Following a restructuring of the company in 1993, Compound UK introduced Lotus Notes in order to assist with sharing information and improving group working. Lotus Notes is a client-server, collaborative application owned by IBM Software Group. However we believe that there were mistakes made throughout the introduction of the software and its use since.
Firstly, Lotus notes had only been implemented for a short period of time before a measure of staff performance was introduced. We believe that Compound UK should have waited a longer period of time in order for staff to get used to using the new software before introducing measures of performance. We think that in any line of business it is a necessity that staff are fully comfortable within their job before introducing an element of competition. Also, changes within a business generally require the co-operation of staff in order to be successful and we believe Compound would have achieved this had the introduction of performance measures been delayed.
This leads to another mistake Compound UK made, in our opinion. In the case study there is no mention of training for the staff involved. Had a training or development plan been put in place, staff may have felt more at ease using the software and been more open to performance league tables being implemented.
Orlikowski (1992) points out, how users understood Notes was mainly influenced by the kind and amount of information about the product and by the nature and form of training received.
It appears that top level management gave the impression to staff that the introduction of the electronic recording system was for their benefit. However this is in contrast to what most staff felt, who believed that it was introduced simply to increase central surveillance and control. If management had communicated the benefits of such a system to staff in greater detail, staff would have been more amenable and accepting of it. Instead there appears to be a lack of trust within the organisation which cannot be good for staff moral. It is our belief that the higher levels of management within Compound should be placing greater emphasis on the benefits and opportunities that Lotus provides to staff, helping them to see how it really can make their job easier. At present, the emphasis seems to be on the record-keeping aspects of Lotus i.e. a way of 'checking up' on staff. Morris & Empson (1998) provide an example of an accounting firm which has achieved success through the development of a collective knowledge base, this knowledge base enabled 'Sun Accounting' to become one of the most highly leveraged organisational structures in the UK accounting industry. This shows the potential benefits if Compound staff can embrace Lotus Notes in the same manner.
A main concern of staff is how Lotus Notes is being used. At the moment there appears to be an underlying sense of injustice amongst long-term staff, who feel their performance is being undermined by reps who do not see repping as a long-term career, rather a short-term route to climbing the hierarchical ladder. We feel that this problem of unease could have been prevented by Compound UK. Staff meetings should have been called before Lotus was implemented thus providing staff with an opportunity to raise any concerns they may have. Hopefully, Compound would have been able to allay many of these fears before they became a major problem within the organisation.
One way to improve the use of Notes in relation to this could be to alter the way the league tables are formed. For example, some reps are registering a large number if contacts often only for the sake of their own careers and not the benefit of Compound, they are contradicting the ethos which placed emphasis on only recording 'relevant calls'. We propose that league tables should be altered to include a scoring system which gives greater credit to those who are recording only relevant calls. Other complaints from non-career orientated reps are based upon the use of strategic selling accounts and the fact that some reps are at a locational disadvantage. The league tables should also be designed to reflect the differing opportunities provided by differing locations.
One positive aspect seemed to be the discussion databases which were proving popular. Poplar only until the medical director asked if he could take part. Usage of these databases subsequently declined when he was granted permission. It seems clear that changes should be made to allow reps their own private discussion databases where they feel free to express themselves without fear of retribution under the watchful eye of their peers.
We also feel that an opportunity provided by the introduction of Notes has not yet been exploited to its full potential. Senior medical advisor James Black has successfully managed to improve the usage of Notes amongst newer reps i.e. have them use Notes the way in which it was intended, by thorough interaction with them during training periods and often afterwards. After Lotus Notes' introduction many medics were expected to work with other employees on complex sales situations and the development of new products. Black seems to be one of only a few adhering to this but with great success. If more medics are encouraged to follow Black's lead then Compound should be able to get the most out of Notes by using medical staff to encourage reps to use Notes as Compound originally had intended.
REFERENCES
Orlikowski, W.J. (1992). Learning from
Notes: Organizational issues in groupware
implementation. CSCW’92 Proceedings.
ACM, New York :362-369.
Morris, T & Empson, L (1998). Organisation and Expertise: An Exploration of Knowledge Bases and the Management of Accounting and Consulting Firms. Accounting, Organizations and Society. Vol 23 No. 5/6 pp609-624
Sunday 23 December 2007
Creating Auctionwire Case Study
Auctionwire believe they provide a service which enables customers to obtain a greater income from auctioning items online than they would have been able to achieve by themselves. Primarily this service is their expertise which will lead to higher bids. Like any new company, an innovative and effective business plan is obviously desirable and would increase their chances of success. In general, I believe that the company’s business has been the latter, without being particularly innovative. The business plan, put simply, appears to be a larger version of eBay drop-off shops, where items are bought then sold on at a higher price. Failures such as iSoldit in America is an indication that such a business model is not necessarily set for success (franchisepick.com). However the fact that Auctionwire can now boast high-profile customers such as BMW, MasterCard, Virgin and MTV tends to suggest their business model was in fact effective (canadian business.com).
To entice custom Auctionwire only charged commission on successful auctions. This is an appealing offer to customers who pay a basic fee for listing an item on eBay for example, whether the items sells or not. Similar selling points have been successful in other industries (e.g. “no win, no fee” law firms) and in my opinion there is no reason why it would not be successful in this one.
Auctionwire appear to have found a market niche in the form of corporate and charity customers. They would liquidate excess equipment for corporate clients and out-of-season stock for retailers. For smaller companies I think this would be particularly appealing. Firstly, some might not have thought of the idea, and for those who have, handing responsibility to Auctionwire may be more profitable. However larger companies may be able to set up a team in house, making Auctionwire’s business plan susceptible to imitation. The fact that IBM are currently the highest sellers on eBay highlights this fact (Wilson, A 2007).
Items which are handed into charity shops are very often of nominal value. This conflicts with what Auctionwire sees as an “ideal customer” whose items would be desirable. Also I know volunteers who auction items for charity online and do not charge commission. As a result of this I am sceptical as to whether this area of the business plan would prove fruitful.
The Commission which Auctionwire intend to charge is significantly higher (5% - 20%) than if customers were to use an online auction themselves. EBay for example charge 5% – 5.25% plus the basic listing fee. In essence Auctionwire’s business plan makes the company appealing to those customers who will make a greater net profit from sales despite the higher commission charge.
The software requirements which are outlined in the case study are, in my opinion, fairly comprehensive. However there is no mention of the software meeting any security needs, although perhaps it could be assumed that this would be included. It seems that a new case of fraud is appearing on the news every night and so security should be a primary concern to Auctionwire, particularly as the software will be online.
From the case study it appears that no software which is currently available off the shelf perfectly meets the needs of Auctionwire. Because of this is it possible that developing their own software from scratch would be the most suitable idea. Providing that such software could be designed to meet every need of Auctionwire and the cost was not prohibitive, this would be my recommendation. However the case study is particularly vague regarding the particular details involved in taking on such a project (e.g. costs involved, availability of good developers). Therefore I will recommend the best software solution out of the options provided in the case study.
It should also be noted that there are downsides to such a decision. If software is developed, Auctionwire would be the first company to use it. As a result, all teething problems and unforeseen bugs would have to be rectified and paid for by them. Similarly, it is unlikely that the software would be suitable for other companies as it would be custom made for Auctionwire, meaning they could not even make money from selling the new software. Also, very few repairers would have knowledge of the system and so Auctionwire could possibly become tied to certain repairers who would be able to charge over the odds.
The first two software solutions I ruled out were those of Canauction and Blackthorne Pro. Auctionwire specifically outline that the overall stability of the company and good customer support are of particular concern to them. Canauction falls down on both these fronts. Firstly, it is a brand new software provider with no reputable customers and by entering into an agreement with them Auctionwire would be taking a substantial risk which is not necessary. Secondly the customer service is not up to scratch and certain bugs have to be ironed out. I discounted Blackthorne Pro for a similar reason: a lack of experience. While I feel the software has potential, it is still at the testing stage and it is offline software. As a result I would imagine much of the data would have to be manually fed into the system, thus increasing the number of “touch points” In addition, it is not even compatible with the Canadian eBay, which I imagine would be the main market Auctionwire would be dealing in.
Clear-bid have substantial financial backing, thus providing Auctionwire with the stability they require. However I feel there are too many weaknesses of the software which would cost the company dearly. For example, down time was an issue of concern, as was poor customer service. While Clear-bid did offer the option to add multiple client module (at a cost), even with this I did not think the software was as suitable as SuperAuction.
SuperAuction meets most of Auctionwire’s needs, and the software could be adapted to rectify the majority of any shortcomings. The 24/7 customer support which is offered would be particularly appealing to Auctionwire as they admit to having had little experience in the area. In addition the company can offer a certain degree of experience in the field to Auctionwire. Therefore, if Auctionwire were to decide against developing their own software, this would be my recommendation.
