Impact of National Culture and ERP Systems Success IMPACT OF NATIONAL CULTURE ON ERP SYSTEMS SUCCESS

While Implementing an ERP system is still the aim of some organizations, because of limitations associated with these systems, this trend is slowing. The literature suggests that culture is one of the important factors influencing the success of ERP systems. The studies explore the national cultural influence on ERP system, according to our knowledge; most are from developed countries and focus on the implementation stage. Consequently, this paper provides an overview of ongoing research designed to explore the influence of national culture on ERP systems acceptance in two organizations across two countries, Australia has been selected as a representative of the Western world and Saudi Arabia as a representative of Arab world. User satisfaction has been used as surrogate measure of information system’s success and for this study it is also used as a measure of ERP systems success by dividing it into three categories: technological, organizational and personal. Cultural theory from Hall (1976) and Hofstede (1980) have been reviewed in general but for this study cultural dimensions of power distance, uncertainty avoidance, individualism and collectivism and high versus low context, have been viewed in depth. INTRODUCTION Enterprise resource planning (ERP) systems is an industry term covering a variety of activities with the help of software that assist businesses in managing different functions like product planning, purchasing, inventories, supplier, customer service and order tracking [KRG00], [LSH03]. ERP businesses have been very profitable in last ten years with investments of nearly three hundred billions dollars and it is predicted that this margin will increase by seventy nine billion dollars by the end of 2004 [CNN00] A good number of studies have been carried to investigate the influence of national culture on various technologies. National culture influence has been explored in studies about Total Quality Management [Ngo00], consumer behaviour about online buying across four countries Britain, Germany, Taiwan and Japan [SD04], on software piracy [Hus00] and the adoption behaviour of frame relay [PTW01] This paper includes a literature review, research questions, research approach, data collection and analysis and the significance of the research followed by the conclusion. LITERATURE REVIEW ERP System Drivers: For the last decade organizations around the world have been spending a large amount of money to adopt ERP systems. There were six main reasons that emphasized the need for ERP systems. Firstly, companies require a common database; secondly, they want to improve and standardise their process; thirdly, they require ongoing monitoring; fourthly, cutting down the operating cost; fifthly, improving relations with customers and suppliers and finally, improving their decision-making capability [RV00]. However Cooke et al [CP98] and Davenport [Dav00] state that standardise of business process and integrating the softwares are the main motive behind ERP innovation. Davenport [Dav00] concludes that businesses need something to make decisions in a real time environment was one of the main objectives of ERP implementation. Characteristics: ERP systems have many characteristics that are encourage organizations to implement it: For example, standardizing the business process [CP98] , [Dav98] and [LSH03], keeping track of goods [GG00] and [GG04], availability of unproblematic data base [LSH03], easy and fast tracking of errors [STSB02], accessibility of real time information [RV00] and [Zyg99] , sharing the information throughout the organization and empowering individuals in the organization [STSB02], the ability to provide solutions for problems associated with a legacy system [HL99], having less Proceedings of the Second Australian Undergraduate Students’ Computing Conference, 2004 page 23 Chadhar et al. Impact of National Culture and ERP Systems Success development risks [KHL99], integration with existing software systems [SC03], providing support in decision making [Lon98] and [WP03], keeping customers competent in the market [Lon98], and cutting short the production costs [WP03]. Limitation: A survey from a Swedish base research group has revealed that ERP projects normally cost two times more than the expected and also take 2.5 times longer. However in response, they fulfil only 30% of organizational requirements. Most of theses pitfalls are not technical but because organizational and individual issues were not covered during the implementation stage. In other words a system is combination of people and technology and to get maximum output from it, people have to use it in an appropriate way. [AWC02]. Some limitations associated with ERP systems have been reported in the literature: expensive implementation [GG04], integration [Dav98], [TIM01], complexity [Dav98] , [GG04] and [Kra00], internal focus [Hay00] , [LSH03] , [MPA00] and [STSB02], upgrading and modification [MG00], mismatching with existing business processes [GG04] and [TIM04], inadequate support for decision making [GG04] and inadequate support from management [GG04] , [RV00]. Along with mentioned limitations, national culture has been reported by many researchers, as an important factor influencing on ERP systems implementation [ASA02], [Dav02], [EW03], [FO01], [MNN00], [SCY04], [SYK03] and [YS04]. ERP and National Culture: Despite the importance of the topic, very little empirical research has been reported about relation of ERP system and national culture. One STUDY conducted by Sheu et al. [SCY04] used case study and secondary data collection approaches with reference to companies in U.S.A, Taiwan, Europe and China. It points out that national culture has a significant influence on ERP implementation. Their results indicate that culture influences the training programme which is an important factor for ERP system success. They claim that cultural perceptions about information format could also effect the ERP implementation. Another study by Everdingen et al [EW03] which used the survey approach, investigated the influence of nation culture on ERP adoption across 10 countries in Europe. Using Hofstede [Hof01] and Hall [Hal76] cultural theories, their results showed a positive relationship between Individualism and long term orientation in ERP adoption but masculinity, power distance, uncertainty avoidance, monochromic and low context were found to exhibit a negative relationship. These findings were based on mid size companies and countries from same continent. The results could be different with large organizations and cultures across a different continent. So before results can be generalised; they must be empirically tested with large organizations and across a different continent. CULTURE AND INFORMATION SYSTEMS: Culture has attracted the attention of many information system researchers who suggest it to be a very important factor in information technology development. Barber et al. [BB98] suggest that, for a successful system interface, it is necessary that the design should consider cultural values. They combine culture and usability into “culturability”and add that cultural values affect the degree of user friendliness of a system because different cultures are having different perceptions about background colours, graphics and animation. In addition, Marcus et al. [MG00] add that as the web is continuously developing, precautions should be taken about user interface design, by keeping in mind national culture. Furthermore they argue that cultural values in interface design are now necessary not optional. A study by Chau et al. [CCP02] explored the influence of national culture on online consumer behaviour. Their study revealed that national culture not only impacts on the usage of internet but also on the user’s evaluation of a website. A study by Watson et al [WHR94] revealed that culture overrides effects of technology. They investigated the role of culture in decision making about a project by comparing a group facilitated with a Group Support System and a manual group and found the same results for both group. They attributed these results to culture and concluded that culture is a more dominant factor than technology and it is very hard for technology to break “culturally well established patterns of group behaviour”. Another study by Tan et al [TWWCM98] investigated the influence of Computer mediated Communication (CMC) on majority influence. They found that one of the factors that influence CMC impact on the majority influence is national culture. In addition, their results revealed that, in individualist cultures, CMC is more effective than face to face communication but on the other hand, it is less useful than face-to-face to communication. Along with these finding, they observed that people in individualistic cultures are more like to argue and state their points of view against the majority with the help of technology, while collectivist cultures are less likely to use available technology like CMC to contradict majority opinions. However Teng et al [TCCRW99] did not found the influence of national Proceedings of the Second Australian Undergraduate Students’ Computing Conference, 2004 page 24 Chadhar et al. Impact of National Culture and ERP Systems Success culture on decision making when using Information technology (IT) in an organizational computing environment. They found that managers from Britain, United States, South Korea and Singapore, have the same perceptions about the usage of information technology for decision making. USER SATISAFCTION: According to Ives et al (1983) as referenced by Ives et al. [IH84] “the extent to which users believe that their information meets their requirements” is called user satisfaction. It can be used to measure system quality and system acceptance. Recently Lindgaard et al. [LD03] defined it as “a complex construct comprising affective components as well as a concern for usa