Vodafone erp implementation failure

9/22/17, 2(54 PM

Page 1 of 10https://jigsaw.vitalsource.com/api/v0/books/9781323309568/print?from=376&to=379

PRINTED BY: rholemodel@gmail.com. Printing is for personal, private use only. No part of this book may be reproduced or transmitted without publisher's prior permission. Violators will be prosecuted.

Case Study Vodafone: A Giant Global ERP Implementation

Vodafone Group PLC is the largest mobile service provider by revenue in the world, with 400 million customers across Europe, the Middle East, Africa, Asia Pacific, and the United States. In 2013, it had revenues of $64.6 billion and more than 86,000 employees working in over 30 countries. Since its founding nearly 30 years ago, the business has experienced phenomenal growth, largely by establishing local operating companies that provides products and services to their local markets.

As a result, the company was very decentralized, lacking common practices, centralized operations, and data sharing among its various operating companies. Most of Vodafone’s mobile subsidiaries operated as independent companies with their own business processes. Vodafone was a network of individual businesses, but it wanted to function more like a single global firm to better deal with competitive pressures. Management called for a major business transformation to make this happen.

In 2006, Vodafone’s board of directors approved the “Evolution Vodafone” Business Transformation Program” (EVO) designed to refashion Vodafone into a truly global company, with a centralized shared services organization and common worldwide business processes in finances, human resources, and supply chain management for all of the operating companies. (Shared services refers to the consolidation of business operations that are used by multiple parts of the same organization in order to reduce costs and redundancy.) A common SAP ERP system would provide the technology platform for these changes by supporting information- sharing and common business processes that would simplify and speed up work throughout the company. Additional software tools from Informatica, Opentext, Readsoft, Sabrix, Redwood, HP, and Remedy that could integrate with SAP were added to the mix.

Vodafone’s system turned out to be one of the biggest SAP ERP implementations in the world. How did Vodafone pull it off? First of all, Vodafone’s management realized the company lacked the expertise and resources to manage such a complex project entirely on its own. It enlisted

9/22/17, 2(54 PM

Page 2 of 10https://jigsaw.vitalsource.com/api/v0/books/9781323309568/print?from=376&to=379

the consulting firms Accenture and IBM to provide skills and services that this ambitious project required and which were not available inside the company.

The company spent a year identifying and designing its new business processes and establishing the scope of this project. The management team wanted to limit risks to non- customer-facing processes that were nevertheless important sources of value for the firm. Customer-facing front-end processes were excluded from the first phase of the rollout to keep the transformation more manageable.

Procurement was targeted as the first set of processes to be transformed using the new ERP system. Vodafone had been allowing each of its local companies to manage its own procurement, which prevented it from leveraging the massive purchasing power the company could obtain by managing relationships with material and service suppliers from a single entity. By generating savings from centralized procurement, the transformation project would be able to quickly show a return on investment and win further support. Vodafone did not establish a centralized procurement department but instead created a centralized procurement company based in Luxembourg that uses the SAP ERP platform. Most of the company’s spending goes through this central organization. Suppliers benefit because the system helps them plan their sales to Vodafone and they only need to work with a single purchaser instead of many. This new way of doing business included a new purchase-to-pay process in which invoices are approved automatically for payment by matching them with purchase orders and receipts.

Once the new procurement process and organization were running, Vodafone started creating a centralized shared services organization based on the SAP ERP system. It selected Budapest, Hungary as the pilot location for this new arrangement. Vodafone Hungary is a mid- sized company with 2,000 employees with a small IT platform based on Oracle software. This made Vodafone Hungary more receptive to changing its information system and business processes than Vodafone organizations in larger countries, and Hungary had already been using Oracle systems. There, Vodafone built an entire shared services organization from scratch while simultaneously implementing the SAP ERP system. Vodafone then set up two more shared services organizations in India running on SAP.

After Hungary, Vodafone implemented the new procurement process and SAP software for its

9/22/17, 2(54 PM

Page 3 of 10https://jigsaw.vitalsource.com/api/v0/books/9781323309568/print?from=376&to=379

PRINTED BY: rholemodel@gmail.com. Printing is for personal, private use only. No part of this book may be reproduced or transmitted without publisher's prior permission. Violators will be prosecuted.

