Josh Gold and David Romeo wanted to ‘go live’ with their online auction business, Auctionwire, in May 2004. This business aimed to become a ‘new channel’ that corporations in Canada could sell excess inventory and capital goods as well as a means for charities to sell online. They planned to charge their clients commission on successful auctions for managing the whole auction process from listing items to shipping auctioned items to buyers and collecting payment. They would also absorb the listing fees and manage customer service for the corporations and the charities.
In terms of the business plan that Gold and Romeo plan to follow, I feel that there are positive and negative aspects. Firstly, the online auction market is young and no competitor has yet built a business focused on corporate and charity customers. This is an opportunity to access a new market in the ever profitable reach of eBay which had 94.9 million users and a total payment volume of $12,226,000,000 in 2003 (Case Study). Also, they have a good backing in experience of commerce and finance with the degrees that they hold and further, Gold has experience of building a web portal for health insurance. However, they have little experience of the online auction business which could prove a problem with the claims that they have made in relation to the efficient auction management process they aim to provide.
Also, they plan only to charge commission on successful sales through their auctions. This may be successful for corporations who have new, unsold goods to sell however, in terms of the charities, there could be a problem in selling goods that are left unwanted in their shops. If these charities provide a large amount of second hand goods for auction that are all different and need to be entered into the database separately, it could provide extremely time consuming with no financial reward if these goods are left unsold in the auction.
Further, as Auctionwire plan not to charge their clients anything until a successful auction has been achieved, they may become swamped with items from both corporations and charities that they will be unable to sell and they will need to pay the listing fee on the auction site(s) for these goods. This cost may not be recoverable.
A final point of criticism of their plan relates to not only auctioning on eBay but, on other auction sites. The use of other auction sites may not be as effective as eBay as it is the leading global brand for online auctions with its name being a generic term associated with auctions (http://www.marketingteacher.com/SWOT/eBay_swot.htm). It may be an extra cost to put items on further sites that will not provide as many hits and sales as eBay.
Gold and Romeo also have yet chosen their software with the choice of five different options to choose from:
Super Auction
Canauction
Clear Bid
Blackthorne
Design own software
With the cost of designing their own software being high, predicted at an initial 300 hours for a developer to create the program and a cost of $5,000 to acquire the right to use the code to make the software I would rule this option out. Not solely on this reason but also for the reason that Gold and Romeo have limited time and the program created will be untested which could cause problems.
Therefore, this leaves the four established options all being used by an online auction company at present. As all the software packages are around the same initial cost: $5000, it is hard to differentiate on this basis therefore the decision will be largely based on the functions on offer and how they meet the business plan of Auctionwire.
Firstly, I feel that the weakest bidder should be eliminated – Clear Bid. This is the weakest bidder for three main reasons: it has no Canadian shipping calendar – which Auctionwire need; the company’s customer service suffered from complaints – not ideal if Auctionwire want to set up clients and establish a good working relationship with them and, there would be a $10,000 developer fee to have a multiple client module added. I feel that this cost is far too high and for the total cost of this program, a more tailored one could have been designed solely for Auctionwire’s needs.
Further, I also feel that Super Auction should be eliminated due to one fact – in 2004 eBay halted its access to Checkout Redirect as Super Auction repeatedly failed to live up to the terms it had agreed with eBay (Case Study). Although this software program has the majority of features that Auctionwire require, this bad publicity and failure is not ideal for a business start up that will need to be extremely careful in the preliminary stage of business so as not to loose customers.
This leaves two software packages – Canauction and Blackthorne. I feel that Blackthorne should not be used as it is still in the testing stage and is not yet set up for Canadian business. This could be a major downfall in the start of a business if the software crashes – potential customers could be lost and business lost. Further, it does not support the use of auctioning on other sites as it is directed at eBay which could be a problem if Gold and Romeo do decide to pursue the use of other sites. Therefore, this leaves Canauction. I believe that this software package fulfills all of Auctionwire’s needs in what it aims to offer and the fact that it is a Canadian team who has developed it makes it perfectly aligned for Auctionwire’s strategy. It has also been developed by previous power sellers who will have extensive knowledge of the market. However, there is one downfall to this system – there are bugs that have still to be ironed out and functions that are not yet working. This is a major problem however, I propose that Gold and Romeo invest some of the $15,000 that they planned to spend on software to help solve these problems and also to speed up the process of doing so to meet their deadline of May 2004. However, if this is the best software for them that will maximize their business they may want to review their business strategy to incorporate it if the software is not ready in time. However, this delay should be minimal as on-line commerce moves at an extremely fast pace.
