2013 The San Diego city schools: Enterprise Resource Planning return on investment Case Study Ashish Porwal 501204005 14-Apr-13
Question No1: Calculate the ROI for San Diegos ERP system. How can you quantify thesoft benefits of the System and include them in the analysis? This question should includeROI calculations for the following three scenarios:- a. ROI based on cost savings only b. ROI based on cost savings & efficiency improvements c. ROI based on cost savings, efficiency improvements & soft benefitsSolution: a) ROI based on cost savings only: Total hard cost savings = $3316709 Total projected incremental yearly costs = $1820000 ROI = (3316709 – 1820000)/ 1820000 = 0.82b) ROI based on cost savings & efficiency improvements: Total hard cost savings = $6397834 Total projected incremental yearly costs = $1820000 ROI = (6397834 – 1820000)/ 1820000 = 2.51c) ROI based on cost savings, efficiency improvements & soft benefits: Total hard cost savings = $(6397834 + 320000 + 400000) = $7117834 Total projected incremental yearly costs = $1820000 ROI = (7117834 - 1820000)/1820000 = 2.91
Question NO2: With the information you have access to, what should Wiemann presentand recommend at the board meeting? Specifically, would you recommend going forwardwith the HR system implementation? If not, what alternatives would you suggest?Solution: There are some options to implementing a HR ERP system that will still achieve someimprovement in efficiency with a smaller upfront cost, but they are less effective in the long termbecause of the lack of a central database and increased chance of resistance. There are somegood options or alternatives which can be useful for HR system implementation as given below: The district could chose to use independent software packages for the different roles of HR. They can choose to only upgrade the payroll process by installing an electronic sign- in system and depositing checks directly. The lack of a central database, however, means that HR employees still have to enter the same information into separate databases. This approach will never realize the full benefits of an ERP system and will only increase the cost of merging databases in the future. Another alternative is to roll-out the HR ERP system to only a portion of schools in order to test out the deployment. While this seems to be less risky than an all-at-once deployment, it actually increases the chance for failure. Often, the “experimental” group will encounter unexpected difficulties and give others a bad impression of the ERP system. This causes resistance to the new system in the other school schools, and also makes the deployment more time consuming and expensive. It is better to dive in at once than to drag out deployment.Question No3: What are the risks associated with the project? Would you advise the schoolboard of these risks?Solution: The risk of decreased productivity in implementing the ERP project, but there areother risks that a voter should be aware of, including the risks inherent in any ERP deploymentas well as the risks unique to the education industry. There are following risks which givenbelow: Any ERP system can fail due to the difficulty of customizing the system for many users in different locations, known as wide-scale deployment. San Diego City School District has 180 schools and each needs to be upgraded to the new system. Deploying a new system to multiple users and locations at one time greatly increased the risk of project failure.
Scope creep is another general ERP risk. It refers to expanding the requirements of the ERP system over the course of implementation. A unique risk to the education industry in implementing ERP is the lack of native IT expertise.To combat wide-scale deployment and scope-creep issues, the district has chosen to implementonly the Human Resources module of the ERP system. This will help make it easier to upgradeeach site to the new software, and discourage others from trying to “add requirements” that arenot related to HR.Question No4: What are your takeaways from the case?Solution: This case focuses on the challenge of quantifying the return on investment (ROI) of alarge technology project, enterprise resource planning (ERP), in the nonprofit environment of theSan Diego City Schools. The school district does not generate a profit, so traditional revenueenhancement arguments do not work. Instead, the case discusses the internal processes re-designand system consolidation enabled by the new ERP system. The system ROI is composed of twomajor components: Cost savings from removal of legacy applications and productivity improvements. The cost containment benefits are relatively straightforward to quantify, but do not justify the system. The productivity improvements are harder to quantify, and many can be categorized as soft benefits. Many of the productivity and cost-saving benefits will not be realized without personnel reductions, which are especially difficult in school districts and government agencies.