PresubmitERP in Nigeria

A comparative study between native and multinational

corporations utilizing ERP systems to enhance

competitiveness

Masters Thesis

BA 399 MBA Research Project

Presented to

Walter Kruz

By

Alaezi, Ekeoma Kelechi

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Table of Contents

1. Introduction &&&&&&&&&&&&&&&& &&...4

1.1 Definition of Terms&&&&&&&&&&&&&&&&.&5

1.2 Background of ERP Implementation&&&.&&&&&&..6

1.2.1 Objectives of ERP system Implementation/&&&&..........9

1.2.1.1 The drivers &&&&&&&&&&&&&&&&&.&&.9

1.2.2 Challenges of an ERP Implementation&..&&&&&&&9

1.3 Statement of Problem&&&&&&&&&&&&&&.......10

1.4 Purpose of Study&&&&&&&&&&&&&&&&&&.11

1.5 Scope and Limitations&&&&&&&&&&.&&&&&&12

2.0 Review of Literarature and Study&&&&&.&&&&&&.13

2.1 Literature Review&&&&&&&&&&&&&&&&&&.13

3.1 Research Design With Supporting Rationale&.&&&&&.14

3.2 Methodology&&&&&&&&&&&&&&&..&&&&...14

3.2.1 Survey Administration an Scoring&&&&&...&& &&14

3.2.2 Survey Instrument and Measurement Framework

Development &&&&&&&&&&&&&&&&&&...17

4.1 Data Collection&&&&&&&&&&&&&&&&&&&.18

4.1.2 Vendor and Solution Responses&&&&&..&.&.&&..18

4.1.3 End-User Responses&&&&&&&&&&&&.&&&..19

4.1.3.1 Selected Core Issues&&&&&&&&&&..&..&&...19

4.2 Selected Company Cases&&&&&&&&&&...&&&...22

4.2.1 Case for ERP Usage: Ibeto Cement Example &&&.......23

4.2.2 Case for ERP Usage:

Mortgage Processing Excellence at HB Bank&&&&&.23

4.2.3 Call for ERP Implementation Caution :

Recommendations &&&&&&&&&&&&&&&&24

5.1 Research Findings and Analysis&&&&&&&.&..&....25

5.2 SWOT Analysis for ERP market

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Nigeria Viz-a-viz Global Market&&&&&&&..&....&.27

5.3. Other Findings—Multinational Companies&&&..........28

5.3.1. Vendor Landscape &&&&&&&&&&&&&..&.28

5.3.1.1 SAP AG Profile&&&&&&&&&&&&&&&&...28

5.3.1.2 Oracle / PeopleSoft Profile&&&&&&&&&&&...30

6.0 Conclusion and Recommendation&&&&&..&...............31

7.0 References&&..&&&&&&&&&&&&&....&.........32

List of Tables

Table 1&&&&&..&&&&&&&&&&&&&&&.&&..13

Table 2 &&&&&..&&&&&&&&&&&.&&&&........14

Table 3&&&&&&..&&&&&&&&&&&&.&&.&&.19

Table 4&&&&&&..&&&&&&&&&&&&&.&.&&.20

Table 5&&&&&&..&&&&&&&&&&&&&&&&&21

Table 6&&&&&&..&&&&&&&&&&&&&&&&&23

Table 7&&&..&&&&&&&&&&&&&&&&&&&&24

Table 8&&&.&&&&&&&&&&&&&&&&&&&&.29

List of Figures

Fig 1&&&&&&&&&&&&&&&&&&&&&&...&&7

Fig 2&&&&&&&&&&&&&&&&&&&&&&..&&14

Fig 3&&&&&&&&&&&&&&&&&&&&&&..&&18

Fig 4&&&&&&&&&&&&&&&&&&&&&&..&&20

Fig 5&&&&&&&&&&&&&&&&&&&&&&..&&21

Fig 6&&&&&&&&&&&&&&&&&&&&&&..&&21

Fig 7 &&&&&&&&&&&&&&&&&&&&&&&....22

Fig 8&&&&&&&&&&&&&&&&&&&&&&&&.24

Appendix A -Vendor/Solution Provider Questionnaire sample&&&&&.&28

Appendix B -End User Questionnaire sample&&&&&&&&&....29

Appendix C-SUMI Questionnaire Page 1&&&&&&..&....30

Appendix D-SUMI Questionnaire Page 2&&&&&&.&.....31

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1. Introduction

Fewer than ten indigenous Nigerian companies are using ERP applications in the day to

running of their business processes, while a handful of other companies using ERP

systems in Nigeria are multinationals like Schlumberger, Shell, Citigroup and Chevron,

and locally an indigenous bank, and other small to medium-sized businesses. In

government circles, the Delta state government of Nigeria, the Federal Inland Revenue

Service and the Central bank are the few arms of government to have embraced ERP

solutions. Certainly lots of Nigerian businesses, banks, companies and arms of

government still haven't caught the obsession or yet still found sufficient reasons to

implement ERP solutions.

Looking first of all at some of the more successful operations in Africa, to give impetus

and drive to a project in a continent where many believe “everything is government,

expatriate or micro" argument. Zimbabwe has a thriving locally-owned business sector,

many of them using ERP systems. These companies have recognised that good systems

are vital for them to be able to compete both nationally and internationally, and they have

followed the rules to make sure that they can compete, can grow and can manage major

business sectors. In doing so, they provide not only many jobs, but more importantly,

extensive career paths for their employees. They also develop satellite industries which

provide employment and entrepreneurial opportunities.

In Mauritius, Namibia, Kenya, Botswana and other countries in Africa, similar rules apply.

