INTEGRATED CASE STUDY

ACB11BLAPREPARED FOR: PROF DR JAMALIAH SAIDPREPARED BY:

KHAIRUL BAHRIAH BINTI AYOB 2012586271

NORSUHAIDA BINTI DAHALAN

2012533873

NORFADILAH BINTI MUHAMAD MANAWARY 2012937683

NURUL NADIA BT HJ ABD SHAFID 2009956671TABLE OF CONTENTS1.0SWOT ANALYSIS -----------------------------------------------------------------------3-5

2.0FEASIBILITY ANALYSIS -------------------------------------------------------------6-14

3.0GANTT CHART --------------------------------------------------------------------------15-16

4.0IS TERMINATION LIM IS A RIGHT DECISION?---------------------------------17

5.0HOW TO OVERCOME STAFF RESISTANCE -------------------------------------18-19

1.0 SWOT ANALYSISStrengthAny implementing of new system required the economy feasibility as baseline project plan. The purpose is to identify either the companys financial benefits or costs associated with the implementing of SAP. Economic feasibility also referred to as cost benefit analysis. It is very important to identify or it will be impossible for conduct a sound economic analysis and determine whether SAP is more feasible than another. We need to review worksheets that can use to record costs, cash flows, benefits and techniques for making cost benefit calculation. These worksheets are used for decide whether the SAP is relevant for implementing.

Meanwhile, for implementation SAP, we can determine whether it can provide benefit for ATLAM. A new system, SAP allow complex segmental reporting, provision for integration of data, system maintenance and support were possible, audit points raised during procurement process might be resolved with provision of Materials Management Module. The opportunities of implementation SAP could improve ATLAM to be more efficiency, speed and flexibility because can access data quicker and good for decision making.

The implementation benefit can be dividing into tangible benefit and intangible benefit. Tangible benefits are benefit which can be measured in currency. Tangible benefit can be seen for the implementing SAP is increasing efficient of activity and reduction on error because there is a segmental reporting such divisional profit and loss, variance analysis. Intangible benefit means that benefit not measured by currency. The intangible benefit can get for ATLAM such improvement of employee self-motivate, quality of employee in learning and understanding new tasks and more timely information.In operational feasibility, when SAP is implementing, it can fit the business model in ATLAM. As ATLAM current is using system that cannot generate the financial reports. When ATLAM is implementing SAP, it can make the system be more efficient because SAP provide segmental reporting.

WeaknessOther than the benefit, we also have to determine SAP disadvantages, such as the cost incurred. The cost that include in the development of SAP to implementation of SAP that cost RM5,000,000; new hardware that cost RM 1,000,000; training costs RM 1,272,550; and customization work RM 72,840. We can also dividing out the cost into tangible cost and intangible cost. Tangible cost is hardware costs, labour cost, and operational costs from employee training. Intangible cost is loss of customer goodwill, employee morale and operational inefficiency.

As for ATLAM in implementation of SAP system, it is a must for identify and evaluate whether SAP system will perform effectively, reliable and capability of resources to utilize SAP system. In addition, the risk assessment to access technical risk level of SAP system will be based on the project size. Implementing SAP system will be a high risk on the project for ATLAM. The projects have limited time around 7 weeks for the project team member to set up and manage it. It will impact to the team member because it will have high stress on it.OpportunitiesSAP system project is highly structure and is well define have a lower risk. When ATLAM is implementing SAP system, PETRA group will provide applicable system to ATLAM. Then, it will have two group of people related to which is development group and user group. The project will have a high risk on the development group meanwhile the user will have low familiar with the SAP system because never use it before. But, ATLAM will provide training for employee to reduce the risk of implement SAP system.

Lim has said that some of staff has never used the PCs in the department. Implementing SAP system will eventually expose the staff learning to use the system with the right data to produce the right report by the training provided. Threat

Political feasibility is about understanding how key stakeholders within the organization view the proposed system. This is due to an information system may affect the distribution of information within the organization, and thus the distribution of power, the construction of an IS can have political ramifications. Those stakeholders not supporting the project may take steps to or block disrupt or change the project intended focus. For ATLAM, the key stakeholder is their own staff. The most important thing is to overcome the resistance change of ATLAM staffs. Because staff is the parties whose will do their job with SAP system. If they refuse to change will disrupt the project that implement.

Gopal has said that the implementing SAP system is about not only change on technology, it also about a change in work processes, culture and habits. A change in work processes and culture is not easier because employee already familiar with the work scope they do the same thing every day. Other than that, change mind in employee for employee job roles that has been in their mind for few years. The existing operations and support infrastructure of ATLAM cannot handle the SAP system. It has shown that the implementing SAP system has high risk in term of operational risk and impact on ATLAM operation. So, the support from PETRA and appropriate training is important in order to affected staff in ATLAM to make the implementation be operationally feasible.

