COLLEGE OF BUSINESS

BKAL 3063 INTEGRATED CASE STUDY

FIRST SEMESTER 2013/2014 (A131)

LECTURE: Pn. NORAZA BT MAT UDIN

CASE 7: SAP for ATLAM

EXPIRE: 8 December 2013 (Before 10 a.m.)

GROUP A (7)

NAME MARISA BT MUSRIL GOH ING MIN ELIZABETH ESTONIA ANAK JONIC NURLIYANA BT ZAINUL ABIDIN WONG ZI XIN

MATRIC NO 195468 205438 207727 207788 207877

1

Contents 1.0 INTRODUCTION ................................................................................................................ 3 2.0 ISSUES AND ANALYSIS .................................................................................................. 3 2.1 ISSUES ............................................................................................................................. 3 2.1.1 Implementation of SAP system ................................................................................. 3 2.1.2 Resistance to change .................................................................................................. 4 2.1.3 Conflict between top management ............................................................................. 4 2.1.4 Termination of Mr. Lim ............................................................................................. 5 2.2 ANALYSIS OF FEASIBILITY STUDY ......................................................................... 5 2.2.1 Economic Feasibility ................................................................................................. 5 2.2.2 Operational Feasibility ............................................................................................... 7 2.2.3 Technical Feasibility .................................................................................................. 7 2.2.4 Schedule Feasibility ................................................................................................... 8 2.2.5 Legal and Contractual feasibility ............................................................................... 9 2.2.6 Political Feasibility .................................................................................................... 9 2.3 SAP vs ACCPAC ............................................................................................................. 9 3.0 RECOMENDATION ......................................................................................................... 10 3.1 Resistance to Change ...................................................................................................... 10 3.2 Conflict Management ..................................................................................................... 11 3.3 Termination of Mr Lim................................................................................................... 12 4.0 Conclusion .......................................................................................................................... 13

1.0 INTRODUCTION Akademi Teknikal Laut Malaysia (ATLAM) was establish on 15 August 1981. Their vision was to be a leader in maritime education and training, where their mission was to facilitate value added learning via a conducive environment and provide excellent services to its clients. Before privatization on 1 January 1997, ATLAM had been in a very poor state. The management of ATLAM was a wholly owned organization of MICT Berhad. ATLAM relied on a customized single-user system where the system cannot produce financial reports. Therefore, they had been asked to upgrade its accounting system with the PETRA group-wide SAP (Systems, Applications, and Products) system. Zulkifli Osman, the Finance Manager, was responsible to manage this project. The new system should be ready by 1 April 2002. However, there are some issue arises regarding the implementation of new system (SAP system). Some of the project team members, Lim and Gopal, not agree with SAP implementation. Lim was having conflict on opinion with Zulkifli when discussing matter of SAP system in ATLAM. Time also limited to prepare to replace the old system with SAP system. In addition, change in system/technology will need change in work processes, culture, and habits. This issues lead Zulkifli took action by terminating Lim from the project team. Does Zulkifli action reasonable? What should he do regarding this issue/matter?

2.0 ISSUES AND ANALYSIS 2.1 ISSUES 2.1.1 Implementation of SAP system Based on the case study, ATLAM need to upgrade its accounting system and the Finance Manager, Mr. Zulkifli Osman decided to implement new accounting system called SAP. But somehow, he had to reach an agreement with other top management and this decision had leaded them to some arguments about implementing SAP for the company. First of all, the argument is about the cost of implementing the SAP system. Compared to ACCPAC system, the cost of implementing SAP is higher and it might affect the company financial and non-financial information and their strategic implications in the long-run. Second argument is the annual license fee as well as the security for the system. For the internal control and their audit purposes, they need to allocate one ID per user. This can be related to the security for the system too. In order to access the system, user must have ID to access it. Therefore, it is going to cost them a lot. In this situation, its impossible for ATLAM to bear the costs since ATLAMs cash flow as at December 2001 was at a deficit. The third
3

