SIGNIFICANT FACTORS INFLUENCING ERP IMPLEMENTATION IN LARGE ORGANIZATIONS: EVIDENCE FROM 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

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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.

[email protected]

Reem Hamdy Abdel Azim, Information Systems Department, Faculty of Management Technology, The German University in Cairo, Egypt.

[email protected] 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).





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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). Porter’s Model for the five ‘Competitive Forces’ on any organization; identifies technology as a driving factor for competency in Enterprise organizations. Also, Porter’s ‘Competitive Advantage Theory’ identifies four main determinants affecting a company’s competitiveness in its business field. Heeks (2007) uses the Porter’s ‘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





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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,





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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





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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 ERP’s 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





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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





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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.





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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).

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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





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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 Porter’s 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.





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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 government’s 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 1st Quarter – 2009 1st 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).





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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





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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





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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 Porter’s 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





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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 company’s 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. References About. 2010. 'Small business: Canada', Accessed, January 3, 2010,

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

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