2.0 FEASIBILITY ANALYSISFor implementing SAP our group decides to choose several feasibility factors that can be determined whether to proceed with implement SAP or not. There are:-i. Economic feasibility

Economic feasibility is required for baseline project plan. The purpose for assessing economic feasibility is to identify financial benefits and cost associated with the implementing SAP. Economic feasibility is often referred to as cost benefit analysis. During project initiation and planning, it will be impossible to define precisely all benefit and cost related to implementation. Next we review worksheet that can use to record costs and benefits and techniques for making cost benefit calculation. These worksheet are used for decide whether the SAP is valuable for implementing.

Besides, the implementation benefit has been dividing into tangible benefit and intangible benefit. Tangible benefits are benefit which can be measured in dollar. Tangible benefit can be seen for the implementing SAP is increases speed of activity and reduction on error because there is a segmental reporting such divisional profit and loss, variance. For intangible benefit can get for ATLAM such improvement of employee morale, broader societal implication, promote ATLAM learning and understanding and more timely information.

ii. Operational feasibility

Operational feasibility is a process of examining the likelihood that the project will attain its desired objectives. The purpose is to understand the degree to which the proposed system will likely solve the problem or take advantage for the opportunities outlined in the system service request or project identification study. For ATLAM, when SAP is implementing it can fit the business model in ATLAM. As current system they cannot produce financial reports. Thus when they implementing SAP, it can make the system be more efficient because SAP allow complex segmental reporting.

iii. Technical feasibility

Technical feasibility analysis should include an assessment of the development group understanding of possible target hardware software and operating environment to be used, as well as system size, complexity and group experience with similar system. As for ATLAM case, it is must identify and evaluate whether SAP system will perform effectively, reliable and capability of resources to utilize SAP system. Other than that, the risk assessment to access technical risk level of SAP system will be based on the following:

a. Project size

As the large the project is, there will be a high risk on the project. The project will have an impact for ATLAM when implementing it. Moreover during implementation, ATLAM left limited time which around 7 weeks for the project team to manage it and it will have stress on it.

b. Project structure

When ATLAM is implementing SAP system, PETRA group will provide applicable system for ATLAM. Even the user representative, Lim whose is disagree and refuse for implementation of SAP system, it still need follow what have been decide because it is under control as ATLAM management have highly commitment through the system.

c. Development group and User group

When ATLAM implement SAP system, it will have two group of people related to its which is development group and user group. The project will have a high risk on the development group meanwhile the user will have low familiar with the SAP system because never use it before but they can conduct training for employee to reduce the risk of implement SAP system.

iv. Schedule feasibility

Schedule feasibility is consider all potential time frames and completion date schedule can be met and the meeting these date will be sufficient for dealing with needs of the organization. For ATLAM, schedule should with the duration of SAP system before it is fully implement like Gantt Chart and time frame. The scheduling risk should also evaluate for possibility of happen of improper function of SAP system since the project is lack of time.

v. Political feasibility

Political feasibility is about understanding how key stakeholder within the organization view to proposed system. This is due to an information system may affect the distribution of information within organization, and thus the distribution of power, the construction of an IS can have political ramifications. Those stakeholders not supporting the project may take steps to or block disrupt or change the project intended focus. For ATLAM, the key stakeholder is their own staff. The most importance thing is overcome the resistance change of ATLAM staffs because they are parties whose will do their job with SAP system.

Capital budgeting analysis

Capital budgeting is the process of planning for purchases of the long-term assets. This technique focuses on cash flow rather than profits. This is mean that it will identify the cash inflows and outflows rather than revenues and expenses flowing from the investment. In the analysis, we assume that depreciation is 34% for the six years based on reducing balance method, internal rate of return is 25%, discount rate is 10% and marginal rate is 28%. This analysis including:

i. Initial Investment

Initial investment is cost incurred to enter a project. It is important to understand how much it cost to start and run a project in order to determine the feasibility range. Below show calculation of initial investment of implementation of SAP:

Initial InvestmentRM

Hardware

Initial software license

Training costs

Customization work2,000,000.00

1,000,000.00

1,271,550.00

72,840.00

TOTAL4,344,390.00

The initial investment that needs to pay the implement of SAP is RM 4,344,390.00 which more expensive if compared to ACCPAC. Although the initial investment is huge but it gives a lot of cost saving in term accounting time and efficiency cost, technical expertise cost saving and process and procedures cost savings as well for long-term period.