REFERENCES
Comisarow, M. and Mark, C., Creating Auctionwire, The University of Western Ontario, 2006
http://www.marketingteacher.com/SWOT/eBay_swot.htm
Sunday 23 December 2007
Compound Case Study
Compound UK is the selling division of a multinational pharmaceuticals company and primarily operates within the UK health sector. The reforms which took place within this market in the 1980s and 1990s led to more complex sales situations for Compound UK as hospitals became more autonomous which meant that Compound could feasibly be dealing with many different needs and conditions within the same market. In response to the changing conditions Compound UK took the decision to reorganise their business and six months after the restructuring further changes were made as it was felt that staff should share information across functional and geographic boundaries and Lotus Notes was viewed as a package which could assist with this process.
The intention of Lotus Notes was clearly to make the company more efficient and effective in their dealings with customers but with the benefit of hindsight it is possible to see that the implementation could have been managed very differently and this will now be considered.
Firstly, the introduction could have been managed differently by providing training to all reps rather than only new reps who joined the company. The training not only ensured that reps had been introduced to Lotus Notes before being allowed out to visit potential customers but also became a good social event as it allowed new employees who would normally be isolated through working from home to meet with their colleagues and develop a good team spirit. Had this idea been expanded to include current reps Compound could possibly have avoided many of the internal problems as staff would not have been so suspicious of the reasons behind the implementation and would have been more responsive to using the software properly rather than using it to further their own objectives.
Following on from the above, I would have advocated more people in senior positions following the lead of James Black as he ensured that he met with staff and got to know them as people rather than statistics on league tables. This approach was clearly successful as reps were willing to communicate fully with him, even if this meant admitting to losing a contract, and this ensured that he had the best information available to him and could give advice to ensure that future contracts would be more successful. This approach should have been encouraged throughout the company rather than allowing certain managers to encourage the "yes sir" approach used by certain employees purely to further their own careers without considering what would actually be best for the company.
A final point which should have been managed differently relates to the reward structure which was in place. Despite a new system (Notes) being implemented the reward structure remained the same and this should have been changed in order to give employees an incentive to use the system correctly. The different approaches taken by different managers simply adds to the inconsistency within this company as some employees were awarded 30% of their salary for using the shared databases fully and effectively whilst others received no credit for this and were instead judged on how many hours they had worked and if they had surpassed their sales targets. The introduction could therefore have been managed more effectively if the company had made changes to the reward structure which would make it clear what would be judged to be "proper" use of the system and would therefore encourage such behaviour.
In terms of using the functions of Lotus Notes, there are a few things that could have been done differently. One major point arises from the contact recording database: a database used to record the views, interests and requirements of particular doctors. Many reps used this contact list to make their efforts more visible by inputting a large number of contacts including all the doctors, managers, accountants and even nurses that they met in practices and hospitals. This furthered them in the league however, it was not beneficial to Compound to have this many contacts all from one practice or hospital and it also infuriated other reps who were not as motivated to further their career. Moreover, many reps that were disillusioned by this new technology simply inputted a line or a full stop. In terms of resolving these issues there could be a facility installed within the customer database to limit the number of different contacts within one hospital or practice so as to build upon the relationships already established with these contacts rather than have numerous different contacts with little knowledge on them.
Further, the use of a league facility may have gone against Compound’s favour. As can be seen from the example of school league tables, they tend to only measure one thing – results. Therefore, everything is targeted at achieving these with no focus on other aspects of the teaching environment such as extra-curricular activities or teaching quality. This is exactly the case here as the results of the league tables are based on achieving customer contacts. Therefore, it is not measuring the quality of the work being done but, rather the quantity of customers. A recommendation to improve this would be the use of multiple indicators to measure improvement or measuring the number of followed through sales from customer contact. They need to ensure that when measuring targets, the targets fit in with their overall company strategy.
