Wednesday, 19 August 2009

Why Novartis Backed Off from Enterprise Software

Table of contents
PM 101: CONTEMPORARY PROJECT MANAGEMENT 1
TABLE OF CONTENTS 2
SUMMARY 3
1.WHY WAS NOVARTIS HAVING TROUBLES WITH ITS REQUISITION-TO-PAY PROCESS? 4
2.WHAT MANAGEMENT, ORGANISATION, AND TECHNOLOGY FACTORS WERE INVOLVED? 4
2.1 Management factors: 5
2.2 Organisation Factors: 6
2.3 Technology Factors: 6
3.WAS THE SOLUTION TO THIS PROBLEM A GOOD ONE? 7
4.WHY? 7
CONCLUSION 7
REFERENCES: 8
BIBLIOGRAPHY: 9

Summary
Change Management is a major challenge may confront any organisational progress when an organisation tries to superimpose a system. Prior to the risk of the new system failure in meeting its goals there are many other risks embedded in expected and unexpected conflicts, lack of enthusiasm to the new system especially with the hygiene seekers and obstacles by the protestants who may feel their current titles threatened by the upcoming change.
When this change is an expansive large scale one which may extend to reach different geographical or/and work areas, coordination challenge will rise in the horizon and may enforce the organisation to assign a team especially to handle the job, inserting such a new team will definitely impact the organisation structure and the elations amongst the existing teams.
Ensuring success of any change in terms of implementation is one hundred percent a matter of configuration management. This was the learned lesson from “Why Novartis Backed Off from Enterprise Software” case study and this is what will be discussed through this paper.

In today’s fast growing market major changes must be applied to the world wide organisations’ communication systems as a response to the need of integrated systems with the ability of covering different departments and crossing geographical borders ensuring the smooth flow of information at relatively low cost.

‘ERP is (Enterprise Resource Planning) An integrated information system that serves all departments within an enterprise.’ (PCMAG.COM, 2009)
Usually implementing an ERP system aims to Total Cost Reduction by reducing the cost of internal communications, requisition-to-pay process and information exchange.

Although ERP may observably help cost reduction which may be big temptation to the upper management, many challenges are embedded in the implementation process some of those are ‘The Need for Business Continuity…Working in Partnership’ (AMEInfo, 2003).

Shortage in change management planning and control will definitely lead to failure further to creating unnecessary problems with organisation financials, structure, politics and etc.

To avoid these headaches, attention shall be paid to the coming considerations ‘In-house Technical Expertise… Trust Your Consultant … Do Not Over negotiate’ (Karasev, 2009)
Change management and configuration management considerations shall be carefully yet strictly implemented when intending to start such a vital yet risky process.
1. Why was Novartis having troubles with its requisition-to-pay process?
‘It was not a true integrated requisition-to-pay process’ (Overby, 2003).
Novartis was having trouble because of the following:
• The high cost of its system integration as many processes needed manual processing ‘. . . The company’s existing process for invoicing was inefficient, requiring manual approvals from many different managers’ (Overby, 2004)

• Their operations in various countries needed to get tied all together and coordination amongst them needed to be done. ‘. . . were impressed by SAP’s ability to address their industry-specific business requirements as well as the vendor’s superior global service and support network’ (Overby, 2004)


2. What management, organisation, and technology factors were involved?
Another definition of ERP is : ‘ERP software is multi-module application software that integrates activities across functional departments, from product planning, parts purchasing, inventory control, product distribution, to order tracking’ (Zhang, 2005)
Looking at Novartis case study under the light of this definition helps recognising management, organisation, and technology factors were involved.

2.1 Management factors:

• Lack of Configuration Management.
As training on a new system is one of the most critical considerations of a system superimpose; it must be planned and executed prior to the system implementation and unfortunately this was not taken seriously by Novartis leading to a serious conflict.
‘...information systems specialists scrimped on training and did not pay sufficient attention to the new system’s impact on business processes.’ (Overby, 2004)

• Lack of Motivation.
Implementing a new system which is expected to have a serious impact on particular working zones requires proper motivation in order to keep every one on the track. Expected benefits should be highlighted through real life training precedes implementation this would work as a kind of encouragement.
In our case staff especially accounts were not ready and when they showed lack of enthusiasm they should be taken seriously by the management, they are the experts in their zone.
‘The accounts payable and strategic sourcing departments fingered a recent upgrade to the SAP R/3 financial modules as the source of their financial crisis. ’ (Overby, 2004)

• Coordination problems rose ahead.
Although the action by Ray Pawlicki, Novartis’s vice president for information and chief information officer to arrange a six months program to foster joint leadership was helpful as it gets the groups to finally start listening to each other, yet it was a late action which if done earlier to the clash would save a lot money and time in stead of leaving each of the groups working in his own silo.