ii. After- Tax Cash Flows For Year 1 Through 6

Year 1Year 2Year 3Year 4Year 5Year 6

Savings:RMRMRMRMRMRM

Accountant's time and efficiency-400,000.00800,000.001,200,000.001,600,000.002,000,000.00

Technical expertise cost savings600,000.001,200,000.001,400,000.001,600,000.001,800,000.002,000,000.00

Process and procedures cost savings-500,000.00900,000.001,200,000.001,500,000.001,800,000.00

Working capital saving900,000.001,200,000.001,500,000.001,500,000.001,500,000.001,500,000.00

Total Savings1,500,000.003,300,000.004,600,000.005,500,000.006,400,000.007,300,000.00

Costs:

Average SAP license cost-150,000.00200,000.00225,000.00250,000.00250,000.00

Cost to convert old data to new data100,000.00160,000.00180,000.00560,000.00600,000.00640,000.00

Cost of Overheads300,000.00420,000.00490,000.00560,000.00600,000.00640,000.00

Cost of system maintenance and firewalls60,000.00120,000.00130,000.00140,000.00150,000.00160,000.00

Cost of hardware expansion-260,000.00300,000.00340,000.00380,000.00400,000.00

Cost of Training500,000.00800,000.00900,000.001,000,000.001,100,000.001,300,000.00

Total Costs960,000.001,910,000.002,200,000.002,825,000.003,080,000.003,390,000.00

Earning before tax and depreciation540,000.001,390,000.002,400,000.002,675,000.003,320,000.003,910,000.00

Depreciation cost (34%)1,477,092.60974,881.12643,421.54424,658.21280,274.42184,981.12

Net book value after depreciation2,867,297.401,892,416.281,248,994.75824,336.53544,062.11359,080.99

Earning before tax(937,092.60)415,118.881,756,578.462,250,341.793,039,725.583,725,018.88

Tax fate (28%)(262,385.93)116,233.29491,841.97630,095.70851,123.161,043,005.29

Earning after tax(674,706.67)298,885.591,264,736.491,620,246.092,188,602.422,682,013.59

Depreciation reversal1,477,092.60974,881.12643,421.54424,658.21280,274.42184,981.12

After-tax cash flows802,385.931,273,766.711,908,158.032,044,904.302,468,876.842,866,994.71

iii. Payback Period

Payback period is a method that estimated the amount of time required for cash flows generated by investment to repay the cost of the investment. This analysis provides insight liquidity of the investment.

YearCash Flow

RMCumulative Cash Flow

RM

0

1

2

3

4

5

6(4,344,390.00)

802,385.93

1,273,766.71

1,908,158.03

2,044,904.30

2,468,876.84

2,866,994.71(4,344,390.00)

(3,542,004.07)

(2,268,237.36)

(360,079.33)

1,684,824.97

4,153,701.81

7,020,696.52

To determine the remaining period:

Payback period = 3 + (Balance left in year 3 / Cash flow in the year 4)

= 3 + (360,079.33 / 2,044,904.30)

= 3.18 years or 3 years and 3 months

Therefore, the payback period for implementation of SAP is 3.18 years. This mean that AHLAM will able to recover the cost of initial investment for SAP in 3.18 years which the cash flows generated by SAP equal to its initial investment RM4,344,390. This also shows ATLAM can move into profit and do not need beat the cost of implementing SAP after 3.18 years.

iv. Net Present Value (NPV)

NPV gives a truer picture of the profitability of potential investment by explicitly taking into consideration the size and timing of all the cash flow associated with the proposed investment. It involves discounting a stream of future cash flows back to its present value.

YearCash Flow

RMPVIF

10 %Present Value

RM

1

2

3

4

5

6802,385.93

1,273,766.71

1,908,158.03

2,044,904.30

2,468,876.84

2,866,994.710.9091

0.8264

0.7513

0.6830

0.6209

0.5645729,449.05

1,052,640.81

1,433,599.13

1,396,669.64

1,532,925.63

1,618,418.52

Total Present Value7,763,702.77

Net Present Value (RM) = PV Initial Outlay

= RM 7,763,702.77 RM 4,344,390.00

= RM 3,419,312.77

Based on the calculation above, the value of NPV is positive so that SAP is desirable to implement in the company.

v. Internal Rate Of Return (IRR)

Internal rate of return is the rate of return from capital investment. In other words, IRR is the discount rate that make NPV equal to zero. With the NPV analysis, the IRR can be compared to a required rate of return to determine whether the company should accept the investment. An investment with IRR that greater than required rate of return may be accepted while it may be rejected if IRR less than required rate of return. By using trial and error method:

