TECHNOLOGY FOR BUSINESS
Supporting Industries as a Main Driving Force for E-commerce
Adoption in Saudi Arabia
Hani Brdesee, Brian Corbitt and Siddhi Pittayachawan
School of Business IT and Logistics, RMIT University, Bourke Street, Melbourne, Australia
Keywords: Technology, e-Commerce, Adoption, Tourism, Saudi Arabia, Supporting Industries.
Abstract: Using a qualitative approach, this study examines e-Commerce adoption in the Saudi tourism industry. The
research concerns factors that impact of tourism firms moving their sales online. The study’s findings
suggest a relationship between the competency of Saudi’s ICT supporting industry, and the level of
e-Commerce integration in the tourism industry. Further, assumptions of global e-Commerce regarding the
acceptance of universal payment systems and the intention of firms in pursuing a strategy of e-Commerce
may not be valid for some developing countries. The conclusion from this study is that assumptions
underpinning global e-Commerce are based on the practices of developed economies and are not yet
sufficiently flexible to accommodate elements of difference, as described by this Saudi study.
1 INTRODUCTION
Communications are the lifeblood of business, and
the last decade saw widespread adoption of
interlinking technologies as governments and
industry explored concepts in networking the
previous stand-alone operations, (Laube and
Zammuto, 2003). The advent of internet browsers
and communication infrastructure facilitated the rise
of electronic commerce transactions (Turban et al.,
2008). e-Commerce is a constituent of the wider
term e-business; the former referring to trading
products or services via the internet, whilst the latter
comprises all communications, collaboration and
transactions between parties through the internet
(Laudon and Traver, 2009). Thus e-commerce may
be regarded as a commercial conceptualisation that
exploits the internet and its supporting electronic
infrastructure (Shareef et al., 2009).
Online retailing is now an attractive and cost-
effective means for start-ups or smaller firms to
access new customers (Malhotra and Malhotra,
2006). Internet trading allows 24-hour access of
products or services, eliminating communications
delays and leading to higher business transaction
speed (Laudon and Traver, 2009, Schneider, 2008).
Productivity with e-Commerce is enhanced for all
organisations, private and public sectors, through
maximising sales or public services, and minimising
costs (Chaffey, 2002).
Not all businesses adopt e-Commerce; some
avoid it completely whilst others use part of the
infrastructure and, with time, increase their IT-based
functionality (McKay and Marshall, 2004). Theorists
identify behaviours that lead to adoption or refusal
of new technology, (Davis, 1989; Venkatesh et al.,
2003). Findings identify organisations that rely on
technology as the acceptance driver, whilst others
consider organisation or external technology
readiness as the acceptance motivation factor or
factors (Molla and Licker, 2005; Selim, 2008).
2 LITERATURE REVIEW
Researchers explore the acceptance rate for new
technologies through theoretical modelling.
Innovation diffusion theory is routinely used in
empirical studies to provide a structure for testing
technology adoption variables (Marez and Verleye,
2004; Troshani and Doolin, 2007).
In the theory of reasoned action, an individual’s
action is determined by the behavioural intention to
act, (Ajzen and Fishbein, 1980). The theory of
reasoned action posits that beliefs and evaluations
determine attitude, normative beliefs and motivation
to the subjective norm. It was later used in the
development of the Technology Acceptance Model
175
Brdesee H., Corbitt B. and Pittayachawan S..
TECHNOLOGY FOR BUSINESS - Supporting Industries as a Main Driving Force for E-commerce Adoption in Saudi Arabia.
DOI: 10.5220/0003448401750180
In Proceedings of the International Conference on e-Business (ICE-B-2011), pages 175-180
ISBN: 978-989-8425-70-6
Copyright
c
2011 SCITEPRESS (Science and Technology Publications, Lda.)
(TAM) (Legris, Ingham and Collerette, 2003). TAM
posits that perceived ease of use and perceived
usefulness are important factors in explaining ICT
systems’ usage; that is, the degree to which a person
believes that using a technology will save effort.
