Post on 12-May-2015
Real world ROI of an ERP Implementation Measuring the Tangibles and Intangibles
University of Alabama at Birmingham
Rahul Thadani
UAB Mission Statement
“UAB is a research university and academic
health center that discovers, teaches and applies
knowledge for the intellectual, cultural, social
and economic benefit of Birmingham, the state
and beyond.”
Introduction : About UAB
§ Over 18,600 Employees. § Over 17,000 Students
§ 70 research centers
§ 82 City Blocks
§ Decentralized administrative structure
§ UAB Hospital: Consumer Choice Award: 12 consecutive years
§ Largest employer in the state of Alabama
University of Alabama at Birmingham
Where are we?
University of Alabama at Birmingham
“.. a system that enables fast, accurate, efficient tracking and
reporting of administrative activities… eliminate redundant entry
of information… eliminate need for voluminous paper reports….
Provide sufficient information in flexible formats to eliminate the
need for departmental shadow systems ..” (UAB, 1998)
Vision for UAB’s ERP system
University of Alabama at Birmingham
ERP life-cycle framework – (Esteves & Pastor, 1999).
ERP System Life Cycle
University of Alabama at Birmingham
Change Management
People
Process
Product
Adoption Decision Acquisition Implementation Use &
Maintenance Evolution Retirement
1998 2000 2004 2006 2010
Average cost of ERP: upwards of 11m
Measuring Benefits
Quantifying KPIs
Success Factors
Perceptions
Quantifiable Data Elements
Original Vision
Measuring ROI
University of Alabama at Birmingham
• Intangibles: Measure the satisfaction of the various
constituents based on their expectations of the system and their
experience with it.
• Tangibles: Analyze raw financial and HR data to look
at trends, changes in growth and attempt to relate these
changes to the system based on the feedback from users .
Measuring UAB’s ROI
University of Alabama at Birmingham
1. Executives
2. Power Users
3. End Users
4. IT
Intangibles
University of Alabama at Birmingham
Measuring ROI across 5 dimensions
Intangibles Shang & Seddon Model
University of Alabama at Birmingham
Operational
Managerial
Strategic IT Infrastructure
Organizational
1. Cost reduction (Labor, Inventory, Administrative)
2. Cycle time reduction,
3. Productivity improvement
4. Quality improvement (error rate, redundancy,
accuracy, reliability)
5. Customer services improvement (ease of data
access for customer queries)
Intangibles Shang & Seddon Model
University of Alabama at Birmingham
Operational
1. Better resource management (Better workforce
management)
2. Improved decision making and planning(reports,
real-time use of data, accessibility)
3. Performance improvement (financial, operational
efficiency, and effectiveness management)
standardization, compliance
Intangibles Shang & Seddon Model
University of Alabama at Birmingham
Managerial
1. Support business growth (transaction volume,
capacity, capability, new functions)
2. Build cost leadership (economies of scale, shared
services)
Intangibles Shang & Seddon Model
University of Alabama at Birmingham
Strategic
1. Build business flexibility for current and future
changes (integration with other systems)
2. IT costs reduction (hardware, support staff, etc)
3. Increased IT infrastructure capability
(standardized platform, performance, reliability,
availability, disaster recovery etc)
Intangibles Shang & Seddon Model
University of Alabama at Birmingham
IT Infrastructure
1. Support organizational changes
2. Facilitate Business learning (cross training of
employees)
3. Empowerment (accountability, value added
responsibility, users have ownership)
4. Built common visions (efficient communications ,
collaboration)
5. Better Employee morale and job satisfaction
(improved skill levels)
Intangibles Shang & Seddon Model
University of Alabama at Birmingham
Organizational
Collected thru:
HR and Financial Oracle system
UAB Financial Reporting
Auxiliary Systems
Tangibles
University of Alabama at Birmingham
Realizing the Benefits
University of Alabama at Birmingham
Aggregate Response
POWER USERS END USERS
Significant Improvement
Improvement
No Change
Significant Deteriora5on
Deteriora5on
Cost Reduction; Cycle Time; End Users; Level of expectations
Operational Dimension: Observations & Findings
University of Alabama at Birmingham
0.85
1.24 POWER USERS
END USERS
-1
0
1
2
1.1 Cost reduction
1.2 Cycle time reduction
1.3 Productivity
improvement
1.4 Quality improvement
1.5 Customer services
improvement
Sub Dimension
Operational
Overall Operational
Deteriora5on
Significant Improvement
Improvement
No Change
Significant Deteriora5on
Decision Making, Compliance
Managerial Dimension: Observations & Findings
University of Alabama at Birmingham
1.10 1.06
POWER USERS
END USERS
-1
0
1
2
2.1 Better resource
management
2.2 Improved decision making
and planning
2.3 Performance improvement
Sub Dimension
Managerial
Overall Managerial
Deteriora5on
Significant Improvement
Improvement
No Change
Significant Deteriora5on
Cost Leadership, realization of promised benefits, shadow
systems
Strategic Dimension: Observations & Findings