Mauritius is a world player in textiles, Namibia is advanced in retail, Kenya and Botswana

have thriving tourism sectors. Uganda's march to prosperity is rapidly becoming the stuff

text books are made of. Seychelles is one of the most environmentally conscious

countries on earth. Even in Mozambique, long ravaged by civil war, building cranes are

aplenty on the skyline of Maputo, and evidence of development commercial, residential,

agricultural and tourism related - is everywhere. All these successes are linked to

flourishing ERP effectiveness in the running of businesses in key sectors of the economy

allowing enterprises to grow and prosper, with all the spin-offs for the economy and

employment.

To advance Nigeria’s march to economic prosperity, which has never been so desirous to

her citizens and the international community, there must be a lot of efficiency brought into

the day to day running of government and enterprises by leveraging on ERP systems.

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1.1 Definition of Terms

Budget: A plan which provides an estimate of future expenditure and revenues related to

planned activities.

Business Plan: A plan which provides an estimate of future expenditure and revenues related

to planned activities.

Billing: The process of sending invoices to customers.

Downtime: Time when a resource is scheduled for operation but is not producing for reasons

such as maintenance, repair or setup.

Database: Data stored in a mass storage device under the control of a software package

called a database manager.

Inventory: Raw material, WIP, stock, finished goods and all items required for manufacture or

trade.

Lickert scale: This is considered to be a natural way of eliciting opinions about a software

product.

Manufacturing Resource Planning (MRP): Method for planning of all of the resources of a

manufacturing company

Performance evaluation: Process of measuring performance for the purposes of feedback

and reporting. Reporting: Collecting and summarizing production data

Resource planning: Represents the process of determining the long range capacity needs of

the business

Software Usability Measurement Inventory (SUMI)—is a rigorously tested and validated

method to measure software quality from a user perspective.

Total Quality Control - the objective of eliminating all possible sources of defects from the

manufacturing process.

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1.2 Background

Companies in the global market place thrive in competitiveness and effective utilization

of available tangible and intangible resources. This has always driven these companies

irrespective of location to adopt solutions that enhance this posture. These companies

want to run their businesses as a whole and not their IT, human resources or any other

department. They want to do more with less. They want to remain ahead of competition

in the global market place. When MRP systems used by most manufacturing firms

evolved to ERP systems these global organizations were the first to embrace it as their

values. It's real for some companies, where the ERP systems can meet the vast majority

of their requirements, and they're not so big that they run into scalability issues.

With ERP solutions a single application can track and monitor all of a business's

functions.

The number and features of the Modules vary with the package. Some of the most

common modules available in almost all packages are:

• Shop-floor Management

• Inventory Management

• Procurement Management

• Production Control

• Transportation Management

• Supply Chain Management

• Customer Relationship Management

• E-business

• Finance/Accounting

• Manufacturing Planning/Scheduling

• Plant Maintenance

• Quality Management

• Material Management

• Human Resources

• Distribution Management

• Customer Order Management

• Cost Management

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The key features for evaluation and selection of an ERP are:

1Fig 1.1: ERP Serving as a Cross-functional Enterprise Backbone that Integrates & automates many Internal Business Processes

Scalability - ERP solutions are designed to grow with the company. Unlike some stand-

alone applications, they do not succumb to volume and change pressures, leaving you to

start over from scratch.

Vendor management— Managing a plethora of vendors for customer service is not

easy. An integrated suite gives you one solution supplier to work with.

Functionality—Access to the functionality required to run the business over time—at an

affordable price point.

1 Excerpt - Can ERP Become An Alternative To MIS ? Swatisudha Samantaray Roll. No. R060106013 UPES

Facilitating Mergers and Acquisitions—ERP implementation has the potential to

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ERP implementation has the potential to hasten integration of newly acquired hasten

integration of newly acquired businesses.

Cheapest Choice at First—but it will usually be the most economical in the long run

as your business needs grow and change.

Reliable Service and Support—The ability to access affordable service and support

is critical. It is easier to support an integrated ERP environment than a mixture of

different applications.

1.2.1 Objectives of ERP system Implementation

The opening up of the Nigerian economy has led to a significant growth of the mid market

segment. This growth has been across industry verticals in the manufacturing, retail,

services, and information technology sectors. This growth and along with that the associated

competition and quest for enhancing market share has led organizations to re-look at its

processes and procedures and put in place proper processes enablers and solutions to

make its business more efficient and effective.

The objectives of embarking on an ERP implementation are to:

• Align business objectives with technology solutions

• Evolve in the organizational value chain by enhancing customer confidence and

stakeholder commitment.

• Achieve better organizations resource and asset utilization.

1.2.1.1 The Drivers of ERP Implementation decisions

• Introduce efficiency and improvement of its business processes

• Achieve transparency and availability of data across functions

• Obtain right Information at right time for effective decision making.

• Improve utilization of human capital and assets

• Improve financial management

• Cater to requirements of legislations in financial reporting

• Streamline the supply chain processes

• Improve Customer Relationship Management

• Achieve efficiency in organizational reporting

• Ensure data security and data scalability

• Adopt systems that address changing technologies

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1.2.2 Challenges of ERP Implementation in Nigeria The path treaded by an organization from identifying the need for an ERP till the

implementation is a long one. This involves identification of business needs, budgeting for the

procurement of product and services, evaluation of various products to suite its business

needs, staring the implementation journey and finally adopting the ERP package as an

organization-wide solution.

The challenges that an organization goes through in the ERP journey are primarily:

Choice of solution: This is a critical decision that an organization needs to take.

Implementation Process: This is major and time consuming activity which involves

analysis of the organizations processes, recommendation of good practices, mapping the

processes to the package, data management, implementation and support.

Internal Change Management: An ERP implementation entails changes in processes

and reporting structure. Addressing this paradigm shift is a process that the organization

has to go through. This will help in achieving the acceptability of the users to the new

systems.

Commitment of the Organization: ERP has to be viewed as a process enabler rather

than a package to be installed and run. The implementation process is a journey towards

achieving organizational efficiency. This demands a strong commitment of the

organization’s stakeholders throughout the entire process.

Inadequate Market reach: Top market ends are saturated though lopsided.

