Failure in the Implemented ERP in the Queensland Health - Report Example

Report on the failure in the implemented ERP in the Queensland Health Name: Number: Course: Lecturer: Date: 1. Executive Summary The main purpose of this report is to find out why Queensland Health’s ERP implementation failed, give recommendations on what the organization should have done to avert the failure and examine whether Queensland Health should have succeeded with their ERP implementation. In order to achieve this, the failure factors which may have contributed to failure of Queensland Health’s ERP implementation must be examined. The methods of investigation used were an assessment of various different media releases, dissertations, and articles. From the study, it is evident that Queensland Health did poor ERP selection and poor project management. They did not communicate their business requirements to the vendor and provide the appropriate information inherent to the software development. Moreover, the selection of software was primarily based on a one size fits all plan and was not selected specifically to fit Queensland Health. Recommendations discussed include: employee involvement in ERP implementation process, planning and managing risks proactively, good project management, proper testing before Go-Live date and training end users. A closer assessment of the Queensland Health system and its specific causes of failure will determine if the ERP is totally inappropriate and not capable of being fixed. Contents 1.Executive Summary 1 Contents 2 2. Introduction 3 3.Discussion and Analysis 4 3.1.Poor Management by Queensland Government 5 3.2.Poor Project Management 6 3.3.Poor quality of Business Process Reengineering (BPR) 7 3.4.Queensland Health ERP Software misfit 8 3.5.Poor quality of ERP system testing 8 3.6.Stakeholder Involvement and communication 9 3.8. Risk management 12 3.9.Inadequate user Training 12 4.Conclusion and Recommendations 14 4.1.Conclusion 14 4.2.Recommendations 15 4.2.1. Recommendation to Information technology governance and security 15 4.2.2. Queensland Health 16 4.2.3. Shared Services 17 18 2. Introduction Use of Information technology systems gives organizations a competitive advantage. This could be true for Enterprise Resource Planning (ERP) systems that are able to transform business processes via computerization (Markus, 2000). The use of these systems in an organization often provide a helpful return (Hunton, &Reck, 2001), but this study is not always the case. Implementation of ERP system is costly and has always led to conflicting economic proceeds (Markus & Tanis, 2000). One cause why ERP implementation fails to meet expectations is due to its poor implementation (Nicolaou, 2004). Second reason is that an ERP system is a poor match for a specific organization and maybe should not have been implemented (Hong & Kim, 2002). This report provides detailed reasons for the failure of the Queensland Health’s ERP. It will also give recommendations on what the organization should have done to avert the failure and the give a discussion on whether Queensland Health should have continued with their ERP implementation or use another option. This report is organized into two sections. First, a detailed assessment of ERP implementation problems faced prior Queensland Health ERP system failure is presented. Finally, a recommendation list is presented by project managers in relation to project management, project scope, quality, time, cost and expectations. The study reveals some of the intricacies throughout the planning and implementation phases that may happen in any company globally. Recommendations are offered in solving the issues of ERP system implementation. 3. Discussion and Analysis Knowing the common reasons for any ERP implementation failure and how to avoid them can save on time and money and helps make project successful. In this section, issues that contributed to the Queensland Health ERP implementation failure are discussed and analyzed. These critical failure factors were identified as follows: 3.1. Poor Management by Queensland Government The study shows that Queensland Government did not manage ERP implementation well. It should have been involved in the implementation of project from the beginning to the end, and support its end of the deal by providing all required information to the vendor.  It is also evident that the top management was not consistent in its operations and practices until the system was complete and ready to be implemented. For example, the governance of IT program management was unable demonstrate to audit whether Queensland government would realize the complete benefits that were anticipated from the major investment of an estimated $545m across all 3 projects. In addition there was a lack of transparency in relation to key decisions and the way these decisions would have effect on end users. If the top management is not strongly devoted to the system development, does not anticipate and plan for the great changes brought about by ERP implementation, or does not fully participate in the implementation, system implementation has a high possibility of failure. ERP implementation must be viewed by project’s top management as a change in the way an organization does business (Umble & Umble (2003). The implementation was supposed to be managed by utilizing a strong matrix project framework. Queensland Health should have assigned project management roles and responsibilities to its project management department, leaving project team leaders in each area with full responsibility while general management responsibility left to Queensland Health’s project manager. For instance, to divide the likelihood of poor project level focus (Kuprenas, 2003), enhance communication (Zomorrodian, 1986) and facilitate a better meaning of a shared project schedule (Amoako and Salam, 2004), the project team was transferred from personal offices into a one open plan office. 