The CEO of Scotia Limited, Jean Whitehead has just returned from an industry conference where several ERP (Enterprise Resource Planning ) vendors had presented their products. Jean was very impressed with the features and benefits that ERP might bring to Scotia. Jean had picked up a picture from one of the vendors booths that showed an ERP configuration. Jean believes that an ERP should be a simple solution to all their problems.
A typical ERP configuration
Scotia Limited is a very successful electronic parts manufacturer located in Halifax, Nova Scotia. In the last 6 months Scotia Limited s response time in their customer billing systems and purchasing systems has begun to slow considerably and errors are disrupting production ( lack of raw materials). In addition, Scotias 10 year old IBM wide area network (WAN) has had many unexpected instances of unplanned down time (averaging 100 hours/year). Each hour of down time costs the company an estimated $15,000/hr as often over 400 employees are affected. The existing internal business systems were developed and maintained by Scotias IT Department consisting of 6 analysts, 12 programmers and 7 technical support personnel. Much of the program code was originally written in Cobol over 19 years ago for an IBM mainframe which was replaced 10 years ago but still used when the WAN was implemented. Software maintenance efforts to fix problems or add new features continues to grow and now represents over 40% of the IT budget. Scotias IT group currently has a backlog of requested systems changes and needed modifications of over 24 months.
Option 1 The controller of Scotia, Kim Smith, was glad to hear that Jean now believes that a more modern ERP solution, SAP or Oracle, and new hardware upgrades are necessary to address these problems. Smiths preliminary assessment of buying an ERP system (Hardware & Software and installation ) would amount to total cost of $ 8.1 million over the next 6 months.
Option 2 Peter Sharp, the IT Director feels that the $8.1 million price tag is too high and he is confident that his IT Department could develop their own customized ERP using new agile programming techniques in 36 months and with hardware upgrades and installation bringing the cost of the new system to $ 7.5 million
Option 3 Jean Whitehead, the CEO has become frustrated with the constant bickering between Smith and Sharp at recent executive meetings, to the point where the CEO has threatened to outsource the IT Dept. and the running of all IT systems. One reputable ERP cloud outsourcer gave Scotia a ballpark quote of $1.2 million per year for 10 years to do everything with expected completion in 6 months.
The CEO has asked you, an outside consultant, to make a recommendation as to which option 1) Buy a new ERP Package & hardware, 2) have the IT Department build an ERP and upgrade/replace existing hardware, or 3) outsource all IT completely in the cloud to an outside contractor, you believe would be most appropriate for SCOTIA to choose. The CEO has never really paid much attention to IT issues and has only been dragged into this debate because of the constant bickering and an increase in complaints from SCOTIAs major suppliers and customers regarding SCOTIAs current unreliable business processes and systems. The CEO would also like you to briefly explain what an ERP system is and how it would benefit SCOTIA and any potential risks, and to perform an MOTC analysis of key issues, and to evaluate the three (3) project proposals, and make a recommendation with a risk assessment and conversion recommendation too. Assume pre Covid 19.
What is an ERP systems? (3 marks). Briefly describe three major potential benefits of ERP to Scotia ( 3 marks) Briefly describe major risks of an ERP system (3 marks) (Total of 9 marks estimated time 16 minutes.
Perform a MOTC analysis on the Scotia Limited case by asking two key relevant questions for each area of the MOTC and explain why each question is important. estimated time 28 minutes)
Evaluate the three options presented ( 4 marks each) advantages and disadvantges and make a final recommendation ( 4 marks). For each option; buy a package, build internally or outsource the entire IT identify each’s advantages and disadvantages and conclude with your recommended option with an explanation as to why. (total marks 16 estimated time 28 minutes)
Assess the level of IT project risk in your recommended solution and how it should be managed (5 marks) and what conversion strategy would you recommend for implementing your recommendation and why (3 marks). (Total marks 8 , 15 minutes)
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