Empirical studies find that perceived usefulness, not
perceived ease of use, is positively related to
behavioural intentions to use an IS or ICT
application (Chau, 2002; Hu et al., 1999). Venkatesh
et al., (2003) formulated the unified theory of
acceptance and use of technology (UTAUT).
Researchers subsequently successfully tested the
unified model (Shaobo and Gang, 2008; Wills, El-
Gayar and Bennett, 2008). However, scholars find
that technology adoption theories and models such
as TAM should focus on individuals’ behaviour, not
the behaviour of an entire organisation (Liao et al.,
2008; Suebsin and Gerdsri, 2009).
The tourism industry comprises several
interrelated sub-sectors such as travel agents,
airlines, hotels, car rental agencies and tour
providers. The firms of these sub-sectors are bound
to accept change through market pressures such as
competition, customer demand and technological
change. Researchers consider industry factors and
environmental conditions as the drivers for change,
not necessarily the behaviours, norms, and beliefs
that come from individual, organisational or national
culture. There is a continuum of industry-based
factors, such as strategic positioning, supply chain
logistics and information-sharing, that motivate the
organisations to respond to technological change
(Molla and Licker, 2005; Piris, Fitzgerald and
Serrano, 2004). An extended e-Commerce adoption
model proposed by Molla and Licker (ibid.)
considers the relevant contextual and organisational
factors that can affect e-Commerce adoption in
developing countries. The perceived e-readiness
model (PERM) comprises two constructs, first,
perceived organisational e-readiness (POER), and
second, perceived external e-readiness (PEER). Each
construct includes factors that impact the
organisation’s initial e-Commerce adoption. The
study finds that the majority of these factors provide
meaningful predictors of e-Commerce adoption.
3 STUDY CONTEXT
This study examines a global phenomenon of trade
and technology from a standpoint of a commercial
environment which is steeped in its own traditions
and thus very different assumptions emerge. The
contextual discussion places this research in Saudi
Arabia undergoing great change, and draws from
this aspect of Saudi practices that may affect the
outcomes of the research.
Of primary importance to Saudi Arabia is an
effective ICT infrastructure and the Ministry of
Communications and Information Technology
(MCIT) role is to develop the country’s ICT services
for economic and social development (MCIT 2007).
E-readiness, as the Economist Intelligence Unit
defines it, is “the measure of a country’s ability to
leverage digital channels for communication,
commerce and government in order to further
economic and social development” (EIU 2009).
Saudi Arabia is ranked 46th from a total of 70
countries, having an e-readiness level of 5.23 from a
maximum of 10, considered a reasonable acceptance
of new technologies (Aldogily, 2009; Almoteri,
2009).
Saudi Arabia accounts for some 40 per cent of
ICT spending in the Gulf region (BMI, 2009). The
country is therefore a maturing market for ICT;
however, it has a fast-growing population and
demand for new technological solutions.
Liberalisation and competition in the telecom sector
will increase domestic ownership of computers and
smart phones.
There are several financial organisations,
including Alrajhi Bank and Alahli National Bank,
that offer online payment systems through debit
cards and the interest-bearing Visa and Master Cards
for those willing to use them for international or
non-Arabic transactions (Alriyadh, 2007).
Islam provides the traditional reason for visitors
to come to Saudi Arabia for pilgrimage. The
pilgrimage involves bookings for travel, food and
lodging. Further, there are places of antiquity and
religious devotion in this vast area, and pilgrims may
take the opportunity to visit traditional sites whilst
they are in Saudi Arabia.
Saudi Arabia is a stable centre for religious,
traditional and adventure visitors. Key tourist areas
include coastal areas, areas of natural beauty and
historical sites. It annually hosts some sixteen
million domestic tourists and seven million
expatriate tourists, besides the five million pilgrims
(Seddon and Khoja, 2003). Further, domestic
tourism is also a government target, as three-quarters
(76%) of Saudis holiday outside the country,
spending about $US6.5 billion each year (Middle
East Business Intelligence 2001).