The strategic selling database also caused disruption between the different reps within Compound. Many career orientated reps used these to record numerous points regardless of whether they had any complex sales issues in their territory at that moment in time. This is again similar to the point of the customer contact database in that it was focused towards quantity with the use of league tables. Again, an initiative needs to be taken to ensure that what is being inputted is relevant to complex sales rather than quantity of words that may have nothing to do with the sales. Another recommendation that could be pushed to dissolve this problem would be to monitor the usage of the regional databases to share ideas to benefit each of the reps. This part of notes was said to be used effectively by those who were not trying to further their career by exploiting the technology. Therefore, if everyone was encouraged to use this, the culture adopted by the older reps may be installed in the younger reps.
In conclusion, I feel that had Compound managed the introduction of Lotus Notes more effectively by giving consideration to the effect that a lack of training and an unchanged reward scheme and introduction of a league table would have on staff behaviour. This could have been used as an opportunity to install an overall company ethos but instead has led to a divide amongst employees. The system could be improved by the above recommendations to ensure that the targets of Compound are being met in terms of sales to customers rather than a device to input 'office politics'.
This assignment was produced in collaboration with Lynsey Smith
The intention of Lotus Notes was clearly to make the company more efficient and effective in their dealings with customers but with the benefit of hindsight it is possible to see that the implementation could have been managed very differently and this will now be considered.
Firstly, the introduction could have been managed differently by providing training to all reps rather than only new reps who joined the company. The training not only ensured that reps had been introduced to Lotus Notes before being allowed out to visit potential customers but also became a good social event as it allowed new employees who would normally be isolated through working from home to meet with their colleagues and develop a good team spirit. Had this idea been expanded to include current reps Compound could possibly have avoided many of the internal problems as staff would not have been so suspicious of the reasons behind the implementation and would have been more responsive to using the software properly rather than using it to further their own objectives.
Following on from the above, I would have advocated more people in senior positions following the lead of James Black as he ensured that he met with staff and got to know them as people rather than statistics on league tables. This approach was clearly successful as reps were willing to communicate fully with him, even if this meant admitting to losing a contract, and this ensured that he had the best information available to him and could give advice to ensure that future contracts would be more successful. This approach should have been encouraged throughout the company rather than allowing certain managers to encourage the "yes sir" approach used by certain employees purely to further their own careers without considering what would actually be best for the company.
A final point which should have been managed differently relates to the reward structure which was in place. Despite a new system (Notes) being implemented the reward structure remained the same and this should have been changed in order to give employees an incentive to use the system correctly. The different approaches taken by different managers simply adds to the inconsistency within this company as some employees were awarded 30% of their salary for using the shared databases fully and effectively whilst others received no credit for this and were instead judged on how many hours they had worked and if they had surpassed their sales targets. The introduction could therefore have been managed more effectively if the company had made changes to the reward structure which would make it clear what would be judged to be "proper" use of the system and would therefore encourage such behaviour.
In terms of using the functions of Lotus Notes, there are a few things that could have been done differently. One major point arises from the contact recording database: a database used to record the views, interests and requirements of particular doctors. Many reps used this contact list to make their efforts more visible by inputting a large number of contacts including all the doctors, managers, accountants and even nurses that they met in practices and hospitals. This furthered them in the league however, it was not beneficial to Compound to have this many contacts all from one practice or hospital and it also infuriated other reps who were not as motivated to further their career. Moreover, many reps that were disillusioned by this new technology simply inputted a line or a full stop. In terms of resolving these issues there could be a facility installed within the customer database to limit the number of different contacts within one hospital or practice so as to build upon the relationships already established with these contacts rather than have numerous different contacts with little knowledge on them.
Further, the use of a league facility may have gone against Compound’s favour. As can be seen from the example of school league tables, they tend to only measure one thing – results. Therefore, everything is targeted at achieving these with no focus on other aspects of the teaching environment such as extra-curricular activities or teaching quality. This is exactly the case here as the results of the league tables are based on achieving customer contacts. Therefore, it is not measuring the quality of the work being done but, rather the quantity of customers. A recommendation to improve this would be the use of multiple indicators to measure improvement or measuring the number of followed through sales from customer contact. They need to ensure that when measuring targets, the targets fit in with their overall company strategy.
