Information Systems Failure in a Small Enterprise - Case Study Example

EVALUATING IT SYSTEMS FAILURE: A CASE STUDY Student’s Name Course Professor’s Name University City (State) Date EVALUATING IT SYSTEMS FAILURE: A CASE STUDY 1 Student’s Name 1 Course 1 Professor’s Name 1 University 1 City (State) 1 Date 1 Introduction 3 Question 1 4 Interaction Failures 4 Correspondence Failures 4 Process Failures 5 Question 2 6 Stakeholders involved in ERP system project 6 Role of the Stakeholders in (a) above 6 Board of Directors (BOD) 6 Executive Management which includes the CEO, CFO, and CIO 6 HPT ERP Consultants 7 Question 3 7 ERP Strategy 7 Lack of Support From the Top Management 8 Project Team 9 Improper Management Of Changes 10 Effective Communication 10 Question 4 11 Involvement Of All Employees In Decision Making 11 Test Plan/ Pilot Study 12 Conclusion 12 References 13 Evaluating IT Systems Failure: A Case Study Introduction The Enterprise Resource Planning (ERP) systems implementation gives most of the companies’ significant challenges because some of them fail while others substantially exceed the project costs. Notably, the ERP systems are different from the other large-scale Information Technology (IT) implementations qualitatively in three ways. First the ERP system impacts the whole fire; the system has the new business, and therefore the employees must learn about the new software and business process; finally, it is a business initiative rather than an IT-led (Devos, Van, and Deschoolmeester 2013, p. 57). According to Mishra and Mishra (2011, p. 55), an ERP system is made up of integrated subsystems from all facets of business such as manufacturing, logistics, sales, marketing, and planning. In the current world, ERP is used for financial systems, human resources, supply chain management, and even consumer handling. The systems provide optimization and integration of the various business processes; however, this is difficult for many organizations to achieve including the BC Company. BC Company just like any other firm out was seeking the ERP system so that they could improve their performance which was deteriorating over the years. However, after implementation, BC was suffering due to the gap between what HPT ERP vendor had promised to the actual realized benefits from the use of the ERP system (Ram and Corkindale 2014, p. 151). While BC Company sought to implement the ERP systems into their business processes so that they could improve performance, the ERP system ended up causing more challenges and failure. Question 1 Any IT system failures are classified to either termination of expectation. The expectation failures are further divided into interaction, correspondence, and process failures (Masiero 2016, p.487). Interaction Failures First of the interaction failures occur when there is a mismatch between the organization requirements and the user acceptance (Masiero 2016, p.487). Evidently, the HPT Company does not allow any customization of the ERP system. Contrary to the HPT ERP vendor, the BC Company requires a system that they can modify so that it can help in building the appropriate business communications products for its clients. The HPT and the BC companies did not discuss their business terms when their business transaction. The BC Company realized later that they could not modify the ERP system into their business processes. BC company thus had to adjust their activities to the ERP system which did not increase work for its employees but also led to the staff abandoning HPT ERP systems in various divisions. Additionally, the BC workers are reluctant while others resist when it comes to adopting the use ERP systems, thus making it impossible for the HPT consultants to re-engineer the process initiative successfully. Moreover, the BC senior management was not involved in imposing the ERP, and so the other employees resist the ideologies from the HPT consultants (Ram and Corkindale 2014, p. 155). In short, there were many interaction failures associated with BC Company ERP implementation project. Correspondence Failures The correspondence failures occur when the ERP is evaluated about defined design objectives, and there is no correspondence (Masiero 2016, p.487). The senior management of BC Company budgeted for low costs than the one that has already been spent on the ERP system. The top management allocated A$8.5 Million for the implementation of the ERP system in ten months; nevertheless, three years later the application is not complete, and the project has consumed A$20 million. Also, BC Company expected to improve its performance, and that is why they sought a new IT system since the company was facing. For instance, the company revenue decreased from A$1.2 Million in 2009 to A$1.05 million in 2010. The ERP vendor, on the other hand, guaranteed the BC company that the system would redesign process and therefore enable the company to improve performance through increased process