TWO SHOR T CASES: OILCO & EXPLORECO
SOURCE: Adapted frOIll Pan; A. & Shanks; G. (2000) A model of ERP project illlplementation, Journal of Information Technology ] 5, 289-303.
The first company, OilCO, is a refiner and marketer of a broad range of petroleum products in Australia and 1 1 countries in the Pacific. As one of Australia's major industrial companies, OilCO directly employs more than 2,000 people and owns assets valued at approximately $2 billion. OilCO is the Australian subsidiary of one of the world's largest multinational oil companies. It has a nationwide network of 1 ,800 locations, is one of the four major oil companies in Australia, and enjoys a substantial market share. When the global oil industry under
went significant restructuring and increasing com
petition, OilCO decided to implement a new system to achieve full process integration and automation, improve customer service, and facilitate planned business restructuring. To meet these complex business requirements the company selected a . mainframe-based ERP solution. With 1 ,600 users in Australia, New Zealand, and the Pacific Islands, this ERP system became one of the largest and most complex mainframe implementations in the world. It processed 25,000-35,000 transactions per hour and handled more than 1 ,000 orders per day across the country.
The implementation of the system at OilCO involved major change to the company's business
processes, so they matched the ERP's processing methods. Even though they recognized that some existing business process changes were necessary, OilCO aimed to maximize the integration benefits of the ERP while simultaneously streamlining the com
pany's existing processes. The implementation also involved the development of an oil industry specific module.The ERP (referred to here as ERP-l ) imple
mentation resulted in substantial business benefits for OiICO. They included better sales forecasting, fully automated ordering and delivery processes, real-time financial data, improved data quality, and streamlined business processes. Like any other ERP project, however, ERP-l went significantly over bud
get and over time.
The second company, ExploreCO, is an oil and gas exploration and production company in southwest Australia. ExploreCO is an affiliate of Oil CO. The company is involved in offshore gas and oil exploration and production. When OilCO acquired another oil exploration company that had an operational resource system it became the ExploreCO operational system; however, there was substantial dissatisfaction with this system within the ExploreCO system. ExploreCO had to decide either to rework and upgrade the existing
-
CHAPTER 4 DEVELOPMENT LIFE CYCLE 1 09
system, or to replace it. They chose a new system and conducted a feasibility analysis of several ERP systems. For budgetary reasons and, because it suited their exploration business, they decided to implement an ERP system (referred to here as ERP-2). 1l1e budget and proj ect scope were con
siderably more modest than the OilCO imple
mentation, so they planned to implement and "Go Live" with the system in 11 months.
Documentation on the existing system i ndi
cated that an understanding of the requirements was already advanced, but they took the oppor
tunity to renew and re-engineer the system, par
ticularly given the level of d issat isfaction with the old system. Moreover, they needed to align the new system (ERP-2) with Oil CO's existing ERP (ERP- 1 ) . The implementation project was driven by OiICO's head office, which performed cost analysis, set the scope, made recommenda
tions, and provided leadersh i p on the steering committee. System goals were set via perfor
mance indicators. For example, t he i ndicators included the number of check runs in a given period, a measured reduction i n off-system pay
ments, and a reduction in suppliers from 6,000
TAB LE 4-4 CSFs for ERP Implementation Critical Success Factol's Description
to 600. Given the lessons learned in the OilCO implementation, the steering committee insisted that the best people be released full-time for the life of the proj ect and that a "proj ect champion"
(that was the o fficial title) was placed on t h e steering commi t tee.
The project was completed on time and on budget and was described by the highly experienced project manager as the "easiest implementation" he had "ever been involved in" (from an interview with the project manager in December, 1 999). The busi
ness benefits of the ERP-2 system were significant.
TI1ese include: ( 1 ) a measured reduction in man
ual processes, manual transactions, and the num
ber of suppliers, which has led to improved procurement and inventory systems; (2) stream
lined, real-time accounting systems; (3) a reengi
neering o f processes that involved a devolution of responsibility back into the hands of the oper
ators; and (4) i mproved time accounting (to 15- minute i n t ervals). This last benefit has been particularly i mport ant si nce this company had many joint ventures. The critical success factors (CSFs; Ta ble 4-4), identified in ERP- 1 , were used to augment the second project.
Management support Top management advocacy, provision of adequate resources, and commitment to proj ect
Release of ful l-time subject mat
ter experts (SME) Empowered decision makers
Deliverable dates Champion
Van illa ERP Smaller scope
Definition of scope and goals Balanced team
Commitment to change
Release full-time on to the project of relevant business experts who provide assistance to the project
The members of the project team(s) must be empowered to make quick decisions.