3.2. Poor Project Management The study shows that due to poor project management skills, Queensland Health project managers did not applied effective project management during ERP implementation. Failure by project managers to plan, manage and monitor the project was a key factor that resulted in their implementation failure. Again, the complexity of Queensland Health ERP system required the project team to work together with top management, different departments, consultants and stakeholders during the implementation process. The Queensland Health ERP project was challenging and demanding, as it concerned managing systems, people, as well as reengineering business practices and processes. There was no specific project management methodology applied throughout the life cycle of the project by either the Queensland Health or department of Public Works. Coupled with the complicated tripartite arrangement comprising of CorpTech, Queensland Health and IBM as the prime contractors, resulted in a range of parties not always being clear about their tasks, authority and accountabilities. Although many attempts were made to clarify roles and responsibilities, there still existed some tension between Queensland Health as owners of business processes and data, and the department of Public Works as the system owner. Furthermore, roles and responsibilities for different parts of the ERP project were shared but it was not obvious which Accountable Officer was responsible for the overall control and successful conclusion of the entire project. There was also misunderstanding within Queensland Health, as the key stakeholder agency, and the Queensland Health Shared Service Provider relating to ownership of Human Resource and finance data, processes, and supporting systems and interfaces. This caused additional confusion among stakeholders in relation to roles and responsibilities, accountabilities and coordination. This should have been shared among Queensland Health, Queensland Government, IBM and CorpTech; it needed to work jointly to identify discrepancies. 3.3. Poor quality of Business Process Reengineering (BPR) The preliminary specification of the business requirements for Queensland Health ERP system developed prior to the request for tender was insufficient. Within a systems development life cycle, there are many opportunities all through the project, including the design and planning phases, to verify the requirements and re-examine assumptions. Nevertheless, this process did not result in corrections to the very original assumptions. It is evident from the study that Queensland Health project team’s vision on why or how to carry out Business Process Reengineering; consultants provided a lot of workarounds to solve problems related to business process mismatch. Queensland Health Project team members found it hard to collaborate and contribute to BPR, thus the poor quality of BPR led to faulty system configuration problems. Moreover, during the Business Process Reengineering process, experts did not carry out mapping analysis to map the system functionalities with business requirements causing misfit between Queensland Health ERP and business processes. Moreover, the business requirements and business process mapping were not documented and signed off. Organizations should be ready enough to change their business processes to match with the ERP system so as to minimize the amount of modification needed. The implementation of ERP systems needs assessment of various business processes, which is believed to be one of the significant and positive results of the implementation of enterprise resource planning system (Yakovlev, 2002). 3.4. Queensland Health ERP Software misfit Due to poor process selection and assessment of ERP, Queensland ERP software was found not matching with the business requirements. For example, The Queensland Health payroll system had complicated award structures; it was needed to deal with the requirements of thirteen awards and several industrial agreements which support over 200 different allowances and in extra of 24,000 different blends of calculation groups for the about 78,000 Queensland Health workforce hence the ERP was not efficiently managing a high volume of data. A one size fits all solution was selected to serve a whole of government Shared Services Initiative. Having used Department of Housing as a pilot for the project, the chosen solution did not fit the health care system due to differences in their respective business practices and requirements. 3.5. Poor quality of ERP system testing Over-tight project schedule made testing to be conducted in a rush and was of low quality; the parallel testing to verify individual pays was conducted over 8 months before the Go-Live date of 14th March 2010. Even though many changes were made to the system, after this testing however, no further parallel tests were performed to compare individual employee pays. SAP’s suggestion that a full parallel employees pay run comparison between the LATTICE payroll system and the SAP HR system be planned and implemented prior to Go-Live was not accepted by the Project Board because of size and complexity of accomplishing this job. And although Project Board assessed that there was no ability to do this on a standard pay run, and later compared average gross totals, they failed to implement other compensating assurance processes as to the ability of the SAP HR system to operate as needed in the processing of the departmental payroll. The lack of this level of pledge was not addressed through the preparation of particular performance reports and business contingency plans prior to the commencement of the new system. 