MANAGEMENT FINAL REPORT

04/11/2010

Information Technology in Management

A study of ITs contribution to improving the efficiency of management processes, specifically how SAP, Siebel and Ultimus would help to improve the efficiency of the business processes of a company taken as a case study.

Management Final Report

Management Final Report

INFORMATION TECHNOLOGY IN MANAGEMENT
Submitted by: MUAMMAD AFTAB SAEED

Submitted to:

Miss. ADEELA

Management Theory

Page 2

Management Final Report

Letter of Transmittal
Maam:

I hereby submit for your consideration the final report for the course Management Theory and Practice. Included in this report are our findings with respect to SAP, Siebel, Ultimus and finally, PSO and our conclusions based on these findings. We submit that the contents of this report are my own work unless otherwise indicated by way of referencing to the source of the material included.

Sincerely, MUAMMAD AFTAB SAEED

MEF 1ST SEMESTER

Page 3

Management Final Report

Executive Summary
The report is divided into four chapters, each dealing with a specific part in sequence, leading up to the case in the fourth chapter and subsequently the conclusion of the report and our finding thereof. The opening chapter is an introduction to the terminology and concepts that would be presented in this report. Starting off with an introduction to IT and its role in the present day world in refining and updating management processes and practices cannot be ignored and should not be so. In addition to a preliminary establishing of IT in management, we have also included in the mentioned chapter information about various terms used in the report with their definitions and brief discussions, such as ERP, CRM and BPM as we believe a basic knowledge and reference point for these terms would lead to a better overall understanding of the subject matter of this report and our resulting conclusions. The second chapter deals with an introduction to the next step in our research, the three solutions selected as representatives of EPR, CRM and BMP, i.e. SAP, Siebel and Ultimus. A brief introduction to these solutions with a short background into their origins and an overview of their functionality and primary areas of focus is included to provide the reader with an insight into their similarities and differences as well as their primary working. The third chapter deals with an introduction to Pakistan State Oil, the company selected as our case for its highly successful implementation of SAP. Now that we have provided a fundamental basis for the reading knowing what ERP, CRM and BPM mean and how SAP, Siebel and Ultimus tie into these concepts, the reader can better appreciate the assistance SAP is providing PSO with its daily management. Included in this chapter, therefore, is information on what difference SAP has made at PSO primarily and in which departments the modules have been implemented. The fourth and final chapter deals with an overview of PSOs working before and after SAPs implementation and elaborated upon the actual and perceived differences in the view of the gentlemen we visited for our research. The fifth and final chapter is the conclusion, in which we address some issues that we believe SAP should address to be a more viable contender for a large market share of the Pakistani corporate pie.

Page 4

Management Final Report

Table of Contents
TABLE OF CONTENTS...................................................................................5 CHAPTER 1 | INTRODUCTION........................................................................6 Business Process Management (BPM)............................................................................6 Enterprise Resource Planning (ERP)...............................................................................7 Customer Relationship Management (CRM)..................................................................8 CHAPTER 2 | THREE MARKET LEADERS .........................................................9 SAP (Systems Applications and Products)......................................................................9 Siebel............................................................................................................................10 Ultimus.........................................................................................................................10 CHAPTER 3 | SAP AT PAKISTAN STATE OIL (PSO).........................................12 Introduction to PSO......................................................................................................12 Overview of SAP at PSO...............................................................................................12 Logistics........................................................................................................................12 Accounting....................................................................................................................13 Financial Accounting..................................................................................................13 Controlling .................................................................................................................13 Human Resources........................................................................................................13 IS Industry Specific Solution......................................................................................13 CHAPTER 4 | PRE AND POST SAP ERA AT PSO..............................................13 Standalone modules before SAP..................................................................................13 Module Integration after SAP.......................................................................................14 Stronger Control...........................................................................................................14 Improved Security........................................................................................................14 Managerial Perspective................................................................................................14 CHAPTER 5 |CONCLUSION...........................................................................17 REFERENCES..............................................................................................18

