buying or getting bought a case study in m and a projects
TRANSCRIPT
Buying or Getting Bought?A case study in merger and acquisition projects
John Hoebler, MorganFranklin
April 2011
Agenda
About MorganFranklin
Disparate Systems• Disadvantages and Benefits of Consolidations
ERP Conversion—Case Study• Strategy
• Plan
• Execution
Q&A
About MorganFranklinMorganFranklin is a 300-person ―roll-up-your-sleeves‖ management consulting firm.
Our Technology Management Practice is Focused
Our Core
Our Extended Capabilities
Products
• SAP
• SharePoint
• Workday
• NetSuite
• JDE
Skills
• System Admins
• Infrastructure
• DBAs
• Developers
We know what we do well, and we have partners that help extend our capabilities.
Leadership | Thought | Execution
1. HR/Financial Management
2. Enterprise Systems Management
• PeopleSoft
• Oracle EBS
3. Enterprise Information Management
• Hyperion
• Microsoft
• Cognos
Our Presence at Collaborate5 Session Presentations
• Sunday - April 10th (11:15-12:15) – Room W202A
IT Projects Off the Rails – Causes and Fixes
• Monday - April 11th (3:45 – 4:45) – Room W202A
Buying or Getting Bought? A Case Study in M&A Projects
• Wednesday - April 13th (10:30 – 11:30) – Room 205C
We Trained You – Why Didn’t You Learn? A Case Study in Change Management
• Wednesday - April 13th (2:15 – 3:15 pm) – Room 204B
Multicurrency Capabilities in PeopleSoft - All You Wanted to Know
• Thursday - April 14th (9:45 – 10:45) – Room 204B
Allocations in PeopleSoft - All You Wanted to Know
Where We Are…
About MorganFranklin
Disparate Systems• Disadvantages and Benefits of Consolidations
ERP Conversion—Case Study• Strategy
• Plan
• Execution
Q&A
Two Disparate ERP Systems with Minimal
Integration
Disadvantages and Benefits of Consolidations
Disadvantages of Disparate Systems
• Costly to maintain multiple disparate and redundant systems
• Multiple standards
• Multiple versions of truth
• Disparate processes
• Consolidated reporting is difficult and time-consuming
Benefits of Consolidating Disparate Systems
• Reduction in IT expenditures by having to maintain fewer systems
• Less complex control environment due to simplified system interfaces
• Streamlined financial reporting and analysis
Where We Are…
About MorganFranklin
Disparate Systems• Disadvantages and Benefits of Consolidations
ERP Conversion—Case Study• Strategy
• Plan
• Execution
Q&A
Case Study: Client Profile
A large government technology contracting company was seeking to integrate
a recent business acquisition that was approximately 10% of its overall size
onto the corporate financial platform.
First - We needed a strategic vision . . . .
Why Projects Fail
Top 3 Reasons Projects
Fail2
1. Management Support
2. Sound Methodology
3. Leadership
1 – 2009 Standish Group CHAOS Survey
2 – Dr. Paul Dorsey’s paper “Top 10 Reasons Why Systems Projects Fail,” as published by Harvard University
Assessment Framework
Baseline requirements and architecture assessments provide basis for the recommendations.
• Use industry baseline requirements to assess acquiring organization’s existing capabilities.
• Compare acquiring organization’s existing and near-term capabilities of current ERP against its
out-of-box ERP capabilities.
• Compare both target architecture platforms against acquiring organization’s strategic objectives.
Score the alternatives based upon the ability to achieve those objectives.
• Provide recommendations on the financial management system strategy.
ERP1 Consolidation
Consolidating to ERP1 improves upon the current architecture but remains
heavily customized.
ERP1: Risks and Benefits
ERP1 provides less functionality, but also less risk and supports overall goals.