At planning stage, set realistic milestones and end date Advocate for system who is unswerving i n promoting the bene
fits of the new system
M inimal customization and uncomplicated option selection Fewer modules and less functionality implemented, smaller user
group, and fewer site(s)
The steering committee determines the scope and objectives of the project in advance and then adheres to it
Right mix of business analysts, technical experts, and users from within the implementation company and consultants from external companies
Perseverance and determination in the face of inevitable prob
lems with implementation
p
1 1 0 CHAPTER 4 DEVELOPMENT LIFE CYCLE
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Tabular summary of the importance of each CSF is then presented in Tables 4-5 and 4-6.
Table 4-5 represents the OilCO case study find
ings; Table 4-6 t h e E xploreCO find ings. The tables show the CSFs in a particular phase. The number of dots in each cell represents the strength of the participants' consensus that that particular CSF was necessary in that phase. FOllr dots indi
cate that the particular CSF was considered to be of major importance in that phase of the PPM.
Three dots indicate that the CSFs were considered very important. Two dots indicate that the CSFs were considered important. One dot indicates that the CSFs were considered to be of minor impor
tance. No dots indicates that the CSFs were con
sidered to be unimportant. We have not included
"smaller scope" as a CSF in Table 4-6 because one implementation was clearly large in scope and the other smaller in scope.
Even when both companies identified what appeared to be the same CSF, they differed in that ExploreCO devised a process and structures in order to facilitate its achievement. The starkest example of this concerns their recognition that a project champion was crucial. In ExploreCO the
champion was actually k nown by that title, was allocated to the project for its duration, had defined responsibili ties, and, most importantly, was a member of the board (called the leadership council) of the company. This level of seniority, plus the daily hands-on approach, proved to be invaluable. In contrast, in OilCO this person was not officially recognized and the person i n the role changed over time. The drive for the system initially came from a USA managing director who promoted the ERP as a global strategy. The ven
ture manager (brought in from the UK) subse
quently became the de facto champion, and there later w as an in-house senior E RP "convert."
There was no defined role, nor were there processes or structures via which his influence could be conveyed.
There is considerable variation in the pat
tern of CSFs between the two companies. B oth companies adopted a policy of minimal cus
tomization and deliverable dates; however, OilCO was forced to commission a n oil i ndus
try-specific module, and they generated endless reports because it was often possible rather than desirable (according to the project m anager).
TAB LE 4-5 OiICO - ERP Implementation Incorporating CSFs Factor
Management support Champion Balanced team Commitment to
change Vanilla E RP Empowered decision
makers Best people
full-time Deliverable dates Definition of scope
and goals
Plallllillg Phase Project
COII!igllmtioll [llstal/atioll Set lip Re-ellgilleel'illg Desigll alld testillg
Ellhallcemellt
CHAPTER 4 DEVELOPMENT LIFE CYCLE 1 1 1
TAB LE 4-6 ExploreCO- ERP Implementation Incorporating CSFs
Factor Plalllling Phase Project Ellhallcemell t
COlljigllmtioll Illstallatioll Set Ill' Re-ellgilleel'illg Desigll alld testillg M anagement
support Champion Balanced team Commitment to
change Vanilla ERP Empowered decision
makers Best people full
time
Deliverable dates Definition of scope
and goals
These changes were accompanied by extensive company restructuring and it is unclear which of these caused them to go years beyond their pro
jected end date. ExploreCO adhered to the prin
ciples of minimal customization and deliverable dates until their project was well advanced in the configur ation and testing phase, when it became clear that the interfaces were unacceptable to the users, at which time they brought in Lotus Notes and wrote the necessary interfaces. This meant they ran 2 weeks past their " rock-solid end date."
CASE STU DY QUESTIONS
1 . Compare and contrast the implementation of
OilCO and ExploreCo. What were the simi
l arities and differences between the two implementations?
2. Why do you think the projects were success
ful? Was it the articulation of CSFs? Was it their strategy of minimal customization? Or something else? Explain.
3. What can we learn from this case? Also, pro
vide suggestions for improvement. •
(HAPTER
LEAR N I NG O B J E C T I VES After reading this chapler YOli Ivill:
.:. Acquire a greater knowledge base of ERP components and how they work together to support business .
• :. Learn why third party products are needed to operationally round out ERP system functionality and the issues involved in using them .
• :. Appreciate the impact of an ERP implementation on platform components such as data security, system reliability, and sustainability .
• :. Understand implementation approaches, the differences between vanilla (minimal or no system modifications) and chocolate (modifying the system) implementations, and the short-term and long-term impacts on the system and company.
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CHAPTER 5 IMPLEMENTATION STRATEG I ES