Enterprise System of Queensland Health - Assignment Example

Running Head: Enterprise System Case Study Student’s Name: Instructors’ Name: Course Code: Date of Submission: Title Case study report on enterprise system ‘Queensland health’ Executive Summary This report has been developed purposely to address the Queensland Health which adopted a new payroll system - a SAP based Enterprise System which was aimed cutting down the operational costs of the business. Despite the fact that the business had invested heavily on the new system, there were enormous failures which cost the business an extra $65 million something that had impacted negatively on the business whereby the effects are felt even up to know. However, this report has found that a well managed and implemented system has been attributed to numerous advantages which include cost savings, quality service delivery, automation and easy decision making which give the business a competitive advantage over the rivals. On the other hand some of the disadvantages that have been associated to enterprise system (ES), include high cost of investment, training and education requirement as well as the need to customize the new system into existing organizational structure. The research on the available alternatives to ES is yet to find one; however, an integrated legacy system is most effective option even though it is not easy to link all the business functions. The report has also reviewed a number of factors that lead to system implementation failure which include inadequate training and education, internal project management procedures and lack of proper budgeting and funding. These failures however, can be overcome through organizational commitment, accurate data entry and pre-planning preparation. The report recommends that strong leadership, continuous implementation process, involvement of all employees and constant review of the implementation process as key tools to ensuring that ES is successful. Table of Contents Executive Summary 3 Table of Contents 4 1.0 Introduction 4 2.0 Advantages of an enterprise system 6 2.1 Decision-making 6 2.2 Automation 7 2.3 Quality 7 3.1 Cost 8 3.2 Training and Turnover 9 4.0 Alternatives to enterprise system 10 5.0 Why the implementation of an enterprise system fail 11 7.0 The future of ERP system 17 8.0 Recommendations 18 9.0 Conclusion 19 References 20 1.0 Introduction Enterprise system is described as the bloodstream of a business. In the current global business, the entire prosperity of the business greatly depend on the success of the use of Information Technology (IT), meaning that its very difficult for a business entity to succeed if the IT system that it uses is a failed one. A good IT system enables the business owners to be in a clear picture on the progress of the business through its reports such as balance sheets and trading and profit and loss accounts. This information can be used by the owners of the business to interpret various aspects of the company in terms of profit realizations and returns on capital investments. IT gives reports that are very important to the business since they can assist the managers and the owners of the business to fully understand how the business is doing (Moon & Phatak, 2005). Computerized business imparts knowledge to the human resource on how various tools can be organized to attain the ultimate goal of the business. Application of computers can be used to achieve speed and efficiency in the long run since it provides enough training in various computing applications such as the spreadsheets. Enterprise Resource Planning (ERP) software is designed in away to equip the users who in this case are the employees with certain knowledge that can be used in performing different business operations. The computerized system provides the employees of the company with some skills both in operations and computing skills that can make one to be more suitable in performing different business tasks. Computerized business operations trains employees on how to be faster in both IT skills and the software. Together with E-business, computer systems can be used to offer managerial support that could be applicable in different business contexts (Charles, 2005). The following report will review the case of Queensland Health which failed to implement the new payroll system by looking at some of the reasons that might have contributed to its failure, the management models that could have been used to avoid system implementation failure apart from the likely benefits that the business is likely to get from the new system as well as the disadvantages and later on give recommendations for the management teams on what should be done during the process of system implementation (Allen, 2008). 2.0 Advantages of an enterprise system Investing in ES naturally looks good and enticing to the entrepreneur and the business stakeholders because of the number of things it brings into board. The enterprise system is normally built on well packaged programs known as enterprise system software. These systems are characterized by a number of aspects that are contained in them which include enterprise resource planning (ERP), supply chain management (SCM) as well as procurement that are very vital to the business. It is important for the managers who are the key players in implementing new systems to know that the following advantages cannot be witnessed if the internal business strategy and organizational structure is not compatible: 2.1 Decision-making The most important reason for an enterprise to use information and communication technology is actually to assist the management establish an information flow system across the organization in order to help individuals access information in a more effective and less costly way than when using a customer-built software. The system is important in ensuring that management information which includes reports is produced regularly to assist the management to monitor the business and control its progress. The reports include customer accounts, balance sheet, trial balance, trade profit and loss accounts. This is possible because information kept is readily available to everybody and can be accessed any time by anybody who has access to the systems (Tinham, 2005). 2.2 Automation Use of an enterprise system as applied in organization, integrates all the data routes by use of highly connected processes and technology. The management role is to ensure that every department and business function is automated. By doing this, the management is able to cut down expenses related to paying employees’ salaries that in this case will not be required as technology will assume their place. An enterprise that is not technology compliant is attributed to high volumes of work since every peace of work is manual, however; through connected processes the business is able to manage its work in a more appropriate speed. Through an automated system, all documents are generated automatically which include; invoices, credit notes, payroll, purchase orders, human resource records as well as the business operations records with high level of accuracy. Errors are reduced to minimum because its only one entry that needs to be made and all the rest of the materials will be automatically captured (Art, 2006). 