Business Information System at Neelkanth Drugs Pvt - Case Study Example

Business Information System Executive Summary Neelkanth Drugs Pvt. Ltd (NDPL) has tasted the failure of an expensive management system (Routray et al, 2014). A look at the case study indicates that the failure was as a result of the fact that there was limited preparation and facilitation of the implementation of the system. Lack of proper system analysis and user involvement led to the system not meeting the needs that were being addressed, leading to a system failure. Neelkanth Drugs Pvt. Ltd also made the mistake of using a system vendor who was not experienced in implementing such large system. Due to this, the vendor was not able to define the requirements and therefore underestimated the requirements. This led to the system having success such as technical failures and network failures. It being a cloud-sourced system, network failure rendered the system useful. Introduction Neelkanth Drugs Pvt. Ltd is an Indian drug distributor. It distributes drugs from manufacturers by selling to retailers. In the first decade of the 21st century, the firm experienced increased growth over time and it was growing at a rate of 30% annually. However, this bust of growth was not to last forever because the growth, presented by a number of challenges, ended up declining. Not only did the growth decide eventually, but it also brought up issues for Neelkanth Drugs Pvt. Ltd because it now had to deal with a larger customer base. The need for use f IT became imminent and the managers had to consider procuring an ERP in order to help in serving the customers better. Some of the problems that led to Neelkanth Drugs Pvt. Ltd requiring them to acquire a system were as follows; Changing market structure The market in India was starting to gain a new structure and this increased completion for Neelkanth Drugs Pvt. Ltd (NDPL). As identified in the case study for Neelkanth Drugs Pvt. Ltd, the Indian drug market was very structured and regulated by the government as compared to the western drug markets. As a result Neelkanth Drugs Pvt. Ltd had to respond to this new challenge in the market. Neelkanth Drugs Pvt. Ltd (NDPL) had to know how to use this new strategy. Apart from having to make the decision to use technology to deal with its strategic issues, the mangers at Neelkanth Drugs Pvt. Ltd (NDPL) had to also make the critical decision as to what approach to use. The possibilities were many and varied and deciding what is the best way to deal with the issue was not an easy decision for ht managers. They had to decide to use a cloud according approach to the technology or they could use the licensed software to implement and Enterprise Resource Planning software. Still there was the alternative of using an in-house team to develop the IT solution for the firm. New technology The decision to use technology for business strategy was difficult because Neelkanth Drugs Pvt. Ltd (NDPL) was dealing with a technology that is really new. Not only was IT relatively new, by the use of cloud sourcing was just in its infancy, especially in India. As a result, Neelkanth Drugs Pvt. Ltd (NDPL) was finding it hard to make the right decisions. By the beginning of the millennium, technology was becoming the centre of strategy for most businesses. This meant that despite the difficulty in choosing the right technology, it had to go on the initiative. This was a breeding ground for bad business decisions for Neelkanth Drugs Pvt. Ltd (NDPL). Government tax policy which seemed to favor the firm There were new government tax policies. Fortunately, this seemed to work in favor of Neelkanth Drugs Pvt. Ltd. The reason behind it was the fact that the new tax policies was making it harder for some business to remain in business, thus decreasing the competition in the market for Neelkanth Drugs Pvt. Ltd. The decision to go the technology way Finally, Neelkanth Drugs Pvt. Ltd. managers decided to go for a cloud-sourced ERP and this is where the problems started. The ERP that Neelkanth Drugs Pvt. Ltd. procured was supposed to achieve a number of advantages for the Neelkanth Drugs Pvt. Ltd. Some of these included; Faster processing of orders IT systems would help Neelkanth Drugs Pvt. Ltd. to achieve the ability to process smaller orders. Due to its big nature, Neelkanth Drugs Pvt. Ltd. was finding to harder to process smaller orders and had to concentrate in bigger orders. However, with the new IT systems, it would be easier for the firm to be able to process small orders thus expanding its market share because a lot of customers were smaller firs that bought in smaller quantities. This was supposed to help Neelkanth Drugs Pvt. Ltd. to gain a major advantage in the market. Ability to manage stock and track expired drugs With manual systems that Neelkanth Drugs Pvt. Ltd. was using, it was extremely hard for it to have an efficient way to manage the orders. As a result, it became necessary for the firm to use technology. The manual system had two major problems with regard to managing the stock. Number one was the fact that it could not be able to keep a proper track of the stock with regard to maintaining the optimum stock. The second was the fact that it was extremely difficult for the firm to manage expiry dates for drugs. Drugs, even the most expensive, would reach their expiry dates without those who were responsible for managing the stock knowing. Eventfully, there would be loads of expired drugs and this meant that Neelkanth Drugs Pvt. Ltd. was making huge losses. There was also the risk of selling expired drugs to customers. New technology would make it easier and feasible for Neelkanth Drugs Pvt. Ltd (NDPL) to be able to manage its stock and this would