Sources
Mark, K & Comisarow, M.B “Creating Auctionwire” 2007. Richard Ivey School of Business, The University of Western Ontario
Wilson, A “Accounting Information Systems” 2007. Class lecture, Strathclyde University
www.canadianbusiness.com/rankings/hot50/list.jsp?pageID=profile&profile=7&year=2007&type=profile&listType=HOT50
http://www.franchisepick.com/owner-of-failed-isold-it-ebay-drop-off-franchise-leaves-apology
To entice custom Auctionwire only charged commission on successful auctions. This is an appealing offer to customers who pay a basic fee for listing an item on eBay for example, whether the items sells or not. Similar selling points have been successful in other industries (e.g. “no win, no fee” law firms) and in my opinion there is no reason why it would not be successful in this one.
Auctionwire appear to have found a market niche in the form of corporate and charity customers. They would liquidate excess equipment for corporate clients and out-of-season stock for retailers. For smaller companies I think this would be particularly appealing. Firstly, some might not have thought of the idea, and for those who have, handing responsibility to Auctionwire may be more profitable. However larger companies may be able to set up a team in house, making Auctionwire’s business plan susceptible to imitation. The fact that IBM are currently the highest sellers on eBay highlights this fact (Wilson, A 2007).
Items which are handed into charity shops are very often of nominal value. This conflicts with what Auctionwire sees as an “ideal customer” whose items would be desirable. Also I know volunteers who auction items for charity online and do not charge commission. As a result of this I am sceptical as to whether this area of the business plan would prove fruitful.
The Commission which Auctionwire intend to charge is significantly higher (5% - 20%) than if customers were to use an online auction themselves. EBay for example charge 5% – 5.25% plus the basic listing fee. In essence Auctionwire’s business plan makes the company appealing to those customers who will make a greater net profit from sales despite the higher commission charge.
The software requirements which are outlined in the case study are, in my opinion, fairly comprehensive. However there is no mention of the software meeting any security needs, although perhaps it could be assumed that this would be included. It seems that a new case of fraud is appearing on the news every night and so security should be a primary concern to Auctionwire, particularly as the software will be online.
From the case study it appears that no software which is currently available off the shelf perfectly meets the needs of Auctionwire. Because of this is it possible that developing their own software from scratch would be the most suitable idea. Providing that such software could be designed to meet every need of Auctionwire and the cost was not prohibitive, this would be my recommendation. However the case study is particularly vague regarding the particular details involved in taking on such a project (e.g. costs involved, availability of good developers). Therefore I will recommend the best software solution out of the options provided in the case study.
It should also be noted that there are downsides to such a decision. If software is developed, Auctionwire would be the first company to use it. As a result, all teething problems and unforeseen bugs would have to be rectified and paid for by them. Similarly, it is unlikely that the software would be suitable for other companies as it would be custom made for Auctionwire, meaning they could not even make money from selling the new software. Also, very few repairers would have knowledge of the system and so Auctionwire could possibly become tied to certain repairers who would be able to charge over the odds.
The first two software solutions I ruled out were those of Canauction and Blackthorne Pro. Auctionwire specifically outline that the overall stability of the company and good customer support are of particular concern to them. Canauction falls down on both these fronts. Firstly, it is a brand new software provider with no reputable customers and by entering into an agreement with them Auctionwire would be taking a substantial risk which is not necessary. Secondly the customer service is not up to scratch and certain bugs have to be ironed out. I discounted Blackthorne Pro for a similar reason: a lack of experience. While I feel the software has potential, it is still at the testing stage and it is offline software. As a result I would imagine much of the data would have to be manually fed into the system, thus increasing the number of “touch points” In addition, it is not even compatible with the Canadian eBay, which I imagine would be the main market Auctionwire would be dealing in.
Clear-bid have substantial financial backing, thus providing Auctionwire with the stability they require. However I feel there are too many weaknesses of the software which would cost the company dearly. For example, down time was an issue of concern, as was poor customer service. While Clear-bid did offer the option to add multiple client module (at a cost), even with this I did not think the software was as suitable as SuperAuction.
SuperAuction meets most of Auctionwire’s needs, and the software could be adapted to rectify the majority of any shortcomings. The 24/7 customer support which is offered would be particularly appealing to Auctionwire as they admit to having had little experience in the area. In addition the company can offer a certain degree of experience in the field to Auctionwire. Therefore, if Auctionwire were to decide against developing their own software, this would be my recommendation.
Sources
Mark, K & Comisarow, M.B “Creating Auctionwire” 2007. Richard Ivey School of Business, The University of Western Ontario
Wilson, A “Accounting Information Systems” 2007. Class lecture, Strathclyde University
www.canadianbusiness.com/rankings/hot50/list.jsp?pageID=profile&profile=7&year=2007&type=profile&listType=HOT50
http://www.franchisepick.com/owner-of-failed-isold-it-ebay-drop-off-franchise-leaves-apology
Sunday 16 December 2007
Mars Incorporated: Online Procurement
As the internet continues to play a major role in globalisation, companies are striving to use the resource to its full potential. Just as millions of individuals use eBay in the hope of snatching a bargain, global corporations are now getting in on the act.
Following the lead of companies such as John Deere, Ford and PetroVantage, Mars Inc are the latest company looking to online auctions as a way to lower costs and increase profitability. These “reverse auctions” involve suppliers bidding for contracts, with the lowest bid winning. There are numerous advantages of such a process which prompted Mars to investigate the option.
Looking at other major firms which had implemented such systems, it was apparent that there were cost savings to be made. For example, BAE systems claim cost savings of 15-20% as a direct result of their online procurement system, Exostar (Flynn, 2003). Other research suggests savings to be around five percent. While this may not sound a great deal, to a company annually purchasing materials to the tune of $4 billion, this represents a significant saving.
Online auctions would also eliminate many of the inefficiencies of procurement processes based on one-to-one negotiations have. Firstly, the auction would be readily accessible worldwide to any company wanting to bid. As a result, competition is increased and the probability of Mars obtaining materials at the cheapest price is increased. Infact, the case study highlights that a problem of the current purchasing system leads to situations where one supplier found out that a competitor had been awarded a contract under terms it would have been prepared to better.
Also, conventional methods of purchasing involve a disproportionate amount of time negotiating prices and quantities. Such a problem is immediately solved using online auctions. Online auctions would also allow Mars to meet its objective of obtaining “the needed materials from the list of approved fairly and at minimum (monetary) cost.”
However at what theoretical cost?
In my opinion two other objectives of Mars could be compromised were online auctions to be used. Mars believe they offer “outstanding quality” and “mutual benefit.” However, selecting suppliers based purely on price may well lead to a decrease in quality, as suppliers strive to cut costs in order to be the lowest bidder. If suppliers refrain from lowering quality and simply cannot cut costs any further, then the profit that suppliers make will simply be reduced. While this may make financial sense to Mars, it contradicts their principles that success should “mutually beneficial to all parties involved” and that suppliers should not be squeezed “to the point of no return.”
Mars continually state that the relationship with their suppliers is extremely important to them and this has been a significant influence on the success that the company has had. However such relations would not be maintained were internet auctions to be used in the future. Two of the most outspoken critics of reverse auctions are David Stec and Bob Emiliani from the Centre for Lean Business Management at Rensselaer Polytechnic Institute (bostonapartments.com). They believe that online auctions do not teach buyers and sellers how to solve problems jointly and conclude that reverse auctions are toxic for buyer-supplier relationships.
As mentioned above, the reason for companies looking into online auctions is simple; to cut costs. However, Stec and Emiliani believe the cost savings which are reported are often inflated and not a true representation of the facts.
Their research paper, published in 2006, revealed that that 50 percent of the savings from using reverse auctions disappear because of factors such as errors in supplier data, post auction negotiation, and changes in specifications or quantities. Such problems would not be incurred as frequently were online auctions not used. In addition it can be the case that a company does not account for extra expenses resulting from problems such as poor quality, late deliveries and supplier non-performance. If this is indeed the case, when these losses are added up, the five percent savings that companies have reported are in fact closer to 2.5 percent and thus less appealing to Mars.
Hohner et al (2003) believe that online auctions are inappropriate when the firm wants to control business volumes or the number of suppliers, as is the case with Mars, who outline stipulations they would want added to a contemporary online auction. The company want to enforce a minimum number of winning bidders in any auction, do not want too many suppliers, want to limit the monetary amount won by any one supplier (presumably to reduce risk) and also to put in place a minimum total amount of business one supplier receieves from auctions. For Mars to successfully implement an auction system which would gain wide acceptance, it would have to customise such a system.
At the time the case was written it appeared that a formula for meeting the needs of Mars had been devised, but determining the winning bids within a short time frame had not. It appears than a human could not do this in a matter of minutes. However, although I admit to not knowing a great deal on the subject of computer programming, I would have thought that a program could now be written which would be able to meet the company’s needs.
In conclusion, I feel it is obvious that Mars would gain a financial benefit from implementing an online auction process- i.e. cost would be reduced. However, the image Mars currently enjoys may suffer as a result as it appears that it is the suppliers who will lose out. While costs would be cut, so could profitability. Therefore I recommend a cost/benefit analysis should be carried out before such a decision is made. If Mars were to go ahead with the plan, I would think it necessary to amend the key principles they advocate, as such a move would conflict with many of these as I have outlined above.
