Saudi Basic Industries: Low Software Quality

Introduction

Smith (2010) pointed out that the software market value of Saudi Arabia would turn at US$ 641 million at the end of 2010, which was US $ 590 million in 2009. This has evidenced the software sector has a straight-line growth of 10% among the anticipated period but most of the players of the software sector have witnessed serious decrease in business-related software sales in 2009. The software manufacturing and trading organisations are struggling to get competence on shifting from labour-intensive manual environments to the completely automating back-office systems and the oil and gas sector is the prevalent software purchaser. The subsequent software purchaser is the government and telecom sector but the non-oil sector has a poor integration for industry-specific applications. This paper would investigate the low software quality of the non-oil sector of Saudi Arabia where Saudi Basic Industries Corporation (SABIC) is focal point of the study and it would look for further recommendations as well as learning outcomes.

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Company overview

The selected company is SABIC which stands for “Saudi Arabian Basic Business Industries Corporation.” It is a multinational company, which is mainly a petrochemicals and steel manufacturer and has its headquarters in Riyadh. SABIC is growing faster and is experiencing higher performance for last few years. The basic materials for structuring the modern world are manufactured by SABIC such as fertilizers, steel equipments, medical equipments, computers, trucks, cars, buildings and many materials. It has experienced consistent profit worldwide, which triggers different ambitions for it in international business. It has almost 33000 employees all over the world while it has its business operations in almost 100 countries in six continents. As a proof of its performance, it has shown sales of SR 151 billion in 2008 along with net profit of 22 billion. 70% share of this company is enjoyed by the government and the rest is belonging to many shareholders (SABIC, 2010).

The vision of SABIC is to become the most preferable provider and world leader in chemical producing thus most of the people of the world become dependent upon SABIC for chemicals. It wants to provide the assurance for best quality of products and services, which it earns through innovation, learning, and excellence in operation. Along with this, it is assuring sustainable development and maximising the value for all of its stakeholders.

It has differentiation in its products offered to the clients, which started from chemicals to fertilisers, metals, and plastics. The main chemicals produced by SABIC are olefins, oxygenates, chemical intermediates, fibber intermediaries, industrial gases and linear alpha olefins. Under the product line of fertilisers, it has Urea, ammonia and phosphate and sulphuric acid. It has also some steel and metal products like flat steel and long steel. PVC, polyester, melamine, polystyrene, polyolefin, polyethylene, polypropylene are the basic plastic products of SABIC. SABIC has the target to maintain a world standard for these products which will ensure the quality of the products and will bring customer satisfaction (SABIC, 2010).

Problem statement

NZTE (2006) reported that though the oil industries are the most dominant sector, the government Saudi Arabia and its development partners are vigorously supporting to flourish its non-oil industries with the intention to achieving elevated levels of national self-reliance overall in essential products and services while the country has also initiated a scheme of privatisation of state owned entities. As an influential member Gulf Cooperation Council1 Saudi Arabia maintains its non-oil sector enhancement and privatisation programme with the standard and regulation of GCC (Al Mal Capital 2008).

Riyad Capital (2010) forecasted that the Information Technology market of Saudi Arabia has demonstrated a revenue generation of US $ 3.4 billion in 2008 and expected to gain US$ 5.6 billion within 2013. The Saudi IT sector aggregately with software and hardware has evidenced a Compound Annual Growth Rate2 of 11% with a per-capita IT expenditure expected to arrive at US$ 170 but the software market has not grown in relation to the others of the IT sector.

The problem faced by SABIC is to use the appropriate technologies available worldwide like computer technology, software, and internet to shape the offerings of the company along with designing the products and services more technology oriented and to innovate new technologies in the petrochemical sector (Parsons, 2008). The core problem is to identify which software SABIC should use as it has low quality software globally.

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Findings Report

IDC (2008) forecasted that the contribution of IT sector to the economy KSA3 could be much higher if the software piracy rate can be reduce at least 10% of the present position that can contribute an additional job creation of 1,056 unites that add US$ 398 million of revenue and US$ 5 million goes to governments as tax.