be so useful for the firm. The issue leading to the failure of the system One issue that comes up with this issue is that there was laxity in the way the system was implemented. It is clear that the vendor did not have what it takes to implement a large system such as an ERP and especially an ERP that is deployed through cloud technology. There is no evidence that there was a comprehensive system analysis to determine what the needs of the system were and this could have been one of the major issues. There is also no evidence that the users who would be involved in using the system were involved in the implementation. These two factors are critical factors for system implementation success. Due to the lack of these two important elements, the system ended up having problems which then led to the eventual failure of the system. The cloud system The decision was reached to procure a cloud sourced system. This was intended to help the firm to solve the above mentioned problems. However, with the cloud sourced system came a cloud of problems that would determine how Neelkanth Drugs Pvt. Ltd. regard the use of technology in the future. Some of the problems that the system had were as flows; Could not read bar codes for some products On the first day of going live with the system, the system could not read bar codes for some products and this introduced a problem with regard to its purchase order processing. The managers hoped that this was only a teething problem and that in the fowling day, this would have been sorted out. The second day however proved to be an even worse day with the bar code readers failing completely to read the bar codes. It was now clear that there was problem and a completely failure of system was declared. Neelkanth Drugs Pvt. Ltd had started on the wrong foot with regard to the use of technology. Network failure The other issue that affected the success of the ERP was network failure. The network continued failing day after day. It is necessary to note that the ERP was a cloud-hosted ERP and so when the network failed, the software became unavailable. The network failure continued to persist yet network is critical for cloud computing because the machines are accessed remotely via internet. This was a crtical barrier for the implementation of the ERP. The failure was due to the fact that the vendor had limited experience and did not provide a good way to gauge the technical requirements of the firm. Results of the failures of the ERP Customer dissatisfaction With the system continuing to fail, customer satisfaction continued t decline. Their order could to be processed in good time. ERPs are supposed to help the firm to have a better way to serve the customer. Neelkanth Drugs Pvt. Ltd. had to deal with the situation fast in order to avoid leading to more serious issues. Neelkanth Drugs Pvt. Ltd (NDPL) had to write off the system in order to avoid more embarrassment. Loss of sales Given that the system was failing so often and stopping the process of processing the sales orders meant that Neelkanth Drugs Pvt. Ltd. was losing a lot of sales. It also meant that some customers were lost when they were dissatisfied with the services of Neelkanth Drugs Pvt. Ltd. Although this was a temporary loss, it definitely had a negative impact and can be directly attributed to the failure of the system. Lost investment Any system implementation failure is always a loss of investment. When a system fails, there is nothing to salvage. With other kinds of investments success as investing in equipment, even when there is a loss, the firm can always have something that will be salvaged from the loss. However, since a failed system cannot be resold to other people even at a loss, when it fails, it means that the organization will have lost a hundred percent of the investment. This is always not in any way desirable especially considering that Information Systems are always very expensive. ERPs are even more expensive. In this regard, when the ERP failed, it meant that Neelkanth Drugs Pvt. Ltd. made a huge loss for all the investments that it had invested in the ERP. As it was now clear that the Neelkanth Drugs Pvt. Ltd ERP had failed, it was scrapped off and the managers were now thinking about the way forward. It had already dawned to them that procuring an information system, especially an ERP was not as easy as procuring a loaf of bread. The factors that determine whether the system will succeed were many and varied. The first critical decision when considering implementing an ERP is to decide which method will be used. There are at least three alternatives that the managers will have with regard to going the technology way. Alternatives Use licensed based ERP The first alternative that the managers can consider is using the traditional licensed ERP. There are numerous ERP vendors around the word, some of which have a global market while others have a local market reach. This has a number of advantages. To begin with, unlike the new cloud technology, this is a time tested system implementation approach that can be trusted. Especially with regard to the big ERP vendors such as SaaS, Oracle and IBM who have a long experience with regard to implementing the ERP systems for firms like Neelkanth Drugs Pvt. Ltd. Neelkanth Drugs Pvt. Ltd. can decide to use this as its strategy to implement the ERP. It must be realied that the main issues that led to the failure of its ERP was becuse the vendor who implemented it did not have enough experience and so was not able to define the scope and requirements of the system. In this case, Neelkanth Drugs Pvt. Ltd. can choose to go for an experienced ERP licensor. This kind of ERP system also has an advantage over developing Bespoke is that