Globally, tourism continues to grow and the
travel industry is swift to adopt technology to
facilitate growth (Ahmed, Zairi and Alwabel, 2006).
This impacts the Saudi tourism industry, which must
adapt to meet the competition from a global tourism
industry that is effectively online and will absorb
ICE-B 2011 - International Conference on e-Business
176
their clientele over time.
4 RESEARCH METHODOLOGY
This study tested the principles in the UTAUT
model and the related organisational and external
factors from the perceived e-readiness model. These
theories provide an integrated framework for
identifying factors concerning tourism
organisations’ adoption of e-Commerce for
marketing. This research used a qualitative research
method to understand the beliefs and attitudes of
leaders of Saudi tourism organisations regarding
their adoption of e-Commerce (Neuman, 2003).
Participants to the study were selected from the
tourism. The interview questions addressed adoption
of e-Commerce, whether the organisation was
prepared to adopt internet trading, and the
opportunities and issues that the interviewee
envisaged regarding e-Commerce for Saudi Arabia.
Jeddah is the tourism gateway for Saudi Arabia,
and the city’s travel industry. Twenty firms were
selected across the range of the travel industry.
Industrial sectors were reflected in participant firms
trading in accommodation, air travel, events and
attractions, and there were five firms offering some
religious travel and four travel agents. The data were
collected by semi-structured interviews to capture
the practices, views and intentions of tourism
industry leaders in Saudi Arabia regarding e-
Commerce. Information collected from the study
participants was coded for common themes for
comparison with the literature. Using interpretive
analysis, the data were examined for a general sense
of how e-Commerce is used or accepted in Saudi
tourism organisation based on the research question.
Each quote was classified under two main
categories: emergent or preset category.
5 DISCUSSION
The overall indicators for e-Commerce usage in the
Saudi tourism industry were that, in common with
national retailers, the majority of participants (10)
were not fully engaged in e-Commerce. There was
some use of websites for bookings, and ICT was
used for business-to-business transactions. An
airline representative was the sole adopter of e-
Commerce to consumers. For tourism organisations
contemplating moving business online, issues
regarding ICT infrastructure and the standard of
local providers were a priority. Respondents to the
study said that secure online financial support from
the local banks was not sufficiently robust to
encourage full online funds processing; other
comments were that regional web developers did not
understand the travel industry and that they were
indifferent to sales promotion opportunities; the
industry representatives were not convinced of the
capacity and commitment of these firms. For web
design, interviewees preferred freelance or global
providers.
Substandard regional ICT infrastructure
impacted the tourism industry and its ability to
compete in the online commercial environment.
Organisations could not prosper without support,
and this was the main argument of the participants.
Participants said that they did not see progressive
ICT organisations within the country that could
guide them to e-Commerce innovation and
infrastructure; nor could they envisage support for
even lesser technologies.
Whilst tourism firms could access global e-
Commerce support, the largest travel contingent, the
pilgrims of Hajj and Umrah, is complex in its
logistics and process. Although parts of the Hajj
package were conducive to online sales, such as air
transport and to a certain extent accommodation,
pilgrims required a full religious and travel service
and this involved both the public and private sector
working in concert to deliver to millions of religious
travellers from many countries.
The absence of dependable local e-Commerce
providers does not prevent Saudi tourism firms
seeking innovation. Thus, travel agencies and
tourism organisations use international providers.
One participant, P4, had experience with several
Saudi travel agencies, and was knowledgeable about
the technology limitations in the country He formed
a partnership with an Indian provider:
Furthermore, the web developers, programmers
and designers who work for the local firms are
expatriates. As the majority are not fluent in Arabic,
the resultant websites are not sufficiently attractive
to induce customers to buy. To surmount this issue,
P5 said that his corporation had developed its online
booking website in Canada; however, those who
produced the website had an Arabic background.
