Symantecs ERP Turmoil Information Technology Essay

Symantecs ERP Turmoil Information Technology Essay A companys Enterprise Resource Planning (ERP) system is like its central nervous system. If it is healthy, it provides the sensory input to management so they can understand what is happening with customers, suppliers, and employees. It helps management respond, by coordinating the companys resources to win customers, battle competitors, and reduce cost, just like muscles in a body. Enterprise resource planning implementations are never easy. In fact, its the equivalent of corporate open heart surgery. And often theres a financial hit if things dont go well. Yet, despite this critical role ERP systems play, most companies fail when in it comes to implementing or upgrading their ERP system. (Eaves, 2009) The horror stories of failed ERP projects are now the stuff of legend. According to one recent report, more than 40% of ERP implementations fail to achieve even half the planned business benefits. Some well known examples include Waste Management suing SAP for $500 million for a failed ERP implementation, Hershey Foods 19% drop in profits from a failed SAP implementation at Halloween time a few years ago, the complete bankruptcy of FoxMeyer Drug, a $5 billion pharmaceutical distributor over a failed $100 million ERP implementation (Eaves, 2010), and, finally Symantecs ERP turmoil, even though it didnt fail completely, but it was the main cause for losing many loyal customers and lower-than-expected earnings in the third quarter of 2007. Adapt to change is always difficult, and even more when a corporation tries to accomplish two difficult tasks in parallel such as a change in organizational structure as well as to adapt on the way the new company operates. This is the case of Symantec that attempting to complete both tasks got into a vicious circle. (Achieving Operational Excellence, 2009) Symantecs ERP turmoil will be our case study discussion and I will highlight in detail the key issues and concepts in the chapter that are illustrated in this case study, find out the factors that were responsible for Symantecs difficulties in overhauling its ERP systems, demonstrate Symantecs adequacy in response to the problem, show the available options that could be done differently to prevent the implementation problems that arose at Symantec, and demonstrate customer loyalty based on historical relationship and switching costs. Key Issues and Concepts Lets first know exactly what the ERP system is and reveal the opportunities that attract many organizations toward adopting their IT systems to an ERP system and demonstrate the challenges associated with the implementation of such systems. An Enterprise Resource Planning (ERP) system is an integrated computer-based application used to manage internal and external resources, including tangible assets, financial resources, materials, and human resources. Its purpose is to facilitate the flow of information between all business functions inside the boundaries of the organization and manage the connections to outside stakeholders. Built on a centralized database and normally utilizing a common computing platform, ERP systems consolidate all business operations into a uniform and enterprise-wide system environment. (Enterprise resource planning, 2010) Figure Enterprise Resource Planning Systems http://www.emanage.in/images/erp.jpg Source: http://www.emanage.in/ Opportunities Associated with ERP Implementation ERP systems connect the necessary software in order for accurate forecasting to be done. This allows inventory levels to be kept at maximum efficiency and the company to be more profitable. Integration among different functional areas to ensure proper communication, productivity and efficiency. Design engineering (how to best make the product). Order tracking, from acceptance through fulfillment. The revenue cycle, from invoice through cash receipt. Tracking the three-way match between purchase orders, inventory receipts, and costing. Managing inter-dependencies of complex processes. ERP systems centralize the data in one place. (Enterprise resource planning, 2010) Challenges Associated with ERP Implementation Customization of the ERP software is limited. Re-engineering of business processes to fit the industry standard prescribed by the ERP system may lead to a loss of competitive advantage. ERP systems can be very expensive. ERPs are often seen as too rigid and too difficult to adapt to the specific workflow and business process of some companies-this is cited as one of the main causes of their failure. Many of the integrated links need high accuracy in other applications to work effectively. Once a system is established, switching costs are very high for any partner. The blurring of company boundaries can cause problems in accountability, lines of responsibility, and employee morale. Resistance in sharing sensitive internal information between departments can reduce the effectiveness of the software. (Enterprise resource planning, 2010) Symantec Project Oasis Symantec Corporation started out with good intentions. Shortly after acquiring Veritas it began an ERP rollout that was designed to standardize and unify the Symantec and Veritas information systems. The goal was to create a single ERP system, within which all of the companys extensive network of resellers, integrators, distributors, and customers could place orders for over 250,000 different products Symantec offered in the same way. That follows the basic concept of enterprise systems which are based on a suite of integrated software modules and a common central database. When new information is entered by one process, the information is made immediately available to other business processes. (Laudon, 2010) Although companies can rewrite some of the software in ERP systems, the software is unusually complex and extensive customization may degrade system performance, compromising the information and process integration. If companies want to reap the maximum benefits from enterprise software, they must change the way they work to conform to the business processes in the software. Although Symantec and Veritas had each used Oracle E-Business Suite 11d prior to the merger, both used highly customized versions of the systems that made integration a daunting task (Laudon, 2010). An overhaul of the combined companys enterprise systems was needed to join together Symantec and Veritass data from key business processes. Enterpyrise systems help large companies enforce standard practices and data so that everyone does business the same way worldwide. Enterprise systems help firms respond rapidly to customer requests for information or products. Unfortunately, the two companies bungled the implementation of the enterprise system almost from the beginning. (Achieving Operational Excellence, 2009) In my perspective, the pros associated with the implementation or upgrade to