Power IT's Acquisition Strategy - the 3rd-Party Modified Off-The-Shelf Solution - Assignment Example

Power IT's Acquisition Strategy - the 3rd-Party Modified Off-The-Shelf Solution As per the Power IT’s acquisition strategy of purchasing an enterprise resource planning solution from a third-party vendor, the company’s finance director and chief executive officer were of the view that the software development expertise of the third-party modified off-the-self solution would be “high”, being off-the-shelf and having the capability of modification as per local requirements, as PowerIT wanted such a software solution that could be adjusted to local company needs. Only 3rd party modified off-the-shelf solution acquisition strategy was fitting the bill because the ERP solution could be modified according to the emerging needs of the end-users. If the company wanted to internally develop the software, it was not sure of its internal IT team’s expertise of the application domain, as shown in figure 2, “variable”. Domain knowledge should be very strong for developing software in-house on such a large scale, which was not in the capacity of PowerIT’s internal team. According to the case writers, local company knowledge of 3rd party modified off-the-shelf solution is relatively low because it is not internally developed; only an internally developed solution by PowerIT can have high knowledge of it. That’s why a 3rd party developed solution is ranked “low” on local company knowledge by the case writers in the area of its relative strength. What were the major problems encountered during the selection and implementation phases of the project? The selection process was faulty. When the three short-listed vendors were asked to give their presentations on their systems’ support to the company’s IT needs, one vendor did not turn up to give presentation, and the other gave a generic presentation while the third vendor discussed the PowerIT environment and the suitability of their product. Although not the least satisfied with any of the vendors for their presentations, the contract was given to the third vendor. The acquisition process should have been given a review or stopped due to not meeting the right vendor. Such an alarming drawback was not even shared by the BDM with the CEO and senior managers. In stead of inviting new tenders or asking the short-listed vendors to provide a detailed demonstration or not awarding the contract, the contract was awarded to the third vendor. The project was selected both by the chief operating officer and financial director. The investigating team found that employees at managerial and shop level were not involved or given any feedback on the acquisition of the ERP system through tendering. It showed lack of interest on behalf of the management in taking the staff along, which indicated their non-serious attitude towards the new ERP solution. It was not deemed as “high priority” project. It affected the discussion levels the business development manager (BDM) had while relating the project. The BDM had the technical expertise regarding the operations of the project but he lacked social interactions skills needed to function in a traditional manufacturing environment. Incidents of personality clashes occurred many times between the BDO and other managers. The office location of the BDO was quite away from where other senior managers had their offices. Staff had to fill an application for required support to the BDO and later after competing training had to present an analysis of the advantage they had after the training to avoid “disciplinary action”. This formality was necessitated by the BDO to make staff get involved and interested in the system. Implementation phase faced unwillingness on the part of system users. The result was loss of opportunity to find the impact of the new system on the current practices. Implementation schedule was prepared by the BDO and he liaised with different departments on their needs to be entered into the plan but important information regarding implementation could not be shared with the IT workers responsible. Guesses had to be made, resulting in errors. All functions were not represented on the interface, which presented bottlenecks in using the system. There were issues regarding system integration. Some previously used software packages were not discontinued, used in conjunction with the displaced MRPII. They were not given a thought at the time of acquisition. Managers had no idea that these applications in Microsoft Excel and Access were being used at the same time by the end-users to divert the issues faced in using the ERP. Even after 18 months since the roll-out of the system, incidents of incorrect data emerged; this was due to poor procedures followed in transferring the data from the MRPII system. What were the major problems encountered after implementation? One major problem was related to not measuring the impact of the changes made as suggested by the end-users, and implemented by the vendors; it impacted the functional performance of the system. It was found by one of the investigators that the system did not enable “backflushing” function. Backflushing is a way of updating stock level, defined as the “deduction from inventory, after manufacture, of the component parts used in a parent by exploding the bill of materials by the production total of parents produced” (Institute of Logistics and Transport 2004)). It is a very critical feature from initial measurements further on. This feature became redundant because of one modification. Most of the after-implementation issues were related to poor user-interface design and lack of relevant training standards. For example, some reports could not be generated. There was deficiency of service in report handling module. Managers and supervisors felt not at ease in reporting modules. Further, users had no idea of particular documentation in the context of using the ERP system. Top of it, right kind of training was not imparted to the end users. Examine Figure 1 - what "Class" of project is this? It seems to be “C” class of project, as data was not accurate and complete. The system was partially used, not providing integrated benefits. The investigators suggested the need for both technical and organizational