Real world ROI of an ERP ImplementationMeasuring the Tangibles and Intangibles                                            ...
Introduction : About UAB                                                           §  Over 18,600 Employees.       UAB Mi...
Where are we?                University of Alabama at Birmingham
Vision for UAB’s ERP system      “.. a system that enables fast, accurate, efficient tracking and      reporting of admini...
ERP System Life Cycle                                   Change Management                                               Pe...
Measuring ROI  Average cost of ERP: upwards of 11m  Measuring Benefits  Quantifying KPIs  Success Factors  Perceptions  Qu...
Measuring UAB’s ROI  •        Intangibles: Measure the satisfaction of the various  constituents based on their expectatio...
Intangibles  1.    Executives  2.    Power Users  3.    End Users  4.    IT                      University of Alabama at ...
Intangibles   Shang & Seddon Model         Measuring ROI across 5 dimensions                                  Operational ...
Intangibles   Shang & Seddon ModelOperational   1.  Cost reduction (Labor, Inventory, Administrative)              2.  Cyc...
Intangibles   Shang & Seddon ModelManagerial    1.  Better resource management (Better workforce                 managemen...
Intangibles   Shang & Seddon Model Strategic    1.  Support business growth (transaction volume,                 capacity,...
Intangibles      Shang & Seddon Model      IT         1.  Build business flexibility for current and futureInfrastructure ...
Intangibles      Shang & Seddon ModelOrganizational   1.  Support organizational changes                 2.  Facilitate Bu...
Tangibles  Collected thru:  HR and Financial Oracle system  UAB Financial Reporting  Auxiliary Systems                    ...
Realizing the Benefits                                Aggregate Response            Significant         Improvement	       ...
Operational Dimension:                                     Observations & Findings                                        ...
Managerial Dimension:                                Observations & Findings                                              ...
Strategic Dimension:                                Observations & Findings                                          Strat...
IT Infrastructure Dimension:                                           Observations & Findings         Significant	  	     ...
Organizational Dimension:                                     Observations & Findings                           2         ...
Tangibles: UAB Today                              UAB Financial Highlights                                          UAB Re...
Tangibles                                      Change in Job Profiles 2004-2010                                           ...
Tangibles      1,000,000     Documents Processed Annually                                                   PO       750,0...
Tangibles                                           Cycle Time Reduction                       HR/	  LD	                  ...
Tangibles                                            HR On Boarding                                                       ...
Tangibles   80%   70%                                                                        46%                          ...
Tangibles                Annual System Maintenance                         Compliance            Bug Fix                  ...
Key Findings : Information Technology  Complexity of Data Security: Four categories: Academic, Administrative,  Clinical a...
Key Findings : End Users  System Use Optimization: System capacity and capability. Policy decisions  and current design ar...
Key Findings : Power Users  Operational Benefits: standardization of -> better system wide  reporting and analysis of data...
Key Findings : Executive  Lessons Learned:  - Design that is structured around functional silos..  -  Avoid replication of...
The Path Forward : Maximizing the ROI  Vision:      To utilize the system to a higher potential through use of      better...
Questions?     “The highest type of efficiency is that which can     utilize existing material to the best advantage”     ...
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E-Business Suite 2 _ Rahul Thadani _ Real world ROI of an ERP Implementation.pdf

