April 12-13 2010, Abu Dhabi, UAE

Abdelghaffar, H. and Abdel Azim, R. H.
Significant factors influencing ERP implementation in large organizations: Evidence from Egypt


5
implement ERP systems (Heeks, 2007). This framework is applied to many developing countries such as
China, India and Brazil.

2.3 ERP in large organizations

The size of a company is determined by three main factors; the annual turnover, the balance sheet and the
average number of employees as defined by the "Company Books" website. To be defined as a small-size
company, the annual turnover must equal to or less than 2,800.00 (approx. 25,000.00 LE); the balance
sheet total must be 1,400.00 (approx. 12,500.00 LE) or less; and the average number of employees must
not exceed the 50. Whereas to be a medium-sized company, the annual turnover must equal to or be less
than 11,200.00 (approx. 100,000.00 LE); the balance sheet total must not exceed the 5,600.00 (approx.
50,500.00 LE); and the average number of employees must be 250 or fewer ( The Company Books, 2010).
Other definitions for small, medium and large enterprises are expressed by the different sources
(Wikipedia, 2010) and (About, 2010), but all are approximate figures that results in that Hence, to be a
large company the annual turnover has to go beyond the 100,000.00 Egyptian pounds, the balance sheet
total must be over 50,500.00 Egyptian pounds and the average number of employees working in the
company must be over 250.

Resource constraints, limitations of the infrastructure and capability are most likely the major challenges
facing a company to adopt ERP systems. However, the factors that are influencing ERP in large
organizations vary from those influencing the Small- Medium- Enterprises (Laukkanen et al. 2007). Large
organizations benefits from adopting and implementing ERP systems range from simple organized
operational level business processes to strategic decision taking capabilities (Seethmraju and Seethmraju,
2008), and (Mabert et al., 2003). The updated IT and the ICT infrastructure play a vital role in ERP
implementation in large organizations.

The basic functional areas (Human Resources, Production and Manufacturing, Sales and Marketing,
Finance and Accounting) do exist in the large organizations. While taking into consideration that the
financial ability of large scale companies enables the large investment in IT/IS and can support the risks
attached to such investment. In their book; Laudon and Laudon (2009) define the most favorable ERP
systems implemented in large organizations in order to be, Customer Relationship Management (CRM)
system, Supply Chain Management (SCM) system, Enterprise Resource Planning (ERP) System, and
Knowledge Management (KMS) System. Major vendors for such systems are international vendor who
excel worldwide such as Oracle, SAP, BAAN, Microsoft Great Plains, etc.

In line with (Seethmraju and Seethmraju, 2008), there is no clear identification of what defines the critical
success factors for ERP implementation in large enterprises. Quiet literally, the reason for this is that not
only the implementation takes responsible for the ERPs success or failure, it is the whole adoption
process which identifies implementation as part and different stages of implementations pre- and post-
preparations, standardization and integration with other implemented ERP systems (Huang et al. 2004).
Thus, CSFs have different weigh of significance over different organizations working in different places
of the world.

2.4 The competitive advantage and the ERP implementation framework

We adopt in our research the Huang and Palvia (2001) framework, to examine the CSF affecting the
successful ERP implementation in organizations working in Egypt. That is to say, in order to accurately
assess the influence of diverse factors over the ERP implementation, a benchmark criteria or a set of pre-
determined factors is required. The framework provides the set of factors needed for organizations to
European, Mediterranean & Middle Eastern Conference on Information Systems 2010 ( )
April 12-13 2010, Abu Dhabi, UAE

Abdelghaffar, H. and Abdel Azim, R. H.
Significant factors influencing ERP implementation in large organizations: Evidence from Egypt


6
assess their ERP systems' implementation. It also provides a tool to measure how effectively the
implementation may achieve a competitive advantage for these organizations.

Whilst investigating the motives that encourage organizations to adopt ERP systems, obtaining a
competitive advantage is found to be a major factor for this purpose. That is to say in a highly competing
business environment organizations, with different scales and in different business fields, all seek to have
a leading role in the enterprise world. The adoption and implementation of ERP systems provides them
with a leading edge in their respective markets over their competitors (Adhikari, 2007). In other words,
ERP adoption and implementation if successfully deployed, must lead organizations to have a competitive
advantage. Nevertheless, large scale companies have to sustain their competitiveness to stay ahead of their
market competitors Adhikari (2007) and Heeks (2007) and maintain their competitive advantage.