efficiency, IT platforms standardization, information sharing, and data mining capabilities. As a result, the company would have reduced overhead costs. Apparently, the design objectives do not correspond with the evaluated results of the ERP system. Instead of the company reducing the overhead costs through efficiency, the system ended up creating more workload and increased costs of operation (Ferreira and Kuniyoshi 2015, p.146). In short, the ERP project implementation had total correspondence failures. Process Failures On the other hand, the process failures occur when the ERP is unable to meet satisfactory development performance such as the inability to deliver within the budget (Masiero 2016, p.487). Evidently, the implementation of the ERP system in the BC company is a total process failure. First all it has escalated the time and budget that was allocated to it. The budget grew from A$8.5 million that was aside for the investment in HPT ERP investment to A$11 million within one year. By 2013, the ERP software and system had used A$20 million. On the other hand, the project was to be completed in ten months; however, three years later in 2013, the project was still not complete. Question 2 Stakeholders involved in ERP system project Internal Stakeholders: Board of Directors and the Executive Management which includes the Chief Executive Officer (CEO), Chief Financial Officer (CFO), and Chief Information Officer (CIO). External Stakeholders: ERP Consultants Role of the Stakeholders in (a) above Board of Directors (BOD) The role of the BOD in any organization cuts across ensuring the managers observe the interests of the shareholders to directly controlling the activities that are undertaken by an organization. In short, in the ERP project implementation, the BOD had a responsibility to ensure corporate responsibility, transformational business nature, business continuity, employee motivation, and protection of the BC company integration (McMahon 2013). Executive Management which includes the CEO, CFO, and CIO The executive management is selected by the Board so that they can administer the activities of the BOD. In short, the CEO, CFO, and CIO were responsible for the advocating of the ERP project, ensuring compliance and regulation adherence, provision and evaluation of human capital, and provision of the adequate resources for the organization. The CEO role is to inform the CFO and CIO about the decisions of BOD and who, in turn, implement them. The CFO provides resources such as finances for the project. CIO also communicates about the procedures to the IT staff (Ferreira and Kuniyoshi 2015, p.150). HPT ERP Consultants Past research on the ERP implementation shows that the ERP consultants appointed to implement the ERP system within any organization contribute to the effectiveness which in turn lead to the success of these systems. Clearly, just like many corporations which choose to implement the ERP system, the BC Company did not have the in-house expertise and therefore was forced to rely on the HPT ERP consultants for the expertise. In short, if BC were able to engage the HPT ERP consultants, maybe there would be chances of successes. Explicitly, the ERP consultants’ roles are the provision of business, and technical expertise, configuring the ERP systems to the most appropriate and training the company staff about the overall ERP system functionality (Ferreira and Kuniyoshi 2015, p.150). Just, the consultants should play a role in lessening the burden of learning for the clients associated with adoption of the new system. Question 3 The five most critical factors that have contributed to ERP implementation failure in BC company are: ERP Strategy The strategy describes the kind of packages the company wants and for how long the application process should take place. The key issues to in the BC Company are the Excessive customization and the long duration of implementation. In the selection of the ERP package, the Company did not consider which software could be compatible with its business processes. Unfortunately, the top management only consulted the HPT ERP vendor for sale of ERP without taking into account why they needed it in the first place. Each ERP package fits some distinct custom development, and therefore, a client should discuss with their vendor about the modifications that they can be made on a particular re-engineering process (Gross 2011). One important issue is the fact that the implementation time is dependent on the customization process. The BC company is all about customizing is products so that they can fit the consumer’s wants. However, HPT, the ERP systems vendor makes it clear that their product does not support such customization. As a result, as the implementation increases from months to years, there is a lot of confusion for the BC staff and the ERP consultants send by the company to teach the client and implement the systems. In the process too, there are