Bureaucratic Nigerian Companies: Bigger Nigerian companies who should be the

ready buyers and users of ERP systems are constrained for reasons ranging from size (on

going mergers and acquisitions), unskilled performance monitoring to management

indecision.

Market Trend: Mid-size companies are now targets of major ERP vendors though these

companies might need only one or two of the ERP modules to run their businesses.

High Installation and maintenance costs: This is driving mid-size Nigerian companies

away.

Manpower shortfalls-Few indigenous consultants for after sales support (user and

ancillary), and training centers.

Awareness-Inadequate know-how to do side-by-side ERP evaluations, select enabling

characteristics of ERP systems and pairing them with the right businesses even as

vendors hustle their products through its irresolute ERP market.

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Generalization of Performance Monitoring: Many have not seen the need to evaluate

their business performance inside the smaller units of the company. There’s still this

generalization of performance.

E-governance still at its infancy: All business in Nigeria falls into three camps:

government owned and managed, expatriate owned and managed, or locally owned

cottage industry. Nigeria has a background that would make one want to continue with the

argument that government owned business are by design labour intensive, so efficient

ERP systems have little place.

1.3 Statement of Problem

The bane of many enterprises has since been improper planning, inaccurate tracking of

supply chains and the vacuums of poorly implemented policies. Other concerns that

should necessitate the implementation of ERP systems for enterprises include;

• The loss of businesses accustomed by inconsistent information and poor

communication across departments and units.

• The wasted purchasing management and power due to non-integrated procurement.

• Lack of coordination on common activities such as human resources, payroll, financial

management and inventory.

• Limited analytical ability characterized by “one off – redo” exercises.

• Siloed functional organizational cultures and business practices with minimal touch

points all lead to wasted funds, resources and valuable manpower.

The need to have these problems addressed as a medium to enhance the competitive

edge of native companies in the international market precipitates this study.

1.4 Purpose of Study

This study seeks to elaborate different lines of action to be taken to increase installed

base of ERP systems in the country, overtake the limitations mentioned above and

capitalize on global market trends to enhance local and global competitiveness of

Nigerian businesses.

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1.5 Scope and Limitations

The scope of this research extends to end-users, vendors and solution providers in

Nigeria whose businesses employ and deploy the use of ERP systems to the running of

every day business functions whether they are multinational or are indigenous—as many

as hope to stay competitive in an ever dynamic business climate vis-à-vis an increasingly

competitive global ERP market.

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2.0 Review of Literature and Study

This research fits within the context of several recent studies exploring the impact of ERP

software applications on business productivity, beyond traditional measures such as the

level of information technology (IT) investment or feature/function comparisons. Through

this research one would argue that end-user productivity is based on multiple dimensions,

all of which are fundamental to maximizing the potential of the investment in IT systems

by the business owner.

2.1 Literature Review

ERP represents an expanded effort to integrate standardized record keeping that will

permit information sharing among different areas of an organization in order to manage the

system more effectively. ERP software provides a system to capture and make data

available in real-time to decision makers and other users throughout an organization. It

also provides a set of rules for monitoring various business processes to achieve the goals

of the organization. ERP systems are composed of a collection of integrated modules.

Among the widely used are for accounting and finance, others are for sales, supply chains

maintenance, manufacturing, and purchasing.

To take advantage of enterprise resource planning systems to drive fundamental business

transformation, organizations need to bring their functional groups together to determine

the optimal footprint for grouping those functions within more modern systems. Oceanic

International Bank Nigeria, like many organizations, has had mixed results in this regard,

and those results manifest in what one may call “functional ERP implementations” that

tend to focus on a narrow set of business functions and not on end-to-end business

processes-(the project is ongoing).

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3.1 Research Design with Supporting Rationale

1 Literature Review using internet blogs and other published works.

2 Data gathering by way of surveys and questionnaires.

i. Survey by use of questionnaires to assemble opinions from users and Vendors of

ERP systems with emphasis on the user companies and banks.

ii. Survey by use of questionnaires for customers of these firms to appraise service

delivery improvements after their company’s implemented ERP Systems.

iii. Case studies of mentioned companies, arms of government.

iv. Experiences from on-the-field work with implementation experts to give vivid

accounts of implementation shortfalls and possible improvements.

3 Data processing and analysis by use of relevant statistical tools and business models.

4 Instrumentation by extensive ERP vendor and end-user researches employing

relevant field experience, statistical software, and questionnaires. See Appendix.

5 Comparing business models and charts of Nigerian firms to those of top-rated

international corporations using ERP solutions.

6. Findings and recommendations

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3.2 Methodology 3.2.1 Survey Administration and Scoring

The survey consists of forty-five statements on software business productivity, grouped into

the six categories of Usability, Familiarity, Transactional Efficiency, Flexibility, Business Insight,

and Collaboration. The survey was administered via telephone to end users of 2ERP packages

ranging from Microsoft Dynamics NAV and Oracle Peoplesoft Solutions, and SAP All-in-One

and SAP R/3 in Sales & Marketing, Finance, and Operations departments of Multinational

companies(50) and Indigenous companies(60). Surveys were administered to capture a cross-

section of functional roles for each of the groups relevant to the research.

The totals by function and groups are shown below in Table 1.

Table 1-Respondent-base Distribution

Sales & Marketing

Finance Operations IT Total

Multinationals 20 10 10 10 50

Indigenous Nigerian Companies

25 10 10 15 60

Fig 2: Participants’ functional fields (N=110)

Sale

s &

Mark

etin

g

Fin

ance

Opera

tions

IT

Multinationals0

5

10

15

20

25

Multinationals

Indigenous Nigerian Companies

15

3For each statement, respondents were asked to respond on a scale of 1 to 6, with a 1

meaning that they “strongly disagreed” with the statement, a 6 meaning that they “strongly

agreed” with the statement, and a 4 meaning that they were “Undecided” with the statement.