The strategic selling database also caused disruption between the different reps within Compound. Many career orientated reps used these to record numerous points regardless of whether they had any complex sales issues in their territory at that moment in time. This is again similar to the point of the customer contact database in that it was focused towards quantity with the use of league tables. Again, an initiative needs to be taken to ensure that what is being inputted is relevant to complex sales rather than quantity of words that may have nothing to do with the sales. Another recommendation that could be pushed to dissolve this problem would be to monitor the usage of the regional databases to share ideas to benefit each of the reps. This part of notes was said to be used effectively by those who were not trying to further their career by exploiting the technology. Therefore, if everyone was encouraged to use this, the culture adopted by the older reps may be installed in the younger reps.
In conclusion, I feel that had Compound managed the introduction of Lotus Notes more effectively by giving consideration to the effect that a lack of training and an unchanged reward scheme and introduction of a league table would have on staff behaviour. This could have been used as an opportunity to install an overall company ethos but instead has led to a divide amongst employees. The system could be improved by the above recommendations to ensure that the targets of Compound are being met in terms of sales to customers rather than a device to input 'office politics'.
This assignment was produced in collaboration with Lynsey Smith
Mars Incorporated: Online Procurement
Mars Inc. (Mars) is one of the largest privately owned businesses that purchases more than $4 billion of materials annually. It is the producer of many well-known brands including Mars, Twix and M&Ms. The company was aware that many major firms were achieving savings of around five percent through the use of online procurement auctions. These are also known as reverse auctions where typically the buyer (in this case Mars) puts a Request for Quote (RFQ) for a supply contract up on the procurement website and potential bidders (suppliers) submitted bids in a reverse style to normal auctions where the bid price was driven down until, usually, the lowest price won the contract. There are many advantages and disadvantages to this method of selecting a supplier which may affect Mars in different ways.
One of the most notable advantages of reverse auctions is the savings that can be made. Recently it was documented that Thorntons the confectioner, a similar business to Mars, had made significant savings by using the online procurement service Wax Digital. Here they only signed up suppliers of hazelnuts, diesel and air conditioning with a six-figure saving (Goldsmith, 2007). This should be noted by Mars especially as they are in a similar business category. Mars is even bigger than Thorntons therefore, even more savings could stand to be made.
The reverse auction system was also seen as an advantage in addressing some of the weaknesses that Mars faced with the previous contracting procedure. One of these points is that the endpoint of negotiations with suppliers could become arbitrary and often led to a situation where another valued supplier may have been willing to offer better terms. The auction environment is ideal for this as it is seen as a much quicker process roughly taking between three and seven days compared to negotiating with suppliers which may have taken weeks of months (www.epiqtech.com). Further, it has been seen that producers have been able to streamline the vendor selection process and have made it easier on themselves to select the right supplier for each process (www.epiqtech.com). Thus, eliminating the problem of other valued suppliers being able to offer a better deal.
Another point related to reducing cost is that through auctioning over the internet, producers can be in business with suppliers from all over the globe. Before this process, producers may not even have known that these suppliers had existed due to lack of communication and information (www.epiqtech.com). This could open new doors for Mars, as an international company, to utilise the best suppliers at the best costs to them.
However, there are several disadvantages to the whole auction procedure as opposed to a conventional one. One of which is that the brute force reliance on price. It has been seen from previous examples that producers may choose the lowest bid only to find low quality products (www.epiqtech.com). Further, recently a large Asian FMCG conducted a series of auctions for its raw materials where the RFQ went well however, the suppliers refused to submit proposals as the initial bid price was set too low. Therefore, they had to cancel the auction and fresh RFQs were issued resulting in them having to pay a much higher rate for the materials (www.esourcingwiki.com). For this reason Mars may want to steer some focus to their relations with suppliers. However, it appears that they have already taken such steps with a team of consultants working with suppliers to help them with their bids.
