Part A - Case Study III-3Make-or-Buy Decision at Baxter Manufacturing Company

1. What are the arguments in favor of Manufacturing Vice President Moore’s proposal to purchase the manufacturing software from EMS? Moore argues that Baxter Manufacturing Company (BMC) is losing it’s reputation as a world-class parts manufacturer and is therefore implying that the company will lose business unless they purchase the manufacturing software. Moore also thinks that the manufacturing software will improve their manufacturing efficiency and customer service. The vendor, Effective Management Solutions (EMS), has told Moore that the entire system can be up and running in six months, where the estimated time to build an in-house system is two years. So there appears to be a big savings in the implementation timeline. The cost to buy the vendor provided manufacturing software is a fixed $220,000. The estimated cost to build the in-house system is over $400,000. So there appears to be a significant cost savings in purchasing the manufacturing software.
Moore also argues that the vendor system is a better system because it is a mature system that has gone through many iterations of changes based on feedback from hundreds of customers. Moore believes that adopting BMC’s manufacturing process to the vendor software will improve BMC’s operations because of the experience that has gone into the manufacturing software.Moore believes that this system will be successful because he is championing the purchase and will make sure that it works. Moore also argues that the situation at BMC is better suited to adopt a new software package since inventory is under control and they are no longer expediting orders due to capacity issues.
2. What are the arguments in favor of developing the needed systems internally? Collins believes that the EMS manufacturing software is overkill for BMC. He contends that the EMS system is designed for much more complex manufacturing operations. He also believes that BMC will have a difficult time trying to implement such a complex system. Collins thinks it would be better to build an in-house system that fits the BMC process. That would allow BMC to enhance the system as they learned how to integrate it with their manufacturing process. Collins also questions whether it is in the best interests of BMC to modify its manufacturing process to work with the vendor system. His argument is that they won’t be able to change the vendor’s system but they would be able to change the in-house system as needed.The other point he makes is that they have failed twice attempting to integrate purchased systems, but have had success with the systems that they have created internally.
3. What problems in managing IT does a small company like BMC have as compared to a Fortune 500 company? The biggest difference between a small company and a Fortune 500 company is resources, both human and money. A Fortune 500 company can dedicate resources to evaluate a new system. A small company has limited staff that is involved in operating the company and therefore cannot dedicate the time necessary to adequately evaluate a new system. A Fortune 500 company usually will have a large internal IT department with the capacity to build internal system that are tailored to the company. And a Fortune 500 company is more likely to have IT staff that have been with the company for a while and therefore are familiar with the business process. A small company will have a very small IT department, if it has one at all. Many small companies rely on contract IT support. This means the IT staff are much less likely to have any familiarity with the company’s business process. From a monetary standpoint, a Fortune 500 company can afford to purchase a vendor system and throw it away if it does not work. And a Fortune 500 company can afford to build a system in-house because it has the budget necessary to pay for a large IT staff payroll. A small company must evaluate all purchases, especially for a large software package. A vendor software package cost may be enormous compared to the income and expenses of the small company. This puts significant pressure on the management of the small company to purchase the perfect system because they cannot afford to throw it away. And a small company cannot afford to hire the necessary IT staff required to build an in-house system. Part B - Case Study III-4 ERP Purchase Decision at Benton Manufacturing Company, Inc.
1. What are the reasons to install an ERP? How about reasons not to?
An enterprise resource planning (ERP) system is designed to integrate data from the various departments within a company, such as finance, sales, operations, and human resources. By integrating the systems into oneyou eliminate the separate systems that each department may have. This benefits the company by eliminating duplicate data entry and storage. And the data can move through the departments without having to traverse segregated systems. It also provides a common system for all departments to use and the IT department to support. Having the data in one system allows management to have access to up-to-date information that represents all departments instead of just having reports from each department separately.
One disadvantage to adopting an ERP system is that they are created with a common set of features for a given industry, and are difficult to tailor to a specific company’s needs. According to Markus (as cited in Brown, DeHayes, Hoffer, Martin, Perkins, 2009) an ERP system is estimated to only provide 70 percent of the needs of a company. This means that some effort is required to add functionality around the ERP system or to interface the ERP system with existing systems. This interfacing can be difficult between legacy systems and an ERP system since they may use quite dissimilar technologies. Another consideration in adopting an ERP system is the cost. ERP systems are very expensive and require considerable consultant time to configure for your specific company, which also adds to the cost. There will also be significant training for your company staff to learn the new system. And there is a very good possibility that you will have to change your business process to conform to the ERP system.