Page 5

Management Final Report

CHAPTER 1 | INTRODUCTION
Technology has changed the world around us. The most profound effect of technology on our lives has come through Information Technology. In this day and age, I.T. has revolutionized our lifestyles. The advent of Information Technology has also changed the way firms conduct their businesses and day to day activities. Managers in I.T. rich firm are equipped with effective data access and communication mechanisms which help them in the four management functions, i.e. planning, organizing, leading and controlling. At the very basic level IT is providing firms and managers with reliable and fast information channels which in turn make a managers decision swift and increase the firms productivity. Companies today have terabytes of data on their suppliers, consumers, inventories, finances and production capabilities and they employ this information to get the most out of each and every dimension of their business. For managers and decision makers all of the decision making information is available at a key stroke. Technology integrates various components of the business and gives the management a comprehensive view of organization structure, operations and processes. Business traditionally has been working independently of assistance from Information Technology. Traditional methodology for conducting and managing a business relied upon a lengthy and significant paper trail and a great deal of manual processing with respect to any business process involved. The times have changed since then and it is to the benefit of both parties t hat IT and business can now work hand in hand and make things better for all concerned. It is in this chapter that we will attempt to discuss this phenomenon and how it occurred and the brief repercussions thereof.

Business Process Management (BPM)

Business Process Management (BPM) is defined as a sequence of structured or semistructured tasks performed in series or in parallel by two or more individuals or applications to reach a common goal. [1] Business process management can be defined as a method for modeling, automating, managing, and optimizing repeatable business processes according to formalized rules and procedures. The BPM process starts with focusing as to how individual applications can be leveraged with this process. The actual work flow is also analyzed also including those activities that take place outside the application. The starting point for a business process often starts outside an ERP system, for example it could be when a customer places an order rather than when the order is entered into the system. The end point would be when the product is delivered or when the payment is recorded. Everything that happens in between these two points is part of the process. [2]

Page 6

Management Final Report

It is observed that the BPM life cycle in application to a scenario consists of the following stages: [3] Process Design Process Modeling Process Execution Process Monitoring Process Optimization

BPM offers a distinct advantage in the ability to transform basic workflow capabilities which take place between humans. Whats more, it can extend these capabilities to the entire enterprise. Instead of addressing a series of separate and distinct tasks, an organization can focus on lifecycle management and continual process improvement. The five keys to BPM Success are listed to be as simple as the below: 1. Identify a process that may be the source of the problem. 2. Ensure that people processes are not ignored when looking for a process to pinpoint as the source of the problem being faced. Often human errors are not taken into account when looking for resolvable problems for an automated system. 3. Performa and analysis of the problem with respect to the perspective of the customer or potential customer. 4. The first requirement is to define the necessary process and subsequently focus on the systems that can be used to execute it. 5. Implement and adapt BPM.

Enterprise Resource Planning (ERP)

Enterprise Resource Planning (ERP) systems integrate (or attempt to integrate) all data and processes of an organization into a unified system. A typical ERP system will use multiple components of computer software and hardware to achieve the integration. A key ingredient of most ERP systems is the use of a unified database to store data for the various system modules. [4] There are several noteworthy dimensions of any ERP, and are mentioned briefly below: Manufacturing: Functions include engineering, capacity, workflow management, quality control, etc. Financials: Encompasses accounts payable & receivable, fixed assets, general ledger and cash management, etc. Human Resources: Consists of benefits, training, payroll, time and attendance, etc.

Page 7

Management Final Report

Supply Chain Management: Includes inventory, supply chain planning, supplier scheduling, etc. Projects: Evaluating and monitoring costing, billing, activity management, time and expense, etc. Customer Relationship Management: Consists of sales and marketing, customer service, commissions, etc. Data Warehouse: Usually accessible by an organizations customers, suppliers and employees.

Customer Relationship Management (CRM)

Customer relationship management is a broad term that covers concepts used by companies to manage their relationships with customers, including the capture, storage and analysis of customer, vendor, partner, and internal process information. [5] CRM encompasses three aspects which can be implemented by the firm in isolation from each other, namely: Operational Collaborative Analytical

To go into the details of each of these aspects would result in a highly technical and detailed explanation, which would decidedly derail us from the purpose of this report, which is why we have left the explanation of a CRM here, concluding by saying that CRM primarily focuses on the customer and partner relationship aspects of the business and assisting with management operations that are directly or indirectly related to this function of a business, which sets it apart from ERP and BPM.