YearCash Flow25%27%29%

RMPVIFPresent ValuePVIFPresent ValuePVIFPresent Value

RMRMRM

0(4,344,390.00)1.0000(4,344,390.00)1.0000(4,344,390.00)1.0000(4,344,390.00)

1802,385.930.8000641,908.740.7874631,799.940.7752622,004.60

21,273,766.710.6400815,210.700.6200789,736.940.6009765,438.80

31,908,158.030.5120976,976.910.4882931,543.580.4658888,884.24

42,044,904.300.4096837,592.800.3844786,064.360.3611738,438.19

52,468,876.840.3277809,001.560.3027747,275.630.2799691,115.88

62,866,994.710.2621751,565.460.2383683,289.220.2170622,140.72

TOTAL487,866.17225,319.67(16,367.57)

Interpolation:

Rate 1 - IRR=NPV 1 -0

Rate 1 - Rate 2NPV 1 - NPV 2

27 - IRR=225,319.67 - 0

27 - 29225,319.67 - (-16,367.56)

27 - IRR=225,319.67

-2241,687.23

27 - IRR=0.9323 x -2

IRR=1.8646 + 27

IRR=28.86%

Based on calculation above, the investment in SAP is feasible because the internal rate of return is 28.86 % which greater than required rate of return of 25%. Thus this project is acceptable.

3.0 GANTT CHART

A Gantt chart is a horizontal bar chart developed as a production control tool in 1917 by Henry L. Gantt, an American engineer and social scientist. Frequently used in project management, a Gantt chart provides a graphical illustration of a schedule that helps to plan, coordinate, and track specific tasks in a project. Gantt charts may be simple versions created on graph paper or more complex automated versions created using project management applications such as Microsoft Project or Excel.

From this case, we are using excel as a tool to create ATLAM Gantt chart. The reason we choose this tool since by using excel it is more affordable rather than use a software like smart sheet which will be costly toward company

AKADEMI TEKNIKAL LAUT MALAYSIA (ATLAM)

SAP SYSTEMS IMPLEMENTATION

TASKSTART DATEDURATION (DAYS)END DATE

DEVELOP SAP WORKPLAN AND BUDGET22/01/2002526/01/2022

FORMING SAP DEVELOPMENT TEAM AND EXECUTIVE24/01/2002326/01/2002

PERFORM FEASIBILITY STUDY OF SAP AND CAPITAL BUDGETING ANALYSIS26/01/2002631/01/2002

CONFIGURATION OF NEW SAP SYSTEM31/01/20021515/02/2002

PILOT TESTING15/02/2002520/02/2002

TRAINING EMPLOYEE20/02/2002525/02/2002

IMPLEMENT WITHIN ORGANIZATION25/02/20023026/03/2002

PREPARE ANALYSIS REPORT26/3/2002701/04/2002

Based on the above table, we already show steps that involve in ensuring the successful implementation of SAP. The Gantt chart above constructed with a horizontal axis representing the total time span (days) of the SAP implementation project in each task and a vertical axis representing the tasks that make up the SAP implementation project. There is 8 step involve in this project which is first is they have to develop work plan and budget. This task take about 1-5 days to finish and next is follow by forming SAP development team and executive which will handle this project and person to refer to. This takes about only 1-3 days and then they must perform feasibility study of SAP and capital budgeting analysis to get understanding regarding SAP which takes 1-6 days.

After that they have to make a configuration of new SAP system to ensure that the system able to give best benefit and suitable with the current operation in the organization. It takes 1-15 days to finish it. Next, the most important task that needs to be done is pilot testing to ensure that this system can be run and able to increase top management trust toward the decision. It only takes 5 days and same with training employee task. This task is needed, so all of these people will have required SAP knowledge and skills or even SAP certifications.

Then, the system that already complete will be implement stages by stages within organization which takes the longest period which is 1-30 days. This is to ensure that the system can be implementing successfully. Last step is preparing an Analysis Report to give feedback regarding new system toward top management which only takes 1-7 days. The time frame is from 22 January 2002 and must be finished before 1 April 2002.

4.0 IS TERMINATION LIM IS A RIGHT DECISION? Zulkifli Osman is the Financial Manager in ATLAM since 1995 while Lim is User Representative in the discussion about the new system upgrade. When having the meeting for discuss the implement SAP as ATLAM new accounting system, Zulkifli and Lim have different opinion. Zulkifli believed the implementation of SAP is better than ACCPAC but Lim strongly disagree with this opinion.

