ERP Implementation Trends and Practices in Saudi Arabia

Al-Turki, Umar M., Andijani, AbduBasit. A., Siddiqui, Atiq W.,

King Fahd University of Petroleum & Minerals

P.O. Box 123456, Dhahran, Saudi Arabia
alturki@ccse.kfupm.edu.sa, andijani@ccse.kfupm.edu.sa, atique@ccse.kfupm.edu.sa

Abstract

In the last few years, Enterprise Resource Planning, ERP, has been implemented by a number of
organizations as an innate solution to their businesses in future. In spite of its intuitive appeal, ERP has
challenges and difficulties in its realization. Saudi Arabia is in a transient phase with regards to ERP
implementation and a number of organizations are either implementing or planning to implement one
of such systems. In this paper, existing ERP trends are investigated, and various aspects were surveyed
to evaluate the overall progress of ERP in Saudi Arabia. The survey captures best implementation
practices, difficulties, experiences and benefits gained.

Keywords: Enterprise resource planning, ERP, Information systems

1 Introduction

Enterprise Resource Planning or ERP is an integrated information system that serves all functions
within an enterprise. ERP is a business management system, having broad set of activates, that results
in various benefits such as streamlining business processes through integration, real time information
processing, elimination of data & operational redundancies, reliable information access, etc. It
essentially integrates various business processes, commonly based on best business practices, bringing
in inherent efficiencies as a result, into the enterprise.

Generally, ERP system implementation is a challenging and time consuming process that needs large
financial recourses. However, the benefits they yield, if properly implemented, are far more
substantial. The benefits include cost reductions, improved customer satisfaction, higher transparency,
real time information tracking, and organizational efficiencies beside others.

Countless organizations around the world have either implemented or in the process of implementing
an ERP system. Its vitality for the success of an organization can be measured by the fact that in the
year 2001, 90% Fortune 100 organizations are reliant on these systems (DeWitte, 2001). According to
a survey conducted with U.S. manufacturers in year 2000, 75% of the U.S. firms were adopting
packaged ERP systems (Mabert, 2001). Initially, larger firms were the first to take on the trend in mid
90s (Rose, 2003). Small and medium enterprises followed later, realizing the benefits larger
organizations were reaping with its implementation (Taylor, 1999).

Several studies were conducted around the globe to assess ERP implementation trends and practices as
well as benefits from different cultural perspectives. Most of these studies include surveys or
interviews of local companies as a mean for information gathering. In a survey, (He, 2003) studied the
progress of ERP implementation in China. The ERP progress with implementation challenges such as
transitional enterprise ownership from planned to market economy, language and cultural barriers
were studied. Factors affecting the adoption of ERP were reported along with the obstacles faced by
China. Reimers (2002) explored the crucial implementation process and context variables such as
effects of local or foreign ownerships in China. The study was mainly focused on SAP R/3 users and a
total of 80 organizations responded to the survey. The results demonstrated that the local Chinese
organizations are as successful as the foreign organizations. However, few areas such as master data
maintenance were better with the foreign organizations as compared to the local organizations.

Rose (2003) surveyed a sample of IT executives from fortune 1000 organizations about the
implementation experience. Approximately 2/3 rd of the organizations surveyed reported success. Those
reported failure were tested for significant differences with respect to 36 ERP success factors reported
in the literature. A number of factors were found to differ relating to change management program,
business plan & vision etc. Data gathered from 117 organizations by McNurlin (2001) identified the
three attributes organizations consider as the most crucial one. These are top management
commitment, effective training and change management program, handling the risk of project
management.

Schniederjans (2003) focused on identifying successful integration sequence of Total Quality

Management (TQM) and Business Process Reengineering (BPR) with the ERP. The Study shows that
the two best implementation sequences are (TQM, BPR, ERP) and (BPR, ERP, TQM). In other wards,
BPR should always proceed ERP implementation.

In (Frantz, P. S., et al 2002), a study of perceptive differences between the chief information officers
(CIOs) and the chief financial officers (CFOs) were discussed. The paper found overall similarities,
though some areas of difference in perception were identified. This paper mainly shows the
differences and effects on implementation due to variation in leadership provided by the business
managers versus the IT managers.

Saudi Arabian organizations are not far behind in adopting ERP systems in spite of the cultural
differences with western organizations where ERP is developed. However the current trends are
scarcely reported in the literature. No studies are available about ERP implementation in local
organization in terms of success and failure as well as practices leading to either result. As far as the
authors know there is no reported attempt for conducting a formal study to identify factors affecting
success in implementing ERP in local organizations.

The objective of this paper is to investigate existing ERP implementation trends and practices in Saudi
Arabian organizations. It tries to identify factors affecting successful implementations of ERP systems
in local businesses. The results of this paper should benefit and guide organizations planning to adopt
ERP solutions for improving their performance and gaining a competitive edge. To uncover these
trends a wide corporate survey was conducted with local and multinational organization working in
Saudi Arabia. The results are analyzed and presented in this paper.

The paper is organized as follows. In section 2, survey details are presented. Results of the survey are
discussed in section 3. In section 4, we draw some final conclusions about ERP implementation in
Saudi organization.