Page 8

Management Final Report

CHAPTER 2 | THREE MARKET LEADERS

For the purpose of this section of the report, we have selected three products to identify three distinct solutions (mentioned in the earlier chapter). The three products selected are SAP (Systems Applications and Products), the Oracle owned Siebel and Ultimus BPM. Each of these is elaborated upon below in a manner brief enough to not stray from the scope of this report yet comprehensive enough to allow the reader a glimpse into their processes and how they are essentially different.

SAP (Systems Applications and Products)

SAP is the world's largest business software company and the third-largest independent software provider in terms of revenues. It operates in three geographic regions EMEA, which represents Europe, Middle East and Africa; the Americas, which represents both North America and Latin America; and Asia Pacific Japan (APJ), which represents Japan, Australia and parts of Asia. In addition, SAP operates a network of 115 subsidiaries, and has R&D facilities around the globe in Germany, North America, Canada, China, Hungary, India, Israel and Bulgaria. SAP focuses on six industry sectors: process industries, discrete industries, consumer industries, service industries, financial services, and public services. It offers more than 25 industry solution portfolios for large enterprises and more than 550 micro-vertical solutions for midsize companies and small businesses. [6] The primary focus of SAPs products is ERP (Enterprise Resource Planning), which it essentially pioneered. The company's main product is SAP ERP. The name of its predecessor, SAP R/3 gives a clue to its functionality: the "R" stands for real time, despite R/3 not actually being a real time solution while the number 3 is indicative of a three-tier client-server architecture (database layer, application layer and presentation layer) and 3-tier architecture: database, application server and client. R/2, which was designed to work on mainframe architecture, was the first SAP version available. As per SAPs website, SAP ERP is the one of five major enterprise applications that makes up SAP's Business Suite. The four other applications are: o Customer Relationship Management (CRM) - helps companies acquire and retain customers, gain deep marketing and customer insight, and align organization on customer-focused strategies o Product Lifecycle management (PLM) - helps manufactures with a single source of all product-Crelated information necessary for collaborating with business partners and supporting product lines o Supply Chain Management (SCM) - helps companies enhance operational flexibility across global enterprises and provide real-time visibility for customers and suppliers
Page 9

Management Final Report

o Supplier Relationship Management (SRM) - customers can collaborate closely with suppliers and integrate sourcing processes with applications throughout the enterprise to enhance transparency and lower costs

Siebel
Siebel systems was the leading vendor for CRM solutions in the latter part of the 1990s, with a 45% CRM market share overall in 2002. [3] Siebel is now a part of the Oracle Corporation, as it was purchased in September 2005 for $5.8 million. Siebel Systems, Inc. was founded in 1993 to address the growing need of organizations of all sizes to acquire, retain, and better serve their customers. Before merging with Oracle, Siebel Systems was the world's leading provider of eBusiness application software, peaking with more than 8,000 employees operating in more than 30 countries and 100 offices around the world. [7]

Siebels CRM solution is tailor made to fit any industry it is applied to. It prides itself on allowing organizations to be able to transform the customer experience. Siebel CRM promises to deliver to its corporate clients the following functionalities, as per their product definition [8]:

Comprehensive CRM capabilities Tailored industry solutions Role-based customer intelligence and pre-built integration

Also as per their websites product description, Siebel CRM is ideally suited to assist the business processes in the areas of Sales, Marketing, Contact Center Service, Contact Center Infrastructure, Customer Data Integration, Quote and Order Capturing, Self-service, eBilling and Partner Relationship Management.

Ultimus
Ultimus is a global business process management (BPM) software company that delivers solutions for business process automation and improvement. The Ultimus BPM Suite, a product of Ultimus, includes models to address all phases of the process life cycle, including modeling, automating, managing, and optimizing and is a leading BPM solution globally, with over 1600 customers worldwide and 2.2 million people actively using it [9]. As per Ultimus website, Ultimus' BPM workflow software provides:

Page 10

Management Final Report

Collaborative Process Design to support BPM teams. Simulation and Modeling - to Anticipate Bottlenecks. Adaptive Rules Engine featuring Adaptive Discovery for rapid adaptation. Custom Views and Portals to support each individual in a process. Interactive-BAM - for management visibility and optimization. People-centric hundreds of capabilities to support people and workflow, especially for handling exceptions, facilitating change, and supporting collaboration.