Sources used
Flynn, T “Doing Your Bidding”, Director, 2003
Hohner, G. J. Rich, E. Ng and G. Reid, “Combinatorial and quantity-discount procurement auctions benefit Mars, Incorporated and its suppliers” Interfaces. Linthicum: Jan/Feb 2003. Vol. 33, Iss. 1; pg. 23, 13 pgs
http://www.bostonapartments.com/business/online_reverse_auction.html
Following the lead of companies such as John Deere, Ford and PetroVantage, Mars Inc are the latest company looking to online auctions as a way to lower costs and increase profitability. These “reverse auctions” involve suppliers bidding for contracts, with the lowest bid winning. There are numerous advantages of such a process which prompted Mars to investigate the option.
Looking at other major firms which had implemented such systems, it was apparent that there were cost savings to be made. For example, BAE systems claim cost savings of 15-20% as a direct result of their online procurement system, Exostar (Flynn, 2003). Other research suggests savings to be around five percent. While this may not sound a great deal, to a company annually purchasing materials to the tune of $4 billion, this represents a significant saving.
Online auctions would also eliminate many of the inefficiencies of procurement processes based on one-to-one negotiations have. Firstly, the auction would be readily accessible worldwide to any company wanting to bid. As a result, competition is increased and the probability of Mars obtaining materials at the cheapest price is increased. Infact, the case study highlights that a problem of the current purchasing system leads to situations where one supplier found out that a competitor had been awarded a contract under terms it would have been prepared to better.
Also, conventional methods of purchasing involve a disproportionate amount of time negotiating prices and quantities. Such a problem is immediately solved using online auctions. Online auctions would also allow Mars to meet its objective of obtaining “the needed materials from the list of approved fairly and at minimum (monetary) cost.”
However at what theoretical cost?
In my opinion two other objectives of Mars could be compromised were online auctions to be used. Mars believe they offer “outstanding quality” and “mutual benefit.” However, selecting suppliers based purely on price may well lead to a decrease in quality, as suppliers strive to cut costs in order to be the lowest bidder. If suppliers refrain from lowering quality and simply cannot cut costs any further, then the profit that suppliers make will simply be reduced. While this may make financial sense to Mars, it contradicts their principles that success should “mutually beneficial to all parties involved” and that suppliers should not be squeezed “to the point of no return.”
Mars continually state that the relationship with their suppliers is extremely important to them and this has been a significant influence on the success that the company has had. However such relations would not be maintained were internet auctions to be used in the future. Two of the most outspoken critics of reverse auctions are David Stec and Bob Emiliani from the Centre for Lean Business Management at Rensselaer Polytechnic Institute (bostonapartments.com). They believe that online auctions do not teach buyers and sellers how to solve problems jointly and conclude that reverse auctions are toxic for buyer-supplier relationships.
As mentioned above, the reason for companies looking into online auctions is simple; to cut costs. However, Stec and Emiliani believe the cost savings which are reported are often inflated and not a true representation of the facts.
Their research paper, published in 2006, revealed that that 50 percent of the savings from using reverse auctions disappear because of factors such as errors in supplier data, post auction negotiation, and changes in specifications or quantities. Such problems would not be incurred as frequently were online auctions not used. In addition it can be the case that a company does not account for extra expenses resulting from problems such as poor quality, late deliveries and supplier non-performance. If this is indeed the case, when these losses are added up, the five percent savings that companies have reported are in fact closer to 2.5 percent and thus less appealing to Mars.
Hohner et al (2003) believe that online auctions are inappropriate when the firm wants to control business volumes or the number of suppliers, as is the case with Mars, who outline stipulations they would want added to a contemporary online auction. The company want to enforce a minimum number of winning bidders in any auction, do not want too many suppliers, want to limit the monetary amount won by any one supplier (presumably to reduce risk) and also to put in place a minimum total amount of business one supplier receieves from auctions. For Mars to successfully implement an auction system which would gain wide acceptance, it would have to customise such a system.
At the time the case was written it appeared that a formula for meeting the needs of Mars had been devised, but determining the winning bids within a short time frame had not. It appears than a human could not do this in a matter of minutes. However, although I admit to not knowing a great deal on the subject of computer programming, I would have thought that a program could now be written which would be able to meet the company’s needs.
In conclusion, I feel it is obvious that Mars would gain a financial benefit from implementing an online auction process- i.e. cost would be reduced. However, the image Mars currently enjoys may suffer as a result as it appears that it is the suppliers who will lose out. While costs would be cut, so could profitability. Therefore I recommend a cost/benefit analysis should be carried out before such a decision is made. If Mars were to go ahead with the plan, I would think it necessary to amend the key principles they advocate, as such a move would conflict with many of these as I have outlined above.
Sources used
Flynn, T “Doing Your Bidding”, Director, 2003
Hohner, G. J. Rich, E. Ng and G. Reid, “Combinatorial and quantity-discount procurement auctions benefit Mars, Incorporated and its suppliers” Interfaces. Linthicum: Jan/Feb 2003. Vol. 33, Iss. 1; pg. 23, 13 pgs
http://www.bostonapartments.com/business/online_reverse_auction.html
Sunday 9 December 2007
MySQL Open source database in 2006
Open source software is a program in which the source code is available to the general public for use and/or modification from its original design, free of charge (webopedia.com). Open source code is typically created as a collaborative effort in which programmers improve upon the code and share the changes within a community (jahadesign.com).
Those who prefer open source software to that of closed source have outlined many reasons why.
One major advantage of open sourced software is that the core software is free of charge, which can greatly benefit internet-enabled start-up companies. In the case of MySQL, it was such companies which were the first users of their open sourced software, making use of software stacks such as LAMP. It is also possible that the introduction of open sourced software has driven the price of commercial software down (tamingthebeast.net). The case study also suggests this is true, with IBM and Microsoft each lowering their database prices and have both “created low-end bundles aimed at smaller organisations and partners.”
The ability and right to modify the source code is also a major advantage of open source software. Software can be improved upon, ported to a new hardware or adapted to meet individual needs (conecta.it). In a business context, software flexibility is about being able to choose solutions suitable for the needs of the users (open-source.gbdirect.co.uk). MySQL used this advantage as a way to differentiate their product from closed source software within an increasingly competitive market.
The case study highlights that MySQL, despite being small in size and having a small marketing budget, is extremely well known. This is the case because they offer open source software, and as a result the market they can reach is particularly large. It is likely that only rich companies could afford software developed by the likes of Microsoft, Oracle and IBM, whereas distributing open sourced software allows students, small businesses and developing nations to make use of the software and in turn, increasing awareness of the company.
In the case of MySQL, the number of functions and features offered were initially greater than those offered by the closed source software offered by IBM, Microsoft and Oracle. For this reason MySQL were able to grow significantly, as companies looked to “scale out” the superior MySQL product into other departments.
Varner (1999) also claims that the quality of open sourced software is higher than its closed source competitor, mainly due to peer review. Companies can hide security holes and fundamental flaws from the users by not releasing the source code, providing the software vendor with complete control of the product. Varner claims that “with open source, more people see the code and find and stop problems before they hurt anything.”
Depending on circumstances, personal preference and knowledge, support issues with open sourced software can be an advantage or a disadvantage to the user (tamingthebeast.com). As a result it is difficult to determine whether such an issue has helped or hindered MySQL. With closed software, the provider has an obligation to provide help in the event of faults, bugs etc (generally at an additional charge) whereas no particular organization is legally responsible for offering support to users of open sourced software. Instead, forums are often the port of call, which are generally free to use.
Also, the number of people able to offer help is likely to be much higher than if a bug in closed source software was reported to the provider. Linus's Law of Software Engineering states, "Given enough eyeballs, all bugs are shallow," meaning that the more people you have looking at a piece of code, the more likely one of them is to find a bug before it gets to be a major problem (Raymond, 2000). It is then up to the user to weigh up whether the guarantee of professional support is worth paying extra for. It is also worth noting that closed source software generally will tie the user to a particular vendor for support.
However, there are also disadvantages of open sourced software which have faced MySQL. As mentioned above, initially the software offered by MySQL was of a superior standard even to that of the closed software which was available. However, Oracle reacted to this by releasing a new version of their software, highlighting the inferiority of MySQL. This rendered MySQL software insufficient to meeting the demands of SAP, their alliance partner.
MySQL also introduced an upgraded version of their software, at a charge. Along with this strategy, which offers increased functions and features, came unforeseen problems. Marten Mickos alluded to this when he conceded that MySQL saw an increase in complaints when customers were paying a subscription for the software because expectations rose. It appears from the study that MySQL did not have a great deal of experience of the customer service side of a business. As a result I do not feel they were sufficiently equipped to deal with such a change in their business. However, the fact that the financial performance is encouraging suggests these problems have been overcome.
Not only is open source software susceptible to imitation, but such companies are also now vulnerable to take over. IBM initially started this trend in 2005, and other large companies have since followed suit. However the take over which was of particular concern to MySQL was Oracle’s purchase of the Finnish company Innobase. Innobase supplied MySQL with a particular transactional engine which was crucial to many of MySQL’s customers. Fears arose that Oracle would discontinue the engine and as a result sabotage MySQL. However this did not materialise, as in April 2006 Oracle renewed the contract between Innobase and MySQL.