25 objectives were identified and scored on a three-point scale:
1. Minimal risk of achieving strategic objectives
2. Some risk of achieving strategic objectives
3. High risk of achieving strategic objectives
Strategic ObjectivesRisk Scores
ERP2 ERP1
Ability to support revenue growth 3 2
Ability to support both public and commercial sectors 1 2
Ability to establish a scalable environment 3 2
Ability to change and adapt to new organizational structures 1 2
Ability to convert acquired businesses to the same platform quickly and effectively 1 2
Ability to easily integrate with third party systems 3 1
Ability to meet all government contracting and financial system requirements 1 2
Ability to train users easily 2 1
Ability to minimize impact on Finance Systems Users 3 1
Ability to capture and maintain operations information in an integrated and standardized reporting
platform (e.g., BI, Financials, and Operations reports)2 3
Ability to standardize reporting and reduce the number of ad-hoc reports 2 3
Ability to minimize required IT skill sets for operations, maintenance, and support 3 2
Ability to minimize development costs/implementation timeline 3 2
Ability to maximize existing IT infrastructure 2 1Total Risk Score
(including scores from the equivalent risks represented on the prior slide)49 45
Functional Area AnalysisA weighted scoring framework was applied to each functional area based on priority and impact.
Recommendation
While the current ERP1 environment is complex with multiple instances, given the acquiring organization’s
investment in ERP1, customizations, and supporting third-party products, the acquired organization’s ERP
capabilities do not significantly outweigh the current ERP1 capabilities.
Next, we needed a plan . . .
Integration Approach: Framework
Multiple sources of information drive a complete strategy and potential alternatives.
Stakeholder Interviews
Discussions with overall stakeholders and key resources provides a broad perspective on the effort.
Resource Processes Legacy
System
One-Off
Systems
Data
Conversi
on
X, Y Contract Administration and Procurement – To Be Legacy
X, Y General Ledger – To Be New
X,Y PCB Lead – To Be New
X, Y, Contracts, Billing and Project Controls – To Be New
X, Y, Project Management – To Be Legacy
X, Y, Project Management – To Be Legacy
X, Y, Project Management - To Be Legacy
X, Y, Project Controls – To Be Legacy
X, Y, Project Controls – To Be Legacy
X, Y, Project Controls – To Be New
X, Y, Billing – To Be Legacy
X, Y, IT – To Be New
X, Y, Accounts Payable and General Ledger – To Be Legacy
X, Y, Accounts Payable – To Be New
Integrating Lessons Learned
Applying lessons learned from previous projects reduces overall risk and improves chances of success.
Issue
Category
#
Findings
Examples Improvement Actions
Project
Management
7 • Project timing didn’t take into account
quarter and year-end close periods
• Changeover leadership didn’t involve
business unit
• Project plan includes post-go-live support
effort
• Include To Be Legacy active involvement as
stakeholders and on Steering Committee
Training 11 • Insufficient training resulted in lack of
adoption and frustration
• No documentation or flowcharts for new
processes
• Emphasize change management work
stream as key component of overall plan
• Provide documentation, processing
timelines, and flows for new processes
System 13 • Work Authorization as configured
doesn’t block overcharging
• People in secured sites can’t access
the portal
• Perform detailed fit-gap to determine areas
of customization
• Review infrastructure access as a part of
overall plan
Process 13 • ODC’s are still being charged to wrong
projects resulting in long-term cleanup
• W-9 information was required but that
wasn’t clear ahead of cutover
• Focus on detailed conversion strategy and
process mapping to new environment
• Perform process fit-gap to minimize
surprises
Change Management: Content Assessment
Functional Area Training
Complexity
(High/ Medium/
Low)
Factors Used to Determine Content Complexity
PCB – Contracts High • Due to downstream dependencies on accurate Contract setup, it is critical to
address with a robust training effort.
• More than half of the evaluated processes were determined to be impacted either
to a medium or high degree.
Project Controls / IFR Medium • Moving from an offline request, approval and tracking system for IFR’s to an online
system.