As Ultimus claims, a solution that is truly dynamic and fits into a business today has to be future-proof, i.e. it should be able to resist the tide of changes and advancements of the future and evolve accordingly. Unlike fixed solutions, Ultimus claims that its suite is a flexible and evolutionary solution that: o Maximization of cost reductions, provides for growth, manages change, and executes an integrated business strategy o Enables cross-enterprise integration to scale and extend management controls across the technology o Manages change effectively as requirements, laws, processes, and regulations change o Provides a structured but customizable environment to extend to other industry and process automation requirements to minimize training costs; o Allows for expansion from department-only processes to even broader BPM for greater business value. Ultimus recently deployed the BPM solution at National Database and Registration Authority (NADRA) of Pakistan, the largest database repository in Pakistan. The Ultimus BPM Suite is being use to automate the core administrative processes and has helped NADRA to ensure document security and standardization of approval procedures at all levels through a streamlined workflow. The Ultimus BPM Suite certainly has facilitated NADRA in making Time Sheets, Inter Office Notes, and Letters processes in a time efficient, and a cost effective manner." NADRA has automated all of the important administrative processes, including inter-office notes, leave requisition, travel requisition, overtime claims and approvals and time sheets. [10]

Page 11

Management Final Report

CHAPTER 3 | SAP AT PAKISTAN STATE OIL (PSO)

Introduction to PSO
In order to get a feel for how IT is truly affecting a business, it is important to take a case study for the product specified and inspect its application upon a large company and its processes and the differences made to their workings as a result of the implementation of the business process solution. It is for this reason that we considered it important to identify just such a scenario, for which we decided to focus on SAP, as it is one of the most widely used and valued solutions globally, plus it has a significant presence in Pakistan as well. It was for the same reason that we picked up Pakistan State Oil (PSO) as the company upon which to base our study as it has an implementation of SAP running for some time now and would be able to identify the difference in their business processes due to SAP more clearly at this point in time. As per PSOs website [5], Pakistan State Oil is the oil market leader in Pakistan, and has managed to firmly root itself into the market, as may be ascertained by its 79% share in the Black Oil market and a healthy 58% share in the White Oil market. It is engaged in importing, storage, distribution and marketing of various POL products, including Mogas, HSD, Fuel Oil, Jet Fuel, Kerosene, LPG, CNG and petro-chemicals. PSO was also the winner of the "Karachi Stock Exchange Top Companies Award" and is a member of the World Economic Forum. In addition to these impressive credentials, it has been a popular topic of case studies in Pakistan and abroad based on its radical corporate turnaround over the last few years. PSO serves a wide range of customers throughout Pakistan, including retail, industrial, aviation, marine and government/defense sectors.

Overview of SAP at PSO

SAP was implemented at Pakistan State Oil in 2003. SAP at PSO consists of the standard SAP functionality, i.e. standard R3, version 4.6C and oil industry specific (IS) solutions. The basic components of SAP, which are present irrespective of the type of firm and its business are logistics, accounting and HR. PSO is using these standard functions of SAP.

Logistics
This category is an umbrella category and caters to different logistic related functionalities through sub-modules. Some of the important modules under logistics identified in the course of the interview were: o Materials Management Related to inventory management and procurement of product.

Page 12

Management Final Report

o Sales Distribution Used to monitor the distribution network o Production and Planning Forecasting and management of the production process.

Accounting
SAP takes care of the overall accounting procedure of Pakistan State Oil. The accounting module provides the regular financial accounting services as well as controlling functionality. Financial Accounting Consists of the standard accounting processes, i.e. journalizing, posting, accounts receivable, payable, current assets, fixed assets, general journal, general ledger, etc. Controlling Used for internal reporting and consists of cost center accounting, process center accounting and profitability analysis.

Human Resources
This module, as the name suggests, is used at PSO to manage the human resources of Pakistan State Oil. Due to constraints of lengths, we did not delve further into details about this component for the purpose of this report.

IS Industry Specific Solution

PSO is using industry specific solution which caters to the oil business. SAP provides over 36 IS solutions other than the standard R3. This IS solution provides PSO with the following custom functionalities: o Silo Management. o Transportation and Distribution Management.