The global operation of SABIC has increased the importance of using updated and quality software in all the steps of its operation. The Kingdom of Saudi Arabia is going through a period of industrialisation and technological advancement (Yasin & Zimmerer, 1995). So, SABIC should be engaged with this. As a multinational company, SABIC also needs sophisticated software in its global operation as almost all of the courtiers are accepting the new technologies for development. There are many countries, which are using highly sophisticated software in manufacturing. As SABIC has the target to become the global market leader, it has engaged to utilise different types of software.

SABIC has operations in six continents and in North America; it has operations in USA, Mexico and Puerto Rico. In Europe, it has operation in almost all countries. In Middle East, it has operation in Iran, Egypt, UAE, Qatar, Bahrain, Turkey, and Saudi Arabia. In Africa, it has its operation in South Africa only. In its Asia operation, it has operations in India, China, South Korea, Japan, Bangladesh, Hong Kong, Taiwan, Malaysia, Indonesia, and Sri Lanka. It has operations in Australia and the Philippines. Beside these, it has some operation in many other countries. If these countries would assess technological or IT advancement, all of these countries have found developed or developing in sense of software use (Yavas, & Yasin, 1993). Therefore, it is necessary for the company to use some software, which will accelerate the operation and will give the competitive equality while the competitors of SABIC are using many software.

Software used by SABIC

No doubt, that SABIC is using some software in its operation but these are not in large scale or massive use. SABIC has developed some software for itself, which has not been updated or eligible to run with the demand of the era. For example, it is using some latest software in enterprise resource planning and development of planning environment, which is assisting mainly some analytical tools. It has developed a web site and using e-mail facilities. Through this, customers can access the website of the company to give orders and track them along with contact with the company but this website ahs also developed is some low quality software (SABIC 2008).

Using of e-commerce does not mean that it has developed its technology rather just giving the global customers the access to its operations (Pons, Aljifri & Fourati, 2003). The use of ecommerce in case of SABIC is limited in tracking product in transit, logistics operation, and shipment tracking. Beside, it has its own software named AMAN, which is accessory type software, which facilitate the integrated e-workflow and help the management to manage the flow of work. Only the senior managers, line managers, and safety professionals are using the software. These employees are using the software only for monitoring the performance of the human resource, identifying slack and reorganise it.

Importance of using software

The importance of using new and sophisticated software is critical for SABIC. As, it is considering some sophisticated materials and want to ensure the best quality products and services, it will have to ensure the use of high quality software in almost all sphere of its operations.

Products

Chemicals, fertilisers, Plastics and metals all these product category has targeted both business and individual level customers. Chemicals are the basic building blocks for customer relationship of SABIC (SABIC, 2010). From clothing to furniture, detergents to foods all need different types of chemicals, which are provided by SABIC. Chemical is accounted for almost around 40% of the total production of SABIC. Olefin, a major chemical of SABIC is used as versatile substances and heavily associated with plastic. In such case, the purification is important which can be assured by use of software. Besides, other chemicals like aromatic and Oxygenates also need sophisticated software to assure the quality. Aromatic chemicals are used in producing everyday products and services. If software can be used in producing these items or quality checking, it will increase the accuracy of production.

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SABIC is producing some intermediaries, which are basically chemicals, used in other operations to produce other products. SABIC is producing these chemical for mainly two reasons. Using these for its own operation and secondly to sell these chemical to others. These intermediaries are fibre, industrial gases, chemical intermediaries, and alpha olefins. To mix different chemical substances much software is used worldwide and SABIC can use them for quality and safety.

Safety

In case of fertiliser production, SABIC is concerning the security and safety. Most of the people of the world are looking for foods and people of third world have less chance to check the quality of the food, as they have got almost no food at all. SABIC has gathered different fertiliser and chemical specialists to innovate different safe fertiliser, which has no toxic effect over the food. However, in this case the proper arrangements of chemicals in fertilisers are key issues, which can be maintained by software. Urea, Ammonia, Phosphates, sulphuric acids have different level of chemicals, which are critical as more or less, use can make the plants toxic or harmful. If this has done to a manual manner, there arise some possibilities of mistakes. However, if software is used, the probability of mistakes will reduce (SABIC, 2010).

The entire production of such fertilisers should be kept under the control of sophisticated software. As, the chemicals used in fertilisers have a negative impact on the environment, used of software for accurate level of chemicals will introduce SABIC as an environment friendly firm. Besides, the consumers of the fertilisers will use the fertiliser for the benefit of less harm to the lad, which will produce the brand loyalty in final stage.