Sources used:
Raymond, E.S “The Cathedral and the Bazaar” (2000) accessed via http://www.catb.org/~esr/writings/cathedral-bazaar/cathedral-bazaar/ on 05/12/2007
Varner, P.E “The Economics of Open Sourced Software” (1999) accessed via http://www.cs.virginia.edu/~pev5b/writing/econ_oss/advantages.html on 05/12/2007
www.jahadesign.com/glossary.htm
www.webopedia.comeu.conecta.it/paper/Advantages_open_source_soft.html
www.tamingthebeast.net/articles5/open-source-software.htm
open-source.gbdirect.co.uk/migration/benefit.html
Those who prefer open source software to that of closed source have outlined many reasons why.
One major advantage of open sourced software is that the core software is free of charge, which can greatly benefit internet-enabled start-up companies. In the case of MySQL, it was such companies which were the first users of their open sourced software, making use of software stacks such as LAMP. It is also possible that the introduction of open sourced software has driven the price of commercial software down (tamingthebeast.net). The case study also suggests this is true, with IBM and Microsoft each lowering their database prices and have both “created low-end bundles aimed at smaller organisations and partners.”
The ability and right to modify the source code is also a major advantage of open source software. Software can be improved upon, ported to a new hardware or adapted to meet individual needs (conecta.it). In a business context, software flexibility is about being able to choose solutions suitable for the needs of the users (open-source.gbdirect.co.uk). MySQL used this advantage as a way to differentiate their product from closed source software within an increasingly competitive market.
The case study highlights that MySQL, despite being small in size and having a small marketing budget, is extremely well known. This is the case because they offer open source software, and as a result the market they can reach is particularly large. It is likely that only rich companies could afford software developed by the likes of Microsoft, Oracle and IBM, whereas distributing open sourced software allows students, small businesses and developing nations to make use of the software and in turn, increasing awareness of the company.
In the case of MySQL, the number of functions and features offered were initially greater than those offered by the closed source software offered by IBM, Microsoft and Oracle. For this reason MySQL were able to grow significantly, as companies looked to “scale out” the superior MySQL product into other departments.
Varner (1999) also claims that the quality of open sourced software is higher than its closed source competitor, mainly due to peer review. Companies can hide security holes and fundamental flaws from the users by not releasing the source code, providing the software vendor with complete control of the product. Varner claims that “with open source, more people see the code and find and stop problems before they hurt anything.”
Depending on circumstances, personal preference and knowledge, support issues with open sourced software can be an advantage or a disadvantage to the user (tamingthebeast.com). As a result it is difficult to determine whether such an issue has helped or hindered MySQL. With closed software, the provider has an obligation to provide help in the event of faults, bugs etc (generally at an additional charge) whereas no particular organization is legally responsible for offering support to users of open sourced software. Instead, forums are often the port of call, which are generally free to use.
Also, the number of people able to offer help is likely to be much higher than if a bug in closed source software was reported to the provider. Linus's Law of Software Engineering states, "Given enough eyeballs, all bugs are shallow," meaning that the more people you have looking at a piece of code, the more likely one of them is to find a bug before it gets to be a major problem (Raymond, 2000). It is then up to the user to weigh up whether the guarantee of professional support is worth paying extra for. It is also worth noting that closed source software generally will tie the user to a particular vendor for support.
However, there are also disadvantages of open sourced software which have faced MySQL. As mentioned above, initially the software offered by MySQL was of a superior standard even to that of the closed software which was available. However, Oracle reacted to this by releasing a new version of their software, highlighting the inferiority of MySQL. This rendered MySQL software insufficient to meeting the demands of SAP, their alliance partner.
MySQL also introduced an upgraded version of their software, at a charge. Along with this strategy, which offers increased functions and features, came unforeseen problems. Marten Mickos alluded to this when he conceded that MySQL saw an increase in complaints when customers were paying a subscription for the software because expectations rose. It appears from the study that MySQL did not have a great deal of experience of the customer service side of a business. As a result I do not feel they were sufficiently equipped to deal with such a change in their business. However, the fact that the financial performance is encouraging suggests these problems have been overcome.
Not only is open source software susceptible to imitation, but such companies are also now vulnerable to take over. IBM initially started this trend in 2005, and other large companies have since followed suit. However the take over which was of particular concern to MySQL was Oracle’s purchase of the Finnish company Innobase. Innobase supplied MySQL with a particular transactional engine which was crucial to many of MySQL’s customers. Fears arose that Oracle would discontinue the engine and as a result sabotage MySQL. However this did not materialise, as in April 2006 Oracle renewed the contract between Innobase and MySQL.
Sources used:
Raymond, E.S “The Cathedral and the Bazaar” (2000) accessed via http://www.catb.org/~esr/writings/cathedral-bazaar/cathedral-bazaar/ on 05/12/2007
Varner, P.E “The Economics of Open Sourced Software” (1999) accessed via http://www.cs.virginia.edu/~pev5b/writing/econ_oss/advantages.html on 05/12/2007
www.jahadesign.com/glossary.htm
www.webopedia.comeu.conecta.it/paper/Advantages_open_source_soft.html
www.tamingthebeast.net/articles5/open-source-software.htm
open-source.gbdirect.co.uk/migration/benefit.html
Sunday 2 December 2007
Case Study: Information Technology Outsourcing at the BBC
Outsourcing is a practice used by companies to reduce costs by transferring portions of work to outside suppliers rather than completing it internally (firstdata.com).
This is exactly what the British Broadcasting Corporation (BBC) did in 2004, when it signed a ten year IT outsourcing contract with Siemens Business Services. The Chief Technology Officer of the BBC, John Varney, claimed that by agreeing such a deal, the BBC could save £20-£30million a year over the course of the contract. It is difficult to argue against such a fact. Outsourcing to another company gave BBC Technology the benefits of being part of a global technology company and brings it the economies of scale and critical mass it needs to bring new applications through very quickly (information-age.com).
There were detractors of the deal though, for example BECTU-the independent union for those working in broadcasting and allied areas (bectu.org.uk). They claimed that it would lead to job losses and there was no guarantee outsourcing would be a success. There was also a general feeling that such cost cuts could be made “in-house” without the privatization of BBC Technology. Varney responded by claiming that such savings could not be realized without redundancies, and by cutting jobs the BBC’s would damage its ability to deliver necessary technological changes.
Encouragingly, eighty companies put themselves forward for the preliminary stage of the process. The BBC went through a particularly rigorous selection process before accepting Siemens’ offer. The fact that over one thousand man hours were spent negotiating with the final three candidates suggests the BBC could not be accused of allocating too little time to the decision. In addition to this, an analytical process was carried out by a sub-group not including Varney. This assessed the suppliers against all the BBC’s criteria using a scoring mechanism. Furthermore, Varney and “one or two others…questioned every decision, just to make sure there were no errors or judgement.”
There were a number of other positive aspects of the BBC’s selection process which can be praised.
In an interview with conspectus.com in 2005, Varney reveals himself in particular to be “passionate about making sure that the end users were involved in the selection process all the way through.” In the same interview he is attributed as saying that he personally answered emails from technology staff regarding any questions they may have had over the process or deal itself. Such personal staff support should be commended.
The selection process was not based purely on the value of money which could be saved. Instead, Varney claims that “the BBC also looked at the supplier’s understanding of a public service organization” by spending time on how the companies viewed and valued staff. While such an attitude would be praised were it to be carried out, it is this area which prompted such a negative attitude from BECTU and its members.
While BECTU claim that employees were promised that they would remain with the BBC after privatization, the final two firms had not came to a decision on the transfer of jobs and redundancies. This begs the question; who made such promises (the BBC or the two final companies) and why when “the winner of the contract was to buy BBC Technology along with all the staff members?”
Most business processes rely heavily on technology and as a result IT outsourcing became a popular option in the 1990s. Companies identified the capital, time and space-savings associated with reductions in staff, training, equipment and work environments as advantages of outsourcing IT (computerweekly.com).
However as with most projects, there are drawbacks also. Firstly, the company loses control over a crucial business service. This is always going to be the case regardless of the success or failure of a project. However, it is the consequences which define whether outsourcing is advantageous to the company or not. In this case SBS are now in control, but if they reduce costs and increase performance then it is obviously not a drawback of outsourcing. If however the IT services provided were to be of a poor standard then this obviously does become a major disadvantage.
The other potential drawback of outsourcing is the one most applicable to this case study; the damage to staff moral or “culture clashes” (Kobayashi-Hillary, 2005). Although all technical staff were to be transferred to SBS, the whole process may have left a “bad taste” in the mouth of other employees, who perhaps saw colleagues treated poorly.
The deal to outsource IT services has undoubtedly been a success for Siemens. As a result of this opportunity, they have earned themselves a good name and become one of the leading IT vendors in the broadcasting industry in Europe. SBS’s senior analyst believes the service they can provide is now second to none in the IT vendor community.
Despite criticism, the BBC have also benefited from the deal, although perhaps not to the extent they hoped to. In a report by parliamentary spending watchdog the Public Accounts Committee (PAC), it has now emerged the savings for the first year fell 38 per cent short of target at just £22m (news.zdnet.co.uk).