argument is about the time constraint issue. Due to the time constraint, ATLAM need to implement SAP as soon as possible since the decision to upgrade the accounting system has been made. In addition, to implement the SAP for the accounting system has brought another argument which is the department will have an issue on the equipment such as lack of PCs and space availability for the staff to practical the new system. Hence, all these arguments need to be solved in order to implement SAP for the accounting system. 2.1.2 Resistance to change The next major issue in this case is staff resistant to change from the old system to SAP system. This resistant showed by Mr. Lim, the User Representative, who highlighted how difficult it was for the staff to adapt and get used to the new system. Lim also showed aggression and anger towards Mr. Zulkifli in meeting such a sign and symptom of an adverse reaction to change. In addition, ATLAM is a government agency that had been through a privatization on 1 January 1997, due to that; the staffs have a very strong character and quite conservative. Some of the staff had never used computer before, so they are reluctant to learn new things in the work place, they just want to do their job like they did for the past few years. Their minds are conservative enough to resist change in work process, culture and habits that some of the staff might refuse to accept SAP implementation. Another concern is they afraid they might lose their job based on their ATLAM privatization experience that lead to cut off some of the positions. 2.1.3 Conflict between top management We could found out that in the project team, there are some issues regarding to the top management behavior among them. There been a lot of issues rises in the meetings from Mr. Lim, the User Representative and followed by Mr. Gopal, the User Project Manager concerning to the implementation of SAP for the accounting system. The conflict happens when they are trying to disagree with the other top management decisions for applying SAP into the system by listing out the consequences of SAP to the company. They brought many issues on the meetings that include the company capabilities on implementing SAP. All these meetings bring a lot of tense to all the top management. Thus, in order to implement SAP for the accounting system, they have to reach an agreement between them and work as a project team to overcome the problems and issues raised.

2.1.4 Termination of Mr. Lim The climax of all these issues has ended up in the termination of Mr. Lim from the project team by Mr. Zulkifli. However, a small discussion with Mr. Kamal after the second meeting has made a great impact on Mr. Zulkifli. He started to question himself on his action whether it was right to terminate Mr. Lim or not. Well, based on the situation in this case study, we came to a conclusion that Mr. Lims termination was not the right thing to do. This is because Mr. Kamal has highlighted that Mr. Lim is very experienced and also raise up lots of contrast ideas regarding the implementation of SAP system at ATLAM. However, his comments were based on the benefits of company and concern on his fellow colleagues. He was trying to defend his stands from end- user perspective and was not aiming to underestimate SAPs benefits. Mr. Lim was defending his arguments based on cost benefit analysis as via implementing SAP the company will be spending out more money. In contrast, during the meetings were held, Mr. Zulkifli saw Mr. Lim as a threat as he wasnt really supporting Mr. Zulkiflis idea to implement SAP system in their firm as soon as possible due to the pressure from the higher management. Mr. Zulkifli also thought that Mr. Lim was trying to influence other colleagues, (Mr. Gopal, for instance) by his ideas. 2.2 ANALYSIS OF FEASIBILITY STUDY Feasibility study is an evaluation and analysis of the potential of a proposed project which is based on extensive investigation and research to support the process of decision making. There are some feasibility to assess and considered in a number of area for the SAP project, like economic feasibility, operational feasibility, technical feasibility, schedules feasibility, legal and contractual feasibility, and political feasibility. 2.2.1 Economic Feasibility Economic feasibility refers to the financial viability for ATLAM to implement the SAP project. For example, ATLAM may use Cost- Benefit analysis to access the economic feasibility like initial investment, after tax cash flow for Years 1 through 6, payback period, net present value, and internal rate of return. i. Initial Investment

Initial investment or initial outlay refers to the cash outflow at the start of a project or investment. For example the cash outflow for start the SAP project. The initial outlay for the project is as below. By included the initial outlay of the project will help us to identify whether the project is profitable or not.
5

Initial Outlay Hardware Software license Training cost Customisation cost Total initial outlay RM2,000,000 RM1,000,000 RM1,271,550 RM72,840 RM4,344,390

ii.