Respondents were also given the option to respond that they “didn’t know” or that the

statement “was not applicable to their situation.”

The score for each business productivity category is the average score across all the

statement responses. The overall score is a weighted average, which is derived by averaging

the scores of each category. Some statements are worded negatively, which is to say that a

high response on the Lickert scale indicates a low or negative impact on user productivity.

Before calculating the overall scores for each category, the scores for those negatively worded

statements were normalized to a standard scale to enable overall averaging of results. For

example, a response of a “2” (“disagree”) to the statement “It takes too long to learn how to

work with this software ”would actually be averaged as a “6” to reflect a relatively high level of

positive impact.

2 ERP End-User Business Productivity: A Field Study of SAP & Microsoft: Page 1 of 12, March 2007

3 McSweeney, R (1992) SUMI -- A psychometric approach to software evaluation. Unpublished MA (Qual) thesis in Applied Psychology, University College Cork, Ireland.

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3.2.2 Survey Instrument and Measurement Framework Development The survey instrument and business productivity measurement framework are based on two

major inputs: standard usability test methodologies and extensive ERP user research.

The SUMI methodology informed the end user survey design and I leveraged 6SUMI questions

where appropriate in the business productivity measurement framework. SUMI, the “Software

Usability Measurement Inventory,” is a proven industry-standard methodology used to

measure software quality from the end user’s point of view. The SUMI methodology was most

relevant and comprehensive in our categories of Usability and Familiarity.

Together, these three inputs (see Tables 2, 3 and 4) provide the basis for the comprehensive

evaluation framework used in the study.

4Challenges with the Software’ statements/questions based on the Software Usability Measurement Inventory

(SUMI), © Human Factors Research Group, Ireland.

17

4.1 Data Collection

4.1.2 Vendor and Solution Provider Responses

4.1.2.1 Detailed Findings and Implications

In this study, vendor and solution providers including major industry leaders like SAP, Oracle,

BaaN and Microsoft. ERP vendors in the Global market (including those in Nigeria who have

had years of experience in the international ERP market).In tables 2 through to 4, only

questions with direct bearing to core of this study were incorporated.

Table 2 (See Appendix II)

Vendor and Solution Provider Response Average Response/Score

Which Industry sector is most ready to embrace ERP solutions? (50 Respondents) 12 Respondents for Oil and Gas Enterprises

Which Industry in your own opinion will have a better competitive edge after employing ERP Systems (50 Respondents) Public Sector and Banking had 13 respondent each

Service performance delivery improved after your client, the company in question installed ERP solutions for day to day running of their businesses. (50 Respondents)

Yes (27) 54%

What is the major challenge of end-users? (50 Respondents)

Improper IT Orientation(17)

34%

Service performance delivery improved after your client, the company in question installed ERP solutions for day to day running of their businesses

Yes(30) 60%

Do you offer installation and training or do users have to figure it out from the manual (if they even read it)? (50 Respondents)

Yes(33) 66%

Will you fly someone out there, do a site survey to review user alarms, transport, and general needs, help them design a perfect fit solution, field trial it with me, and support clients after installation? (50 Respondents)

Yes(28) 75%

Does your solution fit with end-users manpower and resource availability? (50 Respondents)

Yes(28) 56%

How would you rate your client’s assessment of your solution? (50 Respondents)

High (40) 80%

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4.1.3 End-User Responses

In the table that follows, respondents reacted to the following statements on the same five point scale (5=strongly agree, 3=neither agree/disagree; 1=strongly disagree):

4.1.3.1 Selected Core Issues

According to this end-user survey conducted among 20 organizations, the top three factors

while selecting an ERP solution are Long Term Support, Fit with Core Business Processes,

and Product Flexibility and Scalability which have direct bearing on compatibility with current

platforms and technical know-how available.

Fig 3 Gauging buying decisions for ERP purchase globally and locally with respondent data cut across 110 Users by Category.

Difference in Productivity Scores based on: Which of this factors best determined your buying decision?

Purchase and Installation

Price

Functional fit with core

business processes

Ease of Implementation

Long-term Support

Product Flexibility and

Scalability

0 5 10 15 20 25 30 35

Purchase and Installation Price

Purchase and Installation Price Functional fit with core business processes

Long-term Support Product Flexibility and Scalability

Ease of Implementation

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In furtherance, respondent views this subject “Does this software helps collaborate with other

companies I work with, such as suppliers, customers?” was summarized by Fig 3 below.

Fig 4. ERP User Collaboration showing percent difference between respondent scores

One survey respondent said of the importance of business insight and competitiveness:

“[Before we implemented our ERP system], the worst part was reporting. We were responding

months if not years after data input. Now, I can get information to the executives: ‘here’s what you

are going to do next year based on deposits we have now. It allows us to be more proactive in

terms of decisions we make in marketing, employment levels, cost, operations9 we are now

looking at today and tomorrow because we have real-time data, not data that is a year old.

Everything is coming together” (SAP User).

Table 3 - Other Responses (see Appendix I)

End User Response Average Score(Multinational Companies)

Average Score(Nigerian Companies)

Score Difference

Doing what you want to do with this ERP is Straightforward 4.8 3.6 12%

My company is able to change how we use the software as our business Changes

4.2 3.4 12%

It takes too long to learn how to use this software

2.2 3 8%

I sometimes I don’t know what next to do with this software 2.6 3 4%

There’s too much to read before you can use this software. 3.2 3.8 6%

The software’s awkward when I want to do something which is not standard

3.2 3.2 0%

There are too many steps required 2.2 3.2 10%

It is easy to share my comments and provide feedback on the work of others using the ERP software.

4.6 4.6 0%

Table 4: Competitive Strengths of the software

Responses on ERP Collaboration

Strongly Agree,

18%

Strongly Agree,

18%Strongly Agree,

23%

Strongly Agree,

32%

Strongly Agree, 9%

Strongly Agree

Agree

Disagree

Strongly disagree

Undecided

Disagree 18%

Strongly Agree 23%

Undecided 32%

Strongly Disagree 32%

Agree 18%

20

End User Response

Average Score(Multinational Companies and Indigenous )

Charts

Based on its transactional efficiency would you recommend ERP solutions to companies who want to enhance their competitive edge?

