Vendors’ Perspective
Jim Odhiambo Otieno
School of Business and computing Science, Middlesex University
Burroughs Roads, NW4 4BT, U.K.
Keywords: ERP, Challenges, Critical Success Factors, Implementation, Kenya.
Abstract: Enterprise Resource Planning (ERP) systems have transformed the way organizations go about the process
of providing information systems. They promise to provide an off-the-shelf solution to the information
needs of organizations. Despite that promise, implementation projects are plagued with much publicized
failures and abandoned projects. Efforts to make ERP systems successful in organizations are facing
challenges. The purpose of the study reported in this paper was to investigate the challenges faced by
organisations implementing ERP systems in Kenya based on consultant point of view. Based on the factors
identified from the interview, a survey was administered to ERP consultants from five Kenyan organisations
that were identified as having a key role in ERP systems implementation in their firms in order to assess the
criticality of the identified challenges. A factor analysis of these items identified six underlying dimensions.
The findings of this study should provide to management of firms implementing ERP systems a better
understanding of the likely challenges they may face and put in place appropriate measure to help in
mitigating the risk of implementation failures.
An Enterprise Resource Planning (ERP) system
is an integrated set of programs that provides
support for core organizational activities such as
manufacturing and logistics, finance and accounting,
sales and marketing, and human resources. An ERP
system helps the different parts of an organization
share data and knowledge, reduce costs, and
improve management of business processes. In spite
of their benefits, many ERP systems fail (Stratman
and Roth, 1999). Implementing an ERP system is a
major undertaking. About 90 percent of ERP
implementations are late or over budget (Martin,
1998) and the success rate of ERP systems
implementation is only about 33% (Zhang et al,
2003, Arif et al., 2005).
Over the past few years limited research has been
conducted about ERP implementation issues: mainly
case studies in individual organizations have been
reported. A major problem with such ERP case
studies is that very few implementation failures
challenges resulting to these failures have been
recorded in the literature, and thus the reasons why
implementations fail are not known to practitioners
and researchers. That is a motivation toward
conducting empirical studies to explore challenges
that affect ERP systems implementation. In the
context of ERP project implementation, challenges
represent major pitfalls which if not addressed then a
project stands little chance of success. This study
examines the challenges faced by user and vendor
organizations implementing ERP systems in Kenya.
Consultants from five consulting organizations, who
were identified as having a key role in ERP systems
implementation, were interview in stage 1 of the
research in order to empirically identify challenges
faced by their client organizations during ERP
implementation. A survey was then conducted to
assess the criticality of the identified challenges
which were perceived by respondents as posing high
risk to successful ERP implementation.
This paper is organized in four sections. First
ERP-related literature is reviewed. The next section
introduces the research methodology, followed by
the presentation of the results. The paper ends with
the conclusions and implications for future research
and practice.
Odhiambo Otieno J. (2008).
In Proceedings of the Tenth International Conference on Enterprise Information Systems - DISI, pages 505-510
DOI: 10.5220/0001714605050510
The choice of an appropriate research methodology
is critical in guiding researchers on how best to meet
research objectives. In this study, the purpose was to
discover the perceptions and experiences of
consultants involved in ERP implementation with
regard to the challenges faced by the client
organizations during implementation of ERP
systems. The research was conducted in two stages.
First staged involved an interview with consultants
drawn from different functional areas in five
consulting organizations who had been involved in
ERP implementation at some stage. The second
stage involved conducting a survey on the factors
identified in stage 1 to assess their critically. The
analysis has enabled the identification critical
challenges experienced by organizations
implementing ERP systems based on vendors’
perceptions and experiences.
The target of the study was the consulting
organizations that have been involved in ERP
implementation in Kenya. The key informant
method was used for collecting information in a
social setting by surveying (or interviewing) a
selected number of participants. Five consulting
organisations participated in the study. We contacted
the ERP project managers of each company in
charge of ERP implementation. Questionnaires were
sent to the ERP project managers of each firm, who
forwarded the questionnaires to the project team
members in charge of individual processes. Eight
questionnaires were distributed and a total of six
(75%) were returned. Of the companies that
responded half are wholly locally owned while the
other half are fully foreign owned with both
categories having a workforce 20 to 40 staff. The
vendors implemented a cross section of ERP
solutions ranging from SAP, Oracle financials to
others like Sage line 500. Of the vendors that
responded, 38% implement Oracle Financials,
followed closely at SAP (25%), BAAN, Navision
and Ebizframe all equally had 13%.