changes in user and software specifications which make it difficult for the involved parties to understand what is going. The ERP consultants adhere to what they know, while on the other hand, the BC employees want the ERP business to be similar to those of legacy systems that they used in the past. Consequently, there are high costs implications such as frustrations and time wastage that increased the cost of the implementation process (Rashid 2013, p. 57). All this while, the BC Company has tried to restructure the business process to fit in the ERP system which has proved difficult. Thus, the BC extreme customization of the IT systems is what has made it difficult for the ERP system to fit into its business process. Lack of Support From the Top Management Evidently, the top management only advocated for the change of the IT system in the BC Company; however, the other staffs were not included including the CIO, Mr. Steven Shanks. Interestingly, the meeting that led to the decision that BC needed to change the IT systems for drastic improvements involved the CEO, the Board of Directors, and the CFO. The CIO was informed by the CFO about the management decision to change the long-term BPR system that the company used. As a result, the CIO, Mr. Shanks suggested what the company needed, and that is why they adopted the ERP System. The senior management only approved the ERP software and henceforth left the staff and the ERP consultants the task of implementing it. As a result, since the BC company did not want changes, they ended reluctant and unwilling to change which led to failure (Rashid 2013, p. 57). Thus, the top management did not address the complex BC issues rather sought a technology that they thought was a solution and forced the whole company to adopt. Project Team First of all, the project team is a crucial factor when it comes to the success of the ERP project. In this case, what is the composition of the project team? In BC Company, no staff member had any experience in the ERP system. Interestingly, the management did not combine with the consultants so as to get the expertise that was required for the project. Instead, they let the HPT consultants deal with the implementation and training of the BC employees on how to use the ERP System. In a way, the training process was unsuccessful because the internal staff lacked motivation, support, and authority from the team members (Masiero 2016, p. 490). Additionally, the 50 IT staff was not assigned full-time learning of the new technology rather they were expected to combine the learning and their daily jobs which seemed tiresome and overloading. In simple terms, the company did not give any dedication to the project, and that is why it failed. Moreover, the company did not choose any employee with the right skills to participate in the ERP implementation. Rather all the IT employees were subjected to the company process without analysis of the expertise and knowledge they had in the ERP system. The HPT ERP vendor also did not help the company in selecting the right employees for the job, and that is why there were issues such as conflicts of interests in the previous system and the ERP system (Mishra and Mishra 2011, p. 62). In short, the BC company should have selected an ERP project team and not subjecting the whole company to that process. Improper Management Of Changes According to Ram and Corkindale (2014, p. 155), the ERP project does not only result in system changes but also every other aspect of the organization. Therefore, there is the need for improving the management team so as to effectively deal with the changes that occur when the project is implemented. The management team will vary depending on the project amount of changes, for instance, when BC acquired the ERP software, they required a person in charge who was aware of how it operates so that they can train the other employees. Contrary, in the case of BC Company, the CIO remains the same despite changes in the IT system. Evidently, the CIO, Mr. Shanks, together with the whole management team are not aware of how the ERP operates and even have left the HPT consultants to take charge in training the employees. Additionally, it seems the BPR legacy system is still in operations which make the employees reluctant of adopting the new technology because they have a way of still doing their work in the company (Rashid 2013, p. 57). In short, there lacks proper management, and that is why there was ERP project failure. Effective Communication Any project implementation in a company requires effective communication. According to Tarhini, Ammar, and Tarhini (2015, p.25), communication within the organization is the lifeblood, glue, thread, oil, force, and the most binding agent of all relationships within an organization. Clearly, during the decision making in adopting the ERP system, there was no communication between the BC top management and the other staff. The senior management