Further, again if too much emphasis is focused on cost the producer may loose goodwill from a vendor that they have worked together for years (www.epiqtech.com). This may be particularly damaging for Mars as the bulk of their $4 billion annual direct material purchases came from a small number of highly valued suppliers. It may be that if the auction process continues that Mars will need to make specific efforts to maintain these good relations with the suppliers especially with the five core business principles that it aims to run its business by. The two principles that may cause problems related to the auctions are responsibility and mutuality. However, Mars have already stated that they do not expect to squeeze suppliers to the point of no return with the benefits of the auction being shared between Mars and its suppliers.
A further point that could amount as a disadvantage to Mars is that in auctions, opponents start with a high bid and only reduce it if they are forced to with their competitors and therefore do not always drop to the lowest price they would be willing to offer (www.aia.org). Due to this Mars may not achieve the reduced cost that they were aiming for.
In terms of the problems that Mars have found with the online auctioning system, there are possible solutions. One such problem was that Mars did not want to become dependant on just a few suppliers or end up with too large an amount of prospective suppliers. I feel the Mars has already partly found a solution to this problem through the use of passwords to gain access to the auction website. This means that all the suppliers that Mars are interested in can gain access and bid. To further combat the problem of not enough bidders, they could send the RFQ via letter or e-mail to make the announcement more visible to prospective suppliers and even advertise their website with the view of prospective suppliers applying for a password to access the site at the discretion of Mars.
In conclusion, I feel that the advantages and the measures that Mars have taken to reduce the disadvantages of the auction procedure make it a worthwhile venture to pursue. It speeds up the process of selecting a supplier and negotiating considerably and also, on the whole, has been seen to reduce costs. I also feel that if Mars continue to follow its five core business principles, through to the auction process that they will not loose the valued relationship that they have built up with valued suppliers especially if they highlight that the potential savings could be shared mutually.
REFERENCES
Bell, P, C, Mars Incorporated: Online Procurement, Ivey Management Services, 2003
Goldsmith, J, Thorntons Whips up Suppliers with Reverse Auctions, Silicon.Com, October 2007, Accessed from: http://www.silicon.com/retailandleisure/0,3800011842,39168748,00.htm
http://www.aia.org/static/state_local_resources/projectdelivery/CICC_of_MN_Reverse_Auctions.pdf
http://www.epiqtech.com/e-procurement-Trends.htm
http://www.esourcingwiki.com/indexphp/Maximising_Potential_Benefits_In_Reverse_Auction
One of the most notable advantages of reverse auctions is the savings that can be made. Recently it was documented that Thorntons the confectioner, a similar business to Mars, had made significant savings by using the online procurement service Wax Digital. Here they only signed up suppliers of hazelnuts, diesel and air conditioning with a six-figure saving (Goldsmith, 2007). This should be noted by Mars especially as they are in a similar business category. Mars is even bigger than Thorntons therefore, even more savings could stand to be made.
The reverse auction system was also seen as an advantage in addressing some of the weaknesses that Mars faced with the previous contracting procedure. One of these points is that the endpoint of negotiations with suppliers could become arbitrary and often led to a situation where another valued supplier may have been willing to offer better terms. The auction environment is ideal for this as it is seen as a much quicker process roughly taking between three and seven days compared to negotiating with suppliers which may have taken weeks of months (www.epiqtech.com). Further, it has been seen that producers have been able to streamline the vendor selection process and have made it easier on themselves to select the right supplier for each process (www.epiqtech.com). Thus, eliminating the problem of other valued suppliers being able to offer a better deal.
Another point related to reducing cost is that through auctioning over the internet, producers can be in business with suppliers from all over the globe. Before this process, producers may not even have known that these suppliers had existed due to lack of communication and information (www.epiqtech.com). This could open new doors for Mars, as an international company, to utilise the best suppliers at the best costs to them.
However, there are several disadvantages to the whole auction procedure as opposed to a conventional one. One of which is that the brute force reliance on price. It has been seen from previous examples that producers may choose the lowest bid only to find low quality products (www.epiqtech.com). Further, recently a large Asian FMCG conducted a series of auctions for its raw materials where the RFQ went well however, the suppliers refused to submit proposals as the initial bid price was set too low. Therefore, they had to cancel the auction and fresh RFQs were issued resulting in them having to pay a much higher rate for the materials (www.esourcingwiki.com). For this reason Mars may want to steer some focus to their relations with suppliers. However, it appears that they have already taken such steps with a team of consultants working with suppliers to help them with their bids.