The questionnaire consisted of two main parts:
the company background and statements which
expressed the challenges identified in stage 1 one of
the study. The first part was designed to determine
characteristics such as size of the company,
ownership, location of company etc. The second part
consisted of nineteen statements about the success
factors of ERP systems implementation, derived
from the literature review. The language used in the
survey was both English and Kiswahili (national
language in Kenya). Translation was rather easy
because Kenyans used original English terms for
many technical and management concepts and
especially for information systems and computing
The factors identified at the interview stage were
included in the questionnaire and respondents were
asked to state the extent they disagreed or agreed
with the statements in a likert scale of 1-strongly
disagree, 2- Disagree 3- Indifferent, 4-Agree and 5-
Strongly agree. This method was employed on the
grounds that it avoids the problems of having to
consider ten challenges simultaneously in order to
rank them. The data collected was then analyzed by
using SPSS. Based on the responses, descriptive
statistics, factor analysis (FA) and reliability tests
were carried out to identify the critical challenges
faced by user and vendor organizations during ERP
implementation in Kenya and data validity
Based on the responses from the vendors and
literature review, we identified 10 factors that could
be considered as major challenges faced by
organisations implementing ERP in Kenya. Table 1
show the factors in order of ranking.
Table 1: Ranking of challenges.
Challenges Mean
High cost involved 4.99
Lack of IT skills among users 4.94
Poor ICT infrastructure 4.83
Data conversion problems 4.81
Inadequate time allocated for training 4.71
Integration problems 4.68
Government ICT policies 4.67
High staff turnover 4.61
Scarcity of funds 4.56
Inadequate preparation by employees 4.50
The individual mean value of the Likert rating
scale is the popular usage indicator for measuring an
item's importance, without regard to the other items:
so the higher the value the more important the
factor. All items are rated above the 3.0 scale (mid-
ICEIS 2008 - International Conference on Enterprise Information Systems
Table 2.
Challenges Mean F1 F2 F3
High cost involved 4.99 .792
Lack of IT skills among users 4.94 .682
Poor ICT infrastructure 4.83 .689
Data conversion problems 4.81 .815
Inadequate time allocated for training 4.71 .792
Integration problems 4.68 .610
Government ICT policy 4.67 .556
High staff turnover 4.61 .651
Scarcity of funds 4.56 .699
Inadequate preparation by employees 4.50 .815
2.58 2.21 2.07
Percentage of variance
18.5 15.54 10.78
Cumulative percentage of variance
37.96 22.7 40.16
Cronbach alpha coefficient
0.83 0.76 0.68
3.1 Factor Analysis
In an attempt to reduce the number of item
(challenges), and to understand their underlying
structure, a factor analysis (FA) was performed. FA
is a data reduction technique that uses correlations
between data variables. The underlying assumption
of FA is that a number of factors exist to explain the
correlations or inter-relationships among observed
variables (Chatfield and Collins, 1992). For the
present study, FA was performed on all nineteen
variables using principal components extraction
(Tabachnick and Fidell, 1989). The goal of this
method is to extract maximum variance from the
data set within each factor. It is basically used to
reduce a large number of variables down to a smaller
number of components. The measure of sampling
adequacy for the twenty items was 0.87 indicating
that the items were suitable for factoring (Kaiser,
A three-stage factor analysis was conducted with
an orthogonal (varimax) rotation to obtain a stable
factor structure (Rai et al., 1996), resulting in easily
interpretable factors. Under this three-round factor
analysis, items were omitted according to the
following two criteria: (1) no loading greater than
0.45, or (2) loading greater than 0.45 on two or more
factors (Kim and Mueller, 1978).
Table 2 shows the results of this analysis. A first
factor analysis was conducted and produced five
factors. According to the two criteria, one items was
dropped. A second factor analysis on the remaining
9 items resulted in three factors and the dropping of
one item. Finally, a three-factor structure was
derived which kept a total of 8 items after three
iterations. Factor 1 accounted for 37.96% of the total
observed variation; factor 2 and 3 explained 22.7%
and 16.4% of the total variation respectively. The
three-factor solution (cumulative) explained 77% of
the total observed variation. The minimum
eigenvalue from a varimax rotation for which a
factor was to be retained was set at 1.0 in order to
satisfy the minimum eigenvalue criterion (Nunnally,
Factor 1
, named “High cost further escalated by
extensive customization'', comprises four items
relating to ERP system cost: High system cost, data
conversion too involving, scarcity of funds, and
integration problems. All consultant interviewed
alluded to the fact that cost is a major concern for
organizations implementing ERP systems in Kenya.
