ALEX BOTTAUSCI MARK LEMOINE YOUSEF MADANIJohn Molson School of Business – Concordia University

November 23rd, 2012

ENTERPRISE RESOURCE PLANNING

AT

① COMPANY BACKGROUND

② ENVIRONMENT ANALYIS

③ ERP & THE ORACLE DECISION

④ CHANGES TO IT GOVERNANCE

⑤ CHANGES IN OPERATING MODEL MECHANISIM

⑥ THE IT SAVVY JOURNEY

⑦ EVALUATION OF ALTERNATIVES

⑧ RECOMMENDATION

⑨ CONCLUSION

AGENDA

Public company One of world’s leading engineering & construction firms Founded in 1911 Headquartered in Montreal 28,000 employees Offices in over 35 countries On-going projects in over 100 countries:

Buildings, bridges, roads, mass transit, mining, power plants, etc.

Growth has come from M&A’s Total Revenues of $7.2B in 2011 Net income of $378M

COMPANY BACKGROUND

ENVIRONMENT ANALYSISStrengths

Recognizable brand and great reputationGlobal presenceHistorically solid financial resultsResources to tackle big projectsSpecialist in enviro-construction

WeaknessesExcel is the default tool for reportingLow data visibility and/or accessibilityM&As created internal lack of controlDecentralized: Divisions make own decisions & compete between one anotherHighly complex IT environment from M&As

OpportunitiesLarge markets remains to be exploitedFew competitors operate in certain potentially unstable countries, such as AfricaGrowing market in sustainable construction

ThreatsRegulatory & statutory reporting changesMore sophisticated money laundering & fraud Other big competitorsOperations in politically unstable areas

Drastically improve on Excel’s limitationsImproved internal financial controlsReduce money laundering and fraud risk Improved centralization and control of data and informationDecentralized business units can share more info more efficientlyMore flexibility vis-à-vis regulatory & statutory changesSupporting one system will be less costly and easier to maintainOne system would unite the divisions and encourage common vision & behaviour between them

WHY AN ERP SYSTEM?Improving IT systems can help SNCLavalin combat

weaknesses & threats while taking advantage of strengths & opportunities

SNCLavalin studied many systems Oracle or SAPOracle & SAP are robust enough to handle its international operationsOracle is a better fit as it allows modificationsOracle has many products & services - hardware, software and consultingOracle offers several ERP applications: E-Business Suite Oracle’s E-Business Suite has 50 modulesSNCLavalin chose 16 modules with intent to implement more in future

THE DECISION

2011-20122008-2009 20102007

BOD endorses ERP

Go Live - May 2010

3 Canadian Divisions

Encountered problems

Implementation Began

Team Studied Various

ERP Systems

Oracle Chosen2 Canadian

Divisions PerQuarter

2011

2nd Go Live - April 2011

1 Canadian Division

HISTORY OF THE PROJECT

E-Business TaxCash ManagementBill PresentmentAccounts ReceivableAccounts Payable & Payments

PayrollFringe Benefits Employee Self-ServiceHuman Resources

Finance

Human Resources

OTL (Timesheet)

iExpenses (Expense Reports)General Ledger Project Accounting

Talent Management

Subledger Accounting

(SLA)

Project Management

E-BUSINESS SUITE AT

DATA FLOW WITH

Forecasts vs.

Actual

IT Principles IT Architecture

IT Infrastructur

e

Business Application

NeedsIT

Investment

Business Monarchy

IT Monarchy

Feudal

Federal

Duopoly

Anarchy

Comments IT and CFO decide

IT and Finance selected

technology to use

IT Help Desk with no input from Finance

Implementation Team

made decisions; no

user feedback

Senior Management

was not involved –

left up to the team

INITIAL IT GOVERNANCE BEFORE THE PROJECT

X X

X

X X

Initial Situation

INITIAL CHALLENGES OF THE PROJECT

Lack of clear directives and support from senior management

Lack of training for business units

Certain key functionalities missing - i.e. B.I.

2010 KPMG recommends restructuring the Oracle implementation process V-P ERP position is created and is responsible for the implementation process Oracle Steering Committee is created

CFO, CIO, CHR and senior leaders report to BOD and CEO

Other corporate divisions (i.e. HR & Finance) now more involved; they meet each month to share feedback and suggestions

CHANGES MADE TO IT GOVERNANCE

BOD

CEO

CIO CFO

Senior V-P Controller Finance

V-P ERP

IT Development HR Systems Deployment &

ConversionDevelopment

Functional Design

IMPLEMENTATION TEAMSteering

CommitteeCFO, CHR,

CIO& Senior Dir.