University of Alabama at Birmingham
0.88
0.50
POWER USERS
END USERS
-1
0
1
2
3.1 Support business growth
3.4 Build cost leadership
Sub Dimension
Strategic
Overall Strategic
Deteriora5on
Significant Improvement
Improvement
No Change
Significant Deteriora5on
Personnel Costs, Technology changes, DR, High Availability, H/
W costs
IT Infrastructure Dimension: Observations & Findings
University of Alabama at Birmingham
-0.14
IT
-2
-1
0
1
2
4.1 Build business flexibility
4.2 IT costs reduction
4.3 Increased IT infrastructure
capability
Sub Dimension
IT Infrastructure
Overall IT
Deteriora5on
Significant Improvement
Improvement
No Change
Significant Deteriora5on
Organizational Changes, Business Learning, Employee Morale
Organizational Dimension: Observations & Findings
University of Alabama at Birmingham
1.06 0.97 POWER USERS
END USERS
-1
0
1
2
Sub Dimension
Organizational
Overall Organization
al Deteriora5on
Significant Improvement
Improvement
No Change
Significant Deteriora5on
Tangibles: UAB Today
University of Alabama at Birmingham
0
500
1000
1500
2000
2500
3000
1997 2004
2011
248 540
617
858 562
1180
1100
2686
$ m
illio
n
UAB Financial Highlights
Grant in $m Payroll $m
Hospital Revenue $m Total UAB Revenue $m
0
5
10
15
20
1997 2004
2011
10.4
15.1 14
18.6 15.85 18.7
UAB Resources
Sq feet in million Employees '000
Students '000
xxx
Tangibles
University of Alabama at Birmingham
Total Jobs, -0.41%
Executive /Administrative,
7.80%
Professional/ Non Faculty,
12.95% Techical/ Paraprofessional,
10.02%
Secetarial/ Clerical, -19.82%
-30.00%
-20.00%
-10.00%
0.00%
10.00%
20.00% %
Ch
ang
e in
Job
s
Change in Job Profiles 2004-2010
Total Jobs Job Profile
Tangibles
University of Alabama at Birmingham
Invoices
Requistions Journal Batch LD TEL
HR
PO
0
250,000
500,000
750,000
1,000,000
2005 2006 2007 2008 2009 2010
Documents Processed Annually
Process Improvement; Transactional Transparency; Accuracy
Tangibles
University of Alabama at Birmingham
0.908
2.44
4.9
5.5
0.31
1.44
2.84
2.56
0 1 2 3 4 5 6
Time Entry
Requisi5on
Invoice Approval
HR/ LD
Days
Cycle Time Reduction
2010 2005
xxx
Tangibles
University of Alabama at Birmingham
10.19
8.1
0 2 4 6 8 10 12
Avg 5me for New Hire
Days
HR On Boarding
2010 2005
Hardware cost savings: % Change since 2004
Tangibles
University of Alabama at Birmingham
46% Overall Hardware Cost Reduction since 2004
0%
10%
20%
30%
40%
50%
60%
70%
80%
H/W Cost Savings: % change since 2004
Database Server
front end servers
interface server
SAN
load balancer
firewall etc
Tangibles
University of Alabama at Birmingham
Enhancements
45%
Maintenance 31%
Bug Fix 18%
Compliance 6%
Annual System Maintenance
Complexity of Data Security: Four categories: Academic, Administrative,
Clinical and Research.
IT strategy and planning: Dependent on the vendor schedule for upgrades
and planning.
Improved Performance and Maintainability: higher reliability and negligible
failure rates. Easier Cloning and Backups
IT costs: IT costs are higher than initial projections; Cost of development
staff increased by 50%. Hardware costs down 46%
Key Findings : Information Technology
University of Alabama at Birmingham
System Use Optimization: System capacity and capability. Policy decisions
and current design are main causes of current limitations. real time view of
data/transactions.
Training: Need for advanced training that focuses on business processes
used at UAB and how to optimize the use of the system for greater
operational and managerial efficiencies.
Embrace Shadow Systems: Costs may be reduced through better
integration, policy changes and reporting methods.
Key Findings : End Users
University of Alabama at Birmingham
Operational Benefits: standardization of -> better system wide
reporting and analysis of data. compliance requirements and external
reporting needs. A significant amount of workload has been pushed
back to end users, enabling staff to focus more on core activities.
Workforce requirements: Quality and skill sets of work professionals.
Key Findings : Power Users
University of Alabama at Birmingham
Lessons Learned:
- Design that is structured around functional silos..
- Avoid replication of old processes in new system.
- Business processes should be changed to match that of the system
functionality.
- Risk assessment more complex, and window for management of risk is
smaller.
- Transparency of data and finances leads to less fraud and more
accountability.
Key Findings : Executive
University of Alabama at Birmingham
Vision:
To utilize the system to a higher potential through use of
better integration, accessibility and reducing inefficiencies
Objectives:
• System Level Architecture design
• Build better Business Intelligence
• Re-focus of activities based on cost analysis : fine tune
process flows and eliminate process inefficiencies
• Minimize need for shadow systems
The Path Forward : Maximizing the ROI
University of Alabama at Birmingham
“The highest type of efficiency is that which can
utilize existing material to the best advantage”
Questions?
University of Alabama at Birmingham
Rahul Thadani
rthadani@uab.edu
University of Alabama at Birmingham