Yes :85 No : 25

Did the software match up to what they promised at the sales Presentation?

Yes : 45 No : 55 Undecided:10

Did the performance of software compensate for its huge financial cost?

Yes: 54 No : 48 Undecided 8

Transactional Efficiency, measures the user’s perception of how easy it is to execute

common and repetitive tasks, the efficiency of the interface as it pertains to those common

tasks, and the speed and reliability of the software are key to enhancing competitive edge.

The question bordering on Transactional Efficiency is the category with the largest user

response score difference while that bordering on the compensation for its huge financial cost

stood out with a narrow user response score difference– The respondents who answered yes

were scored 6% higher those who answered yes (Table 4.3—Fig 6) compared to respondents

on the performance and price question where those who answered Yes scored 55% higher

than those who answered No.

The responses indicate strongly that price sensitivity and efficiency were largely uncorrelated

by users as one would have expected. The disharmony of transactional efficiency responses

showed it was one question of more concern to users than price was.

Competitive Strengths of The Software

Yes , 85

No, 25

0 10 20 30 40 50 60 70 80 90

Yes

No

Would you recommend

ERP solutions to

companies who want to

enhance their competitive

edge?

No of Respondents

55%

Difference

Competitive Strenghts of the Software

Yes , 45

No, 55

Undecided , 10

0 10 20 30 40 50 60

Yes

No

Undecided

Did

the s

oftw

are

matc

h u

p

to w

hat th

ey p

rom

ised a

t

the s

ale

s P

resenta

tion ?

No. of Respondents

Competitive Strenghts of the Software

Yes , 54

No, 48

Undecided, 8

0 10 20 30 40 50 60

Yes

No

Undecided

Did

the p

erf

orm

ance o

f soft

ware

com

pensate

for

its h

uge

financia

l cost?

No. of Respondents

Fig 5 Competitive Strengths of the software I

Fig 6 Competitive Strengths of the software II

Fig 7 Competitive Strengths of the software III

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4.2 Selected Company Cases

This report includes Issues based on the following criteria: Weight: High, Critical, Unknown Support: Yes/No Score: 1-5 Confidence: High, Medium, Low, Unknown 5 PROJECT REPORT OF A FOREMOST CEMENT COMPANY NIGERIA

PRODUCT: SAP VENDOR: SAP NIGERIA

Table 5 Weight Support Score Confidence

Ease of Use High Yes 5 High

Significant Install Base in our Industry and Manufacturing High Yes 4 Medium Environment.

Vendor System Architecture High Yes 5 High is appropriate for Aggressive e-business

Cost of Total Ownership/Upgrades Critical Yes 4 High

Data Security and Protection structure-especially High Yes/3rd Party 5 High Online needs.

Connectivity to Other Systems High Yes/3rd Party 4 High With which data is to be shared

The financial condition of the High Yes 3 Medium Vendor

The Quality of Support High Yes 4 High

Performance and Scalability Critical Yes 5 High For 80-100 Users

Connectivity to Important Field Critical Yes 3 Medium Management System

Commitment to Products High Yes 5 High Further Development 5 March 2008 Survey

22

Total Product Score: 82.2% Summary of Business Process Category Scores

Business Process Category | Score 7 High-Level Differentiators 82.2%

Summary of Support Answers

Support Value | Percent Yes ---------------------80.0% Yes/Custom ----------5.0% Yes/3rd Party -------15.0% Yes/Upgrade---------0.0% Yes/Future------------0.0% No-----------------------0.0% Unanswered----------0.0%

4.2.1 Case for ERP Usage: Ibeto Cement Example

Ibeto Cement is an indigenous cement packaging and distribution company with about 500

employees. It has been operation for over 10 years and has its major plant located in the

south of the country.

The company revolutionized the impact of cement prices on builders and the general

populace as it drastically reduced prices of the product in the face of cut throat prices from

its competitors in 2007. Having had its license revoked by an outgoing administration and

the decision reversed by the incoming administration the company was set to improve its

internal processes and post appropriate returns to investors and the generality of the

Nigerian people. Thus implementing ERP systems was a major step to improve operations

and catch up and overtake competition with the aim of sustaining its impressive price

regime and distribution expertise. (See Table 6)

The company‘s 2nd quarter 2008 revenue as well its turn around time shot up as soon it

implemented new technologies including ERP systems to the day to day running of its

businesses. Increasing the turn around time to package almost 1.5 million metric tonnes of

imported consignment was of major concern to the company’s management. It finally

achieved this 10-day packaging and warehousing turnaround feat with the aid of its newly

installed enterprise resource planning systems.

Key market metrics in production and sales saw the company’s competitive edge reckon

that of other major packaging, producing and distributor companies.

6 High Level Differentiators-HLD having a value other than 'Yes' in the 'Support' data field and/or less than '5' in the 'Score' data field will have its contribution to the category and total score reduced. The overall total product score are then based on the requirement/HLD priority/weighting values. Requirements/HLDs with no value in either the 'Support' or 'Score' data are not considered in the report.

23

Key among the goals were Improving efficiency and speed of operations, cost

optimization, improve manpower utilization, faster access to markets, need for readily

available business intelligence should compel organizations to adopt processes and

solutions that will help sustain their competitive advantage.