Whilst the larger firms of some participants were
knowledgeable in global outsourcing for their ICT
needs, smaller organisations may not be able to do
so. There is thus an opportunity for Saudi
entrepreneurs to access tailored ICT capability from
global providers and distribute it to the local market.
P11 supported this initiative, questioning the lack of
interest in international firms to access the large
available Saudi market.
Other interviewees mentioned the high cost of
TECHNOLOGY FOR BUSINESS - Supporting Industries as a Main Driving Force for E-commerce Adoption in Saudi
Arabia
177
local ICT providers in implementing full e-
Commerce successfully. However, P6 suggested that
Saudi organisations may bypass local ICT issues by
using common facilities, mentioning an international
online booking service as an example. An Arab
website could be available to local tourism
organisations to upload their packages and prices.
The main barrier against a common online Saudi
booking provider such as P6 suggests is the lack of
information produced by the industry. The
participants noted that any booking portal cannot
operate without reliable information and
performance guarantees. P4 commented on the
success of international online booking providers,
noting that the depth of information from their
global networks is the driver of their success. P2
said that his organisation’s adoption of virtual
marketing had to be superior to that available in the
local and even the global market. Participants
frequently stated that it is not enough to engage an e-
Commerce provider, if such were available, but that
the provider had to understand the tourism industry
to the extent that it could be marketed well online.
One other issue was the selection of the
outsourcing ICT sector. Some participants preferred
the generic, off-the-shelf solution, as their
management considered that this form of e-
Commerce solution minimised risk of failure and
was cost-efficient. Other participants preferred
customised systems, or purpose-built solutions. The
third group preferred proven freelancers, as they
were disinclined to approach the industry leaders.
Further, as noted, the last group used global web
developers quite successfully. For all groups,
participants were not confident that their providers
could take their online presence to the next step for
e-Commerce.
From the hotel management’s point of view,
successful online booking websites are now well-
developed and stable, so that they do not need
further booking enhancements. P3’s organisation, a
chain of Saudi hotels, had tested two customised
booking systems offered by local providers. Neither
was satisfactory and a global provider was later
appointed to implement the service. The interviewee
said that the disappointing experience of the local
providers and the greater complexity of the e-
Commerce applications would lead preferences to
global providers for their proven e-Commerce
systems.
e-Commerce presents challenges for tourism
industry members who prefer not to depend on
intermediaries, or wholesalers, to sell their services.
However, to sell directly to consumers some
companies prefer to work with freelancers who can
develop a specialised system to meet client needs.
Frequently, the decision to use freelancers is based
on competency and value for money. The general
opinion of the participants, and thus the Saudi
tourism industry, was not complimentary towards
their local ITC providers.
Participant P3 was the hotel chain representative
and, as noted, accepted a booking system by a local
ICT provider for testing. The provider installed the
demonstration system for staff to load and trial;
however, the test was disappointing due to the
transactions speed.
The competency standard of the local ICT
industry support is perhaps the greatest barrier to
tourism development for Saudi Arabia. It is not at
issue whether the industry should be online – all
tourism members must use ICT to communicate
throughout the industry, even if they cannot fully
reach their customers through the internet. It is not
sufficient for travel agencies to prefer shopfront
sites; the proliferation of travel-related experiences
in Saudi Arabia alone means that the most expert
travel agents cannot access the information
necessary to serve a client’s interests without ICT,
even if it is the most basic of technology, a
telephone.
Participants commented upon the cost of the ICT
providers. As noted, there was reluctance by the
sophisticated participants to employ local ICT
support firms due to a perceived lack of competence;
however, cost for these services was a separate
issue. Participants linked the size of their business to
their ability to justify the outlay for elaborate
websites and online services. Small and medium
sized organisations were not able to afford high cost
e-Commerce solutions.
However, an online presence could reach more
potential customers through website portals, that is,
a tourism organisation could join a travel provider to
market their services. This reduced the cost of either
purchasing ICT services or establishing a unique
website. P6’s organisation used an online portal,
Yosr, which assists many Hajj providers to organise
their client travel data from pilgrim registration to
the finish of the Hajj rituals. The annual cost of the
portal is reasonable because development costs are
shared by the Hajj travel providers. Participants also
linked quality with cost, as higher quality deserves
higher value.