Edward Leigh MP, chair of the PAC, summarized most criticisms of the BBC when he said: "The BBC's approach to the contract has been distinctly second-rate. Its estimates of annual savings have fluctuated widely; many parts of the BBC are still using other suppliers; and there was no provision for the BBC to share profits above an agreed level. Indeed, the BBC has chosen not to check on how profitable the contract actually is for Siemens." (news.zdnet.co.uk)
Sources Used
Kobayashi-Hillary, M “Outsourcing to India Second Edition: The Offshore Advantage” Springer Berlin Heidelberg (2005)
news.firstdata.com/glossary.cfm
www.conspectus.com/2005/specialreport/downloads/ViewfromtheTop_Jan05.pdf
www.computerweekly.com/Articles/2007/05/31/224431/it-outsourcing-the-expert-view.htm
www.information-age.com/article/2004/october/the_bbc
www.bectu.org.uk
news.zdnet.co.uk/itmanagement/0,1000000308,39287767,00.htm
This is exactly what the British Broadcasting Corporation (BBC) did in 2004, when it signed a ten year IT outsourcing contract with Siemens Business Services. The Chief Technology Officer of the BBC, John Varney, claimed that by agreeing such a deal, the BBC could save £20-£30million a year over the course of the contract. It is difficult to argue against such a fact. Outsourcing to another company gave BBC Technology the benefits of being part of a global technology company and brings it the economies of scale and critical mass it needs to bring new applications through very quickly (information-age.com).
There were detractors of the deal though, for example BECTU-the independent union for those working in broadcasting and allied areas (bectu.org.uk). They claimed that it would lead to job losses and there was no guarantee outsourcing would be a success. There was also a general feeling that such cost cuts could be made “in-house” without the privatization of BBC Technology. Varney responded by claiming that such savings could not be realized without redundancies, and by cutting jobs the BBC’s would damage its ability to deliver necessary technological changes.
Encouragingly, eighty companies put themselves forward for the preliminary stage of the process. The BBC went through a particularly rigorous selection process before accepting Siemens’ offer. The fact that over one thousand man hours were spent negotiating with the final three candidates suggests the BBC could not be accused of allocating too little time to the decision. In addition to this, an analytical process was carried out by a sub-group not including Varney. This assessed the suppliers against all the BBC’s criteria using a scoring mechanism. Furthermore, Varney and “one or two others…questioned every decision, just to make sure there were no errors or judgement.”
There were a number of other positive aspects of the BBC’s selection process which can be praised.
In an interview with conspectus.com in 2005, Varney reveals himself in particular to be “passionate about making sure that the end users were involved in the selection process all the way through.” In the same interview he is attributed as saying that he personally answered emails from technology staff regarding any questions they may have had over the process or deal itself. Such personal staff support should be commended.
The selection process was not based purely on the value of money which could be saved. Instead, Varney claims that “the BBC also looked at the supplier’s understanding of a public service organization” by spending time on how the companies viewed and valued staff. While such an attitude would be praised were it to be carried out, it is this area which prompted such a negative attitude from BECTU and its members.
While BECTU claim that employees were promised that they would remain with the BBC after privatization, the final two firms had not came to a decision on the transfer of jobs and redundancies. This begs the question; who made such promises (the BBC or the two final companies) and why when “the winner of the contract was to buy BBC Technology along with all the staff members?”
Most business processes rely heavily on technology and as a result IT outsourcing became a popular option in the 1990s. Companies identified the capital, time and space-savings associated with reductions in staff, training, equipment and work environments as advantages of outsourcing IT (computerweekly.com).
However as with most projects, there are drawbacks also. Firstly, the company loses control over a crucial business service. This is always going to be the case regardless of the success or failure of a project. However, it is the consequences which define whether outsourcing is advantageous to the company or not. In this case SBS are now in control, but if they reduce costs and increase performance then it is obviously not a drawback of outsourcing. If however the IT services provided were to be of a poor standard then this obviously does become a major disadvantage.
The other potential drawback of outsourcing is the one most applicable to this case study; the damage to staff moral or “culture clashes” (Kobayashi-Hillary, 2005). Although all technical staff were to be transferred to SBS, the whole process may have left a “bad taste” in the mouth of other employees, who perhaps saw colleagues treated poorly.
The deal to outsource IT services has undoubtedly been a success for Siemens. As a result of this opportunity, they have earned themselves a good name and become one of the leading IT vendors in the broadcasting industry in Europe. SBS’s senior analyst believes the service they can provide is now second to none in the IT vendor community.
Despite criticism, the BBC have also benefited from the deal, although perhaps not to the extent they hoped to. In a report by parliamentary spending watchdog the Public Accounts Committee (PAC), it has now emerged the savings for the first year fell 38 per cent short of target at just £22m (news.zdnet.co.uk).
Edward Leigh MP, chair of the PAC, summarized most criticisms of the BBC when he said: "The BBC's approach to the contract has been distinctly second-rate. Its estimates of annual savings have fluctuated widely; many parts of the BBC are still using other suppliers; and there was no provision for the BBC to share profits above an agreed level. Indeed, the BBC has chosen not to check on how profitable the contract actually is for Siemens." (news.zdnet.co.uk)
Sources Used
Kobayashi-Hillary, M “Outsourcing to India Second Edition: The Offshore Advantage” Springer Berlin Heidelberg (2005)
news.firstdata.com/glossary.cfm
www.conspectus.com/2005/specialreport/downloads/ViewfromtheTop_Jan05.pdf
www.computerweekly.com/Articles/2007/05/31/224431/it-outsourcing-the-expert-view.htm
www.information-age.com/article/2004/october/the_bbc
www.bectu.org.uk
news.zdnet.co.uk/itmanagement/0,1000000308,39287767,00.htm
Sunday 18 November 2007
How will off-shoring affect UK accountants?
A common misconception is that all off-shoring involves outsourcing. This is not true. It is important to differentiate off-shoring from outsourcing, which involves the migration of management and of services to an external provider (ebstrategy.com). Rather, off-shoring refers to taking advantage of lower-cost labour by transferring the process to another country whilst retaining management.
Significant developments in the communications sector have made the off-shoring of accounting processes cheaper and easier than ever before. Nowadays, all that is required to produce a value added service is a server and an internet connection.
This has resulted in an “off-shoring” boom, or as it has also been referred to as “the new redundancy” (Loxton, 2004). Philip Middleton, financial services partner at Ernst & Young, acknowledges that more accounting service sector and research jobs are going to go offshore. In fact, he says “That is inevitable and probably desirable.” (Loxton, 2004) However who exactly is it desirable to? Obviously it is not the UK accountant who finds himself unemployed.
For years processes, such as manufacturing, have been carried out in foreign countries in order to take advantage of low labour costs. However many developing countries have spent heavily on education and training in recent times (eurospe.org), putting paid to the common impression that white collar jobs were somehow insulated from the risk of off-shoring. Recently such perceptions have changed. India for example, can now offer ready trained professionals who are willing to carry out the same work as a British accountant for a fraction of the wage (Anonymous, 2005).
Action has already been taken due to the fear of such job loss. Barclays announced a deal with the finance union UNIFI, which outlined official measures that would protect staff in the event of offshore-incurred restructuring (Anonymous, 2005). While this goes some way to compensate those who suffer as a result, it does not eliminate the problem that off-shoring causes job losses to UK accountants.
Jon Carson, CEO of Cambridge Mass realized this and tried to combine the benefits of off-shoring with those of keeping the business at home and advertised jobs at the lower rates he would have to pay for staff in India (Anonymous, 2005). While such an approach would keep UK accountants in a job, it would also adversely affect them by reducing the wage an accountant can command within this country.
However it is not all doom and gloom for UK accountants according to Middleton; “If I look around our business and ask what kind of tasks might go to Bangalore, for example, the answer is probably not a great deal. A lot of what we do requires proximity to clients - close client relationships,” he says.
I feel this is an excellent point and one which may in fact prevent the accounting profession from suffering from the off-shoring boom. For example audit and assurance is a major source of revenue for the majority of accounting firms but you could not off-shore an audit to the other side of the world. Similarly, as Middleton acknowledges, “much of the taxation and financial reporting work that makes up the bread and butter of UK practices requires an in-depth knowledge of the UK tax and regulatory climate and infrastructure.” In order to accumulate such knowledge and understanding, surely the accountant would have to live and work in this country. Both these points help construct a barrier which will prevent many accounting services from being off shored.
Having worked in an accounting firm myself, I have also seen first hand the emphasis which is put on the client relationship, and how far that “personal touch” can go. It would be very difficult, if not impossible, to offer such a level customer service from the other side of the world. This is a factor that has seen many non-accounting companies refocus their business processes to within the UK (e.g. Direct Line). Off-shoring accounting activities may allow processes to be completed at a cheaper price, but whether the quality of work will remain the same is a contentious issue. In the light of accounting scandals and the introduction of the Sarbanes-Oxley Act, many may feel “you only get what you pay for” may be the safest attitude to adopt and if that requires paying more, so be it.
As mentioned above labour-intensive, back office tasks and administration may well be off-shored and for the good of the economy, probably should. For such staff off-shoring is definitely “destabilising and uncomfortable for individuals” (Loxton, 2005). However, for the reasons outlined above, I do not envisage off-shoring having the destabilizing and detrimental effect on the accounting profession that some are predicting.