German operating company. Germany is Vodafone’s largest market, and accounts for more than 20 percent of Vodafone’s total revenue. Vodafone Germany is a much larger organization than Vodafone Hungary, with 13,000 employees, over 130 local legacy systems, and many customized business processes to replace. Work habits were more deeply entrenched, and Vodafone encountered some employee resistance as it tried to implement the new systems and processes. To minimize risk, Vodafone used a phased, incremental implementation, did a tremendous amount of testing, and made all the necessary system modifications before the system went live. Special support teams were dispatched to work with all the employees affected by the transition. These efforts helped address problems and employee resistance before they got out of hand. Once the German implementation was deemed successful, Vodafone rolled out the new system at many more operating companies, prioritizing the implementations based on each operating company’s size, complexity, and willingness to change.

No two rollouts proceeded the same way because each operating company had unique challenges and demands. Many of these companies had grown rapidly, and had numerous legacy systems based on local requirements. There were large numbers of users, interfaces, and legal requirements to deal with. Vodafone’s project team had to balance the need to proceed rapidly with the need to ensure that the system was implemented carefully.

Vodafone’s implementation plan called for a core project team to visit each individual operating company and implement the new processes locally, assisted by a systems integrator and local resources. Local teams and senior management met with the global teams, IT consultants, and local IT vendors in a friendly environment to encourage knowledge-sharing and openness to change. The success of each rollout was based on multiple factors, including the number and complexity of each unit’s legacy systems, the skills of each local project team, and the willingness of each local organization to embrace change. Vodafone enlisted the services of the global consulting firm Accenture to provide skills where needed and assist with change management in the local companies. Over time, the Vodafone project team and the Accenture consultants learned how to tailor their activities to the needs of each operating company. For example, if no representatives from an operating company showed up for the project launch

9/22/17, 2(54 PM

Page 4 of 10https://jigsaw.vitalsource.com/api/v0/books/9781323309568/print?from=376&to=379

meeting or they attended but showed little interest, the project team knew that company might be less cooperative. In such cases, the project would require more resources and attention.

The project team also had to be sensitive to local trends as system rollouts took place. For instance, if an operating company was located in a country experiencing economic downturn, its employees might be more resistant to the rollout. Some might see a major business and technology change as an improvement in their situation, while others might see it as another thing to cope with during a very stressful time.

As it finished rolling out the system to its remaining operating companies, the Vodafone project team used what it had learned to make improvements to its earlier ERP implementations. For example, testing and employee feedback revealed that more attention should be paid to usability. So, the project team enhanced the system’s interfaces to make them more user- friendly.

Given the nature of the business, Vodafone’s management wants about 80% of the company’s internal transactions to take place on a mobile device. According to Niall O’Sullivan, Vodafone’s Global Finance Transformation Director, management believes mobile apps will be a major advantage in driving compliance, increasing ease of use, and reducing resistance to the actual processes themselves. The goal is to have the vast majority of user interactions with the system take place on a mobile phone. According to O’Sullivan, mobility provides easy access for employees who don’t typically engage with the SAP system, so more employees are using the system. The more people use the system, the greater the return on investment. Over 60,000 employees around the world now use the new system, with 80,000 expected by the end of 2014.

Vodafone is now rolling out some of its enterprise applications for mobile devices, and so far, four have been selected. The first to go mobile was a travel and expense reporting application. Employees are able to take a photo of their receipts and get reimbursed without using any paper, and they can issue or approve requests for leave on their mobile phones all at one time. This application has reduced the time required to file travel expenses from 30 minutes to 10 minutes, with 7,500 expense claims filed each week, resulting in 300 person-days’ potential savings per week. Vodafone’s future mobile plans call for the development of a mobility portal and the integration of approval applications with finance, HR, and electronic sourcing.

9/22/17, 2(54 PM

Page 5 of 10https://jigsaw.vitalsource.com/api/v0/books/9781323309568/print?from=376&to=379

PRINTED BY: rholemodel@gmail.com. Printing is for personal, private use only. No part of this book may be reproduced or transmitted without publisher's prior permission. Violators will be prosecuted.