an ERP system outweigh its cons if done properly with a comprehensive plan stating the goals and the expected risks associated with it, implemented a step-by-step without compounding the implementation of the ERP system with the launch of multiple products, and without making too many customizations that lead to inefficient system and make it lose its competitiveness. So I believe that Symantec did not have an effective plan that took into consideration all the possible risks in despite of their knowledge to the risks associated with merging and upgrading two customized versions of an ERP system, they accompanied the upgrade with the launch of other products which made the case even more complicated. The following image shows the organizational change management methodology as it aligns with the ERP implementation road map http://www.sdn.sap.com/irj/scn/go/portal/prtroot/docs/webcontent/mimes/bpx/Business%20Process%20in%20Practice/OCM/ocm_roadmap.jpg Source: www.sdn.sap.com Responsible Factors for Symantecs Difficulties in Overhauling its ERP Systems Management: Most of the issues were due to the companys shortsightedness in implementing Project Oasis. The initial reaction to the launch of the new system was decidedly negative. Once customers reached a Symantec employee, they could spend up to 20 more minutes troubleshooting problems, and were often told that there was nothing that could be done. There was simply too much change occurring all at once for typical customers to handle. Partners were unhappy with Symantecs slow response to many of the problems (Laudon, 2010). Every project with such size should start with a realistic, specific, and a detailed plan that contains all project activities and their sequences in development, estimated budget, associated risks, estimated duration, and perhaps a list of personnel involved in the project implementation. The managements underestimate of the project size and the business processes involved is the most common mistake and fatal error that led many organizations to fail in its ERP implementation, and led sometimes to the demise of others. Despite all Symantecs plans and the involvement of many experts from its management side like its CIO who has a long experience in ERP systems as he worked as a CIO for many ERP vendors like Oracle and PeopleSoft, the management made a fatal error in preparing its users and more than 60,000 resellers, and distributors. The management did not assign its user to a proper training or let the people who will be in a direct contact with the new system on a daily basis and who are the main users of the system such as its personnel and partners to get involved in such a huge change in the system they used to work on and interact with. Organization: The Company was unprepared to meet the increased demand for customer support after the rollout. Symantec neglected to coordinate the development of its new ERP system with the launch of other products from different divisions within the company. The changes to the licensing system were not coordinated with the rest of the project. Customers were unhappy with changes to the stock-keeping unit product system (SKU system). Symantec had overlooked the needs of many customers while designing a technically sound but user-unfriendly ERP system (Laudon, 2010). Technology: Both companies used highly customized versions of Oracles E-Business Suite 11d prior to the merger. Users struggled to process the large amount of information provided to them and were overwhelmed by the increased number of steps, all of them new, required to place orders. Some smaller distributors and partners didnt update their systems to handle the new SKUs and were unable to submit purchase orders electronically. After the rollout, licensing became much more difficult for Symantecs customers and partners, forcing them to wait multiple weeks before receiving their licenses (Achieving Operational Excellence, 2009). Information systems are now required to respond to a wide range of potential users (both within and outside of an organization) with a diverse set of skills, functional specialization and IT competency. The days in which the IT or finance department exclusively specified and furnished information on behalf of end users have gone. Whether users are knowledge workers or occasional users of an information system, they need access to a system on a self-service basis so that they can retrieve information for themselves using the tools most appropriate to their role and capability. (Cognos 8 product, 2006) So implementing a new ERP system which will be used by most personnel within a company needs a proper and in depth training to all involved users at the right time and not at the system rollout. In my perspective, Symantecs management lacked a thorough assessment on the project needs in terms of training to its entire stakeholders such as vendors and customers, they were unprepared to meet the increased demand for customer support due to a new system implementation which always result in an increase demand to customer support, and they didnt pay enough attention to the complexity and size of ERP implementations which was obvious of accompanying the upgrade with changes to software licensing that was not coordinated with the rest of Project Oasis, and launching the update of multiple programs at the same time with the development of the new system. Was Symantecs response to the problem adequate? From the turmoil of Project Oasis rose Project Nero. The company initiated this follow-up project to recapture the loyalty of customers who were disenchanted by the changes brought about by Oasis. The project reached out to customers and fixed the problems with the information systems to improve response times and streamline operations (Laudon, 2010). The company began by adding over 150 new customer representatives to handle the increased volume of calls, reducing wait times and increasing customer satisfaction. Executives traveled the country to improve relations with angered customers and partners. The company introduced a master list of product releases readily available and standardized its communication methods between departments regarding new projects and change management (Laudon, 2010). Symantec used Net Promoter methodology to measure and increase customer loyalty. The results identified specific criticisms and customer problems and dramatically aided Symantec in correcting those problems. Project Nero helped the company weather the worst of the crisis. However, the company does not release the results of its Net Promoter surveys to the public so the extent to which it has repaired its reputation is unclear (Achieving Operational Excellence, 2009). So I believe that Symantec definitely took many critical steps to save its reputation and loyal customers around the globe, also I believe that the most critical steps beside introducing the programs listed above are that