To adopt e-Commerce, online payment is
another issue for tourism organisations in Saudi
Arabia. All participants mentioned the importance of
the payment channels on the internet.
There were statements to the effect that the local
banking institutes do not allow payment providers to
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be connected with e-Commerce websites. Participant
P4 argued that there can be no e-Commerce without
online payment, and these services were not
available within the Saudi financial industry. The
interviewee noted the perceived risk of online
financial transactions with global payment engines.
The participant illustrated this by referring to a
colleague. That person started the business via an
online booking site and contracted with a foreign
online payment provider. The business prospered for
the first few months, and then the payment provider
was asked for the resultant funds. The provider had
disappeared and the matter amounted to fraud.
Similar anecdotes affect the attitude of business
owners toward online commerce who return to the
local financial industry for assistance.
P2 concurred in this view of global finance
managers regarding online services. Regulatory and
logistical restrictions on funds flow between tourism
industry stakeholders: customers, banks and the
tourism industry are further barriers to e-Commerce.
There was a suggestion that a local bank offers a
link to online payment; however, it was not well
publicised.
Although some participants knew about Saudi
online payment providers, there was evidence of
perhaps limited availability of payment online
available from local providers. This is requisite for
e-Commerce. As an example, P5 could not envisage
a problem linking to Saudi online payment
providers, to the extent that his firm was moving
entirely online, with no other transaction channel.
Finally, P10, the airline representative, praised a
Saudi provider of online payment, Sadad. Sadad was
a recent online payment option available to citizens
to facilitate all their financial transactions, including
bills, fees and online tickets, as e-Commerce from
their home computers or mobile devices, or ATM
machines. To date, it is difficult for all tourism firms
to utilise two Saudi banks and Sadad; these
organisations do not promote their services to all
tourism organisations. This makes the adoption of e-
Commerce difficult for these organisations.
6 CONCLUSIONS
From the analysis, the advantages of e-Commerce
are evident to Saudi tourism industry firms. There
are several factors affecting e-Commerce adoption;
however the quality of ICT supporting industries
were of the most concern. The tourism industry
needs efficient support from ICT providers to
practice e-Commerce. Whilst the tourism industry
professed indifference to the global or local
ownership nature of the ICT providers, the findings
were that the local providers present a lesser service
quality than the international firms. Further,
although local ICT providers, particularly website
developers, were considered substandard, their costs
were significantly higher than that of the global
market for a particular service. Cost of e-Commerce
implementation was an issue for the tourism
industry, which was resisting government
encouragement to move Hajj and Umrah bookings
online. None of the tourism organisations used
global payment methods which concerned potential
interest payments, as these were contraindicated
given the nature of much of their business.
The conclusion from this study is that
assumptions underpinning global e-Commerce are
based on the practices of developed economies and
are not yet sufficiently flexible to accommodate
elements of difference, as described by this Saudi
study. Global assumptions of acceptable payment
systems, the relative strength of the ICT industry to
support e-Commerce, and firms’ intentions
regarding e-Commerce are not necessarily valid for
developing countries.
Whilst there are social and legal issues regarding
Saudi online trading, findings show that the state of
the ICT industry in Saudi Arabia significantly
impacts e-Commerce for the nation. Thus the
necessity of managing up to four million people for
Hajj requires a reliable and competent ICT support
industry. This study can initiate further research in
the strength of the ICT support industry and other
factors concerning e-Commerce for developing
countries.
ACKNOWLEDGEMENTS
This research is part of PhD thesis by the main
author under supervision of two supervisors at
RMIT University, Melbourne, Australia. The main
researcher’s study is affiliated by King Abdulaziz
University, Jeddah, Saudi Arabia which is
represented by the Saudi Arabian Cultural Mission,
Canberra, Australia. The authors would like to thank
the participants who added to the study all the sense
of context.
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