In their model, Huang and Palvia (2001) categorized the set of factors affecting ERP implementation in to
two major groups, National (or Environmental) and Organizational (or Internal) factors. According to the
authors, the National (or Environmental) are determined by five main factors, namely; 1) Infrastructure, 2)
Economy and economic growth, 3) Manufacturing, 4) Regional, and 5) Governmental. Whereas the
Organizational (or Internal) factors are determined by another five factors, namely; 1) IT Maturity, 2)
Computer culture, 3) Business Size, 4) Management Commitment, and 5) BRP experience. The model is
as shown in the figure (1) below.
















Figure 1. A framework for examining ERP implementation (based on Huang and Palvia, 2001)

In the National/Environmental category, Huang and Palvia (2001) identified major players affecting the
ERP implementation. Factor number 1 is the 'Infrastructure' which reflects the ICT readiness of the
country in terms of hardware, software, networking equipment, and IS/IT needed facilities which underlay
the platform for ERP to properly and fully function in any organization. Factor number 2 is the 'Economy
and Economic growth' of the country where this organization is maintaining its business in. This what
makes the difference in performance within the same organization; whether it is functioning in a
developed country with a sound economic growth or in a developing country where the economy is still
immature and the economic growth affects not only the functionality of the ERP, but also the whole IS
and IT environment as a whole.
National / Environmental
Organizational/ Internal
European, Mediterranean & Middle Eastern Conference on Information Systems 2010 ( )
April 12-13 2010, Abu Dhabi, UAE

Abdelghaffar, H. and Abdel Azim, R. H.
Significant factors influencing ERP implementation in large organizations: Evidence from Egypt


7

Factor number 3 is the 'Manufacturing strengths' where the authors refer to the original purpose or
implementing ERP systems in the manufacturing era. However, recently ERP systems are implemented in
almost every business field, not only for the SCM in the manufacturing industry. Factor number 4 is the
'Regional environment' denotes the country place of business for the organization, the basic environmental
and cultural impact on the ERP implementation. The culture could tend to utilizing humans rather than
integrating systems, or the region where the country is located imposes a certain acceptance or rejection to
ERP implementation.

And finally factor number 5 is the 'Governmental regulations' referring to whether the government of the
country, where the organization is holding its business in, is committed to facilitating obstacles and
deregulating the business in favor of ERP implementation or not. That is, regulations may set back or
foster the ERP implementation in organizations running in the country's markets.

In the Organizational/Internal category, Huang and Palvia (2001) identified five main factors set to affect
the ERP implementation. Factor number 1 is determined to be the 'IT Maturity' level of the organization.
Organizations depend on decision makers and how far their understanding and acceptance level to deploy
IS/IT systems. The more the organization is IT mature, the more successful the ERP implementation is.
Factor number 2 is the 'Computer culture' which points into the organization's employees and their attitude
towards new systems and resistance to change. Nevertheless, ERP systems' acceptance and
implementation is affected by the organization's reflections on computing, data management, application
functionalities, and all related software integrated issues.

Factor number 3 is the 'Business size' as a reflection on the organization's capability to invest and use
IS/IT systems. It is indicated that the size of an organization, whether small or medium or large, affect the
amount of investment in ERP systems. Earlier, ERP systems are dominated by large scale companies,
whereas recently vendors are approaching small to medium enterprises in addition to that SMEs are
perceiving benefits from ERP implementation in their businesses similar to the foreseen benefits in the
ERP implementation in large organizations. Factor number 4, 'Management Commitment' is considered a
major player in the ERP implementation in both developed and developing countries. The more
elementary the status of the country is, the more influence this factor has over the ERP implementation.
Factor number 5 is the Business Process Re-engineering as part of the deploying ERP systems. While
managing the business processes of an organization, a process management tool such as ERP is
mandatory. BPR is done in order to streamline the business and facilitate the ERP implementation later
on. The changes are higher for organizations with a concrete knowledge and more experience in BPR.