The cost of ERPs implementation averages between
Kshs. 100 to 500 million (USD 1.4 – USD 7
million). However, the cost of ERP implementation
varies from one ERP to another. Baan and SAP, two
of the ERP systems implemented by case
organisations, charge software license fee charged
based on: 1) the number users, 2) the type of users,
3) the number of master records in the database.
Users are categorised based on what they can do or
not do in the system.
Cost continues to be a concern for many
organisations. In the case of SAP, their costing
model seemed not favour Africa. For example, the
cost charged per day per consultant is USD 1,200
plus and an additional hotel and overnight stay
allowance of USD 400 charged per night. This is
three times above the amount charged in Asian
continent like in India that is USD 600 per day.
Implementation costs were found to be, on average
25% percent over budget. Organisations under-
estimated support costs for the year following initial
implementation by an average of 20%. IS maturity
had a major influence on support cost for the year
following initial implementation. Organisations with
low IS maturity experienced an increase in support
cost whereas IS mature organisations experienced a
decrease in costs. This disparity can be traced, in
part, to the widely varying maturity of pre-ERP
environments. Lack of regional standardization and
low budget for IT within Kenya and other African
nations makes it difficult for ERP companies to find
markets with enough potential to justify investing in
costly customisations of the products.
Consultants also noted that benefits of an ERP
application are limited unless it is seamlessly
integrated with other information systems.
Organisations face many challenges relating to ERP
integration – (1) the challenges of integrating
various functional ERP modules, (2) the challenge
of integration with other e-business software
applications, (3) the challenge of integration with
legacy systems. Integration further escalate the cost
of implementing ERP systems. Organisations noted
that legacy systems have accumulated vast amount
of data vital to the survival and operations.
Integration of ERP systems with legacy systems is
more complex than the integration of ERP modules
and Integration of e-business applications. It
routinely requires the installation of third-party
interface software for communication between ERP
software systems and legacy systems. Second
generation ERP systems use relational database
management system (RDBMS) to store enterprise
data. Data conversion from legacy systems to
RDBMS is often a time-consuming and tedious
Integration of the business processes also faced
additional challenges related to new rules built into
ERP software being incompatible with the
established ways of thinking and the norms of
behaviour embedded in the existing work routines.
This is consistent with the idea of ‘best practice’
being situated. Assistant Purchasing in one of the
organisations while explaining that ERP could not
accommodate their work practice said that:
Given our unique requirement, Ebizframe
could not meet our need. The system could
not accept advance payments. It required us
to raise DN [Delivery Note] first then raise
sales invoice and they receive payment
against the invoice. We don’t work that
Factor 2
, named “Lack of IT skills by users and
high staff turnover” comprises four items relating to
lack of capacity to cope with ERP on the part of all
organizational members at all levels due to the
inadequate time for training and high staff turnover:
lack of IT skills among users, inadequate training
time, high staff turnover, and inadequate preparation
by employees.
An all common complaint was the frequency
with which the case study organisations lose key
personnel experienced with ERP or supporting
technologies. Frequently reported problems were:
(1) losing key IT specialists and user representatives
working on the project while the project was going
on, often despite handsome retention bonuses, (2)
losing experienced people after the project was
complete. Many IT specialists thrive on project work
and view assignment as a ‘competence centre’ and
springboard to lucrative opportunities.
One of the major challenges facing ERP systems
implementation in Kenya is the non-existence of
well-qualified employees in implementing
organisations to manage the implementation process
of the system. In one of the case organisations, the
ERP project was supervised by the financial
controller (the ERP Project Manager) and the heads
of administrations (the key users). None of them had
any knowledge about the computer or the ERP
software. The organisations use India and South
Africa as resource base for implementation. The
MIS General Manager said:
All of the company’s leaders were not
qualified to use the computer…They only
trained on the beginnings of Windows and
DOS…Training was internal in finance
department for one week. One week was
not enough. It was just background
Consultant noted that most of the employees in
the implementing organisations are unprepared for
the changes resulting from ERP implementation.
Implementing an ERP will bring in changes to the
way people work within the organization, processes
will change and there may be job cuts and
rationalization of responsibilities within
departments. All this will definitely evoke resistance
from the employees and this has to be managed
effectively before, during and after the
implementation of the ERP package. Consultants
noted that employees are often inadequately
prepared for the major undertaking of ERP
ICEIS 2008 - International Conference on Enterprise Information Systems
implementation. Most respondents noted that they
were neither aware of the reasons for the
implementation nor the business benefits that can be
expected by implementing a new ERP package. ERP
projects are therefore perceived as cost cutting
measure by organisations which lead to mass staff
layout. Consultants noted that there was no strong
change management team in place to oversee to
approve, implement and track the changes in the
organization, which includes the impact and detailed
structure (i.e. documentation) associated with the
life cycle of the ERP project.