2. Do you try to cost-benefit justify such a system, and, if so, how? It is difficult to do a cost-benefit analysis of an ERP system because the benefits of an ERP system are not generally measureable in terms of money. The benefits discussed earlier from an ERP system translate into improved efficiency, improved communications between departments, and improved decision making by management.Another factor in trying to do a cost-benefit analysis is the time it takes to get a return for the investment. Because of the complexity in adopting an ERP system it can take several years before the company starts to benefit. The point at which this occurs will be different for every company. Benton’s approach to determining the benefits of an ERP system was to use an independent study of companies that have implemented an ERP system (Brown, et al., p. 485). That study provided the industry average cost reductions for different departments. Benton projected its savings by multiplying its current costs for each department times the industry averages. Benton determined its costs by multiplying an industry average “cost per seat” times the number of computers they planned to have on the system (Brown, et al., p. 486).
3. What are the corporate culture issues to consider? One issue is the fact that a company may have done business a certain way for years and the ERP system may force them to change how they do things. This may be difficult due to how existing systems operate and the fact that some employees may not want to change. Also there may be resentment by the employees who may feel like the adoption of an ERP system was forced onto them from upper management and that they did not have any input to the decision. Another issue is that the employees may feel pressured to make the new ERP system work at all costs due to the large investment made by the company.
Part C - Case Study III-5The Kuali Financial System: An Open Source Project
1. Discuss the advantages of adopting open source software.
One advantage to using open source software is that there is no cost to acquire the software and no per user licensing costs. This makes it very attractive to use software such as Mozilla’s Firefox browser or Oracle’s OpenOffice productivity suite. Another advantage is that the software is very reliable because there are many people working on it. The fact that you can access the source code and enhance it for your own needs is another benefit. You are also not tied to a specific vendor or forced to use proprietary implementations.
2. Discuss the disadvantages of adopting open source software. The biggest disadvantage of open source software is the lack of documentation. Some projects are better than others, but generally there is not a lot. Plus, companies that provide open source software do so with the idea that you will contract with them for support. That is how they can make money off of the software that they give away. Another issue with open source software is that if there is not a large user base the project usually loses interest by developers and becomes out of date. Another big issue with open source software is the many different licenses that they may be released under. Each of them has different requirements on the use of the software, which can make it difficult to ensure you are in compliance.
3. Why did the Kauli partners decide to make this an open source system? One reason the system was created as an open source system is because of the success the partners had with the Sakai project. This provided them with a blueprint of how it could work to build the financial system. Another reason is that it was too costly for any single institution to attempt to build the system on their own, or to purchase an existing commercial system. By working together they are able to share the cost in development of the system. This cost savings also allows the institutions to devote more money towards teaching and research. Another benefit to the institutions is that they can control what features the system has so that they get a system that works for them, rather than trying to make a purchased system work for them. By making the project open source the partners are not tied to any one vendor like they would if they used a purchased system. Another advantage is that each partner institution would have the ability to customize the system if they wanted to. And one last reason they decided to build an open source system is that there would be resources available to maintain the system going forward.
4. Why did the Kuali partners establish the commercial affiliates program? As with most of the large open source software systems, the cost to acquire the software is free but the support is not. Because the system is large and complex, other institutions that decide to use it will need assistance with the installation, configuration, and implementation. The partners did not want to get into the business of providing this support, so they found commercial entities that were willing to provide this support. These commercial affiliates are a value added reseller (VAR), which does not produce the product but provides all the necessary support and training for a given product.
5. Discuss the major success factors for the Kauli Financials development effort. One factor that has made the project a success is the fact that they have been able to use the existing Indiana University system as the basis for the new system. This saved them a lot of time in not having to define the system requirements and trying to get all the partner institutions to agree on those features. Another reason for the success is that both the Functional Council and the Technical Council are made up of representatives from each partner institution. This gives everyone an equal voice in the project. Another reason for the success is that the project manager and the Functional Council chair are from the same institution and have a very good relationship. This helps with the communication and understanding of what the Functional Council wants and what the development team delivers. Finally, the project has been successful because they chose to keep the schedule and resources fixed. Therefore if they are getting close to a release and do not have everything completed they can just remove some features. This allows them to get releases out to the institutions on time so that they can use the system. Part D - Case Study III-8BAT Taiwan: Implementing SAP for a Strategic Transition
1. Why did BATT believe that implementing SAP R/3 was the best enterprise system software package for this unit to implement? British American Tobacco (BAT) had adopted two ERP standards for use. SAP R/3 was used for the larger, more complex parts of BAT. Sage Tetra CS/3 was used for the smaller, less complex parts of BAT. At the time of the changes within BATT, the IT department had developed an improved strategy for implementing SAP R/3. Thus BAT had decided that SAP R/3 would be the standard implementation of ERP. BAT chose to implement a partial list of the SAP R/3 modules: sales and distribution, materials management, financials, and controlling. These modules were determined to provide the necessary processes for BAT Taiwan (BATT) to support the new business model that BATT had to operate in due to the regulatory changes in Taiwan (Brown, et al., p. 530-532).
2. Discuss the pros and cons of BATT’s using APSS personnel rather than a well-known consulting firm as an implementation partner? One of the big advantages for using APSS is that they operate in the same time zone as BATT itself. This makes communication much easier since staff for both companies is available at the same time. Another benefit for communication is that APSS has staff that speaks the native language of Mandarin Chinese. Another factor was that the support cost for APSS was less because the labor costs in the Asian-Pacific region was less. This was important because BATT was embarking on a new market with unknown revenue. APSS also had the benefit of performing other SAP implementations in the Asian-Pacific region for BAT. Another advantage was that BATT would not have to purchase SAP licenses, because APSS holds on to them for its clients. The only disadvantage of using APSS for the SAP implementation is that they lack the experience that a consulting firm would have.
3. What are some of the potential advantages associated with the usage of a BAT template for BAT Taiwan? Using a BAT template would ensure that BATT operated using the newest business processes adopted by BAT. Using the template also ensured that BATT was in compliance with the corporate data standards. The template also provided the necessary modules such that there would not be a need to customize the implementation except for any legal differences in Taiwan. By operating on the same template as other BAT divisions, the IT department would be able to update all divisions on the same template. This would allow for better support to the BATT staff using SAP. Another benefit is that the BATT staff would be able to seek out business process help from the other divisions that were using the same template.

References
Brown, C.V., DeHayes, D.W., Hoffer, J.A., Martin, E.W., & Perkins, W.C. (2009). Managing Information Technology, Sixth Edition. Upper Saddle River, N.J.: Pearson Education, Inc.