2 Survey Questions

A questionnaire, comprising 13 questions, was designed to address issues like, success and success
factors, resources, time limitations and leadership role. There were two methods employed to collect
information. Firstly, a survey was conducted during a local ERP symposium where a number of local
organizations participated. The participants were mostly from top or middle management of major
companies of the nation. Secondly, the questionnaire was directly filled by companies through
personal interviews with their representatives. The organizations participated in the survey were from
various organizations ranging from local to foreign to multinational and from conglomerates to Small
& Medium Enterprises.

The core questions addressed during the survey are as follows:

 1. Major functional areas implementing ERP
2. Vendor trends
3. Size of organizations adopting ERP systems
4. Rate of success or failure in the implementation
5. Time/Cost estimates conformance
6. Leading role players & change management programs during implementation
7. Important success or failure factors, as suggested by the organization itself.
8. Modules deployment.

3 Survey Results
The collected surveys were analyzed and reported in this section.

3.1 Major sectors implementing ERP

Total number of companies responded to the survey were 74. The distribution of the organization
responded to the survey, according to nature of businesses is summarized in table 1. Largest numbers
of responses were from manufacturing organizations which is around 29.7%. 9.5% & 10.8% were
from Oil, gas and petrochemicals respectively including conglomerates such as Saudi Aramco and
various companies from SABIC. Participation of Retail, IT, Banking and Consumer products
businesses were around 8.1%, 8.1%, 6.8% and 5.4%. Banks include both local and of foreign origin.

Around 6.8% were general contracting organizations. Few government owned utilities such as Saudi
Electric Organization took part in the survey besides a couple of healthcare organizations.

Nature of Business Companies responded

Total %
Manufacturing 22 29.7
Oil & Gas 7 9.5
Retail 6 8.1
IT 6 8.1
Petrochemical 8 10.8
Banking 5 6.8
Consumer Products 4 5.4
General contracting 5 6.8
Utilities 3 4.1
Healthcare 3 4.1
Others 5 6.8
Table 1: Organization participated in survey by sector

3.2 ERP Vendor Market shares

SAP and Oracle were the clear leaders in Saudi ERP market with both nearly having a market of
approximately 40% each. Other presence includes Baan 7.7%, Great Plains 3.8%, Orion 3.8% and
JDA 5.8%, while remaining vendors have 9.6 % of the market in all.
 Figure 1: Vendor Market Shares

3.2 Size of organizations; adopting ERP systems

Organizations are classified as small (S) if they have less than 500 employees; medium (M) if they
have between 500 and 500 employees and large (L) if they have more than 5000. Organizations are
also classified based on their sales volume per year. A company is considered small (S) if it has sales
turnover less than 500 Million; Medium (M) if it has sales turnover between 500 Million and 5 Billion
and large (L) if it has sales turnover larger than 500 Billion. A two way classification of size is shown
in figure 2, with the first represent the employee size and the second represent the sales size. As an
example, MS means companies having medium sales turnover and small number of employees.

Figure 2: Sales Turnover-Number of Employee per Year (Sales, Employees, %)

Most of the companies in this case belongs to the SM (22.31%), SS (19.26%) and MM (12.16%)
categories which together make up 53.73% of all respondents.

For the deployment status (See figure 3) of these companies, 87.3% of the respondents have already
deployed the system in their organization. 22.2 % were in a planning phase and 9.5% responded that
they don’t have any immediate plans to implement an ERP system.

Figure 3: Deployment Status (%)

3.3 Rate of success or failure in the implementation

Here, success is measured in terms of acquiring the promised benefits at the planned time within the
expected cost. Figure 4, shows the degree of success distribution among the respondents. About 28%
reported 100% success while about 47% reported 75% success. 50% success is reported by 20.8% of
the organizations while 4.2% reported total failure (0%). Computing the weighted success percentage
gives an overall success of about 74%.
 Figure 4: Success Rating

The distribution of success as per size of the organization is show below in figure 5 as:

Figure 5: Success Rating by Organization Size

It is clear from the results that larger organization (Both in terms of Sales Turnover and Number of
Employees) had high success rating as compared to smaller ones. The best performing category was
however, MS (Medium Sales Turnover, Small Number of Employees) where most companies
considered their implementation a complete success.

3.4 Time/Cost estimates conformance

Two key questions that were asked to see if the implementation projects were completed within the
specified budget and schedule. The results suggests, as figure 6-7, that 62 % of the organizations were
able to finish either within time or with some delays while around 38% of the organizations failed to
finish their implementation within time.

Similarly, around 60% of the organizations managed to finish the project either within budget or with
some overruns while 38.5% did not finish within budget.

Figure 6: Finished within time (%) Figure 7: Finished within budget (%)

The distribution of above charts per organization size related to time and budget is presented in figure
8 & 9. The results have an apparent pattern in the two cases. In the scheduling or finished within time
case the organizations belonging to the category where having smaller number of employees’ but
higher revenues group (Sales turnover) performed better than the opposite. Overall larger organization
performed better than the smaller ones.
In the case where it was asked that if the project was finished within budget, the lager organizations
showed most of the implementations with cost overruns but there were no complete failures, showing
better financial management as compared to smaller firms (smaller in term of both sales turnover and
number of employees). Overall, budget-wise, medium sized companies showed less efficient results.