• Taking the Wrong Decisions and the Right Ones in a Wrong Way.
- Although the information system department is the one to decide only when it is about the implementation technical information decision, they felt free to decide for the accounts when they insisted from their side on applying the new system to all departments assuming that success is a logic result as the system worked in other organisational areas, This was a big common mistake as I assume that visiting the expert of each working area separately is a major key of success which was ignored leading to political problems like the strict refuge by the accounts to the new system.
- The two last out comes of the coordination meeting were taken regardless of the software vendor whom should be involved in the decision making as a consultant.
‘. .irrespective of the software vendor and that would best support the company’s redesigned purchasing process.’ (Overby, 2004)

• Improper Task Assignment against Deadlines, Budgets and Information Systems.
When assigning the task of training on the information system specialists should be divided into groups to avoid or at least reduce the impact of their training on their attention to the new system’s impact on business processes because of tight deadlines and limited budget.

2.2 Organisation Factors:
‘Making effective use of ERP generally means solving problems with business processes and organizational design’ (Scavo, 2004)

• The Organisation Chart should be redesigned flexibly to best serve the change period’s requirements; this should be done as a part of the change management plan. It would be better if a place was reserved for a representative of the software vendors who should follow up the process closely and coordinate amongst all related parties avoiding conflicts due to the expected and unexpected misunderstanding of the process requirement and sequence.

• The BIM team should be created and showed in the organisational chart earlier so that they would have the opportunity to estimate and report technical problems before they turn into facts. ‘ The information systems department had assigned special staff members to serve as business information managers (BIMs) who could work more closely with end user departments to clarify and support business goals’(Overby, 2004)

• Major early coordination amongst various departments should be done before starting SAP up. A process coordinator should be hired to cover the coordination instead of having the information system team over loaded trying to win two battles in two zones a time.

2.3 Technology Factors:
‘The system is good, but it's being used ineffectively’ (Scavo, 2004)

• Communication:
It was clear since the job started that Novartis was confronting internal and external communication problems and fixing them was the heart and the soul of the intended software implementation.
‘Somewhere in the process of paying invoices, payments were being held, and a backlog of overdue bills was building. A few vendors even withheld credit from the company.’ (Overby, 2004)
Lack of communication led to two different approaches by two different teams whom it took very long time to produce something an agreeable solution by both of them.
‘The accounts payable and strategic sourcing departments fingered a recent upgrade to the SAP R/3 financial modules as the source of their financial crisis… The information systems staff thought a recent implementation of the SAP R/3 software would solve the problem.’ (Overby, 2004)
3. Was the solution to this problem a good one?
‘One was to create a new way for the information systems. . . The other outcome was a proposal to improve the purchasing process for Novartis departments so that they would no longer make independent purchases. . . ’ (Overby, 2004)

• The answer is yes.
4. Why?

• The proposed solution could manage one of the expected advantages of SAP if succeeded; this was the cost reduction through selling in larger quantities; around $4 million was saved in six months time. Although this sound very fine but in case they succeeded with SAP the saved amount would be much larger on the long run.

• The best of breed solution was simpler and less expensive than the intended process. ‘However, Web service is promising to make the process of connecting best-of-breed applications simpler and less costly than it has been in the past, when complicated interfaces were required to integrate solutions from different vendors.’ (Overby 2003)

• Both teams reached an agreed proposal through negotiations which was a good experience for the future. As they were solving their problems together they were creating a healthy communication environment.


Conclusion

• ERP Implementation is not at all a piece of cake, it requires high standards of awareness of change management, configuration management, flexibility in organisation chart and a lot of training.
• ERP may look like the magic lamp in the way of the Total Cost Reduction through saving non necessary cost in today’s world such as the old fashion transportation and correspondence methods yet ERP is not a harsh solution, it can be developed and redesigned to meet each organisation’s needs.


References:
• PCMAG.COM. July 11, 2009. http://www.pcmag.com/encyclopedia_term/0,2542,t=ERP&i=42727,00.asp (accessed July 11, 2009).
• "AMEInfo." How to successfully implement a disaster recovery plan. June 23, 2003. http://www.ameinfo.com/25389.html (accessed July 12, 2009).
• Karasev, Andrew. "ERP Implementation: Success Factors." Ezine@rticles.com. July 2009. http://ezinearticles.com/?ERP-Implementation:-Success-Factors&id=53575 (accessed July 09, 2009).
• Overby, Stephanie. "Enterprise Application Integration: This Could Be the Start of Something Small." CIO. February 15, 2003. http://www.cio.com/article/31703/Enterprise_Application_Integration_This_Could_Be_the_Start_of_Something_Small?page=2 (accessed July 11, 2009).
• Overby, Stephanie. “Can’t We All Just Get Along?” CIO Australia, March 10, 2004 and “SAP Chosen by Novartis as a Major Building Block,” EETimes, June 16, 2003.
• Zhang, Bruce. "ERP Definition - A Systems Perspective." www.sysoptima.com. Augost 08, 2005. http://www.sysoptima.com/erp/erp_definition.php (accessed July 10, 2009).
• Scavo, Frank. "The Enterprise System Spectator." http://fscavo.blogspot.com. May 31, 2004. http://fscavo.blogspot.com/2004_05_01_fscavo_archive.html#108446344417981237 (accessed July 08, 2009).


Bibliography:
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1 comment:

Nathaniel @ software project management training said...

Nice post. Change Management is really the hardest part of an organization to adjust. It's as if you are starting anew, coping again to another way, plan on doing the projects and such.

But we should not worry because this change can help us improve our working patterns, then have a productive and successful project. Great work!