changes. Which will be more difficult to achieve? Why? Although both technical and organizational changes were difficult to achieve but technical changes were comparatively more difficult. Five more system changes requirements were found to be outside the original system specification. These changes were outside the functionality requirements and PowerIT was not going to include them in its future enhancements until a decision was taken to use the current ERP system. Cost was the main differentiator as organizational changes could be made without additional costs but technical changes demanded increase in the cost of the system. Out of 29 system modifications, 5 were outside the scope of start-up system specifications; there was no provision of their addition. Modifications demanded solutions by the vendors that ranged in impact, scope and costs. Costs could go up to the extent of £1,500. Other modifications’ cost was below £1,500. Their justification, resources, and impact analysis had to be made. Although no database functionality needed to be changed but changes in screen designs and reports were required. Additional functionality was needed in 5 items already existing in the ERP but not enabled. Further payment by PowerIT was needed to activate these functionalities. Consider the 5 recommendations for ERP success on pages 396-398 of the text. Discuss how PowerIT did with respect to these criteria. The 5 recommendations are: 1. Secure executive sponsorship 2. Get help from outside experts 3. Thoroughly train users 4. Take a multidisciplinary approach to implementations 5. Look beyond ERP Regarding secure executive sponsorship, in the case of PowerIT, senior management was lacking in providing continuous support and sponsorship. Initially, full interest was shown to purchase the ERP system but later, their enthusiasm went on the decline. Middle level executives also were not keen to use the ERP system. A lot of modifications remained to be accomplished which shows that the interest of the executives in changing the old modules and application was missing in PowerIT. Get Help from Outside Experts Outside help is provided in the contract with the vendor. It is needed to understand the complexities of the system to the end-users. Vendors provide the services of expert project managers for a limited time period so that end users could independently work but in the case of PowerIT, a complaint was made to the investigating team that the team of consultants was changed abruptly; initially, end users had developed a good rapport with the consultants in the initial stages as offices of both the staff – their sitting arrangement – were nearer to communicate and share problems. Suddenly, the vendor changed the whole team of consultants who according to the staff of PowerIT were not expert in consultation. This had a negative effect; as a result executives didn’t prefer working on the new system installed. Thoroughly Train Users Working on complex systems like ERP is not easy for end users. Continuous training needs to be imparted to the workforce to create their interest in working on new applications. This crucial part of the software usage is neglected and is not given due importance because of cost factor. New business processes have to be learnt regularly. Furthermore, enterprise systems are comparatively complex than stand-alone systems. PowerIT employees were not satisfied with the level of training, as they were not thoroughly and appropriately trained. Due to lack of right training, some reports could not be generated, and the difficulty was faced in the handling of report writing module. Relevant job-specific documentation on the usage of the ERP system was lacking. Initial level of training was missing to create confidence among the users. They were not provided sufficient opportunities of learning the system to get away with inherent fears of working on new applications. Take a Multidisciplinary Approach to Implementations Implementations of ERP systems should be covering all ranks of the company, be it middle level managers or departments not directly responsible in the day-to-day working of the system. Support of all personnel is necessary, particularly the information systems department and outside consultants and the most crucially, the end users. In the matter of PowerIT, all ranks of staff were not involved in the process of introducing a new system. Middle level executives were not keen and the big issue was the role of business development officer who after facing disinterest of the employees, started taking disciplinary action against them. The CEO also did not have a good opinion of the business development personnel. Most of all, the senior-most rank of the company could not maintain their interest till the end in the implementation of the ERP system. Look Beyond ERP An ERP system if implemented successfully can pay rich dividends to the organization. But installing, maintaining, and upgrading a complex system the like of ERP is not easy and it does not provide the flexibility to change according to business needs. Same thing happened with the PowerIT. Employees were using the old Microsoft Excel and Access applications without the knowledge of their seniors although ERP system had been implemented. They felt more comfortable in using some of the previous applications. Select and justify one of the 3 options available to PowerIT at this point to re-implement and modify; upgrade; or scrap and replace. PowerIT should go for reimplementation of the current ERP system and modify the processes as per the needs. The report of the investigating team also favors that some of the modifications can be made for the successful implementation of the system and keeping the future needs, some investment is also mandatory. Already, the ERP system might have cost the company huge amount. That should not be wasted. Proper initial and efficient training should be provided to the end users and all ranks of the company and their feed back should be given due importance so that any deficiency in the functioning of the system be removed. Bibliography Edwards, Helen M., Humphries, Lynne P. “Change management of people & technology in an ERP implementation.” Journal of Cases on Information Technology (2005): 143-159, Jan-Mar 2005 Read More