BACKGROUND

 In 2002, SDCS was the eighth largest urban school district in US and the second largest
in CA
 Serves 142,000 students in K-12 at > 180 educational facilities
 25K full- and part-time employees
 2001-2002 operating budget of $1.1B
 Undergoing reform effort to improve teaching and learning in the classroom
 Desire to modernize business practices

ERP and Education Industry

 Education industry second largest in US

 > $320B spent within K-12 segment
 According to the National Center for Education Statistics, 81 school districts in the US
served >= 50K students
 IT spending low
 Average of 2% of revenues going to IT budgets

Question 1: What is the appropriate discount rate for a government agency such as the San
Diego City Schools?
Ans: Discount rates reflect simply the particular use of interest rates to find the earlier value of
expected returns. Interest rates are used by lenders and borrowers to determine the amount of
some future payment. The federal risk-free interest rate in 2002 averaged 5. 4%. Using this as the
base, a government agency other than the federal government would need to add a small risk
premium to compensate investors for the additional risk associated with being a school district
instead of the federal government. San Diego would also need to add additional compensation to
account for tax factors.
With these factors in mind, San Diego should use a discount factor of approximately 7. 8% (5.
4% risk free rate +0 .5% risk premium + 1. 9% tax compensation).

Question-2: Calculate the ROI for San Diego's ERP system. How can you quantify the soft
benefits of the System and include them in the analysis?

Ans:
(1) Return On Investment based on cost savings

Total hard cost savings=$3316709

Total projected incremental yearly cost=$1820000
ROI= (Total hard cost savings-Total projected incremental yearly cost)/Total projected
incremental yearly cost
 = (3316709-1820000)/1820000
= 0.82

(2) ROI based on cost savings and efficiency improvements

Total hard cost savings= $6397834

Total projected incremental yearly cost=$1820000
ROI= (6397834-1820000)/1820000
= 2.51

(3) ROI based on cost savings, efficiency improvements & soft benefits

Soft benefits= $(320000+400000) = $720000

Total hard cost savings= $(6397834+720000) = $7117834
Total projected incremental yearly cost=$1820000
ROI= (7117834-1820000)/1820000
= 2.91

Quantified through creative assumptions:

 Assumptions can come from experiences others had when implementing similar solutions
or from drawing on similarities between other quantifiable benefits
 Other principals compared their successful implementation like receiving an additional
recruiting team, valued at $320K/year
 SDCS spent $400K/year on an internal audit team to provide access to HR data. This
team could be disbanded with the implementation of an HR solution leading to a
$400k/year benefit
 Improved employee morale and productivity could be measured by a lower turnover rate,
leading to lower training costs and recruitment costs, as well as higher output rates
leading to lower clerical demands and improved service.

Question-3: With the information you have access to, what should Wiemann present and
recommend at the board meeting? Specifically, would you recommend going forward with the
HR system implementation? If not, what alternatives would you suggest?

Ans: The deputy chief of business services, Jeff Wiemann should recommend to implement the
HR module of the ERP solution with the benefits and the Return on Investment associated with
it. He should try to convince the board members by telling them the benefits of the module
through following points:

 The administration of employee benefits could be automated.

  The payroll division had several areas and was handling more than twenty eight different
forms to process various pay actions.
 The processes involved in personnel section of the HR division were also complex. By
the implementation of ERP software these processes can also be simplified.
 The district could chose to use independent software packages for the different roles of
HR. They can choose to only upgrade the payroll process by installing an electronic
signin system and depositing checks directly

I will recommend not to implement the HR module. There are alternatives to implement an
HR ERP system that will still achieve some improvement in efficiency with a smaller
upfront cost, but they are less effective in the long term because of the lack of a central
database and increased chance of resistance. The alternatives that can be suggested here
are:
1. Implement all modules at once :
 All IT learning occurs at once and there’s no downtime between implementations
 Reduced training costs
 Reduced time between implementations
 Ideally all modules are on the current version
2. They can chose only to upgrade the process of payroll instead of implementing a full HR
module by installing an electronic sign in system. This will help in maintaining the database
more efficiently.
3. Another alternative is to roll out the HR ERP implementation to only a portion of schools
in order to test out the deployment. This thing is also risky but it doesn’t seem to be as the
experimental will face some unexpected difficulties and give a bad impression about the ERP
implementation.

Question-4: What are the risks associated with the project? Would you advise the school board
of these risks?

Ans: The following risks are associated with the ERP implementation in the schools:

(1) The timeline and costs of implementation could be increased if the district allowed
requirements to be expanded over the course of implementation.
(2) Deploying full system at one time increases the risk of project failure.
(3) There is less technical expertise in the education department as compared to the
industries. So they will face the difficulty in making the required progress.
(4) Scope creep is another general ERP risk. It refers to expanding the requirements of the
ERP system over the course of implementation.
(5) Any ERP system can fail due to the difficulty of customizing the system for many users
in different locations, known as wide-scale deployment. San Diego City School District
has 180 schools and each needs to be upgraded to the new system

To avoid the risks, the following measures could be taken by the school board:
• The deployment of the ERP system should be done in phases to avoid the risk of
the complete project failure.
• They can train their existing employees through some IT consultants who will
provide them with the required software and train them.