2.3 Quality It is important for any enterprise to consider the quality of it services. Apart from ensuring that the business is faster in service delivery and customer response, it is very important for the organization to actualize the benefits realized in terms of cost to benefit both the organization and the business by offering the best at affordable prices. This will go along way in ensuring that customers are real satisfaction. An enterprise system is important in providing word class services both to the employees and the customers to the business. Proper use of e-business enables the organization to offer its services in a more convenient way that is satisfactorily and productive to the business (Al-Mashari, 2003). 3.0 Disadvantages of an Enterprise System Application of an enterprise system is very vital for both large and small businesses given the role it plays in ensuring that the organization has in place a system that can be used to perform it is core functions such as creating of products and service, preparing employees’ payroll, searching for orders, incorporating the business profits as well as costs and revenues. Enterprise systems are aimed at assisting companies to incorporate both its internal external processes by ensuring that all business functions can access and share vital information amongst them. Despite the fact that usage of an enterprise system is associated with a number of advantages it is also important for the management to realize that there are also some setbacks which include: 3.1 Cost The process of installing, implementing and managing an enterprise system is actually a very costly affair for the business. This is more common for small and medium sized businesses (SMBs) that are not able to raise adequate capital to support the implementation process since the investment requires heavy investment in terms of financial and human resource. For example, the businesses require skilled manpower to ensure that the system is safe and secure especially when the possibility information tapping is available (Gupta, 2000). However, to raise adequate resources to implement the systems is not a major problem with large companies who for example can afford to hire consultants and skilled manpower to implement the system. It is approximated that to put in place a proper system could cost the business between $30,000 and $500 million. Apart from the money required to buy the system and consultant services, the company must also abide by the law by buying the license to install the system. This is because a license is the only legal document that gives the company the green-light to continue with process of buying and implementing the system and other services such as technical and software upgrades. In addition to these costs, the company managers must also be aware that the older systems and programs contain a lot of vital of information that is likely to be lost. These legacy costs in most cases force companies to buy new computers applications since the new systems in many occasions are not compatible with the old ones rather than loosing the data contained in the older systems (Kemp & Low, 2008). 3.2 Training and Turnover The process of implementing a new enterprise system is an important stage that will determine if the system will be successful or not. This is because at the implementation stage is where the emerging failures of the system can be detected and corrected where necessary. However, to ensure the system is implemented properly the company must have in place people who have technical know-how about the system (Tinham, 2005). In order to ensure that system is successful in its functions, extensive training of employees must be done in order to ensure that they are system compliant. However, this is not the case with many companies who argue that training of the employees is a very costly undertaking for the business. By doing this, the company is likely to risk loosing some of the employees including those that are trained to the rival companies. The end result is for the company to hire new managers who may not be conversant with the system thus making the process of implementing the system very difficult. Therefore it is the responsibility of the management to ensure that they have the best group of employees who can use the system to lift the business’ bottom line (Charles, 2005). 3.3 Customization In addition to high to high costs of buying and implementing an enterprise system and training of employees, the company is also faced with the challenge of ensuring that the system is up to date and tailored towards the business’ preferences. Given that the system is new to the company, it is notable that many of the employees and consultants are likely to take much longer time to programme to discharge their services. This possibility is so risk especially when customer demands are urgent and cannot be supplied within the specified time to meet the customer demands (Charles, 2005). 4.0 Alternatives to enterprise system In the current business environment world over, ERP software has taken a centre stage in helping companies create strategic platforms that support business processes through enterprise system. The software works as a link for business activities thereby simplifying them by ensuring that everything is done in a certain way. However, the main challenge to this software is its ability to satisfy both the company and industry needs. Research has shown that the remedy that is there for the companies is to come up with an alternative approach that integrates all software components that allows for standard and customized components (Allen, 2008). The aim of this approach is to develop an enterprise system that is consistent to all the company requirements. Although the approach is yet to gain fame, it is important to note that the approach is gaining more importance in the corporate world given the ever dynamic business needs and technology advances that require this ERP software. Referring to Queensland Health case, for example, the system that was used did not take into consideration a number of factors such as establishment of internal firewalls to ensure that information was not lost and any mechanism that could be used to detect any failure during implementation. The best alternative system for Queensland Health could have checked internal network to find out if it is compatible with the enterprise system and ensure that there is a smooth cross-over from the legacy system (Petri, 2008). 