Research

There are different software, which is used massively in the field of research and development. Software like Microsoft office excel, Ammos, Management scientists etc are accelerated the research process and smoothen the collection of designated results inn very short time period (Caspi, Mazuet & Paligot, 2001). Like almost all other companies in the world, SABIC has also the need to do research and development. It needs research in case of collecting information about what the customers want, changes in customer mind, assessing new customers, getting information about new customers and target markets, assessing the product types of competitors and collecting information about the changes in industry and many more (Anderson, Sweeny & Williams, 2003).

SABIC is attempting to some ambitious research programs such as accumulate the products, design new products, and collect proper raw materials timely. In case of cost management and pricing of the products along with some audit-works are also experiencing such research activities. In case of patents and licensing, serving the customers, protecting the environment and many other activities are requiring more research works (SABIC, 2008).

Technology

To being stable in a competitive environment, SABIC has to adopt creativity and technical innovation, which are vital assets of the organisation. Its business strategies and profit generation capabilities could be affected, if it would fail to develop new technologies according to new products and process in the business continuity. So, technological advancement is needed in both business operations and for different business units, like Research & Technology (R&T) division, which plays a major role in this organisation. It is also seen that, SABIC has a strong commitment to develop itself as international standards and practices in case of radioactive emissions. Therefore, it wants to focus on safety of people first, than to establish successful procedures.

By gone through technology of SABIC, it is seen that, technological development must be needed to become market leader as safety producers and technological advancement in the market. Therefore, if all procedures would be maintained by software, it would be easier to control the procedures of R&T.

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Supply Chain Management

With the increased level of competitive global markets, customers’ choices on supply chains make it more complex on the basis of product quality, supply assurance, and different service level (Jasimuddin, 2001). For this reason, SABIC has controlled and delivered supply chain mechanisms according to customers’ value. Like all other products’ supply chain management, this organisation has also maintained supply chain from raw materials to distribution networks, which is called as EMDAD project. This project is followed a way of customers successfully to meet up the need of current and future potential customers (SABIC, 2010).

To maintain fundamental transformation of SABIC’s operations, it should develop software and technological support. The six pillars of fundamental transformation have to be maintained by software support, by which, it can control successful supply chain practices in a more proper and easier way. Therefore, improvement of EMDAD can be possible with the help of different software updates.

Human Resources Management

SABIC has strong workforces, which is source of pride of the company and also to Saudi Arabia. There are 33,000 employees working in this organisation as corporate family, and it will double the employment size within two years. The growth of human resources and geographic reach, both are an opportunity and challenge for this organisation. This is the beginning of the new era of organisation, with learning, growth, integration, and interaction of different cultures in one truly global corporate organisation. For this reason, the organisation has established different learning programmes, which are assigned to work or study around the world for staff. This programme is most helpful to utilise the human capital of SABIC effectively. These programmes are included orientation, culture and language training, securities and other unfamiliar surroundings, which could be faced in different countries by the staffs as international assignments (SABIC, 2008).

To meet up the goal of SABIC within 2020, which is to support its human resources with learning organisations for giving up full support and knowledge on ability to match up in different environments and innovate. So, if these programmes will be formed as software programmes, where all forms of learning have been shown, which would encourages, organises, and sponsors all support for human resources of SABIC.

Corporate Social Responsibilities

Growth in profitable way is aim of SABIC’s business and operations, but this aim is achieved through investment in people and the global community of interests, like families, neighbours, customers, areas, and all over global and stakeholders of the organisation. These are helpful to shape the future of every organisation by reputation and environmental performances that they served to the people (Bontis, 2004). These are called CSR (Corporate Social Responsibilities), which operates in supporting and improving communities with fully aware of obligations. Not only in Saudi Arabia, but also in US, Europe and Asian countries are supported by SABIC in regeneration and renovation. The organisation also encourages employees and people to improve the communities of working and living life. Successful corporate social responsibilities are major corporate values of organisation as integral part of its business operations. The organisation has set core values in business cultures its working environment. For that, it is maintaining different values like honesty, ethnicity, fairness, and truthfulness in all business actions, which is helpful to build relationships of trust in the corporate family.