Table 6: Cement Bagging and Distribution Capacity of Nigerian Cement Plants

Company Bagging (Imported cement)

Location

Rate

Lafarge Atlas Cement PH 2 Million mt

Dangote's 4 Bagging Plants Apapa, Lagos, Onne, Port –

Harcourt 3 Million mt

Flour Mills Lagos 2 Million mt

Eastern Bulkcem [Eagle

Cement]

Port Harcourt 0.6 Million mt

Ibeto Cement Co. Port Harcourt 1.5 Million mt

Source: Nigeria Statistics Bureau (2007)

4.2.2 Case for ERP Usage: Mortgage Processing Excellence at HB Bank

The case-study is based on a real financial institution, although the name of the company

as well as certain details about the nature of its business, its geography and the names of

The case-study is based on a real financial institution, although the name of the company

as well as certain details about the nature of its business, its geography and the names of

its employees has been changed to protect confidentiality has been changed to protect

confidentiality.

Harmond Bank (HB) has over 600 employees and has been operating in the consumer

banking market in Ireland for over 80 years. Its home loans division is one of the most

profitable parts of its business, contributing between 25-30% to HB's overall profits.

Despite increasing competition from other mortgage providers, HB has maintained a

strong position in the home loans market thanks to its attractive range of mortgage

products and its friendly image. Even though the popularity of 'flexible' mortgages allowed

customers to freely switch between mortgage providers, HB has been able to retain

customers by building strong customer relationships and providing a high level of

customer service. This in turn attracted new customers to HB who wished to transfer their

existing mortgage to HB.

24

At HB bank because of the lack of a single, consolidated view of the customer,

opportunities for cross-selling (home insurance, theft insurance, home renovation loans

etc.) were being lost because the CRM suite (an ERP package) was not fully integrated

with the call-centre application. Call-centre staff followed a standard 'script' for every

customer, rather than scripts that were personalized according to the profile of the

customer.

Indeed, behind the glossy veil of the HB Website, 'islands of applications' (25) existed that

reflected how HB's IT architecture had haphazardly evolved rather than being strategically

planned. As Ed put it, HB lacked a "seamless end-to-end process for mortgage

processing." These shortcomings were put an end when HB bank started to transform

their business into a flexible enterprise based on state-of-the-art, back-end business

processes with the implementation of ERP systems with the support of Top-management

which always, is key to successful ERP implementations.

For banks not yet considering ERP systems, this research urges that the experience of

peers who have adopted ERP software is an indispensable source of information for

determining their own IT strategies. Likewise it recommends that adopters regularly

compare experiences with their industry peers – leveraging on this survey for an industry-

specific ERP software benchmark.

4.2.3 Call for ERP Implementation Caution: Recommendations

Here cases of international companies for reference to Indigenous companies are discussed

—Due to problems with an ERP module rollout, medical care product manufacturer Invacare

reported a $30 million (USD) shortfall for the fourth quarter of 2005.

Likewise Grainger, a Fortune 500 distributor of manufacturing supplies and spare parts lost

$19 million (USD) in sales and $23 million (USD) in earnings during the second and third

quarters of 1999.

The culprit—Grainger’s new ERP system, which was counting more products than were

actually on hand in the company’s warehouses.

In 1999, Hershey launched a $112 million (USD) dollar ERP system.

Because of various implementation snafus, Hershey was unable to effectively ship its products

to retailers for Halloween and Christmas of 1999.

The result—a 19 percent drop in 1999 Halloween candy sales, and a 12 percent drop in 1999

revenue overall.

25

5.1 Research Findings and Analysis

• Market segmentation with pricing bias toward companies having yearly turnover around and generally above USD 15 million (eqv 2 billion Nigerian Naira).

About 60% of the Nigeria’s corporate clientele are in this segment.

• Mid-Market client expectations:

Obtain competitive, “fit for purpose” business solutions that would meet or exceed user’s expectations through continual improvement.

Solution deployment needs to be rapid and economically justified.

• Key areas of focus for Vendors/Solution Providers:

Proven package configuration and implementation experience before selecting vendors

“Fit for purpose” bespoke systems development and rapid deployment for decision support

• Cost trend from initial purchase to consistent long term usage decreases over time from

high cost of Initial Purchase to the lowering cost at consistent long term usage as

presented in Fig 6.

10Fig 8 Cost Trend of Automation with Traditional Systems in use at companies

6Source: SAP - Answer to the challenges: 2004 CDI

Time

Costs

Ongoing Maintenance

Consistent Costs-Long Term

Initial Purchase

26

5.2 SWOT analysis for ERP Market: Nigeria vis-à-vis Global Market

SWOT Analysis—Analysis for Multinational Companies to the Left, and Nigerian Companies to the

Right. MULTINATIONAL ERP MARKET NATIVE ERP MARKET

Strengths • Subsidiaries of, and powerful industrial

groups already using it • Market is expanding • Work force is qualified (over 60%

personnel with high educational degrees) • Subsidiary connects to group IS as same

packages are to be implemented in other subsidiaries.

Strengths • Subsidiaries of and powerful industrial

groups already using it want to see ancillary companies adopt it

• Market is expanding

Weaknesses

• There is still too much of a tendency to try and keep it small and simple, to rely on family for management and simple bookkeeping for information. Many hold themselves back, being somehow convinced that they cannot compete with overseas business.

• Brain drain and incapacity to retain skilled manpower.

• Conventional government owned business are by design labour intensive, so efficient ERP systems have little place.

• Expatriate businesses make their buying decisions in their home countries so any ERP system decision to purchase would not be made in Africa, and that locally-owned industries are too small to warrant ERP systems.

Weaknesses • Rising debt burden among major players • Economic recessions and Slow downs • Bitter Price Wars among major players

27

Opportunities Opportunities

Threats Threats

• Industry Consolidation

• Highly price sensitive mid-market

• Intensely competitive enterprise applications market

• Awareness among executives to the benefits still low

• Highly price sensitive mid-market

• Intensely competitive enterprise applications market

• Enterprise Support offering expected to increase share of maintenance sales. A major advantage for ERP vendors despite ERP consolidations.

• Fast growing SMB market segment

• Expanding product line through innovation

• Entrepreneurship, knowledge, staff skills key

to ERP usage on the rise • Chase for small to medium enterprise sector

starting to yield expected patronages. • Increasing awareness and patronage

government Patronage increasing.