• New sources for reports. Project Managers will be expected to be more self-
sufficient in running reports and/or inquiring on and analyzing data.
Procurement High • Entire process shifts from manual/paper driven to an online process.
• In addition to adopting new policies and procedures, users must learn to abide by
a more rigid structure than would be necessary for an offline document
Time & Labor Low • Most users are already accustomed to completing timecards online, so learning on
a different system of entry is not expected to be complicated
Travel & Expenses High • Entire process shifts from manual/paper driven to an online process.
• Large audience, possessing a wide variety of systems/computer skills, so training
must accommodate a range of skill sets.
• Experience suggests that users require extensive support and/or are slow to adopt
the T&E system unless a comprehensive training approach is taken.
Accounts Payable Low • AP function will be absorbed into the Client’s Center (CC) in where AP staff will
receive guidance from experienced PeopleSoft AP personnel using the a defined
mentoring approach
• Little difference in the data entry effort between to be legacy system and
PeopleSoft.
Change Management: Training Needs
Gap Assessment
Functional Area Sub-FunctionTraining
ComplexityAudience Size
Status of
Content1
Prep &
Delivery LOE
User
Training
Hrs
Avg Hrs
/PersonNotes
PCB – Contracts Setup and Admin High 15 Complete 32 360 24 This includes training all PMs,
Project Control and Contract staff
on new processes, cross-walks and
tools.
Inquiry / Reports Low 9 Complete 8 72 8
Project Controls / IFR All High 20 Project Control
50 PM
Incomplete 240 1,680 24
Procurement All n/a n/a n/a N/A N/A N/A Deferred implementation
Time & Labor Entry Low 600 Complete 0 600 1 Training via CBT. No development
or delivery LOE.
Approval Low 100 Complete 0 200 2
Administrator Low 1 Complete 0 4 4
Travel & Expense Entry Medium 300 Complete 0 600 2 CBT
Approval Medium 100 Complete 0 200 2
Administrator Medium 1 Complete 0 4 4
Accounts Payable Inquiry Low 20 Complete 16 80 4 AP will be processed by Shared
Services.
Billing Bill Preparation High 9 Complete 40 288 32
Revenue
Recognition
Low 20 Complete 16 80 4
Accounts Receivable All Low 5 Complete 16 20 4
General Ledger All Low 5 Complete 0 40 8 ―Buddy‖ system training method.
Total Hours 368 4,228
Training Plan
Functional Area Sub-FunctionTraining
ComplexityAudience Size
Status of
Content1
Prep &
Delivery LOE
User
Training
Hrs
Avg Hrs
/PersonNotes
PCB – Contracts Setup and Admin High 15 Complete 32 360 24 This includes training all PMs,
Project Control and Contract staff
on new processes, cross-walks and
tools.
Inquiry / Reports Low 9 Complete 8 72 8
Project Controls / IFR All High 20 Project Control
50 PM
Incomplete 240 1,680 24
Procurement All n/a n/a n/a N/A N/A N/A Deferred implementation
Time & Labor Entry Low 600 Complete 0 600 1 Training via CBT. No development
or delivery LOE.
Approval Low 100 Complete 0 200 2
Administrator Low 1 Complete 0 4 4
Travel & Expense Entry Medium 300 Complete 0 600 2 CBT
Approval Medium 100 Complete 0 200 2
Administrator Medium 1 Complete 0 4 4
Accounts Payable Inquiry Low 20 Complete 16 80 4 AP will be processed by Shared
Services.
Billing Bill Preparation High 9 Complete 40 288 32
Revenue
Recognition
Low 20 Complete 16 80 4
Accounts Receivable All Low 5 Complete 16 20 4
General Ledger All Low 5 Complete 0 40 8 ―Buddy‖ system training method.