CHAPTER 4 | PRE AND POST SAP ERA AT PSO

Standalone modules before SAP
Before SAP was implemented at PSO, the company had various modules which were all stand alone. There was no definite path for information exchange and the inter and intra department communications were not that efficient. For example, sales module had no link with financial accounting. Data was sent from sales to the accounts department and the details were recorded there. Again in the case of procurement, the company did not have an accurate estimate of the number of purchases made during the month, the quantity, and amount and from whom it was purchased. The departments had to wait till the end of the month to

Page 13

Management Final Report

receive data of the businesses of the previous month and this entire process does not include the time required to process the accounting entries. Other than the recording of the firms operations, there was a lot of human aspect involved in information exchange. Information used to travel between departments through different means like telephone, fax, email and memos and did not have a standard operation procedure.

Module Integration after SAP

Through SAP the stand alone modules of the company have been integrated. Since data is recorded, stored and accessed from a single source the communication channels have also improved considerably and each and every department has access to the real time and updated data. For example, if you are doing sales at one location, as soon as the invoice is taken out, the sales revenue is booked, the inventory is adjusted. The COGS are also adjusted and managers can see as to what transactions have taken place. The profit and loss accounts and balance sheet accounts are updated every second. The companys businesses do not have to wait until the end of the month end to receive information but can get the information real time for decision making purposes. Concentrating on the integration we see that the information is now available in one format and from one source only. The information being extracted by any manager of PSO is same and updated to the second.

Stronger Control
SAP has its own standard functionality called checks and balances which caters for the errors in the accounting process but there are some other, customizable control features, due to which PSO has gained control over certain areas. The elimination of standalone systems have lead to the elimination of isolation and hence different departments can now be view as a whole, thereby increasing the managements control over its modules. For example, the inventory in the database will remain the same unless there are sales and proper purchase orders or delivery orders have been issued.

Improved Security
Among the above mentioned benefits PSO has received through SAP there is also increased security. Unlike the pre SAP era now authorization levels can be designated on the computer system and each manager can access information which is relevant to his line of work and decision making and which falls under his set jurisdiction.

Managerial Perspective
Before SAP was implemented at PSO, managers several issues, such as: Non-availability of real time data
Page 14

Management Final Report

Errors in reporting of data Huge transaction times Little or no control over off-site locations Integration of information from different departments taking lots of time Inconsistent financial results

However, with the implementation of SAP at PSO in 2003, most of these issues were resolved. Now we will take a managers perspective as to how SAP has changed their processes and efficiency. One of the most major improvements has been in the procurement department. Mr. Muhammad Rashid Khan, Manager Automotive Lubricants pointed out that before SAP was implemented at PSO, they faced a huge problem in managing the inventory at different warehouses across the country. One of the major issues was that due to poor inventory management, managers were not being able to keep up with the availability of stock at different warehouses and the demand. This resulted in few warehouses being overstocked with inventory while at other warehouses; the inventory was in short supply. This resulted in a loss of sales from those warehouses where the inventory was in short supply. Also, the overstocking of inventory at certain warehouses incurred an additional financial cost of the idle inventory. However, after SAP was implemented, the inventory management was improved considerably. Managers now have a real-time data as to what is the level of inventory at different off shore locations. Also by taking into account the Sales at those particular locations, the manager can predict the future Sales forecasts. Based on his forecast he can manage the inventory so that only the required amount of inventory is available at those particular locations. Due to better inventory management, the sales have improved and the financial costs have also been reduced. Another important aspect is that, the human element between the transactions has been reduced to a bare minimum. Due to less human involvement, the overall efficiency has increased, and the time between different transactions has also been reduced. Furthermore, the errors in reporting of Sales and inventory figures from offsite locations have also gone down. Another important usage of SAP has been in the Sales department. SAP being a high customizable tool, can be modified to suit to different managerial needs. Mr. Salman Zubair, Manager Fleet and Corporate Cards, pointed out that SAP has really helped him in evaluating the performance of different products. SAP gives a manager the flexibility to evaluate the products and his sales staff. The product can be modified to evaluate the performance of the product, like the Sales during a specific period in time, the cost of sales, the receivables turnover, the growth in profit, etc. This can be