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

  1. 1. Real world ROI of an ERP ImplementationMeasuring the Tangibles and Intangibles Rahul Thadani University of Alabama at Birmingham
  2. 2. Introduction : About UAB §  Over 18,600 Employees. UAB Mission Statement §  Over 17,000 Students “UAB is a research university and academic §  70 research centers §  82 City Blocks health center that discovers, teaches and applies §  Decentralized administrative structure knowledge for the intellectual, cultural, social §  UAB Hospital: Consumer and economic benefit of Birmingham, the state Choice Award: 12 consecutive years and beyond.” §  Largest employer in the state of Alabama University of Alabama at Birmingham
  3. 3. Where are we? University of Alabama at Birmingham
  4. 4. Vision for UAB’s ERP system “.. 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) University of Alabama at Birmingham
  5. 5. ERP System Life Cycle Change Management People Process Product Adoption Use & Decision Acquisition Implementation Maintenance Evolution Retirement 1998 2000 2004 2006 2010 ERP life-cycle framework – (Esteves & Pastor, 1999). University of Alabama at Birmingham
  6. 6. Measuring ROI Average cost of ERP: upwards of 11m Measuring Benefits Quantifying KPIs Success Factors Perceptions Quantifiable Data Elements Original Vision University of Alabama at Birmingham
  7. 7. Measuring UAB’s 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 . University of Alabama at Birmingham
  8. 8. Intangibles 1. Executives 2. Power Users 3. End Users 4. IT University of Alabama at Birmingham
  9. 9. Intangibles Shang & Seddon Model Measuring ROI across 5 dimensions Operational Organizational Managerial IT Strategic Infrastructure University of Alabama at Birmingham
  10. 10. Intangibles Shang & Seddon ModelOperational 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) University of Alabama at Birmingham
  11. 11. Intangibles Shang & Seddon ModelManagerial 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 University of Alabama at Birmingham
  12. 12. Intangibles Shang & Seddon Model Strategic 1.  Support business growth (transaction volume, capacity, capability, new functions) 2.  Build cost leadership (economies of scale, shared services) University of Alabama at Birmingham
  13. 13. Intangibles Shang & Seddon Model IT 1.  Build business flexibility for current and futureInfrastructure 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) University of Alabama at Birmingham
  14. 14. Intangibles Shang & Seddon ModelOrganizational 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) University of Alabama at Birmingham
  15. 15. Tangibles Collected thru: HR and Financial Oracle system UAB Financial Reporting Auxiliary Systems University of Alabama at Birmingham
  16. 16. Realizing the Benefits Aggregate Response Significant Improvement   Improvement   No  Change   Deteriora5on     Significant     Deteriora5on     POWER USERS END USERS University of Alabama at Birmingham
  17. 17. Operational Dimension: Observations & Findings Operational Significant     Improvement   2 END USERS 1.24 POWER USERS Improvement   1 0.85 No  Change   0 1.1 Cost 1.2 Cycle time 1.3 1.4 Quality 1.5 Customer Overall reduction reduction Productivity improvement services Operational improvement improvement Deteriora5on     -1 Sub Dimension Significant     Deteriora5on   Cost Reduction; Cycle Time; End Users; Level of expectations University of Alabama at Birmingham
  18. 18. Managerial Dimension: Observations & Findings Managerial Significant     2 Improvement   END USERS 1.10 1.06 Improvement   1 POWER USERS No  Change   0 Overall 2.1 Better 2.2 Improved 2.3 Performance Managerial resource decision making improvement management and planning Deteriora5on     -1 Significant     Sub Dimension Deteriora5on   Decision Making, Compliance University of Alabama at Birmingham
  19. 19. Strategic Dimension: Observations & Findings Strategic Significant     2 Improvement   POWER USERS Improvement   1 0.88 0.50 END USERS No  Change   0 Overall 3.1 Support 3.4 Build cost Strategic business growth leadership Deteriora5on     -1 Sub Dimension Significant     Deteriora5on   Cost Leadership, realization of promised benefits, shadow systems University of Alabama at Birmingham
  20. 20. IT Infrastructure Dimension: Observations & Findings Significant     IT Infrastructure Improvement   2 Improvement   1 IT No  Change   0 4.1 Build 4.2 IT costs 4.3 Increased IT -0.14 business reduction infrastructure flexibility capability Overall IT -1 Deteriora5on     Significant     Sub Dimension Deteriora5on   -2 Personnel Costs, Technology changes, DR, High Availability, H/ W costs University of Alabama at Birmingham
  21. 21. Organizational Dimension: Observations & Findings 2 Organizational Significant     Improvement   1.06 POWER USERS 0.97 1 Improvement   END USERS No  Change   0 Overall Organization al Deteriora5on     -1 Significant     Deteriora5on   Sub Dimension Organizational Changes, Business Learning, Employee Morale University of Alabama at Birmingham
  22. 22. Tangibles: UAB Today UAB Financial Highlights UAB Resources 2686 3000 15.85 18.7 2500 18.6 1100 20 14 2000 1180 15.1$ million 15 1500 10.4 562 858 617 10 1000 248 540 500 5 0 0 1997 1997 2004 2004 2011 2011 Grant in $m Payroll $m Sq feet in million Employees 000 Hospital Revenue $m Total UAB Revenue $m Students 000 University of Alabama at Birmingham
  23. 23. Tangibles Change in Job Profiles 2004-2010 Professional/ 20.00% Non Faculty, 12.95% Techical/ Executive / Administrative, Paraprofessional, 7.80% 10.02% 10.00% % Change in Jobs 0.00% Total Jobs, -10.00% Secetarial/ -0.41% Clerical, -19.82% -20.00% -30.00% Total Jobs Job Profile xxx University of Alabama at Birmingham
  24. 24. Tangibles 1,000,000 Documents Processed Annually PO 750,000 HR TEL LD Journal Batch 500,000 Requistions 250,000 Invoices 0 2005 2006 2007 2008 2009 2010 University of Alabama at Birmingham
  25. 25. Tangibles Cycle Time Reduction HR/  LD   2.56 5.5 Invoice  Approval   2.84 4.9 Requisi5on   1.44 2.44 Time  Entry   0.31 0.908 0 1 2 3 4 5 6 Days 2010 2005 Process Improvement; Transactional Transparency; Accuracy University of Alabama at Birmingham
  26. 26. Tangibles HR On Boarding 8.1 Avg  5me  for  New  Hire   10.19 0 2 4 6 8 10 12 Days 2010 2005 xxx University of Alabama at Birmingham
  27. 27. Tangibles 80% 70% 46% Overall Hardware Cost 60% Reduction since 2004 Database Server 50% front end servers 40% interface server 30% SAN load balancer 20% firewall etc 10% 0% H/W Cost Savings: % change since 2004 Hardware cost savings: % Change since 2004 University of Alabama at Birmingham
  28. 28. Tangibles Annual System Maintenance Compliance Bug Fix Enhancemen 6% 18% ts 45% Maintenance 31% University of Alabama at Birmingham
  29. 29. Key Findings : Information Technology 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% University of Alabama at Birmingham
  30. 30. Key Findings : End Users 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. University of Alabama at Birmingham
  31. 31. Key Findings : Power 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. University of Alabama at Birmingham
  32. 32. Key Findings : Executive 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. University of Alabama at Birmingham
  33. 33. The Path Forward : Maximizing the ROI 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 University of Alabama at Birmingham
  34. 34. Questions? “The highest type of efficiency is that which can utilize existing material to the best advantage” Rahul Thadani rthadani@uab.edu University of Alabama at Birmingham University of Alabama at Birmingham

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