3. RESEARCH METHODOLOGY

The objective of this research is to identify which factors out of the CSFs mentioned in the adopted ERP
implementation framework have more influence in developing countries over the others. Consequently,
we try to understand how these significant factors may help these organizations in achieving their
competitive advantage. In order to achieve this, both qualitative and quantitative approaches were
considered. The survey method was selected to allow researchers collecting data from wide number of
companies (Berdie et at, 1986; Denscombe, 1999). The first step in the survey was identifying the
populations of the large companies working in Egypt and implemented ERP systems form more than year.
Companies selection is based on the fact that these large-size companies are implementing and relying on
ERP systems as their backbone infrastructure for their functionalities. Then the sample was drawn from
the identified population. The sampling covered companies working in different activities and located in
different cities in Egypt.
European, Mediterranean & Middle Eastern Conference on Information Systems 2010 ( )
April 12-13 2010, Abu Dhabi, UAE

Abdelghaffar, H. and Abdel Azim, R. H.
Significant factors influencing ERP implementation in large organizations: Evidence from Egypt


8

The survey used both structured and semi structured questions. The semi-structured questions where
managers have to select their answers from a list of answers and justify why they selected their answers
provided an opportunity to deeply understand the rationale behind their selection (Berdie et at, 1986). The
distribution was done using face to face technique for managers and CIO working in large companies in
Egypt. Data analysis is done on different levels including quantitative data collected from the survey
(based on the factors identified in the framework) and qualitative data collected from mangers responses.
This was integrated by secondary data about ERP and ICT status in Egypt. Furthermore, the research
findings compared against other studies done in other countries in order to ensure the research Reliability.

4. DATA ANALYSIS

In 2009, 51 large organizations were selected from different business fields to distribute questionnaires.
Surveys used both structured and semi structured questions. Out of the distributed questionnaires, 27 valid
responses were received (equal to 52.9%). Out of the valid responses, 48.1% of responses were from
manufacturing organizations, 37% were from organizations that deliver services, 7.4% were from banking
field and the rest were from trading and other activity organizations (figure 2).

4
48
37
7
4
1rad|ng Manufactur|ng Serv|ces 8ank|ng Government

Figure 2. The usage of information by managerial levels s

The analysis of the data collected from the survey shows that 63% of organizations have different
functional areas in sales, marketing, manufacturing finance and human resources while 18.5% had sales,
marketing, finance and human resources departments (Table 1).

Different Organizational departments in use Percentage
Sales & Marketing, Accounting and Finance, Manufacturing and production, Human Resources 63%
Sales & Marketing, Accounting and Finance, Human Resources 18.5%
Sales & Marketing, Accounting and Finance 3.7%
Accounting and Finance, Human Resources 14.8%
Total 100.0

Table 1. Percentages of functional areas in different organizations

Regarding which Information Systems (IS) organizations are using, 25.1% mentioned that they are using
only one system in their organizations either CRM or ERP system. 22% were using different information
systems including CRM, SCM, ERP and KMS. These organizations are using different combinations of
European, Mediterranean & Middle Eastern Conference on Information Systems 2010 ( )
April 12-13 2010, Abu Dhabi, UAE

Abdelghaffar, H. and Abdel Azim, R. H.
Significant factors influencing ERP implementation in large organizations: Evidence from Egypt


9
information systems. The rest (52.1%) either have two or three systems to support their functional areas
(table 2).

Actual combinations of systems in use Percentage
CRM, SCM, ERP, KMS 22.2%
CRM, SCM, ERP 25.9%
CRM, ERP, KMS 11.1%
CRM, SCM 3.7%
CRM 22.2%
ERP 3.7%
CRM, ERP 7.4%
SCM, ERP 3.7%
Total 100%

Table 2. Percentages of IS used in organizations

The information provided by systems was used by different managerial levels. 33.3% of organizations
used information provided by ERP systems to support decision for operational, middle and senior
management while 37% used information for operational and middle management levels only. 29.6%
reported that they did not use any information provided by systems for all managerial levels.

A core part of the survey was about a set of questions that ask managers if applying ERP systems help
their organizations to achieve competitive advantage or not and in which part. These were classified
according to Porters Model competitive forces. 25.9% of responses mentioned that ERP systems did not
achieve any competitive advantage for their organizations (table 3). 11% achieved the five competitive
forces while the rest have different combination of achievement as appear in table (3).

Competitive advantage elements in use in organizations Percentage
NONE 25.9%
Low cost, Product differentiation, Customer-Supplier intimacy, Market niche 11.1%
Low cost, Product differentiation, Customer-Supplier intimacy 14.8%
Low cost, Product differentiation, Market niche 14.8%
Product differentiation, Customer-Supplier intimacy, Market niche 3.7%
Low cost, Product differentiation 3.7%
Customer-Supplier intimacy 3.7%
Product differentiation 7.4%
Low cost, Customer-Supplier intimacy 3.7%
Product differentiation, Market niche 7.4%
Product differentiation, Customer-Supplier intimacy 3.7%
Total 100.0%

Table 3. How implementing ERP systems help to achieve competitive advantage


5. DISCUSSION

The framework proposed earlier in section (2) was adopted to assess which factors have more significant
impact on the success of ERP implementation in Egypt.


