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I N E D U C AT I O N E N V I R O N M E N T
A CASE STUDY ON SELECTION AND
IMPLEMENTATION OF ER P-SAP
AT PETRONAS EDUCATION DIVISION
(A PROJECT UNDERTAKEN IN THE YEAR 2000)
SUBMITTED BY:
RAJA YASMIN RAJA YUSOF (803638)
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TABLE OF CONTENTS
1.0 Introduction 3
3.1 Background 5
3.2 Objectives 6
3.3 The Project Scope 7
3.4 Trends in Higher Education Administrative System 7
3.4.1 Business Trends 7
3.4.2 System Trends 7
3.5 Request for Information (RFI) 11
3.6 System Evaluation and Recommendation 12
3.7 Business Case: Cost Benefit Analysis 15
3.8 System Evaluation During Implementation 18
4.0 Discussion 19
5.0 Conclusion 20
Reference
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1.0 INTRODUCTION
Enterprise Resource Planning systems are not only complex systems that integrate data and
business processes but also require prohibitive upfront investment. However, ERP
implementations have been plagued with various complications that ultimately resulted in
failure and abandoment, especially within education industry.
Many of these failures have been featured in trade journals. Most organizations experience
challenges in their ERP implementations but too much money has been spent and too much
time invested for organizations to abandon their ERP strategy. Even companies who failed in
their initial attempts to bring such systems into production, such as Dow Chemical who
halted their first ERP project after seven years and $500 million, are trying again. A recently
completed survey of US manufacturing firms cited that 75% of the respondents were
pursuing an ERP approach and 44% had already implemented this type of software (Mabert
et al. 2000). The authors suggest that ERP is pervasive in manufacturing and it is likely to
increase in importance. They conclude that extremes are reported in the popular press while
common outcomes are ignored. Reports about the demise of ERP are premature.
This paper identifies factors of success (or failures) using a case study of ERP-SAP
implementation in a Malaysian-based education institution. Despite the meticulous planning
undertaken, this huge exercise had failed to yield the desired results.
ERP systems are information systems that "integrate information and information-based
processes within and across functional areas in an organization" (Kumar and Van
Hillegersberg, 2000). The goal behind an ERP system is to integrate data and business
processes from all departments and functions into a single computer system. An ERP system
consolidates these processes into one software application utilizing one centralized
database. ERP permeates throughout an enterprise impacting employees in all areas of the
firm from manufacturing to finance to purchasing to human resources (Stair and Reynolds,
2010).
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The reasons why many industries and organizations are adopting ERP softwares could be
many and varied: ERP software solutions extend beyond their traditional manufacturing and
logistics base to other industries such as banking, finance, insurance and retail operations
(Kumar and Van Hillegersberg, 2000). These systems are incorporating applications that
support marketing, sales, and customer relationship management and the next generation
of ERP systems will incorporate Internet technologies. The focus is moving beyond internal
business processes to external connectivity between ERP systems of suppliers and customers
(Mullin, 2001). The untapped market of midsize companies is being embraced and ERP
adoption is expanding geographically into such countries as the United Kingdom, India,
Japan, China and Brazil (Kumar and Van Hillegersberg, 2000). ERP vendors are changing their
business model as they move towards a component strategy that separates ERP systems into
modules that can be adopted individually.
Murray, Meg and Coffin, George (2001) in their study have identified several factors to
ensure successful implementation of ERP systems:
Factor 1: Executive Support Is Pervasive and Accountability Measures for Success Are
Applied
Factor 6: Realistic Expectations in Regards to ROI and Reduced IT/IS Costs Exist
Umble, Haft and Umble (2003) in their study have addes a few more criteria in order to
ensure successful implementation of ERP systems:
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Factor 3: Excellent project management
Discussion on the following case study basically facilitates to clarify whether the findings are
consistent with regards to similar implementation in Malaysia, via PETRONAS Education
Division suites of education outfits.
3.1 Background
The Education IT Strategy was undertaken and completed in August 1999 and the
recommendation following that study included a set of projects targeting both
education delivery and back-end processes to help provide direction for future IT
initiatives in PETRONAS Education Division. One of the projects identified was
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Education Management System (EMaS) which was the key IT project focus. EMaS
could comprise a single core system or multiple subsystems to best assist and cater
to the bank-end processes across the identified education units.