decided about the ERP system and did not ask the other bottom employees about any opinion. With this knowledge, it could be possible for the operators to change responsibilities and work with ERP system requirements. Also, communication could have facilitated the employee’s willingness to take part and increase the business process reengineering. There is no evidence of constant communication within the company about the progress of the ERP implementation which increases staff rebellion. On the other hand, there was communication failure between the vendor and the BC because, they only learnt about how they cannot customize the ERP system when they had bought it (Sudevan, Bhasi, and Pramod 2014, p.3016). In short, the ERP project failed because there was no effective communication. Question 4 The CIO recommendations are: Involvement Of All Employees In Decision Making The BC Company should have involved the bottom operators while making the decision on which system to pick to replace the old one. The staff also has opinions, and when involved in decision-making, they are more receptive and supportive during the implementation of the decision made. Consequently, the top management should ask the operators about the difficulties that face during monitoring and evaluation of the ERP systems. In short, the top management should have sought the opinions of all the other employees before making any organizational strategic decision. Test Plan/ Pilot Study First of all, the BC Company should have tested the efficiency of the ERP system through a pilot study. For instance, the company should have implemented the system in two units in the beginning so that they can find out the problems that arise and so correct them when implementing the whole project. The pilot study decreases the large scale risks by adjusting the business process that did not align with the ERP project. In short, the test plan will help the company to avoid trouble when pushing to implement whole new IT systems. Conclusion Any IT system such as ERP system requires that the organizations link every aspect and all its business processes so that it can be successful. Evidently, BC Company adopted the ERP systems so that it improves the performance; however, it ended failing miserably. The ERP project had the correspondence, interaction, and process failures that led to the unsuccessful implementation. As a result, the BC Company experienced high costs, time wastage, and loss of many resources in the process. After cross-examination, the Board of Directors, Executive Management, and the HPT ERP consultants are the primary stakeholders involved in the ERP implementation. The critical factors that led to the failure of the project are the lack of top management support, effective communication, project team, improper management changes, and ERP strategy. As a result, as the CIO I would recommend the BC Company conducts a Pilot study and involves all the employees in the decision making about an IT system in future. References Devos, J., Van Landeghem, H., and Deschoolmeester, D., 2013, June. Narratives of an Outsourced Information Systems Failure in a Small Enterprise. In International Working Conference on Transfer and Diffusion of IT (pp. 57-72). Springer Berlin Heidelberg. Ferreira, A.A., and Kuniyoshi, M.S., 2015. Critical factors in the implementation process of integrated management systems. JISTEM-Journal of Information Systems and Technology Management, 12(1), pp.145-164. Gross, J., 2011. A case study on Hershey’s ERP implementation failure: The importance of testing and scheduling. Pemeco consulting report. Masiero, S., 2016. The origins of failure: seeking the causes of design–reality gaps. Information Technology for Development, 22(3), pp.487-502. Mishra, A. and Mishra, D., 2011. ERP project implementation: evidence from the oil and gas sector. Acta Polytechnica Hungarica, 8(4), pp.55-74. McMahon, C. (2013). Roles and Responsibilities of Key Stakeholders. [online] Business Value Exchange (BVEx). Available at: https://businessvalueexchange.com/blog/2013/09/17/roles-responsibilities-key-stakeholders/ [Accessed 23 May 2017]. Ram, J. and Corkindale, D., 2014. How “critical” are the critical success factors (CSFs)? Examining the role of CSFs for ERP. Business Process Management Journal, 20(1), pp.151-174. Rashid, W.S.A., 2013. Managing stakeholders in enterprise resource planning (ERP) context–a proposed model of effective implementation (Doctoral dissertation, University of Salford). Sudevan, S., Bhasi, M. and Pramod, K.V., 2014. Interpreting Stakeholder Roles in ERP Implementation Projects: a Case Study. International Journal of Computer Science and Information Technologies, Vol. 5 (3), p.3011-3018. Tarhini, A., Ammar, H. and Tarhini, T., 2015. Analysis of the critical success factors for enterprise resource planning implementation from stakeholders’ perspective: A systematic review. International Business Research, 8(4), p.25. Read More