For maintaining every level of business actions with evidence, SABIC must maintain a developed software system for its organisation. It can also set up different software programmes as CSR to support the communities and other stakeholders. Organisational clearance with proper maintenance programme is another software system to show CSR of the organisation (SABIC, 2010).

Safety, Health and Environment

SABIC has produced different products, which are touched millions of people’s lives all over the world. The business success of this organisation is mainly based on customers and employees handling around the world. Therefore, safety, health and environment (SHE) are major initiatives in the success of its business. This organisation is very serious about environmental responsibilities, which is impacted by production and distribution of business operations. Therefore, it is maintained and controlled by new and technologically advanced and safer applications of machines and equipments in the organisation. For this reason, SHE is achieved as excellence, which is a part of good business practices in maintaining profitable and successful business like SABIC (SABIC, 2010).

For proper maintenance and control on safety, health and environment of people, community, area and around the world, the organisation must be planned for some certain and specific system. Software maintenance is easier and cheaper way to control the organisation, so it should develop software system for safety, health and environment.

Learning Report

SABIC performance

The overall performance of SABIC in sense of a multinational organisation is positive. It has experienced a net income of about 22 billion riyal last year along with sales revenue of 151 billion Riyals. It has about 272 billion riyal total assets at hand after the end of the year 2008 but it has affected by the economic recession in late 2008 having some volatility in its financials. However, it is struggling for overcome the situation. If the performance of two years 2008 and 2007 are compared this scenario will become transparent. The total assets of SABIC have increased from 2.5 billion to 2.7 billion but the current assets have decreased in this time period from 0.98 billion to 0.95 billion. Besides, the total liabilities have also increased from 11.9 billion to 12.5 billion. These entire scenarios said that the financial liquidity of SABIC has been deteriorating and also alarming in the sense that increasing in liability means creating more vulnerability (SABIC, 2007).

From the income statement, the alarming financial condition has become clearer. The net income for the year was 0.27 billion riyal for the year 2007 which decreased up to 0.22 in 2008. The earning per share also decreased from 13.99 to 12.57 in between these two years. For this, not only the economic rescission of recent years is liable but also the use of lower quality software and almost no use of technology in many sectors are liable. For example, in its Asia pacific operation, SABIC is going for new innovations, which also need some software incorporation. In case of expanding the market, SABIC must do some research work as different countries have different cultures and different cultures differentiate the norms, values and beliefs from country to country. SABIC is dependent on manual and human sources for this information rather than being set up as effective software.

Emerson’s AMS software

As a solution to the problem of SABIC, the AMS suit of Emerson can be used. This is the forerunner software of “PlantWeb,” one of the most effective software of Emerson (Emmerson, 2010). This software is basically an intelligence providing software, which provides proper guidelines for different manners. It is focusing the customers by increasing the experience of the users through enhancement in usability along with developing predictive intelligence capabilities. Using the digital plant architecture of “Plant Web”, It has expand the wireless HART support for communication systems and added new dimension in this field by introducing a new smart wireless system named THUM which will allow the users to expand the network coverage through standard diagnostics in existing institute. It is the actual solution in case of planning and maintaining networks which is facilitated by wireless communication (Sardar, 1979). By using all these and many other functions, this software can deliver any critical information to any devices. If SABIC will use the software it can be benefited in the following areas in many ways.

Products

As the demands of the customers are changing day by day, SABIC should get the proper anticipation about what might be the demand for the nest modification of products or new products. In addition, this can be done through using the software. As this software is providing information wireless, the information collection and delivery to the centre of the production will become swift. Besides the Emerson project management software, which has some implications in AMS suite, will help SABIC in production, processing, and distribution of products. Different software can be used in different stages of operation. In case of data transfer and preservation, the software will play a vital role, as it is intelligence software. Through this software, the collected data will be examined and assessed and this software can give proper guidelines for what to do with this software. Again, designing the products or packages also needs some consumer attention.

Safety

For ensuring the safety and security in production and also in safe effect over the customers or environment, SABIC can use this software. As this software has the capability to anticipate, it can be used to predict what amount of a chemical should be used in a particular product. As this software will give the users, more connectivity and flexibility of different management like asset management and many more, SABIC can manage its resources and inventories in a safety purpose all over the world. Differentiation in many architectural innovations may also be a result of using the software in case of safety and security. As it is software enabling the wireless communication, safer information sharing between the employees can be possible. It can also be used as a creator of benchmark and can assess the performance against the benchmarks. Many other features of this software will show the maximum level of emissions of environmentally harmful elements and thus shape the environmental friendly characteristics of SABIC.