After- tax cash flow The following is the cash flow after tax for ATLAM from Year 1 until Year 6.

The calculation below shows that the project was creating more cost saving than the cost expense each year from Year 1 until Year 6. Besides, even after consider a 25% tax for each of the years, the total cost saving each still enough to cover the total cost incurred in the year. From the calculation, we can also sees that net saving after tax is increasing each year start from Year 1 until Year 6. Although we can make a summary that invest in SAP create more benefit than cost to ATLAM, but the cash flow calculation did not consider any of the unquantifiable cost and benefit in the analysis.

iii.

Net Present Value

Net present value refers to the total of each year net cash flows discounted to present value for recognize their time value of money. The calculation for the net present value for the ATLAMs SAP project cash flow is as below.

iv.

Payback Period Payback period refers to the period of time that ATLAM need to take for the net cash

flow from a project to equal its initial investment to the project. Based from the calculation in the net present value and the initial outlay, the period of time need for ATLAMs discounted cash flow to cover its initial outlay are as below. Payback Period= 2.2.2 Operational Feasibility Operational feasibility refers to the assessment of how a proposed system solves business problems or takes advantages of opportunities with the new system. It could assess whether the new implement SAP system can help ATLAMs operation more effective and efficient. Based on Lims argument, the new SAP system is very likely to affect the staffs working process, culture, and habits. Besides, staff resistance to change of their working culture and habits will expose the project to the risk of failure. So ATLAM need to think of the ways to handle this issue. 2.2.3 Technical Feasibility Technical feasibility refers to the ability of the ATLAM to develop and implement the SAP system. This means ATLAM has capability of technical resources to utilize SAP system. Before ATLAM implement the project, they need to access the availability of a knowledgeable and experience project manager to lead the SAP project. Besides, that ATLAM also need to ensure the information technology team is well knowledge enough to develop the system. This was to ensure the quality of the developed SAP system and reduce the risk of system break down or system failure. Far apart from the assessment of availability of the technical staff to develop the new system, ATLAM also need to ensure the availability of knowledgeable and experience IT staff to maintain the SAP system.
7

This analysis should include an assessment of the technical risk on SAP System that is depending on four primary factors: project size, project structure, ATLAM development groups experience with similar system, and user groups experience with SAP System development projects and the application area. i. Project Size

This project is reasonably large project for ATLAM, to be said, the larger the size of the projects, the riskier the project is. This is because the project will impacted on entire ATLAM organizations. Almost 20 departments in ATLAM will involved, it will give high stress to project team members which consists of five persons (Sani as Project Manager, Gopal as User Project Manager, Lim as User Representative, Kamal as Functional Analysts and Zulkifli as Finance Manager) to finish the project in shorter duration time (second weeks of February until fourth weeks of March). ii. Project Structure

The requirements for SAP System project is highly structured and well define have a lower risk. In fact, under the SAP system, it will provide an applicable system to ATLAM and to all companies within the PETRA group. Even though there are user representative (Lim) whose refuse to carry on the implementation of SAP system, it is still under control as the ATLAM management have highly commitment through the system. iii. Development group and User group

