Prepared By: Abed El-Karim Hammoud

Assessment Item 1-Analysing case study | Prepared to : John Petnehazi

 Technology and Management
Assessment Item 1 – Analyzing Case study

Contents

Abstract......................................................................................................................3
What is an Enterprise System?..................................................................................4
How to Avoid an ERP Implementation Failure........................................................5
Business Benefits of Enterprise system.....................................................................7
 Improve alignment of strategies and operations.........................................7
 Improve productivity and insight.................................................................7
 Reduce costs through increased flexibility...................................................7
 Support changing industry requirements....................................................8
 Reduce risk.....................................................................................................8
 Improve financial management and corporate governance......................8
 Optimize IT spending....................................................................................8
 Gain higher ROI faster..................................................................................8
 Retain top performers...................................................................................8
 Provide immediate access to enterprise information..................................8
How ERP implementation might goes wrong...........................................................9
Conclusion...............................................................................................................10
UNIVERSITY OF
TECHNOLOGY AND MANAGEMENT
References:..............................................................................................................11
ATLANTA

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Abstract

This document gives a brief introduction to enterprise systems. Using SAP and Oracle E-
Business suite as an example, the series of tasks that companies should conduct to avoid ERP
system failures are clearly discussed, in addition to the advantages of having an enterprise
system and the ways companies can benefit most. As these systems are delivered with pre-
implemented modules and address the organizations’ business processes, they require a slightly
untraditional implementation approach with a strong focus on business modeling and
organizational analysis. Enterprise systems are often introduced as part of larger reengineering
projects, enabling the organizations to streamline their backbone operations and work more
efficiently.

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What is an Enterprise System?

Organizations today depend on information systems that help them carry out their operations
efficiently, reliably and keep information updated and available. Some of these systems have
been developed internally and cover just a small fraction of the organization’s processes or data.
They are often not well integrated with other systems and require a substantial amount of manual
work to complete the business processes. Increasingly, however, large-scale standard packages
are replacing the smaller and specialized solutions. From 1985 to 1997 the share of large
organizations using packaged enterprise systems has risen from about 30% to 95% (Robsen
1997). When Hydro Agri Europe introduced its SAP enterprise system in 1999, it replaced
around 120 applications that were used all over Hydro’s 17 sites in Europe. Whereas the
packages in the past were only used by large organizations, we now have software intended for
small and mid-size companies as well. A survey of European mid-size companies shows that the
adoption of packaged enterprise systems increased from about 27% in 1998 to more than 50% in
2000 (van Erdingen et al. 2000). With the introduction of light versions and accelerated
implementation tools in recent years this trend has continued and few organizations are now
running their businesses without packaged software.

An enterprise system is a packaged application that supports and automates business processes
and manages business data. They come with pre-implemented and customizable modules that
reflect best practice for common business operations. Business data from different functional
areas are integrated and kept consistent across the organization. A characteristic of enterprise
systems is their complexities both in terms of business data and in the way they affect the
organization’s business practices and individual work tasks. The term enterprise System is often
used synonymously with enterprise business application or with the more restricted term
enterprise resource planning (ERP) system. We will in this document base the discussion on ERP
systems, though the conclusions are equally valid for other types of enterprise systems.

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How to Avoid an ERP Implementation Failure

Have you ever wondered why every time you hear a story about an enterprise resource planning
(ERP) implementation failure, the vendor gets the blame? Customer would say, we did
everything they could to avoid it, but the vendors either provided inappropriate training and
support, or simply a poor quality product.

Frankly, I do not think that an ERP implementation failure can possibly happen without at least
some contribution from the customer. As a customer, no matter what the vendor does to
influence you during the selection process, the final decision is yours and you have to make sure
you make the right one.

Here's a list of things should consider before selecting an ERP, both during the implementation
and even long after. I have selected some of the reasons that ERP failed implementations share
as per the Standish Group authors of the well-Known CHAOS and Technology Evaluation
research which is published on June 17, 2009.

Vendor References: Always ask for references and do not rely exclusively on word-of-
mouth and the Internet. Ask your vendor to provide contact information for some of their
customers--and call them. They will probably not say bad things about the vendor and
the system, but if you ask the right questions, you will have an idea about some of the
challenges you might face when dealing with that vendor implementing the software.

Decision Support System (DSS): No matter what the size of your company is or how
much you're ready to spend on ERP, you should always use a decision support system, a
tool that supports decision-making activities. TEC's ebestmatch™ is a very good
example--and, if you cannot afford to buy or build a DSS, you can always try to create a
non-computerized version of it, following the structure of existing systems (you can use
ebestmatch free for two hours in order to get an idea how a DSS works).