Total Hours 368 4,228
Training Plan – Key Components
1
2
3
Training Complexity and Audience Size: Significantly
impacts training medium (e.g. classroom or web-
based) and other logistics
Prep and Delivery Level of Effort (LOE): Impacts the
training timeline
User Training Hours: Most trainees were billable to a
particular project and considerable care needed to be
taken to reduce the revenue impacts due to training
Existing Tools Assessment
Data Conversion Assessment
Fit-Gap Analysis: Process
Fit-Gap Analysis: BI
Where gaps existed, recommended solutions were developed and effort assessed.
Fit-Gap: Legacy Systems
No to-be legacy system requirements with zero fit to the new system.
Gap solutions developed using multiple toolkits:
• Process Change
• PeopleSoft Report
• COGNOS Report
0
5
10
Degree of Fit
Partial
Full
None
Fit-Gap: Reporting
784
80
200
Resource Types Required to Meet To-Be Legacy Gaps
COGNOS
PeopleSoft
Functional
Key Roles and Activities
Report Resources
• Separate direct and B&P projects on the summary
dashboard
• Include all projects on dashboard that have current year
activity
• Add MTD and YTD cost, revenue, and profit information
on the dashboard
• Add operating unit and operating structure 2 as details
• Add total project value
System 1 Resources
• Develop PSR—Off-site labor breakdown query
Functional Resources
• Create design documents
• Create test cases
• Execute tests
• Create documentation/resolution of test problem reports
Training
• Tasks and effort are accounted for in the Business
Process section
Cutover Assessment
Two alternatives are being considered and evaluated based on functionality,
cost, and risk.
Option 1: Cut over to-be legacy to PeopleSoft starting with Accounting Period 8
– Processing begins in PeopleSoft during the eighth accounting month (August). Cutover
would occur after July closes (~7/28). This option will involve more external resources
and pose a higher risk.
– By going live in August, Finance will have 60 days to identify conversion issues and
30 days to identify issues with any errors in monthly processing.
Option 2: Cut over to-be legacy to PeopleSoft starting with Accounting Period 10
– Processing begins in PeopleSoft during the 10th accounting month (October). Cutover
would occur after September closes (~9/25).
– Reduced external cost, although external resources will still be required.
– If the project is delayed beyond Period 10, will need to pay for additional SOX
compliance testing for both to-be legacy and to-be new processes/systems.
Option 1 Requires Nimble Execution, Given
Accelerated Time Frames
Timeline Assumptions
• Go-live scheduled for end of July for the August cycle
• Project starts June 1
• 5-week design/development window minimum
• 5 weeks for testing and change management/training
Option 2 Provides Additional Time, Lowering
the Overall Risk of the Project
Timeline Assumptions
• Go-live scheduled for end of September for the October cycle
• Project starts June 1
• 9-week design/development window
• 9 weeks for testing and change management/training
Option 2 is the Better Path
Finally, we needed to execute . . .
Phases and Associated Phases in ERP
Integration
The Implementation Team and the Role of
Change Management
Change Mgmt
Lead
CEO
Business Unit 1
Leadership
Business Unit 3
Leadership
Business Unit 2
Leadership
CFO CIOCOO
Implementation
Lead
Implementation
Team
(Functional)
Implementation
Team
(Technical)
End User End User End User End User End UserEnd User
Implementation Team
Change Mgmt Team Lead
Change Champions
Business Line Change SMEs
End Users
Key:
Common Mistakes
Not incorporating key stakeholders into the project early
• If concerns from key business leaders are not addressed early, resistance will materialize
and sink any well-intentioned efforts
• Getting key stakeholders on board early will help in obtaining acceptance from the rest of
the organization
Uncoordinated communications and training
• Often, these two areas are not addressed effectively and are implemented as an
afterthought to the project plan
• Communications and training need to be planned well in advance with the audience in mind
Q&A
For more information:
How MorganFranklin Can Help
Contact Us
John Hoebler, Director, ERP
MorganFranklin Corporation
office: 703.564.7525
e-mail: [email protected]