Symantecs executives traveled the country in order to satisfy and improve relations with angered customers and partners, and that CEO Thompson routinely calls to check up on the quality of customer service . (Laudon, 2010) Solutions Could Have Prevented Symantec Implementation Problems Even the most careful planning and well-designed systems can quickly go awry if customers are unable to make use of the new system. Enterprise applications involve complex pieces of software that are very expensive to purchase and implement. The total implementation cost of a large system, including software, database tools, consulting fees, personnel costs, training, and perhaps hardware costs, might amount to four to five times the initial purchase price for the software (Achieving Operational Excellence, 2009). Enterprise applications require not only deep-seated technological changes but also fundamental changes in the way a business operates. Business processes must be changed to work with the software. Employees must accept new job functions and responsibilities. Most implementation projects fail or experience enormous problems because executives, managers, and employees did not understand how much organizational change was required (Achieving Operational Excellence, 2009). Specific Symantec problems that perhaps could have been avoided: Communicate with employees better to counteract the negative attitude towards the project. Communicate with customers and distributors better about the upcoming changes. Make sure all of the systems that were changing were coordinated throughout the organization. Not change as many systems all at the same time. Even though stretching the implementation out over a longer period may have cost more money, perhaps it would have prevented some of the massive problems overall. In my perspective, the most critical factor in Symantecs ERP turmoil was the lack of a thorough communication with employees and customers who are the main users of the new system which I believe was a fatal error from the management side. Also other important factors were the lack of coordination among the different programs throughout the organization and the change in many systems all at the same time. So I think if Symantec management paid enough attention to the details and avoided the factors listed above, they were going to have a successful ERP implantation in terms of cost, time, and customers retention. What about If Youre the Customer? Historical Relationship Measuring customer loyalty is no passing fancy at Symantec. The executive leadership committee-which is chaired by Salem and includes division and department vice presidents, as well as CIO Thompson and Parrish-meets every two weeks to review loyalty metrics and identify what each unit manager is doing to improve their scores and efficiency. (Walsh, 2008) Technology may be the engine that drives business, but business is still conducted by people. Understanding the needs, desires and experience of the customer-whether that person is an internal user, a reseller partner or a consumer-is critical to any companys success and growth. (Walsh, 2008) So based on a strong historical relationship, many of Symantec customers and partners believe that Symantec always strived to achieve a high level in customer loyalty. This strong relationship between Symantec and its partners was the most critical factor that assisted Symantec to succeed in retaining most of its customers and go back on track despite the turmoil and difficulties faced by many customers during Symantecs ERP project. Switching Costs Another critical factor that most customers usually consider is that IT applications introduce switching costs that make it very costly to switch vendors. Companies become dependent on the vendor to upgrade its product and maintain the installation. Many of Symantecs partners and smaller distributors were reliant on Symantec and perhaps could not afford to switch vendors. That would mean they would have to switch all of their internal systems at great cost. (Achieving Operational Excellence, 2009). In my perspective, I will be reluctant to switch vendors if I was a customer because based on historical relationships I believe that Symantec is an outstanding corporation and always srtives to satisfy customers and customer satidfaction at Symantec is the first goal for achieving success. Also I may consider another factor, if the problems seem temporary, I will hang on, but if the problems seem insurmountable, I will desert the sinking ship. Conclusion ERP systems are the nervous system of any company, so doing an ERP implementation is like brain surgery: only to be attempted if there is a really good reason and not to soon be repeated. ERP implementation projects often fall victim to some of the same problems of any large, complex project. However, there are some repeatable problems that good planning early in a project can work to avoid and thats exactly what Symantec lacked in its ERP implementation. (Eaves, 2009) Even the most careful planning and well-designed systems can quickly go awry if customers are unable to make use of the new system. Enterprise applications involve complex pieces of software that are very expensive to purchase and implement. The total implementation cost of a large system, including software, database tools, consulting fees, personnel costs, training, and perhaps hardware costs, might amount to four to five times the initial purchase price for the software (Achieving Operational Excellence, 2009). If Symantec did better in communicating with employees, customers, and distributers about the coming changes, made sure all of the systems that were changing were coordinated throughout the organization, and did not change as many systems all at the same time, it could prevented the turmoil and difficulties it faced during the implementation of its ERP project. Eliminating confusion and improving the product ordering process wasnt enough. Symantec realized that it needed to recapture the hearts and minds of its customers and partners. Project Nero, the follow-up to Oasis, established several strategic objectives to improve everything from Symantecs change-management processes to continuously measuring customer loyalty. (Walsh, 2008) Customers are often reluctant to switch vendors based on historical relationships. If the problems seem temporary, the customers will hang on. If the problems seem insurmountable, some customers will desert the sinking ship. Companies who decide on a complete overhaul in their IT systems and start an ERP implementation should learn from the successes and failures of others and try to avoid known mistakes made by the other organizations through the ERP implementation practice. There are time-proven approaches that can enhance the success of the ERP implementation and each company shoul d examine each one of these approaches and study them carefully to increase its success level .