E-Business Suite 2 _ Rahul Thadani _ Real world ROI of an ERP Implementation.pdf

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


Where are we?


“.. 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


ERP life-cycle framework – (Esteves & Pastor, 1999).

ERP System Life Cycle


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


• 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


1. Executives

2. Power Users

3. End Users

4. IT

Intangibles


Measuring ROI across 5 dimensions

Intangibles Shang & Seddon Model


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)



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



Managerial

1.  Support business growth (transaction volume,

capacity, capability, new functions)

2.  Build cost leadership (economies of scale, shared

services)



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)



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)



Organizational

Collected thru:

HR and Financial Oracle system

UAB Financial Reporting

Auxiliary Systems

Tangibles


Realizing the Benefits


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


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


Improvement

No Change


Decision Making, Compliance

Managerial Dimension: Observations & Findings


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


Improvement

No Change


Cost Leadership, realization of promised benefits, shadow

systems

Strategic Dimension: Observations & Findings


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


Improvement

No Change


Personnel Costs, Technology changes, DR, High Availability, H/

W costs

IT Infrastructure Dimension: Observations & Findings


-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


Improvement

No Change


Organizational Changes, Business Learning, Employee Morale

Organizational Dimension: Observations & Findings


1.06 0.97 POWER USERS

END USERS

-1

0

1

2

Sub Dimension

Organizational

Overall Organization

al Deteriora5on


Improvement

No Change


Tangibles: UAB Today


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


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


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


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


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


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


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


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


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


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


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


“The highest type of efficiency is that which can

utilize existing material to the best advantage”

Questions?


Rahul Thadani

[email protected]


E-Business Suite 2 _ Rahul Thadani _ Real world ROI of an ERP Implementation.pdf

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