Technology

This software will accelerate the information and communication technology of SABIC along with having some significant contribution in the field of human resource, supply chain, corporate social responsibility, and environment (Maxwell, Wasselhove, and Dutta, 1999). Technology and research play a vital role in configuring the business environment of completion. Use of the Emerson software will develop the communication in both inter and intra level through information sharing and data management. All the technological sectors of SABIC will get the benefit, which will result in satisfying the customers. This software will also serve the customer through giving intra communication with the company, which will ensure the consumer satisfaction. In case of research, this software will play the main role by collecting, preserving, analysing different data, and providing solution. As, doing manual research demands more times, using this software will save more time and money. This software will also help to combine different information collected from distinct places and sources and will show the ultimate solution.

Supply chain

The supply chain management of SABIC will also be benefited by the software. Communication is a key part of supply chain management, which is basically the flow of information from one personnel to another. As SABIC’s supply chain is mainly the control and delivery mechanism, this software will help to predict the proper control and delivery systems because has intelligence power (Caspi, Mazuet & Paligot, 2001). It can also be used as the inventory management tool and planning for distribution routes. SABIC’s offerings are based on six key pillars. Firstly, differentiation in customer service which will get the facility to anticipate the idea, which will be appreciated by the customers. Secondly, restructuring the supply chain network will be benefited by prediction about suitable supply chain plans, which can be provided by the software. Thirdly, optimising the business process, which will be lead by the acceleration in communication and production process facilitated by the AMS suite? Fourthly, the organised manner will be maximised, as the software will assist in almost all level of planning. Fifthly, streamlined and integrated IT platform will be earned by the advanced information sharing facility of the software. Finally, continuous performance improvement will be possible, as the software will provide the entire performance monitoring, improvement options and development of positive environments for performance increase.

Human resource

For SABIC, having a good human resource is not only a challenge but also an opportunity for its global operation. It has a different global mobility program to move and rotate the staffs continuously. The effective use of the human resource is another challenge, which requires the training and other learning process. However, the most important aspect of human resource management is recruiting and placement of employees. All of these aspects can be benefited by the Emerson’s AMS suit. As it has the intelligence capability, it will assist in assessing the candidates in recruitment process. After evaluation of a candidate, the software can set the performance measurement based on the information gathers for the employee. After a time period, the software can measure the performance and also give suggestion for improvement in performance.

Corporate social responsibility

To shape the future of the company and to create a good relationship with the customers, SABIC has to do some work as corporate social responsibility. For example, it has some investment in education sector such as giving scholarship to the brilliant students. Besides this, it is working for betterment of education system and international level scholarship programs along with special programs based on skill and knowledge development. In all these fields, the software can be useful. Using the software for designing such a program or o help the students in automated information sharing for the scholarship will help to establish the company as a good company having high CSR appeals.

Health and environment

As a petrochemical manufacturer, environmental excellence is a challenge for SABIC. It has high investment in eco-friendly production process. Almost all of its product production has toxic emission, which creates harm of the environment. The emission of carbon di-oxide, sulphur, using of sodium chloride and waste management are the basic environmental work done by SABIC. In case of health, the software can be useful in diagnosing the health problems of the employees, workers or customers as it has some diagnosing facilities. In case of the environment, the software can assist to select the optimum level of toxic substance emission.

Conclusion

From the above discussion, the problem of SABIC has been clearly identified as a solution-able dilemma, which can be solved by using good software. In all the steps of operations, SABIC has a need for software like Emerson’s AMS suite, which will give the company some competitive advantage over the competitors. Software application at SABIC has evidenced an incremental boost in the growth of the company and added extremely accomplished jobs to the workforce supporting further application of new software and extended ICT services. Due to rising benefits from software application and accrue to services assurance to the customer and all over the supply chain, SABIC also evidenced to lowering the use of piracy software within its business application and such software anti-piracy delivers would increase its revenue by working business software.

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Footnotes

  1. Gcc
  2. CAGR
  3. Kingdom of Saudi Arabia
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