The document discusses ERP options for Big Valley City to replace its aging PeopleSoft system. It analyzes 3 alternatives: 1) upgrading to Oracle Fusion, 2) outsourcing support to 3rd parties like Accenture, TomorrowNow or LegacyMode, or 3) switching to tier 2 products like SunGard Bi-Tech or GEMS. A financial analysis shows outsourcing to LegacyMode would save $477k over 3 years vs continuing with PeopleSoft, while providing improved support. The document outlines implementation steps and a timeline for LegacyMode, to transition support by April 2008.

1. CRIC Consulting
Enterprise Resource Planning : Ongoing maintenance
and cost benefit analysis

2. Enterprise Resource planning (ERP)
Integrated
Management
System
Finance &
HR Admin & Planning Sales & Services Operational
Accounting
2

3. ERP (Continued)
ERP
ERP
ERP Providers
Implementers
Tommorow Legacy
Oracle SAP GEMS BI-Tech Accenture
Now mode
Tier I Tier II
41%
Failure: Implementation
3

4. Big Valley City
• Metropolitan city in Central valley,
General California
• 26.2% living below the poverty line
Information • Currently use PeopleSoft ERP
systems • Recently spent $2M to upgrade PeopleSoft
Environment • IS department has 70 employees
4

5. The Problem
Oracle takes
over PeopleSoft in Peoplesoft
2005 customers facing possible
upgrade to Oracle's
Fusion in 2008
5

6. PEST Analysis
6

7. Political
•Increase Taxes
•Job creation
Pressure on •Infrastructure
Government to Investment, including IT
7

8. Economic
•Budget deficit
•Increase in labor cost
Economic •Shrinking tax base
challenges •Liquidity Crunch
8

9. Social
•High poverty rate (about 26%)
•High unemployment rate
•Cost and absence of quality
Healthcare
Social •Lack of skilled manpower
challenges •Influx of illegal immigrants
9

10. Technological
•Improvement in Healthcare
facilities
•Outsourcing of back-office
jobs
•City infrastructure
Technological requirements
challenges •Modernization of existing
Educational system
10

11. Key Issues
High existing costs & spending
Inappropriate revenue collection methods
Quality of life of citizens
Vague data
11

12. Key Issues Matrix
Importance
Low Importance High Importance
Urgency
Analyze plans, performance
Low Urgency Quality of life
for sound decision making
Inappropriate revenue
High Urgency High Costs
collection methods
12

13. Suggested Alternatives
Upgrade to Oracle Fusion
Outsource Oracle support services to 3rd party
Vendors
Replace PeopleSoft with ERP Tier II products
13

14. Alternative 1: Upgrade to Oracle
Fusion
Pros Cons
Known commodity Higher long term costs
Complexity of use and
Feature-rich functionality
support
Higher turnover rates due to
Easy to customize as per
increased demand of TIER1
customer requirements
ERP professionals
Stable vendor/Less Poor quality of support &
change maintenance services
14

15. Alternative 2: Outsource Oracle
support Service to 3rd party Vendors
Pros Cons
Capable of meeting Big Valley Unfamiliarity with the
functional needs system
Lower long term costs Higher one time costs
Vendor collaboration
Enhanced quality of support
issues
Quick resolution time of issues
Flexibility in selection of ERP
implementer vendors
Negotiable contract terms
15

16. Alternative 2:Comparison of 3rd party support
vendors
Accenture TomorrowNow LegacyMode
Pros • Leading IT service • Large provider of SAP • Flexible contract
provider • Highly experienced term: 1,3,5,10-year
• Expertise in PeopleSoft with PeopleSoft • Maintain legal
& Oracle ERP products products compliance
• End-to-End help desk • Resolves issues without costly
services immediately upgrades
• Flexible contract
agreement
Cons Charges premium cost Face pressure to switch to Only one year of help
SAP desk support
16

17. Alternative 3: Replace Peoplesoft
with ERP Tier II products
Pros Cons
Lower long term costs
Higher one time costs
than PeopleSoft
Specialized in public Time-consuming
sectors implementation
Staff readiness
Good support services
challenges
Simpler technical
environment/faster Risk of project failure
learning curve
17

18. Alternative 3: Tier II ERP Products
SunGard Bi-Tech GEMS
• Specialized in public sector • Specialized ERP provider
• Availability of all ERP for public sector
modules • Offers Property
• Extensive training services Management Systems ERP
offered module
• Roughly 37 % savings over 5 • 29% savings over 5 year
year period period
18

19. Financial comparison Analysis
19

20. Alternative I
PeopleSoft
Current annual maintenance fees: $260,000
Assuming another 5% increase in the future
3-year maintenance fees total at $975,000
20

21. Alternative II
3rd Party
Implementors
•Total cost: $450,000
Accenture
•Cost saving: $330,000
•Total cost: $390,000
TomorrowNow
•Cost saving: $390,000
•Total cost: $303,000
LegacyMode
•Cost saving: $477,000

22. Alternative III
Tier II Products
Switching cost be 30% of current 3-year maintenance fees
Bi-Tech:
• Total cost for 3 years: $725,400
GEMS:
• Total cost for 3 years: $983,000

23. Alternative I Alternative II Alternative III
Total Oracle Accenture Tomorrow Legacy SunGard GEMS
cost in 3 Fusion Now Mode Bi-Tech
years ($)
780,000 450,000 390,000 303,000 725,400 983,000
1200
Thousands
1000
800
600
400
200
0
23

24. Evaluation criteria
Best Long Term Position
Best Functional Capability
Lowest Cost
Lowest technical skill requirement
Best technical architecture
24