5.0 Why the implementation of an enterprise system fail Given the case of Queensland Health audit report, it is true that the process of implementing the ES can fail if a number of factors are not taken into consideration from the initial stage. The audit that was done at Queensland Health reveal that damages that may result from failure in implementation are enormous and can cost the millions of dollars. Negligence is very common in many companies. For example in the case of Queensland Health, the company lost over $65 million that it had invested in the new system since it failed to cross over from the old legacy system. Apart from failing to perform as planned the system had failed to capture employees’ information leading to very difficult scenarios which include: partly payment of employees’ salaries, overpayment and mis-payments. The problem with these kinds of results is that the news got its way to the public thereby impacting negatively on the company image (Allen, 2008). The process of implementing ERP software varies from one company to another depending on the business strategy the company has. Huge sums of money running from million dollars to multi-million dollars are spent by companies without giving keen attention to the internal disciplines that will support or hinder the system implementation. Citing the case of Queensland Health, the process of doing risk assessment was not comprehensive enough to predict the chances of failure and success and if possible put in place a system back-up (Tinham, 2005). The company had also failed to do proper analysis on the benefits, objectives as well as cash flows. The major mistake that was done by the company management is that it assumed that by buying the system and put into work will alone transform the business processes and provide the desired results. This misguided approach might have been the case at Queensland Health and the ultimate conclusion by the management team is the blame on the ERP software as a bad venture (Petri, 2008). The following are the reasons that can be attributed to failure in the implementation of the ERP software at Queensland Health and in many other companies that wish to switch from the old legacy to a new enterprise system: 5.1 Best business practices The business structure defines the business’ practices and traditions. The existing business outlook greatly determines the success or failure of the ERP system. The process to change the business system must always be consistent with the change in the employees’ view. This is so because in most cases the employees have some vested interests in the already existing practices and therefore for the implementation process to succeed, the employees must be convinced first on the importance of the enterprise system because they play a very vital role in applying the system (Petri, 2008). Business practices often lead to numerous adjustments to the ERP system making it quite different from the original consequently giving unexpected results for the business. In the case of Queensland Health, the system failure had also been attributed to several business activities that were in operation by then. The business practices that were used at Queensland Health were not compatible to the new systems and therefore the staff could do what they want because they lacked full knowledge about the system (Open source ERP, 2011). 5.2 Training and Education In implementing a new system, one challenge that has been cited by research is the situation where you find that the staff is not knowledgeable enough about the new system. The role of training and educating the staff is to let them know more about the system and the benefits it carries as well the role of each employer in implementing the new system. In the case of Queensland Health, for example the Department of Education and Training had failed to ensure that the project management practices were in place to assist in disseminating important information and knowledge about the company goals (Open source ERP, 2011). This is important for any management team because it enables to create an environment that is welcoming where innovative and effective business decisions are given a priority. Lack of proper coordination between the company and the system vendors is associated by failure for the two to work together to ensure necessary usage manual is available for every employer to guide them on the implementation process. This greatly contributed to system failure at Queensland Health because the company had not taken the training process more serious thus resulting to very many errors. This is because the employees were not confident enough to programme their jobs to offer the desired results (Alexis, 2008). 5.3 The Project Manager In most cases when the ERP system is introduced, it is the management team who does the implementation process. Actually this is where the system starts to fail because the subordinate staff is not fully involved even though it is supposed to play an important role in implementing the system. The problem arises when the subordinate staff that is actually the end-user of the system at the information technology department is not given the authority to implement certain business processes (Alexis, 2008). The role of the managers is to keep in perspective the objectives of the business by providing direction to the subordinate. However, in most instances this is not the case. Looking at the case of Queensland Health, the methodology that was used was never consistent throughout the process. The tripartite system was used whereby the IBM as the vendor, the Queensland Health and the CorpTech were involved. This arrangement caused a lot of confusion whereby no single party let alone the employees who were clear of their responsibilities in the implementation process. Like many other companies that introduce the enterprise system usage, responsibilities were totally confused and it was not easy to hold any person responsible for the system failures that were experienced at Queensland Health (Kimberling, 2011). 5.4 Implementation Budget The project budget is actually aimed at acquiring and implementing the ERP software, however, in most cases once the project managers assumes the responsibility, it is notable to realize many companies fear to spend for such ventures thus creating financial constraints for the process of system implementation. Under-funding is common whereby many of the managers by software but are not willing to spend in implementing it. For example, budget constraints for implementation for the new payroll system at Queensland Health, could be attributed as one of the reasons for its failure. This is because from the audit report that was provided the estimate that was provided at first was $6.13m before some adjustments costing an extra $0.926m was arrived at which resulted to adjustment of the total estimate to be $6.194m. As if this is not enough, the final estimate for the project was found to be $24m something that caused a lot of tension which resulted into very serious management defects (Kimberling, 2011). 