European, Mediterranean & Middle Eastern Conference on Information Systems 2010 ( )
April 12-13 2010, Abu Dhabi, UAE

Abdelghaffar, H. and Abdel Azim, R. H.
Significant factors influencing ERP implementation in large organizations: Evidence from Egypt


10
5.1 National/Environmental factors

Looking into the national factors help to understand how ERP implementation could lead to achieve
competitive advantage in Egypt. The ICT infrastructure factor is in twofold; internet users and IT
infrastructure (the governments investments in it). Egypt is in a solid position compared to other
developing countries. The ICT sector in Egypt has turned to play a major role in the Egyptian economy
and economic growth of the market players. This factor contributes to the GDP with 3.7% (MCIT, 2009).
Number of internet users is approaching 15 million users.

Factor #1: Infrastructure
The definition of the ICT infrastructure comprises measurements of the Hardware, Software, Networking,
Databases, Intra- and Extra-networks (Laudon and Laudon, 2007). In Egypt, the ICT infrastructure has
indicators covering the fixed line subscribers, fixed line penetration, mobile subscribers, mobile
penetration, internet users, internet penetration, ADSL subscribers and ADSL penetration (MCIT, 2009).
Indicators for the ICT in Egypt show a rapid growth in the request of ICT services and products (MCIT,
2009). The availability and sustainability of these services help to large organizations to implement ERP
systems in organizations without fears that any external communications could not be supported by the
current infrastructure. Therefore, organizations are being encouraged to implement ERP as demonstrated
in table 4 to be a significant factor of the CSF.

Not only the hardware and networks, but also software, databases and services are provided in Egypt.
There are many organizations that provide ERP systems such as Microsoft, SAP and Oracle. Other
software organizations create different ERP systems for different sizes of organizations either large or
SME. Consequently, there are more opportunities for organizations to implement ERP systems and get
technical support.

ICT Infrastructure indicators 1
st
Quarter 2009 1
st
Quarter - 2008
Fixed line subscribers 11.8 11.3
Fixed line penetration 15.6% 15.1%
Internet Users 13 millions EGP 10.9 millions EGP
Internet penetration 17.2% 14.6%
ADSL subscribers 787.638 Thousands EGP 482.493 Thousands EGP
ICT Economic indicators Q1 2009 Q1 2008
ICT sector revenues 10.06 billion EGP 8.93 billion EGP
ICT operating organizations 3055 2435

Table 4. Information and Communications Technology Indicators (MCIT, 2009)

Factor #2: Economy and Economic growth
Since the economic status of a country represents its IT/IS development as described in the model
previously, it is found that this factor has high influence over enterprise organizations working in Egypt.
Facts stated by the Ministry of Information and Communication Technology shows that the ICT sector
and its main economic indicators are growing steadily. ICT revenues has reached 10.06 billion EGP in Q1
2009 with comparison to 8.93 billion EGP in Q1 2008, also the ICT operating organizations are 3005 in
Q1 2009 in comparison to 2435 in Q1 2008. Whereas the real GDP of the Egyptian ICT has increased
from 6.33 billion EGP in Q1 2008 up to 7.182 billion EGP in Q1 2009 (MCIT, 2009).

European, Mediterranean & Middle Eastern Conference on Information Systems 2010 ( )
April 12-13 2010, Abu Dhabi, UAE

Abdelghaffar, H. and Abdel Azim, R. H.
Significant factors influencing ERP implementation in large organizations: Evidence from Egypt


11
The figures provide a high influence for this factor as it provides a concrete foundation for ERP
implementation in Egypt as organizations can use to gain more competitive advantage. This goes in same
direction with the findings of (El Sayed et al., 2003) where they stated that the economic status of Egypt
will have formed a solid background for more enterprises to come and invest in the market.

Factor #3: Manufacturing
The manufacturing factor is of a spiny nature. ERP solutions were initially developed to serve the
manufacturing industry and its supply chain. Time changes and now ERP systems have formed an
essential axis of almost all business fields, not only the manufacturing. In this research, manufacturing
organizations are 48.1% of all business fields working in Egypt. Other industries using ERP in their day-
to-day functionalities are food industry, transportation, telecommunication, etc. Nevertheless,
manufacturing is still the major location of ERP implementation. This might indicate that this factor is
partially significant if at all- for the ERP implementation but not in the success of ERP.