Vodafone’s business process transformation and ERP system have increased business efficiency and produced annual cost savings of $719 million. The total cost of ownership (TCO) of information technology has been lowered. Throughout the world, Vodafone has a consistent way of working and a more unified organizational structure. Getting the various operating companies to think and act more uniformly and to adopt a shared service model has produced benefits that are not immediately quantifiable, but should lead to further profitability in the long run.

Sources: “Customer Journey,” Vodafone Group PLC. www.mysap.com, accessed May 28, 2014,”www.vodafone.com, accessed May 29, 2014; Derek DuPreez, “Vodafone HANA Project Moves Beyond Trial Despite Skills Challenge,” TechWorld, March 11, 2013; “Using SAP MaxAttention to Safeguard the Global Rollout of SAP ERP,” www.mysap.com, accessed April 8, 2013; and David Hannon, “Vodafone Walks the Talk,” SAP InsiderPROFILES, October-December 2012.

Case Study Questions

9-13 Identify and describe the problem discussed in this case. What management, organization, and technology factors contributed to the problem? 9-14 Why did Vodafone have to spend so much time dealing with change during its business transformation? 9-15 Why was an ERP system required for Vodafone’s global business transformation? 9-16 What management, organization, and technology issues had to be addressed by the Vodafone project team to ensure the transformation would be successful? 9-17 What were the business benefits of Vodafone’s global business transformation? How did it change decision making and the way the company operated?

http://www.mysap.com/

http://www.vodafone.com/

http://www.mysap.com/

9/22/17, 2(54 PM

Page 6 of 10https://jigsaw.vitalsource.com/api/v0/books/9781323309568/print?from=376&to=379

MyMISLab

Go to mymislab.com for Auto-graded writing questions as well as the following Assisted-graded writing questions.

9-18 What are 3 reasons why a company would want to implement an enterprise resource planning (ERP) system and two reasons why it might not want to do so. 9-19 What are the sources of data for analytical CRM systems? Provide three examples of outputs from analytical CRM

http://mymislab.com/

9/22/17, 2(54 PM

Page 7 of 10https://jigsaw.vitalsource.com/api/v0/books/9781323309568/print?from=376&to=379

PRINTED BY: rholemodel@gmail.com. Printing is for personal, private use only. No part of this book may be reproduced or transmitted without publisher's prior permission. Violators will be prosecuted.

Chapter 9 References

“Social and Mobile CRM Boost Productivity by 26.4 Percent.” DestinationCRM (March 8, 2012).

Bozarth, Cecil and Robert B. Handfield. Introduction to Operations and Supply Chain Management 3e. Upper Saddle River, NJ: Prentice-Hall (2013).

Carew, Joanne. “Most Companies Failing at CRM.” IT Web Business (February 14, 2013).

Cole, Brenda. “Cloud ERP Users Say Up, Up and Away.” Business Information (February 2014).

D’Avanzo, Robert, Hans von Lewinski, and Luk N. Van Wassenhove. “The Link between Supply Chain and Financial Performance.” Supply Chain Management Review (November 1, 2003).

Davenport, Thomas H. Mission Critical: Realizing the Promise of Enterprise Systems. Boston: Harvard Business School Press (2000).

Davenport, Thomas H., Leandro Dalle Mule, and John Lucke. “Know What Your Customers Want Before They Do.” Harvard Business Review (December 2011).

Drobik, Alexander and Nigel Rayner. “Develop a Strategic Road Map for Postmodern ERP in 2013 and Beyond.” Gartner Inc. (July 2013).

9/22/17, 2(54 PM

Page 8 of 10https://jigsaw.vitalsource.com/api/v0/books/9781323309568/print?from=376&to=379

Essex, David. “Tomorrow’s ERP Raises New Hopes, Fears.” Business Information (February 2014).

Hitt, Lorin, D. J. Wu, and Xiaoge Zhou. “Investment in Enterprise Resource Planning: Business Impact and Productivity Measures.” Journal of Management Information Systems 19, No. 1 (Summer 2002).

IBM Institute for Business Value. “Customer Analytics Pay Off.” IBM Corporation (2011).

Kanaracus, Chris. “ERP Software Project Woes Continue to Mount, Survey Says.” IT World (February 20, 2013).