Hardware and software compatibility: Make sure the software you're buying is
compatible with the hardware you have or intend on purchasing. For example, if the ERP
you have selected uses Reporting Services, you should be aware of the fact that only
some versions of Microsoft SQL Server have it.

Flexibility: Can the vendor give you more than it promised? Vendors can be very
flexible, depending on how important you are to them. A small customer can obtain
more "attention" from a vendor then a big one, if the former has the potential to bring

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more business to the vendor. Also, vendors can have special offers when trying to get
into a new market, outrun the competition, etc.

Change management: People do not change their habits because you tell them to.
Vendors and external consultants can help you with this, but remember that people will
follow motivated leaders. If you (as a project manager or user) are skeptical about the
ERP you've selected, then obviously something went wrong during the selection process;
the vendor then will have a hard time fighting with the users' unwillingness.

Legacy data: Make sure your vendor can import legacy data from your old database,
Excel files, or other external data sources. Unless you are a new company, you probably
will have data that needs to be imported. Before importing, try to clean it, remove
duplicate or useless information--which can cause lots of problems later.

Real costs: How much will it really cost to implement the ERP you selected? Are there
any hidden or additional costs? For instance, if you decide to install Windows Vista on
all workstations, you will probably need to replace old printers, which are not compatible
with Vista. Also, if you decide to print labels out of the system, you might need special
software and specific printers.

Business processes: In theory, no one should know better than you how your company
works. Still, sometimes you cannot see the forest for the trees. An ERP implementation
project could be a good occasion to review and optimize your own processes and
procedures. There is no reason to automate ineffective or useless processes.

Implementation methodology: Some customers do not even look at vendors who do

not have such a methodology. A vendor should be able to provide a document describing
the implementation process, with objectives, milestones, resource allocation, etc. If a
vendor doesn't have it, it will probably do things on the fly.

Training: Does your vendor have enough qualified people to successfully train your
employees? If the vendor has three trainers working on ten large customers, they might
not be able to take care of you, as they should. Also, if the trainer assigned to you was
just hired by the vendor, he/she might not be experienced enough, which can cause a lot
of problems.

Audit: Depending on the size of the project, simpler or more complex forms of auditing
should be performed during the implementation. Ideally, you should create an auditing
procedure with your vendor, but you can also involve independent consultants or project
auditors.

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Technical and customer support: Can your vendor provide the level of support you
need? With a team of five people and hundreds of customers, it might take weeks to
solve a problem. Make sure you understand what's included in support. Is the vendor
going to do backups of your database on a regular basis? Are you getting upgrades, and
when and how does that affect your work?

Definitely there are some more reasons might not be as critical as the ones we have addressed,
but take it into consideration would prevent you from any failure that might happen to your
implementation.

Business Benefits of Enterprise system

ERP systems (SAP and Oracle) deliver a comprehensive set of integrated, cross-functional
business processes. With SAP ERP, you can gain the following benefits:

Improve alignment of strategies and operations

 Run your enterprise in accordance with strategy and plans, accessing the right information in
real time to identify concerns early.
 Pursue opportunities proactively.
 Achieve corporate objectives by aligning workforce and organizational objectives.
 Find the best people and leverage their talent in the right job at the right time.
Improve productivity and insight
 Leverage self-services and analytics across your organization.
 Improve operational efficiency and productivity within and beyond your enterprise.
Reduce costs through increased flexibility
 Use enterprise services architecture to improve process standardization, efficiency, and
adaptability.
 Extend transactions, information, and collaboration functions to a broad business
community.
Support changing industry requirements
 Take advantage of the SAP NetWeaver platform's latest open, Web-based technology to
integrate your end-to-end processes seamlessly.
Reduce risk

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 Solve complex business challenges today with SAP, your trusted partner for long-term
growth, with 30 years of experience working with organizations of all sizes in more
countries than any other vendor.
 Join SAP's world-class partner network, uniquely qualified to support the best business
practices in more than 25 industries.
Improve financial management and corporate governance
 Gain deep visibility into your organization with financial and management accounting
functionality combined with business analytics.
 Increase profitability, improve financial control, and manage risk.
Optimize IT spending
 Integrate and optimize business processes.
 Eliminate high integration costs and the need to purchase third-party software.
 Deploy other SAP Business Suite applications incrementally to improve cash flow and
reduce costly borrowing.
Gain higher ROI faster
 Install SAP ERP using rapid-implementation techniques that cost less than half what
traditional approaches cost.
 Leverage preset defaults and prepackaged versions available for specific industries.
Retain top performers
 Retain your top performers through clearly defined career and development plans.
 Link employees' performance to compensation programs such as variable pay plans and
long-term incentives.
Provide immediate access to enterprise information
 Give employees new ways to access the enterprise information required for their daily
activities.