3.6. Stakeholder Involvement and communication The implementation of any new ERP system is usually accompanied by changes in business operations and also ways of working. If this is not sufficiently addressed, new systems implementation can be met by resistance from stakeholders or system end users (Brown et al., 2002). Time and again, this resistance from stakeholders can manifest in various forms such as system withdrawal (Allen and Wilson, 2005) or not using the system (Maguire and Ojiako, 2007). Stakeholder buy-in is a significant success factor for any ERP project and its important role in project life cycle(Al-Mashari and Zairi, 2000). For example, study shows that communication affects the belief of technology (Amoako and Salam, 2004), and enhances information flow between the vendors and customers, hence giving feedback. In Queensland Health project, identification of the customer was so confusing; CorpTech whose primary role was to manage the prime contractor signed all project and contract documents with the prime contractor (IBM). Sign-offs from business user (Queensland Health) for changes made to the formal contract approved by CorpTech and project deliverables were not readily evident. For instance, the conditions within contracts were signed by CorpTech, the prime contractor and the project scope document was signed by CorpTech and the prime contractor, with no documented approval by Queensland Health as a stakeholder. Furthermore, it is evident that there was disagreement within Queensland Health, as the key stakeholder agency, and the Queensland Health Shared Service Provider concerning the ownership of human resource and finance data, processes, and supporting systems. This caused further confusion among stakeholders as far as roles and responsibilities, accountabilities and coordination are concerned. Research on systems implementation (Ojiako and Greenwood, 2007) has shown that poor employee involvement in system development will always lead to limited understanding of the new system by employees. 3.7. Unclear Project Scope Project scope is a key component of any project initiation document within an organization’s project management methodology. This project scope document should be agreed upon and approved by all key stakeholders as part of the project initiation stage. For the Queensland Health case, the project scope was formally approved by Queensland Health 20 months after start of the project. There was also an important request for change of project scope which was approved by the Department of Public Works on 30th June 2009. On the other hand, audit report highlighted that the documentation of the scope change justifying the increase of $9m to the budget was delivered by the prime contractor after the above date, on 17 July 2009, and was only officially accepted by the Queensland Health Project Directorate on 29thSeptember 2009. There was further opportunity to elucidate scope when the Queensland Health project moved into design phase; however, it proved to be ineffective. Moreover, during end user system acceptance testing, a large number of loop holes were identified and there was a regular conflict between the parties over whether those defects were real or they were changes in business requirements, which finally led to further system change requests and as a result, project cost increased. All these should have been clarified at the commencement of the implementation.  Change of scope late in the Queensland Health project meant that costs and timelines were to the highest degree underestimated. Project controls are the core of any project management (Gray and Larson, 2000). A proper process is mainly vital in a large project such as ERP systems implementation. several time to time checkups of project status and progress lead to updates of project status and progress allow for opportune corrections to the system and keep the project on the right track (Somers and Nelson, 2001). Strictly controlled project scope and time also lower cost of ERP implementation (Gray and Larson, 2000). 3.8. Risk management Risks are project inbuilt (Gray and Larson, 2000) and it can classified as either organizational, technical or business. Moreover, risks from each category appear all through the whole project, from project initiation to Go-Live (O’Leary, 2000). Due to this, risk management actually should cover all problem areas of project management. Having a solid action plans in advance is important to alleviate risks (Kulik, 1997). Effective risk management is also necessary as risks change frequently (Welti, 1999). From the case study, it was found that the time allowed for end user managed inter-operability and Queensland Health ERP system testing (8 months)was greatly inadequate as it appeared that no time was allowed for any contingencies, deliveries behind schedule or any other important failure in system testing. 3.9. Inadequate user Training The general perception of the employees from the case study was that they were not trained adequately before system implementation. It appeared that the majority of workforce involved in the Queensland project was first trained on the new ERP system. This meant that at the time of implementing, one amongst the three employees wasn’t trained about the new ERP system. For example, anomalies in pay were not identified in time as staff was not familiar with the new system and procedures. This led to production of exception reports and more checking done to identify issues and come up with alternate method of paying affected staff. This greatly affected the working of the new system after implementation. The diagram below highlights major causes of ERP implementation: Figure 1: Failure factors 4. Conclusion and Recommendations 4.1. Conclusion It is concluded that the top most critical failures factors for the downfall of ERP implementation at Queensland Health poor top management