PETRONAS Education Division was formed late 1998 when different training
institutions under the Human Resource Division were consolidated. The Education
Division has developed an overall Education and Training Master Plan and in that
year was in the process of implementing the Master Plan.
The Education units involved in this software selection initiative comprised the
following five different units:
3.2 Objectives
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3.3 The Project Scope
In the study, the project team which was anchored by UTP, undertook a structured
project scope comprising the following:
Trends in higher education administrative systems;
EMaS project study via Request for Information (RFI) exercise
A combination of business trends and system trends in the higher education industry
was forcing institutions to consider their administrative software selection decisions. 1
The system trends also in some ways weighed down in considering the best
solution for an education set-up:
1
Source:Gartner Group report on Higher Education Integrated Solution Providers: YE99
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a lack of established vendors in the education management software market.
Higher education client typically took longer, up to 36 months, compared to
corporate client to decide on a software package, making the education
sector less attractive to vendors. In addition, higher education financials were
based on fund-accounting principles and vendors' software required major
modification from existing A/P, A/R and G/L software. It was also difficult to
take corporate-based financial accounting packages to fit higher education
needs without investing considerable time and effort. Another reason was
during the study period, there was no stable and consistent set of business
processes that was applicable to a large number of institutions. Institutions
requested considerable customisation to fulfil requirements, hence impeded
vendors from planning/implementing future software enhancements and
releases.
SAP: There was no product readily available yet and still in development
stage;
Peoplesoft: Higher education product was new with two years of
experience;
Oracle: Recent acquisition of a higher education software company; and
Lotus: No specific education administration and management product
available, only a framework with development tools .
Thus, institutions were faced with the difficult "make" or "buy" decision for a
custom-built, in-house solution versus partnering with a vendor for package
systems.
2
Source:Gartner Group report on Higher Education Integrated Solution Providers: YE99 and EMaS Project Team
analysis.
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house solutions; the cost effectiveness of custom-building an in-house
solution; and adherence to application design and development timeline to
meet user requirements. Partnering with software vendors however, would
promise functionalities in new releases and application of leading edge
technology; collaboration in software design with vendor and other
institutions thus resulting in shared development costs; and viable support
structure from vendor for package systems. Recent trends, however,
favoured the latter, which was partnering with software vendors for package
systems.
Industry Trends: Vendors must be among those listed for the higher
education industry solution;
Interest in this region: Vendor must have plans to have an office (in
the near future) within the Australasia region or has a partner solution
provider operating in this region;
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Technical and Functional capability: Product must be compliant with
PETRONAS platform and general guidelines (operating system,
database). Product fulfilled specific areas in the user requirements
gathered from education units; and
Support availability: Vendor must have reliable support structure -
helpdesk, training, maintenance and consultancy or has appointed
partner solution provider for local support.
Other niche
players SAP (Campus Management)
As of 12/99
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3.5 Request for Information (RFI)
The project team then communicated with the potential vendors to evaluate
their interest and support in this region, plus technical and functional
capabilities of the product. The final number of RFI to be issued was then
derived. The following is a brief snapshot of the process:
Number of 30 18 12
vendors selected
The purpose of the RFI was to solicit for information on available education
application software to support the multiple and varied education units
within PETRONAS Education Division. The software was to provide a
standardized and common operating platform for specified functions within
the education industry. Components of the software would have to support
one or more of the students admissions, managing student records, student
financials, student services and facilities in addition to managing graduation
and alumni data.
Based on the above vendor identification process, RFI's were issued to the
following seven student administration solutions and five gap-filler solutions:
Student Administration
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Technology One - (StudentOne)
Peoplesoft (Higher Education) and Buzzeo Inc. (Six Logix) however, had
declined to respond.