Factor 3
, named “Poor ICT infrastructure and
ICT policies” comprises two items relating to
government policy on ICT and the state of ICT
infrastructure in the country: poor ICT infrastrucre
and government policy on ICT.
Consultants noted that poor telecommunications,
internet and intranet, and mobile coverage affect
ERP adoption and use in Kenya. Organisations in
Kenya face obstacles related to Kenya’s poor
telecommunication infrastructure in getting the ERP
systems up and running. Organisations operating
nationally, regionally, and internationally must incur
additional costs in providing communication
backbone. Consultant noted that most organisation
do not trust the reliability of local
telecommunications and thus are forced to install
alternative telecommunication means, the most
common being Very Small Aperture Networks
(VSAT). This is expensive by Kenyan standards, but
this is the only way to go about it. However, the
drawback with the VSAT system as mentioned by
the IT manager at a consultant is that “it would
support only batch data transfer (via FTP), which
caused significant delays…up to one-and-a-half
seconds per keystroke…that is not acceptable for
online transactions”.
Even with current networks communication is
quite slow. Two main aspects of ERP system by
infrastructure are the system availability and speed
as commented by a consultant at
PricewaterhouseCoopers “The system cannot run
full month without breaking” and when the system is
available it is likely to be slow.
A consultant noted that a company was forced to
completely abandon implementing web-portal in
their ERP due to lack of internet connectivity in
Muhoroni (town in remote location in Western
Kenya). The cost of setting up a private using VSAT
was exorbitant for the company to afford. Poor
internet connectivity is also hindrance to complete
value chain management and customer relationship
The poor ICT infrastructure in Kenya according
to consultants is because the Kenyan government
exerts excessive control over the national
communications operator. The government often
operates national communications directly through
Telkom and Coomunications Commission of Kenya
(CCK), largely because the private sector is often
incapable operating such an infrastructure. There is
hope that things that ICT infrastructure will improve
once Telkom is privitised early next year, 2009.
Although there has been a move towards
deregulation and privatization of Telkom, the
process is still slow and had often been opposed by
government telecommunication ministries national
security forces.
In combination with inefficient state-run
telecommunications, another major impediment to
ICTs in Kenya come from the onerous tariff
structure. It works out that the average
telecommunications revenue per subscriber line in
Kenya is twice as much in Europe, and four to six
times as much as in USA.
Cronbach alpha coefficients were calculated to
test the reliability of these challenges, as shown in
the last row of Table 2. The reliability of
coefficients obtained ranges from 0.67 (factor 3) to
0.83 (factor 1). Srinivasan (1985) proposed that a
coefficient of 0.7 or higher is acceptable, while a
coefficient of 0.5 or higher is considered sufficient
when dealing with exploratory research combined
with unvalidated data. Thus, the reliability
coefficients in this study are deemed acceptable. The
strength of factor analysis is that it provides a basis
for data reduction. Therefore rather than looking at
all ten items, just three factors can be examined.
That simplifies the rankings and clarifies the most
important items. Rather than focusing on individual
items, practitioners and researchers can focus on the
broad set of items represented by the essential
All factors – ten – were .rated as critical (rating > 4).
The findings of this study supports Huang and
Palvia’s (2001) view that ERP projects faces
additional challenges in developing countries related
to economic, cultural and basic infrastructure issues.
In fact, ERP implementations in Kenyan
organizations face some unique challenges some of
which are summarised below:
Costs of the system are high for many
companies thus putting off many potential
buyers of the systems.
Inadequacy in resources e.g. funds thus
delaying the implementation process.
Poor IT skills among users of the system in
the companies.
Poor change management among
implementing companies with users not
ready for change and minimal management
support in the systems implementation
Poor ICT infrastructure especially lack of
adequate network coverage nationally
Inadequate training time allocated to ERPs
implementation. Companies always in a
rush to see the project completed without
due respect to work that has to be done.
Data migration from existing systems very
involving, some times incompatible with
the new systems
The conflict, caused by the implementation of
ERP systems in developing countries, between the
globalization and localization of management work
practices is worth of further investigations.
However, this conflict is not a unique phenomenon
to developing countries.
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