IT Principles IT Architecture

IT Infrastructur

e

Business Application

needsIT

Investment

Business Monarchy

IT Monarchy

Feudal

Federal

Duopoly

Anarchy

Comments IT and CFO decide

IT and Finance

continue to work

together

IT and other BU work together

User Group highly

involved in identifying priorities

Steering Committee +

C’s guides high level decisions

CURRENT IT GOVERNANCE PROJECT

X X

X X

X

X

X X

XX

IT Principles IT Architecture

IT Infrastructur

e

Business Application

needsIT

Investment

Business Monarchy

IT Monarchy

Feudal

Federal

Duopoly

Anarchy

vs. TOP 3 IT GOVERNANCE MODELS

Initial Situation Current Situation

CURRENT CHALLENGES OF THE PROJECT

Lack of clear directives and support from senior management

Lack of training for business units

Certain key functionalities missing - i.e. B.I.

Steering Committee Created + V-P ERP

Comprehensive training

Customization of features but B.I. & data mining still are issues

Business Process Integrati

onLOW

HIGH

Coordination Unification

Diversification Replication

LOW HIGHBusiness Process

Standardization

StandardizationLOW

Different software systems at local sitesDecision making is localized at each

siteThis is due to M&A Integration

LOW

Many international sites – data is not being shared

CURRENT OPERATING MODEL MECHANISIMS:DIVERSIFICATION

FUTURE OPERATING MODEL MECHANISIMS: UNIFICATION

Business Process Integrati

onLOW

HIGH

Coordination Unification

Diversification Replication

LOW HIGHBusiness Process

Standardization

StandardizationHIGH

One standard software at all sitesStrong centralized governance for IT

Integration HIGH

Share data across international sites

Via BI module which will make data mining easy

Localizing : Realized that IT costs too much

JOURNEY : STANDARDIZING

Standardizing: Shared data and reduced IT costs

TWO ALTERNATIVESEventually both need to be done … but which

first?1 – International Rollout 2 – Enhance Current Solution

Goal – 1 global systemReplace multitude of systems35 countries

Software Oracle upgrade recommended every 2 yearsNew modules to consider – e.g B.I.

Challenge

s

Benefits

CHALLENGES & BENEFITS

LanguageCultureTrainingLegal/fiscal/tax considerationData conversion

Senior management not convinced enhancements are necessaryIntegrating new modules is highly complex and costly

One system worldwideImproved internal controlsData visibility & miningSimplified financial reporting

Higher user acceptanceImproved functionalityBetter data mining capabilitiesLess bugsService level agreements with Oracle up-to-date

1 - International Rollout 2 – Enhance Current Solution

Risk of

Implementi

ng

Risk of

NOT Implementi

ng

RISK ASSESSMENT

Delays global rollout – another year or two with limited control over foreign offices

User acceptance low if key features are missingTeam inexperienced with international rolloutData conversion issue:

Canada (80%) = one system (JCS)World = various systems (i.e. Accpac, Peachtree)

Limited control of foreign offices

Loss of financial control – i.e. $56m missing!

SNCLavalin committed to investors to upgrade

Less than perfect functionality

Lack of data mining capabilities

More bugs

Service level agreements with Oracle not up-to-date

1 - International rollout 2 – Enhance Current Solution

Enhance current systemHigher user acceptanceImproved functionalityBetter data mining capabilitiesLess bugsUp-to-date service level agreements with OracleImplement new module B.I. will increase data mining flexibility

Easier to manage one site for up grades instead of 35 countries Rollout may have risks associated with it Enhancement is a guarantee to have risks

RECOMMENDATIONAlternative 2 Enhance Current Solution

PROJECT TIMELINE

Total IT Team includes 50 people

TIMELINEOne Month 2 Months 6 Months 12 months 18 Months

RESPONSIBLE ACTIVITY Dec '12 Feb '13 Jun '13 Dec '13 Jun '14

1/3 Team + 1 Consultant

Upgrading Data Conversion Test Custom/Fix Test Training Go Live

1/3 Team + 2 Consultants

Business Intelligence Define Business Needs Define Customization Develop Customization Quality Assurance Testing Training Go Live

1/3 Team Production Support for Current Users

Continue to Support Business Units

Budget# Rate

(Hourly)Project Length

(Hours) Costs

Head count Regular 50 $41 3,120 $6,396,000

Consultant 3 $175 3,120 $1,638,000

Overhead Cost 10% of Labor cost $803,400

Modules Cost BI Module $2,000,000

Licensing (Canada) $28,000 Total Cost $10,865,400

PROJECT BUDGET

SNCLavalin has come a long way It still has a long way to go Improvements to Governance are complete We recommend enhancing certain solutions for reasons mentioned earlier

CONCLUSION

ALEX BOTTAUSCI MARK LEMOINE YOUSEF MADANI

THANK YOU!

John Molson School of Business – Concordia University November 23rd, 2012