Factor #4: Regional
The strategic regional location of Egypt makes it clear that investment is a good choice in a country that is
positioned in the heart of the Middle East, key player within the Arab countries, and owns the Suez Canal
which links three continents namely; Africa, Asia and Europe. This 'Regional' factor has a clear influence
on attracting large scale companies and multinational organizations to work in Egypt and consequently
adopting and implementing ERP systems. This explains the persistence of enterprises to be encouraged to
invest and lay in a premium country like Egypt.

Factor #5: Government regulatory
The Egyptian government is responsible for regulating the usage and deployment of IT services by
resolving issues and bridging obstacles encountered by the different businesses (Huang, 2001). In Egypt,
the government initiated a regulation that encourages organizations to implement ERP systems. For
example, the Egyptian government mandated international auditors for organizations which accordingly
require the usage of accounting and financial systems. Recently, more implementations of these systems
are encouraged in the last few years in the Egyptian market based on the positive governance of the
market.

5.2 Organizational/Internal factors

Factor #1: IT Maturity
Successful ERP implementation relies heavily on organizations acceptance and deployment of IS. It is
equally important for organizations to provide a smoothly collaborate and support with ERP vendors
(Huang et al, 2001). Multinational organizations under study are all of medium to high level of IT
maturity. Our data analysis shows that 95% of the organizations do have internal and external IT
infrastructure and IT departments. According to the (MCIT, 2009), the international internet bandwidth
has increased by 79% from Q1 year 2008 to Q1 in year 2009. Therefore the IT Maturity exists as a
significant factor that plays a significant role in Egypt.

Factor #2: Computer Culture
The Computer culture as defined earlier is measured by the employees acceptance to technology and
computer usage. (El Sawah et al., 2008) refer to as Organizational culture with the same meaning in
mind; that is the employees are interacting via intra-extranet and have an acceptance level of computer
European, Mediterranean & Middle Eastern Conference on Information Systems 2010 ( )
April 12-13 2010, Abu Dhabi, UAE

Abdelghaffar, H. and Abdel Azim, R. H.
Significant factors influencing ERP implementation in large organizations: Evidence from Egypt


12
maturity and IT/IS commitment. Besides, within the Egyptian environment; Egyptians are increasingly
using computers, internet and IS in their daily activities. It was found that ADSL subscribers have
increased by almost 63% from Q1 in year 2008 to Q1 in year 2009. Furthermore, data analysis shows
22.2% of the organizations have implemented CRM, SCM, ERP, and KMS. Almost quarter of the number
of organizations do have CRM, SCM, and ERP systems implemented and up and running.

Factor #3: Business Size
For organizations to capture the full potential benefits of ERP implementations, a decision for heavy
investment in IT/IS has to be taken. To achieve the expected payoff for a huge investment in ERP
implementation in Egypt, the Business size factor is set to large-size organizations. Our research study has
focused on the large sized multinational organizations working in Egypt. The Business size as a factor for
a successful ERP implementation by nature has a positive influence in our case as large systems excel
better in large organizations.

Factor #4: Management Commitment
In their research for CSF for ERP implementation in Egypt, (El Sawah et al., 2008) have pointed out that
managers at the executive level have to show serious commitment and support for ERP implementation to
be successful. Organizations under study in our research have shown to be following a global strategic
IT/IS implementation and reflecting their performance to their headquarters. In addition, one of the
interviewed CIOs reflected that 'Management Commitment' factor plays a vital role in the pre-stage of
ERP adoption in any organization, whereas other factors may have more influence over the
implementation process itself.

Factor #5: BPR Experience
The Business Process Re-engineering (BPR) as a factor for determination of a successful ERP
implementation is beyond the focus of our research study. A further in-depth analysis to organizations
understudy is need for better understanding of the influence of this factor. However, there will be no ERP
implementation in any business without a prior BPR for all businesses activities and processes taking
place. That is why it is assumed that all organizations under study have involved and undergone the BRP
experience to have their currently working ERP implemented.
















Figure 2. Significant factors influencing successful ERP implementation in Egypt.
National / Environmental
Organizational / Internal
European, Mediterranean & Middle Eastern Conference on Information Systems 2010 ( )
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Abdelghaffar, H. and Abdel Azim, R. H.
Significant factors influencing ERP implementation in large organizations: Evidence from Egypt


13
This comes in parallel with (El Sawah et al., 2008), and (Rasmy et al., 2005) where they identified the
same factors in the developed ERP implementation success index for organizations working in Egypt. We
found that there are major players on the successful ERP implementation from within the 'National factors'
and Organizational factors' identified in the framework. To sum up, figure 2 demonstrates these factors
and identifies what we found of significant influence over ERP implementation for organizations working
in Egypt.