Further, again if too much emphasis is focused on cost the producer may loose goodwill from a vendor that they have worked together for years (www.epiqtech.com). This may be particularly damaging for Mars as the bulk of their $4 billion annual direct material purchases came from a small number of highly valued suppliers. It may be that if the auction process continues that Mars will need to make specific efforts to maintain these good relations with the suppliers especially with the five core business principles that it aims to run its business by. The two principles that may cause problems related to the auctions are responsibility and mutuality. However, Mars have already stated that they do not expect to squeeze suppliers to the point of no return with the benefits of the auction being shared between Mars and its suppliers.
A further point that could amount as a disadvantage to Mars is that in auctions, opponents start with a high bid and only reduce it if they are forced to with their competitors and therefore do not always drop to the lowest price they would be willing to offer (www.aia.org). Due to this Mars may not achieve the reduced cost that they were aiming for.
In terms of the problems that Mars have found with the online auctioning system, there are possible solutions. One such problem was that Mars did not want to become dependant on just a few suppliers or end up with too large an amount of prospective suppliers. I feel the Mars has already partly found a solution to this problem through the use of passwords to gain access to the auction website. This means that all the suppliers that Mars are interested in can gain access and bid. To further combat the problem of not enough bidders, they could send the RFQ via letter or e-mail to make the announcement more visible to prospective suppliers and even advertise their website with the view of prospective suppliers applying for a password to access the site at the discretion of Mars.
In conclusion, I feel that the advantages and the measures that Mars have taken to reduce the disadvantages of the auction procedure make it a worthwhile venture to pursue. It speeds up the process of selecting a supplier and negotiating considerably and also, on the whole, has been seen to reduce costs. I also feel that if Mars continue to follow its five core business principles, through to the auction process that they will not loose the valued relationship that they have built up with valued suppliers especially if they highlight that the potential savings could be shared mutually.
REFERENCES
Bell, P, C, Mars Incorporated: Online Procurement, Ivey Management Services, 2003
Goldsmith, J, Thorntons Whips up Suppliers with Reverse Auctions, Silicon.Com, October 2007, Accessed from: http://www.silicon.com/retailandleisure/0,3800011842,39168748,00.htm
http://www.aia.org/static/state_local_resources/projectdelivery/CICC_of_MN_Reverse_Auctions.pdf
http://www.epiqtech.com/e-procurement-Trends.htm
http://www.esourcingwiki.com/indexphp/Maximising_Potential_Benefits_In_Reverse_Auction
Wednesday 12 December 2007
Computerising the NHS
The NHS is major part of British society but often comes under fire for failing to provide the high level of service which its users expect and demand. Most people assume that this is an argument concerning the standard of healthcare provided but in fact the issue runs much deeper and includes the background processes which enable the service to run at all. Like any modern organisation IT has a major role to play within the NHS and it has been claimed that greater use of IT is key to reforming the NHS. (The Economist, 2002) The Wanless Report provided some shocking statistics for everyone involved in the NHS: spending on IT had to immediately double if the NHS was to meet its targets and the NHS was guilty of spending less on IT per employee than any other industry sector. (Wanless Report in The Economist, 2002) It is therefore clear to see that computerising the NHS needs to be taken seriously as in order to regain its status as a 'national treasure' it is necessary to look to the future and consider how this process can best be undertaken in order to add value to the organisation and ultimately improve the level of service provided.
At the centre of the technology employed by the NHS is ‘the spine’. This is made up of a set of Care Record Services (en.wikipedia.org). Key to these care record services are a set of systems: the ‘Choose and Book’ hospital appointment booking system; the electronic prescription service; the personal demographic service and the ‘GP2GP’ records transfer system for family doctors (Shifrin, 2007). It will also allow for information from multiple sources to be available to those with authority to use it (Spronk, 2007).