The projects have a high risk as the development group and user group has low familiarity with the application area of SAP System. However, conducting some training will reduce the risk. Medium risk of technical assessment of SAP project should be considered as acceptable to ATLAM as refusing to take any risk will cause ATLAM couldnt make the major breakthroughs in innovative uses of systems. By using those project risk assessment factors to access the technical risk level of SAP System, the result drawn that SAP System project has a medium risk. 2.2.4 Schedule Feasibility In schedule feasibility study, ATLAM is required to assess time frame and project completion dates. For example, in the conversation in the first meeting on 22 January 2002, the SAP system should be ready for use in 1 April 2002. This means, the project team have
8

less than six month times to develop the project. Besides, the project team also needs to develop a project task schedule for the project members to identify project tasks sequence and project task that can be run parallel to avoid delay. 2.2.5 Legal and Contractual feasibility Legal and contractual feasibility refers to the assessment of legal and contractual ramifications of the new system. For example, when developing the SAP system, ATLAM need to assess the possibility of legal actions taken towards ATLAM due to copyright offence. 2.2.6 Political Feasibility Political feasibility refers to the assessment of key stakeholders opinion in organization towards the new developed system. For example, ATLAM need to assess the acceptability of the new SAP system in the staff, as they are the user for the system. Besides, the project team needs to find the ways to convicts the staffs to not resistance on the new system. Perhaps the team may explain how implementation of SAP can helps to ease the system users job and increased the effectiveness and efficiency of the organization. 2.3 SAP vs ACCPAC Advantages: SAP i) ii) iii) iv) v) vi) Focus on process, not on functions Individual solutions Enhance productivity Efficient work environment Real time information Global integration ACCPAC i) ii) iii) Identical user interface Data processing Easy to use and customize

Disadvantages: SAP i) ii) iii) iv) High cost Complexity Risk of project failure Inflexibility ACCPAC i) ii) iii) Technical difficulties Integration setbacks Differences in programs

3.0 RECOMENDATION 3.1 Resistance to Change There are some of the approaches that ATLAM may take to deal with the resistance to change. According to Kotter and Schlesinger, there are six approaches that ATLAM may choose to overcome the staffs resistance to change. i. Participation In this approach, the aim was to involve employee to participate in the project by allowing them to input some ideas in decision making process. For example, ATLAM may involve its end use for the SAP system by allowing them to design the systems interface. By this ATLAMs staff will be more committed to implement the change as the interface designed according to their requirements ease them to fit in the change. But, the shortcoming of this approach is it might take a longer time for ATLAM to develop the SAP system. ii. Education and communication This approach was relies upon the hopeful belief that communication about the benefits of change to employee will result in their acceptance of the need to exercise the change. For example, ATLAM may explain how the implementation of new SAP system can lighten the staffs workload and improve their efficiency. But this approach also has the shortcoming of time consuming when the persuasion involved many staffs. iii. Power or coercion This approach was aim to solve the resistance to change faster by using the power owned by initiator to force the staff to accept the change. For example, ATLAM may compulsory the staff to implement change of SAP system under the CEOs order. But this approach comes with a weakness as people might get angry with the initiators. iv. Facilitation and support In this approach, employees may need to be counselled to help them overcome their fear and anxieties about the change. So ATLAM may counsel their staff why they are resistance to accept the change of SAP system. This approach might be the
10

best approach to overcome the resistance to change due to the adjustment issues, but it was risky as the staff might still resist to change after the larger amount of time and cost has consume. v. Negotiation Negotiation refers to the approach to meet the win-win situation between two parties. ATLAM may use this approach to ask the staff resist to accept SAP system by bargaining with the company to meet a compromise and agreement between two parties. But this approach can be time consuming when they cannot reach an agreement in a meeting. vi. Manipulation and cooptation This approach should be the last choice of approach to overcome the resistance to change when other approach wont work and too costly. Although this approach can be relatively quick and inexpensive solution to resistance, but can lead to future problems if the staff found out they have been manipulated.

