As businesses and entities across the globe leverage digital transformation to enhance efficiency and profitability through enterprise resource planning (ERP) tools, many African countries are yet to substantially appreciate this new frontier for driving business success.
Elsewhere, ERP applications and systems have proven to be invaluable for streamlining operations, better managing portfolios of an entity and enhancing efficiency to businesses that have adopted them. The global ERP software market size is currently valued at $46.8 billion, and is expected to hit over $71 billion by 2030, with manufacturing companies leading in adoption.
In Africa, out of the 54 countries in the continent, only a few have embraced ERPs at a notable rate, with South Africa leading in ERP adoption. The others with significant ERP usage are only Kenya, Egypt, Morocco and Nigeria. Several factors explain this sluggish trend in the continent.
The cost of ERP implementation
First, ERPs are relatively costly to implement and maintain. While they may not be much expensive to acquire from a vendor, there are other aspects that make their implementation costly. For instance, these systems require training for users on how to effectively run them, which comes at a high cost. Training cost covers the largest percentage of the overall implementation cost.
Installation and configuration of ERPs is also a costly endeavor since some vendors maintain client’s software on a third party server, requiring more time and money to configure. Additional customization and regular maintenance services also add on cost. It is reported that most ERP implementations end up costing three to four times the initial budget. With restrained and constrained budgets, many African countries find it challenging to invest in such systems.
Slow internet
Again, ERP systems require a robust infrastructure to implement, specifically, technological infrastructure. They require stable and fast internet connectivity and adequate power supply to operate. However, most African countries have challenges with these two aspects. Electricity is a challenge to most parts of the continent, and internet connectivity is relatively slow or unstable in the urban areas, and worse in rural areas. This limited technological infrastructure in the continent hinders successful implementation of ERP systems.
Poor planning
Furthermore, cultural dynamics in the continent present an obstacle in ERP implementation. “According to analyst firms, up to 75% of ERP implementations fail. Some of the reasons cited for those failures include poor planning, over customization, and a lack of understanding of core objectives,” says JP van Loggerenberg, the chief technology officer at continental ERP leader SYSRO. “There is also little understanding of the ERP implementation process because it is not a ‘one-size-fits-all’ process. The steps a customer takes along an ERP journey is almost like climbing mount Everest. It involves multiple stages that need to be completed and ‘climatized’ before moving to the next.”
During each stage of the journey, Loggerenberg explains, customers need to be asking their vendor the right questions to avoid heading in the wrong direction.
Language barrier
While most ERP software are developed with few inbuilt language models, with the predominant being English, locking out Francophone. This is making it a challenge to implement English-built ERPs. A classic example is Tanzania, which has adopted the Swahili language as the national language. Implementing legacy ERPs there is thus a challenge, as a vendor would need specific customization for such markets.
This requires more work. For instance, SYSRO is working to deliver a customized ERP project in Portuguese language for the Mozambique market, according to Marius Wessels, the professional services manager at SYSPRO Africa.
Regulation and low skillsets
In addition, ERP vendors, Wessels says, have to conform to government laws and especially tax laws, which vary from country to country, some of which may not be supportive, since most of these ERPs are foreign investments. “And those challenges will always be there. Local legislation, tax, we need to implement the government tax laws,” notes Wessels.
There is also a huge skill gap in the African continent for ERP implementation. Just like developers, the pool of professionals capable of effectively managing and operating ERP systems is very shallow in Africa. Moreover, there is also a lack of motivation by businesses to implement these systems.
Change resistance is derailing wide adoption of ERPs, as businesses and governments are not willing to undertake capacity building and training to equip personnel with the relevant skills for effective ERP implementation. Marius points out that this is a challenge that even SYSPRO has been facing, in its quest to conquer new markets in the African continent.
What is the way forward?
Africa has a great potential to implement ERPs. There is a massive market for ERP vendors to conquer in the continent. Economies in the continent are on an upward trajectory, presenting an opportunity for greater uptake of ERPs. But several things have to be done to pave the way for wider adoption of ERPs.
There is an urgent need for investing in technological infrastructure. Governments and organizations need to collaborate to enhance internet connectivity and power supply, which are crucial for ERP implementation. Secondly, since government policies influence the success of an industry, African governments can ensure policies that support ERP adoption are formulated and implemented.
This way, more vendors could be encouraged to venture into the market. Again, there is a massive need for skill development through capacity building and training. Educational incentives and training programs to address the skill gap will ensure a skilled workforce that can effectively implement ERP systems.
While the biggest challenge lies on the cost of implementing ERP systems, developing affordable and cost-effective ERP solutions can encourage wide adoption. For instance, local and international tech firms can collaborate to offer customized and cost effective solutions for the continent, therefore encouraging more uptake by businesses. There is also a need for awareness creation on the benefits of ERPs. This could address the challenge of change resistance by governments and business managements.