Sources Used
http://www.ebstrategy.com/outsourcing/basics/definition.htm
http://www.articlesbase.com/advice-articles/offshore-accounting-bpo-myths-and-realities-211753.html
www.eurospe.org/education/education_developingcountries
“The Off-shoring Craze” Anonymous, Human Resource Management International Digest. Bradford: 2005. Vol. 13, Iss. 3
“Analysis: Offshoring - Offshore Accounting” Liz Loxton, Accountancy. London: Feb 2004. Vol. 133, Iss. 1326
Significant developments in the communications sector have made the off-shoring of accounting processes cheaper and easier than ever before. Nowadays, all that is required to produce a value added service is a server and an internet connection.
This has resulted in an “off-shoring” boom, or as it has also been referred to as “the new redundancy” (Loxton, 2004). Philip Middleton, financial services partner at Ernst & Young, acknowledges that more accounting service sector and research jobs are going to go offshore. In fact, he says “That is inevitable and probably desirable.” (Loxton, 2004) However who exactly is it desirable to? Obviously it is not the UK accountant who finds himself unemployed.
For years processes, such as manufacturing, have been carried out in foreign countries in order to take advantage of low labour costs. However many developing countries have spent heavily on education and training in recent times (eurospe.org), putting paid to the common impression that white collar jobs were somehow insulated from the risk of off-shoring. Recently such perceptions have changed. India for example, can now offer ready trained professionals who are willing to carry out the same work as a British accountant for a fraction of the wage (Anonymous, 2005).
Action has already been taken due to the fear of such job loss. Barclays announced a deal with the finance union UNIFI, which outlined official measures that would protect staff in the event of offshore-incurred restructuring (Anonymous, 2005). While this goes some way to compensate those who suffer as a result, it does not eliminate the problem that off-shoring causes job losses to UK accountants.
Jon Carson, CEO of Cambridge Mass realized this and tried to combine the benefits of off-shoring with those of keeping the business at home and advertised jobs at the lower rates he would have to pay for staff in India (Anonymous, 2005). While such an approach would keep UK accountants in a job, it would also adversely affect them by reducing the wage an accountant can command within this country.
However it is not all doom and gloom for UK accountants according to Middleton; “If I look around our business and ask what kind of tasks might go to Bangalore, for example, the answer is probably not a great deal. A lot of what we do requires proximity to clients - close client relationships,” he says.
I feel this is an excellent point and one which may in fact prevent the accounting profession from suffering from the off-shoring boom. For example audit and assurance is a major source of revenue for the majority of accounting firms but you could not off-shore an audit to the other side of the world. Similarly, as Middleton acknowledges, “much of the taxation and financial reporting work that makes up the bread and butter of UK practices requires an in-depth knowledge of the UK tax and regulatory climate and infrastructure.” In order to accumulate such knowledge and understanding, surely the accountant would have to live and work in this country. Both these points help construct a barrier which will prevent many accounting services from being off shored.
Having worked in an accounting firm myself, I have also seen first hand the emphasis which is put on the client relationship, and how far that “personal touch” can go. It would be very difficult, if not impossible, to offer such a level customer service from the other side of the world. This is a factor that has seen many non-accounting companies refocus their business processes to within the UK (e.g. Direct Line). Off-shoring accounting activities may allow processes to be completed at a cheaper price, but whether the quality of work will remain the same is a contentious issue. In the light of accounting scandals and the introduction of the Sarbanes-Oxley Act, many may feel “you only get what you pay for” may be the safest attitude to adopt and if that requires paying more, so be it.
As mentioned above labour-intensive, back office tasks and administration may well be off-shored and for the good of the economy, probably should. For such staff off-shoring is definitely “destabilising and uncomfortable for individuals” (Loxton, 2005). However, for the reasons outlined above, I do not envisage off-shoring having the destabilizing and detrimental effect on the accounting profession that some are predicting.
Sources Used
http://www.ebstrategy.com/outsourcing/basics/definition.htm
http://www.articlesbase.com/advice-articles/offshore-accounting-bpo-myths-and-realities-211753.html
www.eurospe.org/education/education_developingcountries
“The Off-shoring Craze” Anonymous, Human Resource Management International Digest. Bradford: 2005. Vol. 13, Iss. 3
“Analysis: Offshoring - Offshore Accounting” Liz Loxton, Accountancy. London: Feb 2004. Vol. 133, Iss. 1326
Friday 16 November 2007
Case Study: Geneva ERP Implementation
This case is primarily about the implementation of Geneva Pharmaceutical’s new Enterprise Resource Planning system, R/3 from SAP.
We felt the following points were particularly important to this case study:
· The implementation of the system was split into three phases.
· Geneva’s old system, IBM AS/400, had a wide array of software programs for different processes. Each business unit deployed applications that best met their own needs, despite the fact they were incompatible across all other business units.
· Whitman-Hart were initially contracted to assist with migration to the new system. They were a consulting firm who were appointed due to their experience in R/3 implementation. The consultants employed by Whitman-Hart were technical specialists with little knowledge of business domain.
· Verne Evans was initially assigned to manage the project during Phase I.
· In February 1998 Randy Weldon was hired as the new Chief Information Officer (CIO).
· Accelerated SAP (ASAP) was selected for deployment as it promised a short implementation cycle of only six months.
· Whitman-Hart were replaced in 1999 by Arthur Anderson Business consulting to assist Geneva with Phase II and III.
· Phase 1 was not completed efficiently and the implementation had spun “out of control.”
· ERP requires a new way of thinking and is “not only a technology change but also a change is work process.”
· At the time the case was written, Phase II and III had not been completed.
From the key points above we can note some of the key decisions taken by Geneva…
Obviously the main decision that was made was that to replace the old IBM AS/400 system with an ERP system. This decision was taken because the old system was simply not efficient enough. The pharmaceuticals market is a fiercely competitive one and as a result, a large emphasis is placed on the search for higher margins in the industry. For example, operational efficiency plays a major role in this and previously, data which was shared across different business units had to be double-booked and re-keyed manually. This often resulted in data entry errors, higher costs of error processing and greater data inconsistency. This is addition to the additional labour time taken up to input the data.
Once the decision to replace the old system was made, a decision had to be made regarding exactly which ERP system to implement. This was narrowed down to a decision between two: BPCS from Software Systems Associates or R/3 from SAP. The generics division opted for R/3.
The implementation of R/3 threw up more key decisions. The problematic first phase meant decisions had to be made regarding how Geneva could get implementation back on track. The decision was taken to bring in Randy Weldon due to his extensive experience of R/3. Weldon decided to replace Whitman-Hart with Arthur Andersen as consultants since Whitman-Hill had very little knowledge of the business domain making them unsuitable. We have gone into greater detail on this decision below. Other key decisions taken in phases II and III included the re-introduction of the Supply Chain Management initiative and the introduction of “Available to Promise” primary decision metric.
What could we learn from Geneva’s Experience?
As stated above, the case study was written before Phase II and III had been completed. As a result it is very difficult to comment upon the success of these phases or the lessons which could be learnt. As a result our answer will mainly focus on the lessons that could be learnt from Phase I and the planning which preceded it.
The first question that we feel should be asked is why Geneva implemented the IMB AS/400 in the first place. A greater deal of communication and forward thinking would have resulted in the company questioning why they were using different software in each department, each not compatible with the next. We are not suggesting that the upgrade would not have been required, but the initial system itself would have been more efficient.
The case study tells us that Whitman-Hart did have previous experience implementing the R/3 system, however their performance would suggest otherwise. The fact that Whitman-Hart employed technical specialists with little business domain and that Weldon was not in favour of them suggests that, as a company, they were not held in particularly high esteem. If this indeed was the case it is possible that Geneva “cut costs” by not carrying out thorough enough research on Whitman-Hart and perhaps some more time and money spent at an early stage may have saved them a lot more in the long run.
The project manager of Phase I, Verne Evans, had no prior R/3 experience. We feel this is quite unbelievable and in doing so, Geneva immediately put the success of the project at risk. The result was the implementation spinning out of control and issues could not be resolved. In this case, surely Randy Weldon, or someone with similar experience, should have been involved and lead the project from the start. In such a set up Evans could have gained experience working under Weldon thus gaining experience himself.
ASAP was also used in order to cut down the time implementation would take. While good in theory, perhaps in hindsight Geneva would have stayed clear of such a plan. We believe this typifies the way in which Phase I was structured: it was done as quickly as possible as cheaply as possible, a view that is shared by Anne Bourgeois, Geneva’s internal IS team leader.
It appears the project to implement R/3 seemed to lack a sense of leadership from the start. Despite ten IS personnel, ten full-time users and ten part-time users being deployed, they were not efficient. It seems that at the time of writing the case study, Phase II was on track and the project as a whole was looking up. It is unlikely that the introduction of Randy Weldon merely coincides with the up turn in fortunes. We feel the main lesson to be learnt is that in most circumstances a combination of experience and leadership is required to successfully guide any project.
We felt the following points were particularly important to this case study:
· The implementation of the system was split into three phases.
· Geneva’s old system, IBM AS/400, had a wide array of software programs for different processes. Each business unit deployed applications that best met their own needs, despite the fact they were incompatible across all other business units.