3.2 Conflict Management Conflict management is vital to solve the conflict between the project team members. This is because we cannot avoid conflict in the process of forming a team. Conflict refers to the process that begin when you perceive that someone has frustrated or is about to frustrate a major concern of yours. One of the methods to resolving conflict is by mediate the conflict. In this approach, the project manager takes a direct interest in the conflict between two parties and seeks to find a solution to the conflict. The project manager may either employ defusion or confrontation tactics in negotiating a solution. In defusion tactics, the project manager is less concern about the source of conflict than the mutually acceptable solution. Whereas confrontation tactics more concern about finding the source of conflict. This tactic is more emotional, time intensive, and in the short term, may actually make the conflict worse as both parties stand firm with their opinion. But this tactic is more effective in a long run as it seek to determine the causes of conflict so they can be corrected. Since there are short of time in for ATLAM to solve the conflict between Mr Lim and Zulkifli, so the project manager is advice to use the defusion tactic to solve the

11

conflict. The project manager may use the phrase such as We are all on the same team here to demonstrate the desire to defuse the conflict without plumbing its underlying source. Besides, that Mr Lim is the representative of the user that reflects the systems users opinion so the team should not easily terminate him. 3.3 Termination of Mr Lim Mr. Zulkifli should not withdraw Mr. Lim from the SAP project team. Although Mr. Lim raises many issues during the meetings about the implementation of SAP, however, for some extent, the issues been raises by Mr. Lim are also helping the project team to have a better consideration about the implementation of SAP in ATLAM. From the issues raised, the project team will know better about the problems that may occur while implementing the SAP system in ATLAM. This will help the project team to have a strategy to avoid the problems to occur or minimize the impact brought by those problems. This will definitely help in smoothing the implement process of SAP in ATLAM. Besides, the withdrawal of Mr. Lim from the project team will also give constrain to the project team in implementing the SAP system. This is due to there are possibility that the view of Mr. Lim gives influence to the employee and thus the uncooporation of the employee will harden the implementing process of SAP in ATLAM. Besides, since another motive of Mr. Zulkufli to implement the SAP system in ATLAM is to link the system of ATLAM to its parent companys system, PETRANET to match the group report structure. Thus, to reduce the capital fund in investing SAP system in ATLAM, Mr. Zulkifli can discuss with the parent company to subsidise ATLAM in implementing SAP system. The most strong point to pursue the parent company to subsidise ATLAM in implementing the SAP system is that after the implementation, the report of ATLAM will match with the parent companys report and this will ease the parent company in preparing consolidated reports. Besides, as the parent company was successfully implement SAP system, if ATLAM get subsidiary from the parent company, the expenses on hire the experts to implement SAP can be eliminated as the parent company can provide this resource to ATLAM. This will also increase the feasibility of the SAP implementation in ATLAM.

12

4.0 CONCLUSION

After we go through the analysis and evaluation on SAP system, we suggest that ATLAM continue their plan to implement the system. Even though there are some issues and constraints to implementing SAP system at the beginning, the system would be worthwhile implementing as it would benefit for ATLAM in the future. Of course in order to gain something from the system in the future we need to sacrifice or take any risks arises. Based on the Cost-Benefit analysis to access the economic feasibility, we can see that the net saving after tax is increasing each year from Year 1 until Year6. The payback period need for ATLAMs discounted cash flow to cover its initial outlay was 3 years and 6 months. Therefore, ATLAM needs to continue implement SAP system no matter what. Regarding time constraint issue, ATLAM can use Gantt chart as a tool to monitor the project activities. It allows the project team to be able to focus on the project status at any date during the projects development. There are six approaches that ATLAM may choose to overcome the staffs resistance to change. They are participation, education and communication, power/coercion, facilitation and support, negotiation, and manipulation and co-optation. Finally, Mr Zulkifli should not terminate Mr Lim from the project team just because they having different opinion. Although Mr Lim raises many issues during the meetings, its was for the good of the organisation. His ideas should have been taken into consideration as hes very experienced and knew what he was doing. Therefore, Mr Zulkifli should reconsider his action of terminating Mr Lim. This is because with Mr Lim presence, he could help in smoothing the implementation process of SAP system in ATLAM. As conclusion, good teamwork and information system would bring bright future for ATLAM.

13