Klein, Richard and Arun Rai. “Interfirm Strategic Information Flows in Logistics Supply Chain Relationships. MIS Quarterly 33, No. 4 (December 2009).

Laudon, Kenneth C. “The Promise and Potential of Enterprise Systems and Industrial Networks.” Working paper, The Concours Group. Copyright Kenneth C. Laudon (1999).

Lee, Hau, L., V. Padmanabhan, and Seugin Whang. “The Bullwhip Effect in Supply Chains.” Sloan Management Review (Spring 1997).

Liang, Huigang, Nilesh Sharaf, Quing Hu, and Yajiong Xue. “Assimilation of Enterprise Systems: The Effect of Institutional Pressures and the Mediating Role of Top Management.” MIS Quarterly 31, No. 1 (March 2007).

Maklan, Stan, Simon Knox, and Joe Peppard. “When CRM Fails.” MIT Sloan Management Review 52, No. 4 (Summer 2011).

Malik, Yogesh, Alex Niemeyer, and Brian Ruwadi. “Building the Supply Chain of the Future.” McKinsey Quarterly (January 2011).

9/22/17, 2(54 PM

Page 9 of 10https://jigsaw.vitalsource.com/api/v0/books/9781323309568/print?from=376&to=379

Mehta, Krishna. “Best Practices for Developing a Customer Lifetime Value Program.” Information Management (July 28, 2011).

Morrison, Tod. “Custom ERP No Longer in Vogue.” Business Information (February 2014).

Maurno, Dann Anthony. “The New Word on ERP.” CFO Magazine (July 25, 2014).

Novet, Jordan. “New Salesforce.com Features Meld Social Media, Marketing, and CRM.” Gigaom (April 23, 2013).

Oracle Corporation. “Alcoa Implements Oracle Solution 20% below Projected Cost, Eliminates 43 Legacy Systems.” www.oracle.com, accessed August 21, 2005.

Panorama Consulting Solutions. “2014 ERP Report” (2014).

Rai, Arun, Paul A. Pavlou, Ghiyoung Im, and Steve Du. “Interfirm IT Capability Profiles and Communications for Cocreating Relational Value: Evidence from the Logistics Industry.” MIS Quarterly 36, No. 1 (March 2012).

Rai, Arun, Ravi Patnayakuni, and Nainika Seth. “Firm Performance Impacts of Digitally Enabled Supply Chain Integration Capabilities.” MIS Quarterly 30 No. 2 (June 2006).

Ranganathan, C. and Carol V. Brown. “ERP Iinvestments and the Market Value of Firms: Toward an Understanding of Influential ERP Project Variables.” Information Systems Research 17, No. 2 (June 2006).

Sarker, Supreteek, Saonee Sarker, Arvin Sahaym, and Bjørn-Andersen. “Exploring Value Cocreation in Relationships Between an ERP Vendor and its Partners: A Revelatory Case Study.” MIS Quarterly 36, No. 1 (March 2012).

http://www.oracle.com/

9/22/17, 2(54 PM

Page 10 of 10https://jigsaw.vitalsource.com/api/v0/books/9781323309568/print?from=376&to=379

Seldon, Peter B., Cheryl Calvert, and Song Yang. “A Multi-Project Model of Key Factors Affecting Organizational Benefits from Enterprise Systems.” MIS Quarterly 34, No. 2 (June 2010).

Strong, Diane M. and Olga Volkoff. “Understanding Organization-Enterprise System Fit: A Path to Theorizing the Information Technology Artifact.” MIS Quarterly 34, No. 4 (December 2010).

Sykes, Tracy Ann, Viswanath Venkatesh, and Jonathan L. Johnson.” Enterprise System Implementation and Employee Job Performance: Understanding the Role of Advice Networks.” MIS Quarterly 38, No. 1 (March 2014).

“Top 5 Reasons ERP Implementations Fail and What You Can Do About It.” Ziff Davis (2013).

Wong, Christina W.Y. , Lai, Kee-Hung and Cheng, T.C.E.. “Value of Information Integration to Supply Chain Management: Roles of Internal and External Contingencies.” Journal of Management Information Systems 28, No. 3 (Winter 2012).