· Whitman-Hart were initially contracted to assist with migration to the new system. They were a consulting firm who were appointed due to their experience in R/3 implementation. The consultants employed by Whitman-Hart were technical specialists with little knowledge of business domain.
· Verne Evans was initially assigned to manage the project during Phase I.
· In February 1998 Randy Weldon was hired as the new Chief Information Officer (CIO).
· Accelerated SAP (ASAP) was selected for deployment as it promised a short implementation cycle of only six months.
· Whitman-Hart were replaced in 1999 by Arthur Anderson Business consulting to assist Geneva with Phase II and III.
· Phase 1 was not completed efficiently and the implementation had spun “out of control.”
· ERP requires a new way of thinking and is “not only a technology change but also a change is work process.”
· At the time the case was written, Phase II and III had not been completed.
From the key points above we can note some of the key decisions taken by Geneva…
Obviously the main decision that was made was that to replace the old IBM AS/400 system with an ERP system. This decision was taken because the old system was simply not efficient enough. The pharmaceuticals market is a fiercely competitive one and as a result, a large emphasis is placed on the search for higher margins in the industry. For example, operational efficiency plays a major role in this and previously, data which was shared across different business units had to be double-booked and re-keyed manually. This often resulted in data entry errors, higher costs of error processing and greater data inconsistency. This is addition to the additional labour time taken up to input the data.
Once the decision to replace the old system was made, a decision had to be made regarding exactly which ERP system to implement. This was narrowed down to a decision between two: BPCS from Software Systems Associates or R/3 from SAP. The generics division opted for R/3.
The implementation of R/3 threw up more key decisions. The problematic first phase meant decisions had to be made regarding how Geneva could get implementation back on track. The decision was taken to bring in Randy Weldon due to his extensive experience of R/3. Weldon decided to replace Whitman-Hart with Arthur Andersen as consultants since Whitman-Hill had very little knowledge of the business domain making them unsuitable. We have gone into greater detail on this decision below. Other key decisions taken in phases II and III included the re-introduction of the Supply Chain Management initiative and the introduction of “Available to Promise” primary decision metric.
What could we learn from Geneva’s Experience?
As stated above, the case study was written before Phase II and III had been completed. As a result it is very difficult to comment upon the success of these phases or the lessons which could be learnt. As a result our answer will mainly focus on the lessons that could be learnt from Phase I and the planning which preceded it.
The first question that we feel should be asked is why Geneva implemented the IMB AS/400 in the first place. A greater deal of communication and forward thinking would have resulted in the company questioning why they were using different software in each department, each not compatible with the next. We are not suggesting that the upgrade would not have been required, but the initial system itself would have been more efficient.
The case study tells us that Whitman-Hart did have previous experience implementing the R/3 system, however their performance would suggest otherwise. The fact that Whitman-Hart employed technical specialists with little business domain and that Weldon was not in favour of them suggests that, as a company, they were not held in particularly high esteem. If this indeed was the case it is possible that Geneva “cut costs” by not carrying out thorough enough research on Whitman-Hart and perhaps some more time and money spent at an early stage may have saved them a lot more in the long run.
The project manager of Phase I, Verne Evans, had no prior R/3 experience. We feel this is quite unbelievable and in doing so, Geneva immediately put the success of the project at risk. The result was the implementation spinning out of control and issues could not be resolved. In this case, surely Randy Weldon, or someone with similar experience, should have been involved and lead the project from the start. In such a set up Evans could have gained experience working under Weldon thus gaining experience himself.
ASAP was also used in order to cut down the time implementation would take. While good in theory, perhaps in hindsight Geneva would have stayed clear of such a plan. We believe this typifies the way in which Phase I was structured: it was done as quickly as possible as cheaply as possible, a view that is shared by Anne Bourgeois, Geneva’s internal IS team leader.
It appears the project to implement R/3 seemed to lack a sense of leadership from the start. Despite ten IS personnel, ten full-time users and ten part-time users being deployed, they were not efficient. It seems that at the time of writing the case study, Phase II was on track and the project as a whole was looking up. It is unlikely that the introduction of Randy Weldon merely coincides with the up turn in fortunes. We feel the main lesson to be learnt is that in most circumstances a combination of experience and leadership is required to successfully guide any project.
Sunday 4 November 2007
Why did Taurus fail and Crest succeed?
Following years of unglamorous dealings in streets and coffee shops, the London Stock Exchange was officially born in 1881 as an approved, regulated exchange (Head, 2001). Today it is at the heart of global financial markets and is home to some of the biggest companies in the world.
There have been many historical moments along the Stock Exchange’s timeline, each helping it on its way to worldwide prominence. One of the most significant of these was the “Big Bang” on 27th October 1986 (londonstockexchange.com).
On this date of deregulation, the London Stock Exchange became a private limited company and the abolition of fixed commission charges precipitated a complete alteration in the structure of the market.
In 1987 London's antiquated paper-driven procedures almost collapsed under the sheer weight of trading volumes resulting from the unusually buoyant market (Drummond, 1998). These procedures simply had to advance in order to compete with other financial markets worldwide.
Taurus was a computer program that was intended to provide the Stock Exchange with a "state of the art, all conquering" automated system of electronic transmission. This would enable the securities industry to remove paper from the system (in the form of physical share certificates). However, the UK securities industry is very diverse and everyone in the market wanted something different. No one was prepared to compromise so the only solution available to the Stock Exchange was to combine all the various Taurus models (17 in all) into one immensely complex hybrid (Drummond, 1998).
Unsurprisingly, it was an extortionate flop costing £75million. In March 2003, Taurus was abandoned by the London Stock Exchange (euroclear.co.uk).
In July of the same year, work began on a phased approach to the cost effective improvement of UK equity settlement (euroclear.co.uk). It was envisaged that the new system, called Crest, would bring London into line with big financial centres such as New York in having a modern method of settlement.
Crest, unlike its predecessor, has been a resounding success. In fact CrestCo (the company that owns and operates the Crest system and now known as Euroclear) was awarded one of the three trophies in the 1997 British Computer Society Awards, the most prestigious form of acknowledge of excellence in the British Computer Industry (bcs.org).
Simply put, Taurus appears to have been too complex and ambitious a system, overcomplicated further by the hundreds of staff that were involved in its development (Head, 2001). Crest on the other hand was co-ordinated by a core, high level design team of 4 or 5 who kept an overview of the entire project (Currie, 1997). This relatively simplistic (in comparison so that adopted by Taurus) approach appears to have been the secret behind the success of Crest. In trying to meet all the demands of all the transactions, an uncontrollable monster had been created in the form of Taurus. Learning from this, Crest catered only for the 10-15% of business functions that made up 85-90% of transactions. “The market went wild” at such a minimalist system (Head, 2001).
Furthermore, Taurus dictated that all member firms would have to use the system and there was no option to retain share certificates. As a result of this legal problems arose. Crest however, did not force shareholders to relinquish certificates, thus avoiding legal problems and making the system politically acceptable to its institutions.
Crest was also designed after Taurus and therefore benefited from greater technical advances and maturity. From the outset, Crest had a better chance of success. Similarly, many of the software developers who worked on Crest had previously been involved in the design and implementation of Taurus (Currie, 1997). As a result those workers had gained experience in the field and thus started from a position of strength. As had the Bank of England, who set up a company to develop Crest, in order to avoid the inherent organisational politics and difficulties which beset Taurus (unknown, 1993).
When designing Crest, supplier contracts were negotiated at a fixed price whereas those for Taurus were more fluid (Currie, 1997). This prevented suppliers prolonging jobs in order to maximise their own profit and gave an incentive to deliver their product on time and on budget. Had Taurus put similar contracts in place, it may not have cost the £75million that it did. Whilst this can go some way to explaining why Taurus was ten times over budget, it is the reasons outlined above which made Taurus such an infamous failure.
Sources Used:
Articles
Currie, W “Computerising the Stock Exchange: A Comparison of Two Information Systems” Blackwell Publishers Ltd, 1997
Drummond, H “Riding a Tiger: Some lessons of Taurus” Management Decision, 1998, Volume 36 Issue 3
Duffy, M “London’s Embarrassing Mistake” Wall Street and Technology, 1993, Volume 10 Issue 10
Head, C. H “Taurus and Crest, Failure and Success in Technology Project Management”, Henley Management College, 2001
Unknown “Crest: Little Taurus” www.practicallaw.com/7-100-4206, 1993, accessed 25th October 2007
Websites
www.londonstockexchange.com/en-gb/about/cooverview/history.htm
www.euroclear.co.uk/home/home.html#/company/timeline.html www.bcs.org/server.php?show=conWebDoc.1926
There have been many historical moments along the Stock Exchange’s timeline, each helping it on its way to worldwide prominence. One of the most significant of these was the “Big Bang” on 27th October 1986 (londonstockexchange.com).
On this date of deregulation, the London Stock Exchange became a private limited company and the abolition of fixed commission charges precipitated a complete alteration in the structure of the market.
In 1987 London's antiquated paper-driven procedures almost collapsed under the sheer weight of trading volumes resulting from the unusually buoyant market (Drummond, 1998). These procedures simply had to advance in order to compete with other financial markets worldwide.
