Buying Or Getting Bought A Case Study In M And A Projects
- 1. Buying or Getting Bought? A case study in merger and acquisition projects John Hoebler, MorganFranklin John.hoebler@morganfranklin.com April 2011
- 2. Agenda About MorganFranklin Disparate Systems • Disadvantages and Benefits of Consolidations ERP Conversion—Case Study • Strategy • Plan • Execution Q&A
- 3. About MorganFranklin MorganFranklin is a 300-person ―roll-up-your-sleeves‖ management consulting firm.
- 4. Our Technology Management Practice is Focused We know what we do well, and we have partners that help extend our capabilities. Our Extended Capabilities Our Core Leadership | Thought | Execution Skills Products • System Admins • SAP • Infrastructure 1. HR/Financial Management • SharePoint • DBAs 2. Enterprise Systems Management • Workday • Developers • PeopleSoft • NetSuite • Oracle EBS • JDE 3. Enterprise Information Management • Hyperion • Microsoft • Cognos
- 5. Our Presence at Collaborate 5 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
- 6. Where We Are… About MorganFranklin Disparate Systems • Disadvantages and Benefits of Consolidations ERP Conversion—Case Study • Strategy • Plan • Execution Q&A
- 7. Two Disparate ERP Systems with Minimal Integration
- 8. 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
- 9. Where We Are… About MorganFranklin Disparate Systems • Disadvantages and Benefits of Consolidations ERP Conversion—Case Study • Strategy • Plan • Execution Q&A
- 10. 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.
- 11. First - We needed a strategic vision . . . .
- 12. 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
- 13. 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.
- 14. ERP1 Consolidation Consolidating to ERP1 improves upon the current architecture but remains heavily customized.
- 15. 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 Risk Scores Strategic Objectives 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 2 3 platform (e.g., BI, Financials, and Operations reports) 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 1 Total Risk Score 49 45 (including scores from the equivalent risks represented on the prior slide)
- 16. Functional Area Analysis A weighted scoring framework was applied to each functional area based on priority and impact.
- 17. 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.
- 18. Next, we needed a plan . . .
- 19. Integration Approach: Framework Multiple sources of information drive a complete strategy and potential alternatives.
- 20. Stakeholder Interviews Resource Processes Legacy One-Off Data System Systems 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 Discussions with overall stakeholders and key resources provides a broad perspective on the effort.
- 21. Integrating Lessons Learned Issue # Examples Improvement Actions Category Findings Project 7 • Project timing didn’t take into account • Project plan includes post-go-live support Management quarter and year-end close periods effort • Changeover leadership didn’t involve • Include To Be Legacy active involvement as business unit stakeholders and on Steering Committee Training 11 • Insufficient training resulted in lack of • Emphasize change management work adoption and frustration stream as key component of overall plan • No documentation or flowcharts for new • Provide documentation, processing processes timelines, and flows for new processes System 13 • Work Authorization as configured • Perform detailed fit-gap to determine areas doesn’t block overcharging of customization • People in secured sites can’t access • Review infrastructure access as a part of the portal overall plan Process 13 • ODC’s are still being charged to wrong • Focus on detailed conversion strategy and projects resulting in long-term cleanup process mapping to new environment • W-9 information was required but that • Perform process fit-gap to minimize wasn’t clear ahead of cutover surprises Applying lessons learned from previous projects reduces overall risk and improves chances of success.
- 22. Change Management: Content Assessment Functional Area Training Factors Used to Determine Content Complexity Complexity (High/ Medium/ Low) 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.
- 23. Change Management: Training Needs Gap Assessment
- 24. Training Plan User Training Status of Prep & Avg Hrs Functional Area Sub-Function Audience Size Training Notes Complexity Content1 Delivery LOE /Person Hrs PCB – Contracts Setup and Admin High 15 Complete 32 360 24 This includes training all PMs, Project Control and Contract staff Inquiry / Reports Low 9 Complete 8 72 8 on new processes, cross-walks and tools. Project Controls / IFR All High 20 Project Control Incomplete 240 1,680 24 50 PM 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 Low 20 Complete 16 80 4 Recognition 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
- 25. Training Plan – Key Components User Training Status of Prep & Avg Hrs Functional Area Sub-Function Audience Size Training Notes Complexity Content1 Delivery LOE /Person Hrs PCB – Contracts Setup and Admin High 15 Complete 32 360 24 This includes training all PMs, Project Control and Contract staff Inquiry / Reports Low 9 Complete 8 72 8 on new processes, cross-walks and tools. Project Controls / IFR All High 20 Project Control Incomplete 240 1,680 24 50 PM Procurement All n/a n/a n/a N/A N/A N/A Deferred implementation Time & Labor TrainingEntry Complexity and Audience Size: Significantly Low 600 Complete 0User Training Hours: Most trainees were billable to a 600 1 Training via CBT. No development impacts training medium (e.g. classroom or web- particular project and considerable care needed to be or delivery LOE. based) and other logistics Low Approval 100 Complete 0taken to reduce the revenue impacts due to training 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 1 3 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 2 40 288 32 Revenue Low 20 Complete 16 80 4 Recognition Accounts Receivable All Low Prep and Delivery Level of Effort (LOE): Impacts the 5 Complete 16 20 4 training timeline General Ledger All Low 5 Complete 0 40 8 ―Buddy‖ system training method. Total Hours 368 4,228
- 29. Fit-Gap Analysis: BI Where gaps existed, recommended solutions were developed and effort assessed.
- 30. Fit-Gap: Legacy Systems Degree of Fit No to-be legacy system requirements with zero fit to the new system. 10 Partial Full 5 None 0 Gap solutions developed using multiple toolkits: • Process Change • PeopleSoft Report • COGNOS Report
- 31. Fit-Gap: Reporting Key Roles and Activities Resource Types Required to Meet Report Resources • Separate direct and B&P projects on the summary To-Be Legacy Gaps 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 200 System 1 Resources COGNOS • Develop PSR—Off-site labor breakdown query 80 PeopleSoft Functional Resources Functional • Create design documents 784 • Create test cases • Execute tests • Create documentation/resolution of test problem reports Training • Tasks and effort are accounted for in the Business Process section
- 32. 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.
- 33. 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
- 34. 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
- 35. Option 2 is the Better Path
- 36. Finally, we needed to execute . . .
- 37. Phases and Associated Phases in ERP Integration
- 38. The Implementation Team and the Role of Change Management CEO Implementation Change Mgmt Lead Lead Implementation Implementation CFO COO CIO Team Team (Technical) (Functional) Key: Business Unit 1 Business Unit 2 Business Unit 3 Leadership Leadership Leadership Implementation Team Change Mgmt Team Lead Change Champions Business Line Change SMEs End Users End User End User End User End User End User End User
- 39. 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
- 40. Q&A
- 41. How MorganFranklin Can Help For more information: John Hoebler, Director, ERP MorganFranklin Corporation office: 703.564.7525 e-mail: erp@morganfranklin.com Contact Us