28

5.3 Other Findings—Multinational Companies

5.3.1 Vendor Landscape

There are currently two major players in the ERP software market: SAP and Oracle. However,

those two companies represent three major products, SAP, Oracle, and PeopleSoft due to

Oracle’s January 2005 acquisition of PeopleSoft. Over the last few years there has been

significant consolidation in the ERP vendor market. The most recent and most notable

acquisition occurred when Oracle successfully acquired Peoplesoft after a bitter 18-month

takeover battle. PeopleSoft had just acquired JD Edwards when Oracle initiated its hostile

takeover. Now both PeopleSoft and JD Edwards products are being integrated into the Oracle

solution suite. While Oracle has already begun an effort to integrate the best of each product

line via an initiative called “ Fusion”, PeopleSoft will remain a separate, supported product for

at least the next few years. Although Oracle and PeopleSoft have generated more media

attention due to their merger, SAP remains the market leader in terms of ERP software sales.

5.3.1.1 SAP AG Profile

SAP AG (SAP) is a provider of business software solutions. Its principal activities are the

development, marketing, sales and support of a variety of software solutions, primarily

enterprise application software products for organizations, including corporations,

governmental agencies, aerospace and defense, and educational institutions. mySAP

Business Suite solutions are helping enterprises around the world improve customer

relationships, enhance partner collaboration and create efficiencies across their supply chains

and business operations. The Company has more than 26,000 customers in over 120

countries that run more than 88,700 installations of SAP software.

Table 7-SAP Overview

US Address

SAP America, Inc. 3999 West Chester Pike

Newtown Square, PA 19073 (610) 661-1000 (610) 355-3106

Year Founded 1972

Annual Revenue $9.7 billion

Number of Employees

31,000+

29

5.3.1.2 Oracle / PeopleSoft Profile

Oracle Corporation is an enterprise software company that develops, manufactures, markets,

distributes and services database software and infrastructure software, including application

server, collaborative software and development. The Company also offers a suite of business

applications software. It is organized into two businesses, which are further organized into five

operating segments. The software business consists of two operating segments: new software

licenses and software license and product support. Oracle's services business consists of

three operating segments: consulting, advanced product services and education.

Table 8-Oracle Overview

Address

500 Oracle Parkway Redwood Shores, CA 94065 (650) 506-7000 (650) 506-7200

Year Founded 1977

Annual Revenue $10 billion

Number of Employees 40,000+

Website

www.oracle.com

www.peoplesoft.com/corp/

Oracle's Acquisition of PeopleSoft-http://www.oracle.com/peoplesoft/index.html

In December 2004, the Company acquired PeopleSoft, doubling the Company’s share of the

ERP market. PeopleSoft had acquired JD Edwards in 2003. The PeopleSoft acquisition will

require Oracle to support multiple product lines while simultaneously pursuing a significant

effort to merge the diverse ERP products.

30

6.0 Conclusion and Recommendation

My intent is that indigenous Nigerian companies implementing ERPs and those making buying

decisions leverage upon this research to enhance their competitive edge. The business

productivity measurement framework used in this study is to provide a useful mechanism to

gauge the perceptions of actual end users and to benchmark the applications according to the

productivity charts.

Three major points emerge from this study:

• The importance of user productivity should be significantly elevated in software purchase

decisions.

User attitudes are of prime importance, equal to feature/function comparisons. Indeed,

users must feel comfortable using advanced application functionality if it is to benefit the

organization. This study, therefore, has broad implications for companies who are in the

process of developing selection criteria for use as a basis for evaluating ERP systems.9

• High user productivity is driven by more than an appealing user interface and must be

evaluated on multiple dimensions.

• Applications differ in their ability to make features available, usable, intuitive, and

valuable to end users and high marks in these areas positively impact user productivity.

Respondents in this survey scored Microsoft and Oracle applications higher across the

board than they did SAP applications.

Here’s a promise from a major ERP systems provider trying to penetrate the Nigerian ERP

SMB Market. These views are without bias to any one ERP solution.

• They can implement and go-live fast with measurement in days and weeks rather then

months and years.

• They can quickly have any required modifications made at a fraction of the cost of

other systems.

• They can easily and cost effectively integrates into other systems they are required to

support.

• They have a system that can easily adapt to almost any environment as their business

changes.

• They can be assured of a virtually unlimited upgrade path and scalability.

• And last but not least, they can finally have a fixed long term cost that they can predict

and manage.

9 This finding is echoed by Forrester, which concluded that “&before buying or building a new software application — or when making the decision to overhaul an existing implementation — firms should evaluate application usability as a critical component, right along with technology, architecture, and functional breadth and depth.” Put Business Applications To The Usability Test, Forrester Research 2006.

31

With promises and evidences of impressive ROI’s after ERP implementations as submitted in

this work one hopes that the government and businesses will brace up to the challenge of

ensuring ERP systems drive the core of their operations and business re-engineering

processes.

I hope that this framework proves valuable for those considering application purchases and to

enhance their competitive edge, as ERP systems can boost a company’s bottom line but an

ineffective ERP evaluation and implementation can bring a company to its knees

32

7. References

Al-Mashari, M. 2000. 'Constructs Of Process Change Management in ERP Content: A

Focus on SAP R/3', Proceedings of 2000 Americas Conference on Information

Systems, AMCIS 2000, Long Island, California, USA, pp. 977-980.

Alaezi, Onwukwe (2007): Verbal Discourse on Problems of Small Businesses in Nigeria. Center for Entrepreneurial Studies, Fed-Uni-Tech Owerri.

Brown, C., Vessey, I. (1999). “ERP Implementation Approaches: Toward a Contingency

Framework”, Proceedings of the 20th international conference on Information

Systems, ICIS 1999, 411-416.