How ERP implementation might goes wrong

Novartis A.G. is a leading global pharmaceutical and health care company headquartered in
Basel, Switzerland. It operates in more than 140 countries around the world, employing about

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77,200 people and produced nearly US$24.9 billion in revenue and US$ 5 billion in net profit in
2003
Novartis is replacing legacy systems at Novartis offices in more than 50 countries; they have
chosen SAP after conducting a survey by Frost & Sullivan to streamline administrative
processes, Workflow, and reporting in its worldwide operations. But Information Technology
unit and business units at Novartis weren’t talking to one another — until they started speaking a
common language of leadership.
In the northern summer of 2002, the accounts payable department at Novartis Pharmaceuticals
faced a full-fledged financial crisis. Somewhere in the computerized disbursement system,
between invoices and cheques, payments were being held up and backlogs of overdue bills were
building. A few vendors even put a credit hold on Novartis Pharmaceuticals, which is the US
arm of Novartis AG, the $US24.9 billion Swiss pharmaceutical giant.
The accounts payable and strategic sourcing departments impugned IT — more specifically,
recent SAP upgrades to the R/3 financial modules. The message the business departments felt
they were hearing from IT was: SAP is the Novartis global standard, like it or lump it. Frustrated,
accounts payable and strategic sourcing began meeting — without the IT group — to figure out a
way to re-engineer their requisition-to-pay process and perhaps even scrap the new SAP modules
that didn’t meet their needs.
On the other side of the corporate campus, IT executives knew the unpaid invoices were not
completely the fault of the SAP upgrade. The existing process for invoices was inefficient,
requiring manual approvals by too many managers. The IT group had recently launched an effort
to improve its alignment with business partners by appointing business information managers
(BIMs) to clarify and support business goals. Nonetheless, the finance BIM felt frozen out of the
meetings held by the fed-up business community to settle on a new solution.
It’s an age-old story: An IT project starts out with high expectations and involvement from the
business. But as the project progresses, it becomes clear that the two sides have different needs
and constraints. Under the strain of time lines and tight budgets, communication is inadequate.
Business units blame the IT department, and IT feels insulted and misunderstood. Both factions
grow increasingly suspicious and self-protective. Project tanks, and that’s how the situation at
Novartis probably would have played out. “It was a train wreck waiting to happen,” says Jose
Ramirez, Novartis’s vice president of IT for finance and supply chain. “We would have
continued to have political problems, along with a proposal by the business that didn’t have buy-
in from IT. It would have come to a head at some point.”
Instead, Ray Pawlicki, Novartis’s vice president for IT and CIO, effected an intervention: He
invited all parties involved to a six-month program to create a joint leadership approach. It was a
long shot, but it worked. And it helped answer the looming question at Novartis, and among
many business and technology units everywhere: Why can’t we all just get along?

Conclusion

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Implementing an ERP is like connecting dots together to have a good shaped image, while dots
representing different modules with different functions and procedures. Definitely good shaped
images have their dots integrated and well designed. No matter how expensive the Image is, it’s
still useless, till it appeals to people and become a piece of art.

Bring it to real life; we might spend 100 of millions of dollars on an implementation of ERP
application and design it just as we need and in the right way, but without involving business
units or lack of training users, this might cause us to trash all money spent and effort done. Even
though the application is designed correctly and the system fits requirements perfectly.

As a matter of fact people, always play a major role for any system to run smoothly and obtain
information successfully, as with Novartis’ case, there are 100 of cases which can be sorted out
by just bring people along together.

But we have always to keep in mind, as mentioned above, good image has all its dots integrated
together, people, good budget, right software selected and plan in place would cease the failures
and increase the success opportunities of any ERP implementation.

References:

Robsen, W. (1997). Strategic Management & Information Systems. Second Edition.

Financial Times / Prentice Hall.

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van Erdingen, Y. M., J. van Hillegersberg, and E. Waarts (2000). ERP Adoption by
European Midsize Companies. Communications of the ACM, April 2000, Vol. 43, No. 4,
pp. 27–31.

http://www.supplychainbrain.com/content/nc/technology-solutions/erp-enterprise-
systems/single-article-page/article/13-things-a-customer-can-do-to-avoid-an-erp-
implementation-failure (Browsed on December 2, 2009)

http://www.sap.com/solutions/business-suite/erp/businessbenefits/index.epx (Browsed on
22-Nov-2009)

10 Reasons that IT Projects Fail by David Garrett.

Stephanie Overby, “Can’t We All Just Get Along?” CIO Australia, March 10,2004

“SAP Chosen by Novartis as a Major Building Block,” EETimes, June16, 2003

http://www.cio.com.au/article/121863/can_t_we_all_just_get_along (Browsed on
December 3, 2009 1:52 am)

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