Gap Fillers
Scientia - (SyllabusPlus)
Corbett Engineering - (CELCAT)
Schlumberger - (Smart Card)
Each response to the RFI received was evaluated based on the following
criteria stated within the RFI in order to establish a qualitative comparison of
advantages and disadvantages with the associated conditions/consequences,
benefits and costs:
The vendors and the respective capabilities were then prioritised based on the
following decreasing order of compliance with PETRONAS Application Technology
Guide:
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Enhance current SMS (Student Management System) which was an SAP-HRIS
customised system;
SAP Industry Solution for Higher Education and Research: To License SAP’s
solution for higher education with GA (general availability in July 2000, running
on R/3 version 4.6B which would be in compliance with PETRONAS’ latest SAP
version;
SAP complementary partner solutions: To build integration to complementary
partner solutions using partner tools; aor
Other non-SAP based solutions: To license other ERP soultions for higher
education and build necessary interfaces
Upon evaluating the responses, the Project Team narrowed down to two options
(out of four possible options) for the final overall recommendation.
Other than the functional fit and product readiness, SAP Campus Management
solution has advantage over non-SAP solution.
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SAP Campus Management Non-SAP Vendor Solution
Functional Under-development, next release Available product and functionality
is FCS III. GA date is open and
will most likely be post-FCS V.
Technical Supports existing PETRONAS Supports existing PETRONAS
technical guidelines and technical guidelines and
environment environment
Ease of integration/interface with
Group Common Systems
Vendor Existing relationship with vendor No prior relationship with non-SAP
No live customer reference site yet higher education vendors
Existing live customer reference
sites
Support Existing internal support structure No existing local or strong regional
Vendor has strong local presence presence
Total Ranges from RM 8 - 13 million Ranges from RM 8 - 15 million*
Costs
There were certain conditions for adopting Campus Management, given its current
lack of availability:
In turn, there were also certain conditions for adopting a non-SAP solution, given that
PETRONAS adopted an SAP environment and these solutions did not yet have local
presence:
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The Education units to establish a dedicated IT support unit to provide long-
term support of the non-SAP solution
GIRM and the Education units to source for and retain skilled resources to
staff the implementation team
GIRM to re-align existing technical architecture in PETRONAS to support the
non-SAP solution
The Education units to ensure that existing PETRONAS group common
systems and initiatives (e.g. PLIS) are aligned with the non-SAP solution
The non-SAP solution's system integrator to build and establish local presence
to support the implementation effort with the necessary support structure
The non-SAP solution vendor to provide the future release plan that
addresses additional functionality and adoption of leading-edge technology
The implementation team to customise the non-SAP solution to fit the
specific local requirements and establish the necessary interfaces and
integration with Group Common Systems and other PETRONAS systems
where necessary
The key differentiators for SAP CM to be chosen as the core of EMaS solution:-
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Costs Components Costs (RM)
SAP CM Software Cost *1,591,200
Gap-filler (Syllabus Plus) 243,750
Software Cost
Software Consultancy Cost *1,800,000
Implementation Cost 4,940,000
IT Infrastructure & Staff 1,770,000
Access to PETRONAS Group
Common System (for 100
new users)
Student web access fees *2,632,500
(for 2500 students)
Total EMaS cost 12,977,450
The above costs are for UTP, ILPP, ALAM and Permata but cost sharing mechanism
needs to be determined. The number of students used for estimation of software
cost was 4300 (UTP = 2500, ILPP = 1000, ALAM = 800). The total implementation cost
had excluded SMS support/fixes and additional hardware cost. The software cost for
SAP included a 15% discount. There were also discussions to negotiate for a 33%
discount. The software consultancy cost could potentially be reduced given that SAP
Campus Management was a new product. Student web access fees could be
potentially reduced by using an alternative web interface solution (Lotus).
The study has estimated that EMaS would deliver savings ranging from RM0.97
million in year 1 increasing to RM6 million in year 10 with the following assumptions
provided by the users’ input:
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Benefit Ave. Annual
Savings (RM)
Administration efficiency 860,000
Registration process 120,000
Admissions process 22,000
Examination Management
improvement
16,000
Graduation Management
improvement
96,000
Financials Management
effectiveness
62,000
Wider prospects market and
effective marketing
103,000
Optimisation of staff workload 14,000
Loss of potential revenue 2,280,000
Additional intake cost 455,000
The cost benefit analysis showed that although huge upfront investment was
required, in the long run, the benefits would outweigh the recurring costs.