6.0 Implementation failure management models As realized from the case, implementation of ERP software has been attributed to a number of factors such as existing management practices that are not compatible to the software thus making it very difficult for the replace the system. Poor project management processes also has been cited as one of the major hindrances to implementation failure. For example in the case of Queensland Health, there was total confusion in terms of management whereby there was no clear responsibilities for the key players thus putting the implementation process into greater risk of failure. Inadequate budget allocation by the management for the project was also one of the main reasons as to why the system failed (Bhatti, 2000). However, research that has been done on system implementation failure has suggested several options to reducing the risk of system failure which include: 6.1 Organizational commitment The success of the company system greatly depends on how the employees work. For the process compatibility, requires that the staff who are the main implementers of the system need to develop new package of ideas that is supportive of the system. Organizational commitment requires that change of management practices takes place from the top management to the subordinate level in order to realize the intended objectives. Therefore commitment will enable the company to change the status quo to do away with any resistance that may hinder the implementation. Organizational realignment is important in ensuring that the re-engineering effort is effective (Petri, 2008). 6.2 Pre-implementation preparation ERP system in some organization is implemented in several parts and therefore making the process more complex to work with. Because of these, so many related problems do emerge. However, pre-implementation preparation is important in ironing out these issues in advance. One such thing that needs to be dealt with in advance include standardization to allow for customization and create an interface for connecting different sections of the organization. Pre-implementation preparation is important because it helps the organization consolidate its data sharing systems. On the other hand, proper project cost analysis is done at this stage to make sure that the company is willing to spend and support the system. In the case provided, cost analysis was not sufficiently done since inadequate funds were allocated for the project prompting the vendor not to give attention to detailed parts of the system thus contributing to its failure (Open source ERP, 2011). 6.3 Data accuracy Data accuracy greatly determines the end result of a project. Using of the ERP system require that the end users be conversant with the system and how it works. To achieve accuracy from the system, the organization must also invest in training and educating its employees on how to use the system. Training and education should be aimed at reducing performance errors by giving the most desired results. Training and education should be given priority before and during system implementation. Training may take two way approaches. One is to train a few individuals who will train the rest and secondly is to have the vendor do all the training for all the employees (Kyung-Kwon and Young-Gul, 2002). 7.0 The future of ERP system Enterprise system has continued to evolve over years it is finding it is way into organizations. The need for Queensland Health to have an enterprise system was to have a master payroll that will ease the work involved in paying the employees as well as develop some mechanism that will assist the company cut down it is costs apart from minimizing operational errors. The continuity of enterprise system greatly depends on the level of willingness the companies have towards changing their internal infrastructure and come up with the one that will support the ever changing technology. In order to make use of IT, enterprises have been forced to redefine their operational styles in order to handle the ever changing social technologies. In addition, more organizations are becoming collaborative of new technology in order to support their business process and therefore making the future of enterprise more promising (Alexis, 2008). 8.0 Recommendations Considering the case that has been provided to assist the study on enterprise system, it has been discovered that many organization are on run to have the ERP system in place in order to assist in managing various business processes apart from ensuring that operational cost is reduced to a minimum. The major aim for any business is to achieve efficiency and effectiveness in its business operations. However, the major challenge has been how to overcome system implementation hurdles as witnessed in the case Queensland Health. The following recommendations have been made to assist the process of implementing the enterprise system: Strong leadership must be provided by the project management and planning committee which should integrate the entire business. The implementation process requires the executive that respect the process and somebody who has the power to champion the implementation. The organization must always view the implementation process as a continuous endeavor until the ultimate goal is achieved rather than buying a system and forget that it is to be supported for it to work. Implementation is more than just installing the software. There is need to involve all the company employees especially the middle level management in decision making process to make sure detailed implementation plans are developed. Finally, the implementation process must be reviewed continuously to monitor its achievements. This is done by putting in place certain measurements to check whether the system is likely to succeed or not (Kimberling, 2011). 9.0 Conclusion In reference to the case study involving Queensland Health and the implantation of the enterprise system, the report has been as follows; ERP system is very vital in current business world since it helps the businesses improve their service delivery processes, improved quality results and reduced operational costs. It has also been noted that ERP system is attributable to some disadvantages which include: high cost of implementation, training and educating the staff as well as customization to the process. System implementation failure has been associated to inadequate resources in terms of skilled manpower and finances to support the implementation apart from existing management practices. Some of the remedies to implementation failure include providing adequate training, proper budgeting and pre-implementation preparation. 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