the licensor will provide all the technical support that will be needed. This can be useful in minimizing the risk of failure. However, the disadvantage over the bespoke software is the fact that the cost of getting technical support from the vendor can be very high. At the same time, the other disadvantage is the fact that Neelkanth Drugs Pvt. Ltd (NDPL) will not fully own the system but will only own the license to use the system which can mean that the license can expire thus leading to more costs. The other disadvantage of this kind of implementation when compared to bespoke software is the fact that since the systems are pre-developed, they may not fully meet the needs of the firm no matter how fine-tuned they may be. These kinds of ER are designed generally to be implemented in almost any firm and therefore the disadvantage is that they will not exactly suit the individual needs of each buyer. Hire an IT department to develop an in-house system The most traditional method of implementing an information system is developing one in-house. This has a number of advantages over the licensing method and even over the cloud-sourcing method. To begin with, since the system is being developed in-house, it means that all the individual needs of the business even those that are unique to it will be met. The cost scan also be easily controlled and kept at a minimum because the firm has the advantage of deciding how much t pay for certain aspects of the implementation. However, these advantages are not achieved automatically and there are some factors that affect the success of a bespoke system implementation. If not well planned, especially when the firm does not have the right technical skills to plan and implement a system. Bespoke software also has the disadvantage of not having the detail. As has been discussed in the Licensing alternative, ERP vendors are vendors who have gathered technical skill as well as experienced over many decades. When a firm decides to develop a bespoke system, they are trying to achieve in just a few month what these vendors have achieved in years. This just shows how difficult it can be to implement the system. Cloud-sourced ERP The last alternative that Neelkanth Drugs Pvt. Ltd. can use is going back to the cloud sourced ERPs. Even if this venture had failed them in the past, that does not mean that they cannot get it right the second time. Neelkanth Drugs Pvt. Ltd. should not completely give up on the cloud technology. This is because it has been proven to be one of the best ways that firms can utilize to not only gain the best systems but can also benefit from saving up on IT costs. Deciding to go the cloud way will have a number of advantages. First of all, there is the advantage of cost saving, as has already been discussed. With cloud computing, the firms only uses the IT resource that it needs and only pays for that. However, when a firm decides to have their own infrastructure, the problem is that most of the infrastructure will be laying idle and this can be counted as static investment. The other advantage of going back to the cold is the fact that the cloud provider will help technical support. This can be very useful for Neelkanth Drugs Pvt. Ltd (NDPL) because it is very clear that the firm does not have a skilled IT technical team that can help it to be able to wade the waters of implementing an information system as complicated as and ERP. In a nutshell, the major advantages of a cloud-sourced ERP are like those of a licensed ERP apart from the fact that the cloud one is only accessible through the internet. There are however some disadvantages that must be critically looked at when considering the use of a cloud-sourced ERP. To begin with, is the issue of the fact that any networks failure will lead to the failure of the whole system. Considering that connectivity in India may not be as good as in the western world, this can be a risky venture for Neelkanth Drugs Pvt. Ltd (NDPL) and it will be necessary for the managers to be able to understand this and know that there is a way to avoid he connectivity bottleneck. Conclusion There are a number of issues that come up with regard to how firms like Neelkanth Drugs Pvt. Ltd (NDPL) implement IT systems. To begin with, it is has been identified that with regard to implementing an ERP system, the process is as importnat as the final product. Proper planning and carrying out a system analysis is a must if the system is going to be effective. The firm has to make sure that a system analysis and a feasibility study had been done. This without regard of whether the firm is going to use a licensed ERP or it is going to implement one for themselves in-house. The other issue that must be addressed is to make sure that all stakeholders will be involved in the process. This has two main advantages. Number one, it reduces the resistance from the users. In the case for Neelkanth Drugs Pvt. Ltd (NDPL), the stakeholders who should have been involved in order to minimize the chance of the system failing were the customers and the users. The system was going to affect the way the customers interacted with Neelkanth Drugs Pvt. Ltd. and so it was inevitable to make sure that they were involved in the system implementation. The actual users who would use the system would also have been very useful in reverting the failure of the system. In this regard, as Neelkanth Drugs Pvt. Ltd. tries to venture back in the area of technology implementation, they must consider the fact that they have to carry out a proper system analysis and a system feasibility test before implementing. Reference Routray, S. e. (2014). Information System Strategy at drugs. Richard Ivey School of Business Foundation , pp. 2-14. Read More