MGT 542E Management Information System

2011-04-26

Earn Real Profit

Cloud 9 (Team # 9)

Why Integrated IT system is needed?

1) The San Diego City Schools aspect : SDCS has a vision that Schools will be safe, attractive neighborhood learning centers supporting learning and interaction for citizens of all ages. So It is essential that unified form of information sharing & Efficient business processes settlement to achieve the vision which 2) Government aspect and IT company aspect - Government has a strong willingness to invest to achieve public sector services efficiency. - IT companies begin to introduce a product to education market. (ex) SAP, ORACLE) So, the price of Integrated IT system will be falling and the service quality will be rising. Under these circumstance if the introduction of Integrated IT System for the first time in education area, it could become standard in the field and have the strong bargaining power between the vendors.

Alternatives
1) Selecting alternatives : In-house vs Adopt entire ERP system
Criteria Data Compatible & Extendable Maintenance Cost & Convenience Suitability with Work Suitability with Work in the long view System Upgrade Cost O O O ERP system O O O In-house system Detail It is important factor as SDCS moves toward integrated system - In-house : needed a lot of manpower & cost to maintain - ERP : conducted by professional service companies - In-house : can build the system as they want - In-house : can be lasted about for 3 years - ERP : can be extended by purchasing additional modules - ERP : can be upgraded

Above table shows that ERP system is more suitable IT system for SDCS. Furthermore, SDCS can have a strong bargaining power between ERP vendors as it is first case to adopt the system in education market. 2) Selecting module Considering the limited budget, efficiency and related experience, system has to be installed by phases. HR module is the most appropriate as first phase. Because HR module is very common and used widely not only business field but also public sectors for management. So small changes are expected to customize. And As minimize the routine work, employees can concentrate on valuable work like new educational service.

Financial analysis
If the soft benefit is not considered, this project cant produce profit. But its clear, HR module can improve the recruiting process (+$320,000) & data accessibility (+$120,000=400,000X30%) thus these effect have to be reflected the financial analysis. Consequently, the result is as follows.

MGT 542E Management Information System

Soft Benefits NOT considered NPV : $(734,211)
Year (unit : $thousands)

2011-04-26
Soft Benefits considered NPV : $1,097,216 / IRR : 8.7%

IRR : 6.1%

2002 Yr -2

2003 Yr -1

2004 Yr 0

2005 Yr 1

2006 Yr 2

2007 Yr 3

2008 Yr 4

2009 Yr 5

System Status WACC Savings Cost Savings Soft Benefits Cost Installation Cost On-going Cost Financial Benefits

Design Implementation Open Stabilization 7.2% = Cost of Debt + Cost of Equity 4,786 4,478 308 6,900 6,900 (6,900) 13,304 13,304 (13,304) 1,820 1,820 2,966 6,838 6,398 440 1,820 1,820 5,018 6,838 6,398 440 1,820 1,820 5,018 6,838 6,398 440 1,820 1,820 5,018 6,838 6,398 440 1,820 1,820 5,018 6,838 6,398 440 1,820 1,820 5,018

* Assumptions - WACC = { 42%(=Debt ratio) X 5.0%(=Treasury bond rate) } + { 58%(=Equity ratio) X 8.75%(=Tax rate) } - Application Module : $1,800,000 ( -10% by the first movers negotiation power effect) - No. of Person Days : 9,200 ( To focus on the proce s s de s ign cons ulting in e a rly pha s e , +15% ) - In the first year (04), the all cost savings effect will be underestimated (70%) due to stabilization period

Issues for Successful Implementation

1) Selecting ERP Vendor : estimate major players Criteria
Position strong functionality Flexibility Etc

SAP
No.1 finance, manufacturing Lack of flexibility - Stability and integrity is very high

ORACLE
No.2 HR Relatively flexible They are carrying on strong promotion with relatively low product price

Oracle would be supportive because they are more flexible and specialized in HR which can help successful implementation. 2) Consideration before starting the ERP project We need to consider how well we can apply business processes effectively into the system. To do this, at the initial period, many people must be in the project in order to analyze and design the process. Also, the business process must be reorganized in order to have a successful adoption. 3) Consideration at the beginning of the project The object and the direction should be set so almost no changes would be made. If there are too many changes, the implementation period would take longer and also more budget needs 4) Consideration for the implementing The implementing people dont know everything, so the users need to be involved in the ERP project in the first place. By their participation, misunderstanding and distrust about ERP can be reduced. Among district employees, there is nearly no one who knows about ERP. So training is needed. Of course, a certain portion of budget has to be allocated to training. But we can consider using the amount reduced from software license payment for more investment in education. We need to tell users about not only how to use the system, but also inform them about the system so their repulsions could be reduced.