Page 15

Management Final Report

useful tool for a manger to evaluate his product and suggest changes to the Product development department if any changes need to be made. As pointed out before, SAP being highly customizable software can be molded to suit to any managers needs. For instance SAP can be modified to measure the performance of a particular product. It also has an in-built reporting system with a defined set of reports that can be printed out for each module. However, we are not restricted to using these types of reports only. For instance, in the case of our Pakistani market, the attrition rate of employees is high. A manager can modify SAP to produce a report telling him about the attrition rates over the months. This can be very useful for the Human Resources department at PSO to manage their employees more efficiently. Mr. Sohail Ashraf, DGM SAP also pointed out that SAP has also helped PSO in managing its employees better. The employees performance can now be monitored easily with the advent of SAP. An employees productivity can now be monitored in real time by taking into account how efficiently he has been performing his tasks, how punctual he is and so on. The implementation of SAP at PSO has really changed the way managers work. In the accounts and finance department, information is available at real time. As soon as a transaction is made, the Sales, cost of Sales, accounts receivable and other related accounts are updated accordingly. Due to this the financial reports are updated at real time. Mr. Sohail Ashraf, DGM SAP rightly pointed out that before the implementation of SAP, it took a lot of time to integrate information from different departments, compile them under one format, extract the relevant information and produce the financial statements. However with the advent of SAP, this has changed drastically. Now the financial statements are updated at real time, and a manger can extract the relevant information. Another thing that SAP has done is that it has reduced the communication barrier between different departments and different off-site locations. Each location, terminal etc. is connected by LAN, DSL, VSAT and even dialup connections. An off-site warehouse manager can make use of this advanced technology to communicate his exact requirement to the procurement department as to how many units of a certain product are desired. Initially at PSO, this was done over phone, which resulted in many human related errors.

Page 16

Management Final Report

CHAPTER 5 |CONCLUSION
Employees within an organization need real time information to carry out their tasks and make decisions. Introducing technology at PSO has enhanced a managers capability and functionality. It affects the way that organizations think, communicate, share information and do their work. The information exchange is no longer constrained by geographical and time-related boundaries and the integration of information from different ends greatly enhances an organizations efficiency and effectiveness. To conclude, the implementation of SAP at PSO has really turned around its fortunes. During recent years PSO has shown a turnaround of profits and that can be attributed to the efficiency and the effective factors that SAP has brought with itself. Now with the information being available at Real Time, it has aided quick decision for managers, be it the procurement department or Sales department. The usefulness of SAP at PSO can be adjudged from the fact that most of the modules of SAP have been incorporated in PSOs workflow and SAP is being used by managers effectively. SAP has resulted in saving a lot of financial costs for the company due to the elements of efficiency and effectiveness. The human element between transactions has almost gone down to zero which has contributed to the information being error free. Also the communication barrier has been reduced. Offsite locations can now easily communicate with the head office in case of any problems. Also real time evaluation gives managers a chance to evaluate the product and their employees in a better way. In the end we would like to re-iterate the fact that the benefits of SAP outweigh its costs. SAP has improved communication within the organization, integrated different departments into one, played the role of a real time analysis tool and also helped in increasing the sales and reduction of overhead costs.

Page 17

Management Final Report

REFERENCES
1. Ultimus White Papers, The Myth of Process Improvement http://www.ultimus.com/dld/white_papers/myth_zd.pdf

2. Find White Papers, An Introduction to BPM http://www.findwhitepapers.com/option,com_categoryreport/task,viewabstract/vid, 273/title,1239/id,12/cat,113/pathway,no/

3. Wikipedia, Business Process Management http://en.wikipedia.org/wiki/Business_Process_Management

4. Wikipedia, Enterprise Resource Planning http://en.wikipedia.org/wiki/Enterprise_resource_planning

5. Wikipedia, Customer Relationship Management http://en.wikipedia.org/wiki/Crm

6. Wikipedia, SAP AG http://en.wikipedia.org/wiki/SAP_AG

7. Wikipedia, Siebel Systems Article http://en.wikipedia.org/wiki/Siebel_Systems

8. Siebel Customer Relationship Management, Oracle Products http://www.oracle.com/applications/crm/siebel/index.html

Page 18

Management Final Report

9. Ultimus BPM Business Process Management Software Human-centric BPM http://www.ultimus.com/products/

10.

NADRA Press Release, Ultimus

http://www.ultimus.com/news_events/NADRA.htm

11.

PSO Pakistan Welcome to Pakistan State Oil

http://www.psopk.com/about_us/index.shtml

Page 19