Taurus was a computer program that was intended to provide the Stock Exchange with a "state of the art, all conquering" automated system of electronic transmission. This would enable the securities industry to remove paper from the system (in the form of physical share certificates). However, the UK securities industry is very diverse and everyone in the market wanted something different. No one was prepared to compromise so the only solution available to the Stock Exchange was to combine all the various Taurus models (17 in all) into one immensely complex hybrid (Drummond, 1998).
Unsurprisingly, it was an extortionate flop costing £75million. In March 2003, Taurus was abandoned by the London Stock Exchange (euroclear.co.uk).
In July of the same year, work began on a phased approach to the cost effective improvement of UK equity settlement (euroclear.co.uk). It was envisaged that the new system, called Crest, would bring London into line with big financial centres such as New York in having a modern method of settlement.
Crest, unlike its predecessor, has been a resounding success. In fact CrestCo (the company that owns and operates the Crest system and now known as Euroclear) was awarded one of the three trophies in the 1997 British Computer Society Awards, the most prestigious form of acknowledge of excellence in the British Computer Industry (bcs.org).
Simply put, Taurus appears to have been too complex and ambitious a system, overcomplicated further by the hundreds of staff that were involved in its development (Head, 2001). Crest on the other hand was co-ordinated by a core, high level design team of 4 or 5 who kept an overview of the entire project (Currie, 1997). This relatively simplistic (in comparison so that adopted by Taurus) approach appears to have been the secret behind the success of Crest. In trying to meet all the demands of all the transactions, an uncontrollable monster had been created in the form of Taurus. Learning from this, Crest catered only for the 10-15% of business functions that made up 85-90% of transactions. “The market went wild” at such a minimalist system (Head, 2001).
Furthermore, Taurus dictated that all member firms would have to use the system and there was no option to retain share certificates. As a result of this legal problems arose. Crest however, did not force shareholders to relinquish certificates, thus avoiding legal problems and making the system politically acceptable to its institutions.
Crest was also designed after Taurus and therefore benefited from greater technical advances and maturity. From the outset, Crest had a better chance of success. Similarly, many of the software developers who worked on Crest had previously been involved in the design and implementation of Taurus (Currie, 1997). As a result those workers had gained experience in the field and thus started from a position of strength. As had the Bank of England, who set up a company to develop Crest, in order to avoid the inherent organisational politics and difficulties which beset Taurus (unknown, 1993).
When designing Crest, supplier contracts were negotiated at a fixed price whereas those for Taurus were more fluid (Currie, 1997). This prevented suppliers prolonging jobs in order to maximise their own profit and gave an incentive to deliver their product on time and on budget. Had Taurus put similar contracts in place, it may not have cost the £75million that it did. Whilst this can go some way to explaining why Taurus was ten times over budget, it is the reasons outlined above which made Taurus such an infamous failure.
Sources Used:
Articles
Currie, W “Computerising the Stock Exchange: A Comparison of Two Information Systems” Blackwell Publishers Ltd, 1997
Drummond, H “Riding a Tiger: Some lessons of Taurus” Management Decision, 1998, Volume 36 Issue 3
Duffy, M “London’s Embarrassing Mistake” Wall Street and Technology, 1993, Volume 10 Issue 10
Head, C. H “Taurus and Crest, Failure and Success in Technology Project Management”, Henley Management College, 2001
Unknown “Crest: Little Taurus” www.practicallaw.com/7-100-4206, 1993, accessed 25th October 2007
Websites
www.londonstockexchange.com/en-gb/about/cooverview/history.htm
www.euroclear.co.uk/home/home.html#/company/timeline.html www.bcs.org/server.php?show=conWebDoc.1926
Sunday 21 October 2007
Thursday 18 October 2007
How can the ICAS website be improved?
“If your idea of an accountant is someone who sits in the office adding up figures all day, think again.” This is ICAS’ answer to the question of what is a CA?
Unfortunately, a quick sift through their website suggests this stereotypical image is indeed spot on. Page upon page of text is only broken up with a series of black and white thumbnails, displaying suited men and quill pens. Such an impression does nothing to dispel the boring, introverted image of accountants.
In comparison to other accounting bodies’ websites, the ICAS site severely lacks colour and imagination. As a result of the masses of text you are faced with, you unintentionally start skimming, and before you realise, stop reading the pages altogether. The pages of CIMA, ACCA and ICAEW are all bright, attractive and welcoming. The overall impression of the ICAS website could be greatly improved by the use of more colourful images and text on the homepage.
Although there is a greater volume of information on the ICAS website than on any other professional body, I do not feel it is particularly user friendly. For example the sites of both ACCA and CIMA offer a sitemap, which I found particularly helpful when navigating my way around the site. At the moment ICAS do not offer such a facility, so I would definitely recommend this. Similarly, CIMA have a job search option which allows you to customise a search to fit your individual requirements. Although ICAS have a vacancies section, you are unable to filter out unsuitable jobs. This again could be introduced to help improve the website.
As a potential student, I want to know why I should pick ICAS as opposed to another professional body. While other sites actively try to answer this question, the ICAS website does not. Whether intentional or not, this gave me the impression that ICAS think their reputation should be enough to make me apply. ICAEW in particular highlight the benefits offered to their students and provide case studies to create a positive image. Simply answering this question in a paragraph or two would help ICAS eliminate the arrogant impression I feel much of their website gives off.
There are areas of the ICAS website I find particularly useful. The option to receive news releases by email or RSS feed is a unique feature that other bodies currently do not offer. At the moment though, this is limited to ICAS news releases only. I would like to see this extended to include all new additions to the site, be that case studies, articles or general updates to the site.
Again from a student’s perspective, I find the “What employers/students say?” section of the site helpful. Like most people, reading the personal accounts of people who have "been there and done it" leave a much greater impression than advertisements on a website. Although they may well be biased, such personal experiences have a large bearing on career choices I will make. However the number of views given is very limited and out-dated. Therefore, I would like to see this section updated, and include a greater number of student accounts.
Most students find the thought of starting their CA fairly daunting. Introducing a blog, written by a student from their first day on the job would help allay many fears that new students often have. A diary like this would go some way to eliminating the stigma attached to a CA and make the qualification more appealing.
Furthermore, the number of employers who are quoted in this section could be broadened. At the moment only one quote is given and this is attributed to the president of ICAS. I would suggest expanding this section to include the opinions of a variety of companies from a variety of different markets.
If ICAS adopted these basic recommendations, I think their website would be more appealing to prospective students and other users alike.
Unfortunately, a quick sift through their website suggests this stereotypical image is indeed spot on. Page upon page of text is only broken up with a series of black and white thumbnails, displaying suited men and quill pens. Such an impression does nothing to dispel the boring, introverted image of accountants.
In comparison to other accounting bodies’ websites, the ICAS site severely lacks colour and imagination. As a result of the masses of text you are faced with, you unintentionally start skimming, and before you realise, stop reading the pages altogether. The pages of CIMA, ACCA and ICAEW are all bright, attractive and welcoming. The overall impression of the ICAS website could be greatly improved by the use of more colourful images and text on the homepage.
Although there is a greater volume of information on the ICAS website than on any other professional body, I do not feel it is particularly user friendly. For example the sites of both ACCA and CIMA offer a sitemap, which I found particularly helpful when navigating my way around the site. At the moment ICAS do not offer such a facility, so I would definitely recommend this. Similarly, CIMA have a job search option which allows you to customise a search to fit your individual requirements. Although ICAS have a vacancies section, you are unable to filter out unsuitable jobs. This again could be introduced to help improve the website.
As a potential student, I want to know why I should pick ICAS as opposed to another professional body. While other sites actively try to answer this question, the ICAS website does not. Whether intentional or not, this gave me the impression that ICAS think their reputation should be enough to make me apply. ICAEW in particular highlight the benefits offered to their students and provide case studies to create a positive image. Simply answering this question in a paragraph or two would help ICAS eliminate the arrogant impression I feel much of their website gives off.
There are areas of the ICAS website I find particularly useful. The option to receive news releases by email or RSS feed is a unique feature that other bodies currently do not offer. At the moment though, this is limited to ICAS news releases only. I would like to see this extended to include all new additions to the site, be that case studies, articles or general updates to the site.
Again from a student’s perspective, I find the “What employers/students say?” section of the site helpful. Like most people, reading the personal accounts of people who have "been there and done it" leave a much greater impression than advertisements on a website. Although they may well be biased, such personal experiences have a large bearing on career choices I will make. However the number of views given is very limited and out-dated. Therefore, I would like to see this section updated, and include a greater number of student accounts.
Most students find the thought of starting their CA fairly daunting. Introducing a blog, written by a student from their first day on the job would help allay many fears that new students often have. A diary like this would go some way to eliminating the stigma attached to a CA and make the qualification more appealing.
Furthermore, the number of employers who are quoted in this section could be broadened. At the moment only one quote is given and this is attributed to the president of ICAS. I would suggest expanding this section to include the opinions of a variety of companies from a variety of different markets.
If ICAS adopted these basic recommendations, I think their website would be more appealing to prospective students and other users alike.
Subscribe to:
Posts (Atom)