commitment, support poor quality of testing unrealistic expectation of top management from ERP systems, stakeholders involvement and project scope and size. Implementing an ERD needs a wide range of knowledge. The research framework issues raised in this report based on the case study are intended for researcher and professional who are interested in looking at the critical failures factors for the failures of ERP implementation at Australian Queensland Health. This report argues that Australian Queensland health subject matter experts and vendors failed to recognize the financial technical and business impacts associated with the ERP system implemented as a result the assessment ERP system for Queensland Health was unable to choose an appropriate system supporting specific business functions. Good knowledge regarding the ERP products appropriate staff training and proper budget planning is required to prevent the ERP implementation failures   Project managers should also practice close control of ERP project management, to make sure that the process of knowledge transfer is effective and Business Process Reengineering (BPR) is conducted in a professional manner. Before the ERP selection process, it is significant to perform a thorough and comprehensive assessment on the potential applicants of ERP. Business requirements from each functional unit should be clarified and proper documentation done prior to the ERP system selection process. These could help to reduce the risk of ERP misfit. Adequate top management support should be provided during the project entire ERP life cycle. Organization’s top management, project team, and system end users should be trained about what ERP is and its implementation process, how to conduct BPR, the potential related risks and the importance of collaborating with external consultants. 4.2. Recommendations Having identified the potential reasons which caused Queensland Health’s ERP implementation failure, this section gives the following recommendations as a guide to a successful ERP implementation in future. These recommendations are divided into three groups; Information technology governance and security, Queensland Health and Shared services. Each recommendation is explained with examples selected from other sources, which are presented below some of the numbered recommendation. 4.2.1. Recommendation to Information technology governance and security I. The Queensland Government main Information Office program and project management methodologies are to used for implementation of information systems projects. The following should be done: Proper documentation of roles, responsibilities and accountabilities which should be signed by all major stakeholders. The document should be a living document that is regularly reviewed and revised for relevance. Precise outline of the project scope, timeline and size, including core stakeholder sign off. The project scope needs to be strictly managed during the life cycle of the entire project. Large projects should be broken down into phases, with each phase clearly planned, controlled and end phase reviews done. The end phase reports should give an input into the planning processes for the next phase(s). Implement in stages if feasible to prevent setbacks in both management support and time (Umble&Umble 2003). Quality assurance role of the Project Board needs to be evidently documented and implemented. 4.2.2. Queensland Health II. The ongoing process of stabilizing the Queensland Health payroll and rostering systems be continued so as to ensure Queensland Health employees’ payment is correct. Any misfits between business practices and processes configured within the system need to be analyzed and appropriate changes made so as to improve on the accuracy of the payroll results. III. Queensland Health should reassess its current business model to establish the most efficient strategy to offer its payroll services. When simplifying awards the pay rules need to be considered in order to mitigate the risk of payroll inaccuracies. Reengineering the payroll procedure should be done to give an appropriate blend of local decision making and action and the effectiveness of centralized processing. • Reflect business requirements in the system – do not make decisions based on Information Technology recommendations only (Savin and Silberg, 2001). 4.2.3. Shared Services IV. The officers in charge of accounts should be reviewed so that the final responsibility of departmental accountable officers for all costs by their departments is strengthened. V. Information technology governance structure, practices and processes need to be implemented at entire government level so that business results and benefits from IT (Information Technology) projects are achieved, evaluated and reported using a constant approach. These can then be consolidated at the entire government level through the newly established ICT (Information and Communication Technology) governance committees for enhanced transparency of ICT projects and programs. VI. Specific attention needs to be placed to ensure that end to end governance structures are implemented and ensuring that there is transparency of decisions that are made and the effect of those decisions on government agencies for all government projects. VII. Information technology security risk assessment, mitigation plans and control mechanisms need to be well documented and put into practice at the organization level and co-ordinated at the entire government level via the newly formed information security committee. Identify possible ERP project risks, and come up with strategies to avoid them from becoming problems (Kulik, 1997). Understand how to act in response to risk occurrences in advance (Welti, 1999). Reference Allen, D.& Wilson, T. 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