Lim thinks the SAP got a lot of weaknesses while the ACCPAC can bring benefits to the company. Lim argues the implement of SAP costs the company a lot (include the implementation costs and accompanying operational costs). Company are unable to afford the costs due to the deficit in year 2001. Besides that, Lim also argues that the SAP is suitable for manufacturing industry but not education industry. Additional, lack of resources (PCs) in department and staff there are lack of PCs knowledge and skills also make the SAP impractical in ATLAM. However, Zulkifli strength with his opinion and conclude the SAP will be implement in the company because even SAP involved unique risks and challenges, it also bring benefits to the company.

In the case SAP for ATLAM, Zulkifli was terminate Lim from the project team because Zulkifli thinks Lim is a time waster and the time waster cannot be in the project team. Other than that, Zulkifli terminate Lim because Lim raised too many issues when having the meeting and Lim was bring too many questions that justify the reliability of the SAP system. Zulkifli was afraid that Lim would influence the others with his views.

Zulkifli terminate Lim is a wrong decision because Lim was contributed a lot when having the discussion. Lim is very experienced and he brought the issues that are important and should be take into consideration. Zulkifli cannot simply terminate Lim because Lim has some specify knowledge that other people dont have. If Zulkifli terminate Lim because Lim disagree with his opinion, the staff wouldnt contribute their opinion in the other meeting because they will scary the thing happen in Lim will happen for them also. Zulkifli become autocratic, so even decision by Zulkifli was wrong, no people will speak out. This will give the serious effect to the company.

5.0 HOW TO OVERCOME STAFF RESISTANCETo ensure that SAP system can be implementing in ATLAM, Zulkifli need to confident all the staffs that SAP system will help them in the term of business process and all transaction will be more effective and efficient. This is because when a company wants to implement changes in business process and job duties, the most resistance that need to overcome is from the staffs or the users of SAP system. There are a few ways on how to overcome the staff resistance.

1) COMMUNICATE EARLY

Before implementing the SAP system, Zulkifli first and foremost need to communicate with the ATLAMs staffs this is because human is the element has to be a key part of the SAP system project planning. Managers have a tendency to underestimate how upsetting this type of change can be. Zulkifli should begin preparing the staffs for a major change months before, not when its occurring.

2) COMMUNICATE OFTEN

Change is difficult for people to accept especially when it involves areas of expertise and prerogative. Thats why Zulkifli and the other steering committee need to make sure they are being as open as possible and communicating consistently about whats happening. Newsletters, town hall meetings and email updates are just a few of the tactics they can use to make sure ATLAMs staffs are well informed, and the rumour mill isnt taking over. Other than that, Zulkifli also need to seek their feedbacks.

3) EXPLAIN WHATS IN THE SAP SYSTEM FOR THEM

It is important to explain why SAP system need to be implemented and discuss how it will affect ATLAMs staffs. Focus on how the changes will improve the companys performance and help ATLAMs staffs perform their work. At the same time, Zulkifli shouldnt shy away from talking about the bad and the ugly. If it will make things more difficult for individual ATLAMs staffs, consider offering incentives or additional support.4) ENSURE MANAGEMENT BUY-IN

A successful technology implementation starts with the whole-hearted commitment of the steering committee. Therefore, Zulkifli need to have the motives for implementing the SAP system. Then rally the support of your managers and the steering committee. This is because, during the implementation, there will be lots of room for interdepartmental discord. Therefore, Zulkifli need to make sure that everyone is all pulling in the same direction and delivering the same message

5) PROVIDE ADEQUATE TRAINING

Not all ATLAMs staffs are savvy about technology. Therefore, to implement SAP system into ATLAM, it needs to have effective communications and high quality training. Training is a must for ensuring that ATLAMs staffs cope well with the changes and make a smooth transition to the new order.

6) GET THEM INVOLVED

Every system such as SAP has many users that will use the system. One of the ways to overcome the resistance in ATLAM is by involved the key users in the steering committee. Ask for their opinions on the system requirement and then involve them in system demonstrations. Not only will you be benefitting from their expertise, but you will be bringing them on the side. They can even be your champions, helping fellow

ATLAMs staffs become comfortable with the new technology.

7) BLOCK THE EXITS

Once the project director of SAP system had communicated with the

ATLAMs staffs, sought their feedback, its time to proceed. This means that any requirement requests from the users will be vetoed. It is necessary to achieve a successful implementation of SAP system into ATLAM. Other than that, if there to be any changes during the implementation it will increase the duration of time and increase the cost.

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