25. Decision making Matrix (scale of 10)
Alternative I Alternative II Alternative III
Score Score Score
Best Long Term 4 6 7
Position
Best Functional 9 8 5
Capability
Lowest Cost 3 7 9
Lowest technical skill 2 8 7
requirement
Best technical 8 7 5
architecture
Total 26 36 33

26. Does selection help-resolve our Key
issues?
Key issues Alternative II
High existing costs & spending
Inappropriate revenue collection methods
Quality of life of citizens
Analyze plans, performance for sound Decision making
26

27. Vendor selection
(Accenture/TomorrowNow/LegacyMode)
Meeting cost-saving purpose(appx $477,000 for 3yrs)
Improving the quality of service
Freeing up cash flow and human resources to focus on
core business
LegacyMode
27

28. Implementation Steps of
Alternative II
Define Sign contracts Business process
measurement of with change and
efficiency LegacyMode reengineering
Post- Assessment of
implementation new
review transactions
28

29. 1. Define measurement of efficiency
Efficiency of bug fixes & patches
Quality of support to major application releases
Quality of technical support
Compliance with federal government standards and
regulations
1 2 3 4 5 6 7 8 9 10
Legacy Mode
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30. 2. Sign contracts with LegacyMode
Begin Phase I of terminating the maintenance contract with
PeopleSoft
Sign contract with LegacyMode
Negotiate with LegacyMode on the contract terms(3
years), and charges of help desk services during contract
period
30

31. 3. Business process change and reengineering
Employee
Commitment
Maintaining
Reduction
long-term
in IT staff
relationship
Education Change in
& Training process
31

32. 4. Assessment of new transactions
Test the services provided at initial period
Improve the process before final implementation
Schedule for complete termination of existing contract
32

33. 5. Post-implementation review
 Assess the performance of LegacyMode
according to the measurement of efficiency
 Arrange a team to solve the identified issues
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34. Cost Considerations
One-time costs:
Signing the contract
Est. 101,000* 5% = $5,050
Transition
Est. 101,000* 2% = $2,020 Long-time costs:
Possible downsizing Maintenance cost
Est. (64-14) * (29,415/2)= $735,375 101,000*3= $303,000
Unexpected cost Help desk support after 1-year
Est. 101,000* 9%*2 = $18,180
$500,000
Total costs: $1,563,625
34

35. Cost Considerations (Continued)
Savings from lower Maintenance cost ( 3-year)
(260,000-101,000)* 3= $477,000
Savings after possible downsizing
Est. 50 * 29,415 * 3 = $4,412,250
Total Savings: $4,889,250
Benefits= $3,325,625
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36. Decrease Negative Impacts
Possible conflicts Employee Dis- Collaboration
with Oracle satisfaction Challenges
• Accessing the • Communicate with • Focus on smooth
existing contracts staffs honestly and knowledge transfer
• Involve Legal teams constantly • Support process for
for best possible • Reinforce the vision cross-training
actions and benefits vendor support
• Including extra cost • Include severance staff
for handling of costs in the budget • Appropriate
potential Lawsuit documentation of
escalation matrix
36

37. Timeline
August
2006
July 2007 April 2008
•Define
measurem •Business process •Post-
ent of change and implementation
efficiency reengineering review
December September
2006 2007
•Sign contracts •Assessment of
with new transactions
LegacyMode
37

38. Contingency Plan
Quality Forced to
What after
degradation in upgrade to
3years?
service Oracle Fusion
Reassess the Consider not Re-evaluate and
performance of extending the consider switching to
PeopleSoft & contract and re- Tier 2 Products -
LegacyMode after evaluate other SunGard Bi-
every 6 months options Tech/GEMS
38

39. Thank you
39

40. Relation between Key Issues
Transparency & Analyze plans,
Reduction in existing Improvements in performance for
costs revenue collection sound Decision
methods making
Improvements in quality of life of
Improvements in quality of life of
Improvements in quality of life of citizens
citizens
citizens

41. Reason for Failures
In reality only 41% of ERP implementation projects are
successful
Main reasons for failures:
ERP system misfit
Poor project management effectiveness
Too tight project schedule
Users’ resistance to change
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42. Cost calculation —— Alternative
ii
Accenture
• Annual maintenance fees: at a premium cost $150,000
• Annual costs saving: 260,000 – 150,000 = $110,000
• Total costs in 3 years: 150,000 * 3 = $450,000
TomorrowNow
• Annual maintenance fees: 260,000 * 50% = $130,000
• Annual costs saving: 260,000 – 130,000 = $130,000
• Total costs in 3 years: 130,000 * 3 = $390,000
LegacyMode
• Annual maintenance fees: approximately $101,000
• Annual costs saving: 260,000 - 101,000 = $159,000
• Total costs in 3 years: 101,000 * 3 = $303,000
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43. Cost calculation - alternative III
Bi-Tech
•Annual Costs: 260,000* (100-37%) = $163,800
•Total maintenance costs for 3 years: 163,800 * 3 = $491,400
•Assuming switching fees will be 30% of current 3-year maintenance fees,
•Total costs for 3 years: 491,400 + 780,000*30% = $ 725,400
GEMS
•Upfront licensing + training + consulting: $575,000
•Annual maintenance fees: $87,000
•Total licensing etc. and maintenance costs for 3 years: $575,000 + 87,000 * 2 =
$749,000
•Assuming switching fees will be 30% of current 3-year maintenance fees,
•Total costs for 3 years: 749,000 + 780,000 * 30% = $983,000
43