The research we conducted is helpful for large scale companies running their businesses in a developing
country like Egypt to seek the significant CSF applicable in such market for a successful ERP
implementation. The transfer of knowledge as per IS and IT is experienced in many cases, however, as
stated by Shanks et al. (2000) in Doom and Milis (2009) the experience of ERP implementation differs
between countries. Hence, the importance of learning more about the country before moving the business
to it is a vital part of the success of the business as a whole.

Concerning the effect of the successful ERP implementation in large scale companies, surprisingly, almost
25% of the total number of organizations under study does not consider any of Porters Model and its
factors of competency within an enterprise environment. Whereas, only 14.8% of the organizations do
consider three factors of the Porter Model; namely low cost leadership, product differentiation, market
niche, and customer-supplier intimacy. This fact explains the emergence of a gap in performance within
the same organization functioning between different countries in the world.

Our results show that 90% of international organizations under study obtained their competitive edge over
their competitors in their respective fields of business stems from 'National factors', namely; 1) ICT
infrastructure, 2) Government regulatory, 3) Economic growth, and 4) Regional location of Egypt.
Whereas the 'Manufacturing' factor is a common factor for all companies working in Egypt and has no
significant role in the success of ERP implementation in this context. Additionally, we examined the
'Organizational factors', to find some of them are of significance, namely; 1) Business size, 2) IT
maturity, and 3) Computer culture. Whereas the Management commitment and Business Process Re-
engineering are common in all organizations and do not play a differential role in the ERP success
implementation in Egypt.

6. CONCLUSION

To sum up, in this paper we attempt to answer our research question identifying the significant factors
influencing the successful ERP implementation in organizations working in the Egyptian market. Huang
and Palvia (2001) framework for factors affecting ERP implementation was adopted. The framework was
reflected with is identified two main categories of factors; 'National' and 'Organizational' factors affecting
the success of ERP systems. The research is limited to large organizations working in Egypt. This is due
to the fact that in developing countries ERP implementation is deployed extensively in large organizations
rather than in SMEs. Findings show that ERP successful implementations in organizations have indirect
influence on their ability to gain a competitive advantage. National factors such as 'Regional', 'Economy
and economic growth', 'Government regulations' and 'ICT Infrastructure' are more significant than the
'Manufacturing' factor in Egypt. In addition, the Organizational factors such as 'IT Maturity', 'Computer
culture and 'Business Size' have a great impact on organizations with successful ERP implementation than
'Management Commitment', and 'BRP experience'.

Future work derived from our conclusion herein could be that running ERP system does not alone
guarantee continuous competitive edge for organizations. We observe recently that the ERP literature has
introduced further development to ERP systems for developed countries. An initiative for ERP 2.0
European, Mediterranean & Middle Eastern Conference on Information Systems 2010 ( )
April 12-13 2010, Abu Dhabi, UAE

Abdelghaffar, H. and Abdel Azim, R. H.
Significant factors influencing ERP implementation in large organizations: Evidence from Egypt


14
systems is conducted and a special attention should be given to the developing countries that normally
follow the advancements in this direction. (El Sayed et al., 2003) discussed that ERP systems working in
Egypt are found to provide both national and multinational organizations with the needed competing edge.

Based on the recent researches in the field, we found that for companies to sustain their competitive
advantages over their competitors in the market, Information Systems and Enterprise Systems specifically
have to be aligned with the companys strategic planning. This goes in parallel with the findings of this
research. Moreover, (Heeks, 2007) determined for a sustainable competitive advantage, organizations
must seek continuous development of their existing ERP systems.

7. RESEARCH LIMITATIONS

An exploration of ERP implementation in Egypt was conducted to assess the ERP success in
organizations. This is done by identifying the influence of the national and organizational factors on the
competitive advantages of large organizations working in the Egyptian market. We mainly identified an
implicit limitation of this research findings to be that the examined organizations were selected based on
their business environment in Egypt where we ignored the global effect on its functionality in Egypt. The
factors that were identified as insignificant CSF are vital part for a successful ERP implementation;
however, the imbedded successfulness in the multinational organizations working in developed countries
must have little indirect impact on organizations under study.

Acknowledgement
We would like to thank all the contributors for the success of this paper.

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