Rm 30
Cumulated Benefits
In Millions
Rm 20
Cumulated Costs
Rm 10
Rm 0
Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10
The Net Present Value for EMaS investment was +RM4.5mil. at an annual discount
rate of 10.14%. 10.14% was the WACC for PETRONAS Groupwide in 1999.
In addition to the tangible cost savings, there were also intangible costs if the
Education Units had remained status quo. Operating on the current system would
invariably lead to the following immeasurable loss.
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Staff unable to operate Heightened stress, leading to decreased
optimally motivation and productivity.
Unable to realise
Leading to unfulfilled vision.
Vision
The system did not yield the desired results for several reasons:
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Between 2000 and 2004, the system had undergone various enhancements and
customization that had placed a strain on the core system. In 2006 it was decided
that UTP could start soliciting for a new system and at that juncture the rest of other
education outfits would implement their own systems. In 2008, the University
acquired a new locally developed system with specific design to meet the University’s
business and process requirements. Though the University still maintained the
Accounting Package of SAP, the Education Management System is now used via
interface.
4.0 DISCUSSION
Though the executive support was strong and the exercise undertaken had clear
accountability measures, the result was still unsatisfactory. The project team had also spent
significant amount of time to understand the functional requirements of the users and had
built them in the RFI but the outcome was still undesireable. In fact, the entire ecercise of
sourcing and implementing the system was indeed treated like a project but with minimal
success. The members of the project team comprised users, analysts and programmers with
sufficient knowledge and skills of the system but the end-results did not commensurate with
the knowledge and skills. The expectations with regards to ROI and IT/IS were balanced but
it was known and noted even at the top management level that implementation of SAP for
education could be prohibitive in ways that it may not be recoverable given that education
outfits were regarded and categorised as cost-centres, not profit-centres. Even with realistic
project management, external issues especially in relations to SAP-Campus Management
were inevitable and had yielded adverse impact on the implementation.
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The only consistent factor was that in order for ERP implementation to be successful,
minimal customization should be exercised. In this case huge amount of effort, energy, time
and money was invested in customising and enhancing SAP-HRIS as the interim measure
while waiting for the final release of SAP-Campus Management. One of the reasons was that
PETRONAS Education Division was obsessed with following internal processes instead of
adapting the best practices offered by SAP-Campus Management. The team fed input and
feedback on the process in the hope that these would be catered for in the SAP-Campus
Management. However, such did not materialise. PETRONAS’ approach of user driven
system on SAP did not sit well with the system driven application advocated by SAP.
5.0 CONCLUSION
Despite the amount of money, human resources and time spent on the implementation of
the system, in addition to meticulous planning and study undertaken by a group of expert
users and consultants, PETRONAS ultimately succumbed to the choice of having a newly
developed system to cater for the specific need of its institution. Several years after the
study, the decision took a turning in favor of a non-SAP based system though SAP platform
and applications are implemented group-wide across various industries within the
organization.
Though there were many studies undertaken in ERP specifically SAP implementation, most
were related to manufacturing and other industries. Thorough examination within the
education environment is still somehow lacking.
Note:
The author of this paper was the Project Manager of EMaS. The study was undertaken in September 1999 and
ended in February 2000. The system implementation started in July 2000 and ending in 2004 before the
University started to explore the use of newly designed system by local vendor. The new system was launched in
2008. The information provided and the cost estimates were accurate as at the time the study was undertaken.
The information provided in this paper was for academic purpose only and strictly confidential.
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Reference:
Kumar, K. and Van Hillegersberg, J. ERP Experiences and Evolution. Communications of the
ACM (43:4), April 2000, pp. 23-26
Mullin, R. Exchanges Weigh in on ERP Link-ups. Chemical Week (163:5), January 31, 2001,
pp. 32.
Murray, Meg and Coffin, George, A Case Study Analysis of Factors for Success in ERP System
Implementations (2001). AMCIS 2001 Proceedings. Paper 196.
http://aisel.aisnet.org/amcis2001/196
Sieber, T., Siau, K., Nah, F., & Sieber, M. (2000). SAP Implementation at the University of
Nebraska. Journal of Information Technology Cases and Applications, 2(1), 41–72.
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