Figure 8: Finished within time (%) Figure 9: Finished within budget (%)
(Size wise analysis)

3.5 Leading role players & change management programs during implementation

Two more questions that are considered by the ERP researchers and consultants and are vital in
making an effort a success were asked − 1) who took the leading role and 2) if there was a change
management program in place or not.

A, general debate, amongst the ERP community, is to who should lead the implementation program.
That is whether the leadership is to be provided from business managers or from the IT managers to
succeed in an ERP implementation.

Results as in figure 10 suggest two distinct groups in Saudi Organizations − one in which
implementation is lead by business mangers (43.2%) while in other was lead by IT (37.8%). The
remaining 18.9% was lead by the consultants etc.

To investigate this question, the data was further analyzed and compared for the success rate in each
case (Figure 11). Assuming 100-75 % as success and 50% & below as failure the percentage of
success for the implementation where the project was lead by the business managers was 36.5% while
for the projects lead by IT manager the success rate was 21.62%. While failure rates were 6.75% and
16.2% respectively. The success to failure ratio was estimated to be 5.4 for the business managers’
case as compared to 1.3 for the IT managers’ case which shows 4 times higher rate in the business
mangers’ case. Consultants, although relatively fewer in numbers (12%), had a success rate of 5.

Figure 10: Implementation leadership (%)

 Figure 11: % success/ failure (Leadership role case)

Another factor which was investigated is the adoption of a planned change management program used
during an ERP implementation. Here change management is referred to as the process, tools and
techniques to manage the people-side of business change to achieve the required business outcome and
to realize that business change effectively within the social infrastructure of the workplace Jeff,.
(2006).

The results of this question show 60.8% of the organization had change management programs (figure
12) in place, 16.2 % had some informal activity while 20.3 % had none.

Figure 12: Change management program (%)

Further analysis conformed that presence of a change management program show more success
(success to failure ratio was 6 versus 2.5) as compared to an implementation without change
management (see figure 13).

Figure 13: Comparison of % success/failure

(change management program case)
3.6 Important success factors

Organizations were asked to rate (1 highest – 5 lowest) some key success factors including; clear
strategic objectives, strong management commitment, change management program, training, and
software selection. The results are presented in figure 14. The results suggest that most two important
success factors are; strong management commitment and clear strategic objectives while change
management is rated third. Training is rated as fourth most important factor while software selection
was considered the least important factor among all.

Figure 14: Success/Failure claim

3.8 Module Implementations

The modules implemented in various organizations are shown in figure 15. As anticipated, most of the
organizations have implemented the finance module (more than 65 implementations). There are 58
implementations of human resource module, more than 52 implementations of sales and distribution
module and 18 were of manufacturing module.

Besides standard ERP modules, realization of some of newer trends such as customers’ relationship
management (CRM) (15 implementations) and enterprise portal (14 implementations) besides business
intelligence module (12 implementations) were reported.

Figure 15: Modules implemented

4. Discussion and Concluding Remarks

Saudi Arabia is a leading economic force in the Middle East, particularly with reference to Petroleum
and petrochemicals industries. Therefore, performance evaluation of its industries and organizations is
an important issue to be studied and analyzed. ERP is one of the key applications adopted by a number
of organizations around the world, to enhance their productivity, responsiveness and customer
satisfaction. Saudi organizations are moving fast in following this trend in spite of the cultural
difference with western organizations where ERP is originated. However, there has been no formal
study to realize its actual progress. This paper attempts to shed some light on ERP implementation
trends and practices in the business culture in Saudi Arabia.

The survey indicates a clear tendency for adopting ERP solutions by all types of organizations of all
sizes led by companies of large size like Saudi Aramco and SABIC. The results suggest that overall
ERP implementation scored about 74% success. One trend that was evident was that the organization
having higher sales turnover to Number of Employees ratio performed better in terms of
implementation targets such as budget and schedule. Larger organizations i.e., petroleum and
petrochemicals, (Saudi Aramco & SABIC companies) despite some of them being somewhat over
schedule and budget, categorized their efforts as success with no partial or complete failure reported.
The results suggest implementing business leadership rather than IT leadership accompanied by
extensive change management and training programs. These results does not differ much from similar
studies conducted in different cultures which suggests that the critical issues for successful
implementation of ERP systems is the same regardless of the cultural differences.

This work by is by no mean sufficient for answering many issues related to ERP progress in Saudi
Arabia. Many issues remain open for further study in this area. Many cultural issues affecting
successful implementation of ERP systems may be investigated including the use of Arabic language
based ERP systems.

5. Acknowledgement

The authors would like to acknowledge King Fahd University of Petroleum & Minerals for its support
in conducting this research.

6. Bibliography

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He, Xin, (2003). Early trends of ERP implementation in China, Proceedings - Annual Meeting of the
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Mabert, V.A. Soni, A. & Venkataraman, M. A., (2001) Enterprise resource planning survey of U.S.
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