Daniel A. Carr (2004), SAP the Answer to the Challenges, Computer Decisions International (CDI) Publications, Michigan

Davenport, T. 1998. 'Putting the Enterprise into the Enterprise System', Harvard Business Review, July-August 1998): 121-131.

ERP Market Hits A Rough Patch, Growth Declines. The Financial Express (Mar 12,

2003)

Forrester (2006), Put Business Applications To The Usability Test. Forrester Research

2006. Harmon,P. "Developing an Enterprise Architecture," Business Process Trends

Whitepaper, January 2003

J Kirakowski(1994), The Use of Questionnaire Methods for Usability Assessment. SUMI

Background Reading Handbook, 5--The SUMI Questionnaire as at Present, Pg 16.

Lam, Wing: The Journal of Computer Information Systems, Saturday, October 1-2005.

http://www.allbusiness.com/technology/1066322-1.html

McSweeney, R. (1992), SUMI -- A psychometric approach to software evaluation. Unpublished MA (Qual) thesis in Applied Psychology, University College Cork, Ireland.

33

Samantaray, Swatisudha. (2000) Can ERP Become An Alternative To MIS?, Roll. No.

R060106013, UPES

Tom Nevin (1999). Are you ready for ERP?. African Business: June, 1999

William G. Zikmund, Oklahoma State University, Business Research Methods.7th Edition:

Thompson South-Western.

William J. Stevenson, Rochester Institute of Technology. Operations Management. Ninth

Edition: McGraw-Hill, New York.

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APPENDIX A -Vendor/Solution Provider Questionnaire Sample

Primary place of business address is (check all that apply) [ ] Owned Rented [ ] Rented with an option to buy [ ] Donated Do you control one or more entities? [ ] No [ ] Yes Which industry sector is always most ready to embrace ERP solutions? [ ] IT [ ] Aerospace [ ] Health [ ] Banking [ ] Public Sector [ ] Oil and Gas [ ] Telecommunications Which industry sector is least ready to embrace your ERP solution? [ ] IT [ ] Aerospace [ ] Health [ ] Banking [ ] Public Sector [ ] Oil and Gas [ ] Telecommunications Service performance delivery improved after your client, the company in question installed ERP solutions for

day to day running of their businesses. [ ] No [ ] Yes [ ] Undecided How would you rate your client’s assessment of your solution? [ ] High [ ] Low [ ] Fair

Which of these are is most relevant to your gross income. [ ] Maintenance Fees [ ] Installation Fees [ ] Client/Vendor Partnership Fees What is the major challenge of end-users? [ ] Inadequate Previous Training [ ] Improper IT Orientation [ ] Software Performance Issues [ ] Indifference Do you offer installation and training or do users have to figure it out from the manual (if they even read it)? [ ] Yes [ ] No Will you fly someone out there, do a site survey to review user alarms, transport, and general needs, help them design a perfect fit solution, field trial it with clients, and support them after installation? [ ] Yes [ ] No [ ] Yes but subject to negotiation Does your solution fit with end-users manpower and resource availability? [ ] Yes [ ] No

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APPENDIX B-End-User Questionnaires–Open-Ended Questions Sample

Industry Type [ ] IT [ ] Aerospace [ ] Health [ ] Banking [ ] Public Sector [ ] Oil and Gas [ ] Telecommunications [ ] Manufacturing What is the ERP user size of your organization? [ ] 1-9 [ ] 10-99 [ ] 100-999 [ ] 1000-9999 Annual gross revenue (check range that applies) [ ] 0 - N999,999 [ ]N1,000,000 – N99,999,999 [ ] N100,000,000 – N499,999,999 [ ]N500,000,000 – N999,999,999 [ ]N1,000,000,000 –N1,499,999,999 [ ]N1,500,000,000 or more Doing what you want to do with this software is straightforward [ ] Strongly Agree [ ] Agree [ ] Disagree [ ] Strongly Disagree [ ] Undecided My company is able to change how we use the software as our business Changes [ ] Strongly Agree [ ] Agree [ ] Disagree [ ] Strongly Disagree [ ] Undecided [ ] Don’t Know This software helps me collaborate with other companies work I with, such as suppliers, customers, partners, or service providers. [ ] Strongly Agree [ ] Agree [ ] Disagree [ ] Strongly Disagree [ ] Undecided It takes too long to learn how to work with this software [ ] Strongly Agree [ ] Agree [ ] Disagree [ ] Strongly Disagree [ ] Undecided This software is very awkward to use [ ] Strongly Agree [ ] Agree [ ] Disagree [ ] Strongly Disagree [ ] Undecided I sometimes don’t know what to do next with this software [ ] Strongly Agree [ ] Agree [ ] Disagree [ ] Strongly Disagree [ ] Undecided There is too much to read before you can use the software 3.9 46% [ ] Strongly Agree [ ] Agree [ ] Disagree [ ] Strongly Disagree [ ] Undecided This software is awkward when I want to do something which is not standard [ ] Strongly Agree [ ] Agree [ ] Disagree [ ] Strongly Disagree [ ] Undecided There are too many steps required to get something to work [ ] Strongly Agree [ ] Agree [ ] Disagree [ ] Strongly Disagree [ ] Undecided It is easy to share my comments and provide feedback on the work of others in ERP software. [ ] Strongly Agree [ ] Agree [ ] Disagree [ ] Strongly Disagree [ ] Undecided What is the percentage of users licensed to use your company’s ERP systems? [ ] Less than 10% [ ] 10-50% [ ] 51-90% [ ] Above 90% Company relationship to ERP Solution Provider [ ] Vendor Relationship [ ] Installation/Maintenance Relationship [ ] Other Partnership [ ] Unsure Did the software match up to what they promised at the sales Presentation? [ ] No [ ] Yes [ ] Undecided Based on its transactional efficiency would you recommend ERP solutions to companies who want to enhance their competitive edge? [ ] No [ ] Yes [ ] Undecided

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SUMI Questionnaire Page I

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SUMI Questionnaire Page II