In terms of controlling access to the spine, the NHS has proposed the use of personal authentication devices which will transmit encrypted passwords to ensure security (Cross, 1995). Further, full access to information will only be granted to those clinicians who need it, while administrative staff will only be allowed access to basic patient information (news.bbc.co.uk). On top of this there are plans for a website called ‘My Health Space’ which can be accessed over the internet by patients. This will allow patients to access their personal details from home through the use of ‘highly secure passwords’ (news.bbc.co.uk).
(Spronk, 2007)
Further, crucial to the spine is the Transaction and Messaging Spine (TMS), see above diagram. This is the master ‘router’ of all the messages between the systems and is based on the HL7 Version 3 XML Messaging Standard. Message flows from local systems are routed to the NCR (see diagram above) and oppositely, if so required (Spronk, 2007).
The network that supports the spine is called ‘N3’. This is said to be a ‘fast and efficient’ network that ensures that the new systems and services run smoothly and quickly (www.connectingforhealth.nhs.uk). This network uses a sufficient band-width to implement these new approaches such as transmitting digital images through the system (www.connectingforhealth.nhs.uk).
Implementing IT has not always gone smoothly in the NHS and in 2004 there were worries over the NHS National Project for IT (NPfIT) which was an ambitious project to computerise the NHS. This was billed as "not just another IT project" and promised that lessons had been learned from previous fiascos such as those witnessed at the Passport Office and air-traffic control. (The Economist, 2004) However, as could be expected problems were quickly identified with this project. Computer Weekly were quick to highlight that the cost of this project could rise to £18.6billion or even a massive £31billion, substantially higher than the budgeted cost of £6.2billion (The Economist, 2002) and surely enough to send shockwaves round those in charge. This illustrates the huge problem of keeping any major project on budget. If the NHS is to be successfully computerised, the people in charge will have to ensure that all projected costs are as accurate as possible and this budget must be adhered to.
A major point for the NHS to consider when implementing a computerised system is the security of the system. The data which will be held on this system is extremely sensitive and people will understandably want assurance that their personal medical records will not fall into the wrong hands. (Cross, M., 1995) Unfortunately this point appeared to have fallen on deaf ears within the NHS as in 2000 there were concerns over the security, or rather the lack of security, in place and it was claimed that the NHS was paying insufficient attention and care to patient privacy and security. (http://en.wikipedia.org/wiki/National_Programme_for_IT#Criticisms_of_the_programme) Furthermore, in 2004 the NPfIT won the "Most Appalling Project" Big Brother Award from Privacy International because of its plans to "computerise patient records without putting in place adequate privacy safeguards". (http://news.bbc.co.uk/1/hi/technology/3933679.stm)
However, despite the existence of evidence which would suggest that computerised systems within the NHS are lacking in security this does not necessarily mean that the project will be a disaster. If immediate action is taken to correct the problems there is actually the possibility that the new system will be more secure than those used previously as currently patient notes can often be left unattended in hospital wards or consulting rooms. (Cross, M., 1995) A computerised system would therefore solve this problem because all records would be held electronically and would require the use of passwords or other personal authentication devices in order to be viewed.
The security which would be employed should be given careful consideration to ensure that it is as useful as possible. Passwords are likely to be a measure used as they can limit access to information by requiring both a unique user name and password. However, staff must be made aware of basic principles such as never writing down a password and refraining from using words or phrases which can be easily guessed i.e. names of family members or favourite sports teams. (http://en.wikipedia.org/wiki/Password#Security_and_convenience) Another aspect to consider which would make the system more secure would be to time-out after a period of inactivity and require the password to be re-entered. This would be useful because if a computer was accidentally left unattended no unauthorised personnel could gain access to the system under the guise of the original user.
A point to remember is that this is a Government project and these have a long history of failure due to their tendency to be over-ambitious and are often poorly managed. (The Economist, 2002) One only has to consider the air-traffic control NATS system to illustrate this point as this project finished millions of pounds over budget, was years late being delivered (Erskine, R., 2002) and, most worryingly, it was obsolete by the time it was fully implemented. (The Economist, 2002) Most commentators believe that the main reason for this disaster was the fact that it was poorly managed and this can most obviously be highlighted by the fact that the project made use of 3 service providers. (Erskine, R., 2002) This shows a lack of consistency and a complete failure to get the correct people on board from the beginning which ultimately led to its failure. The fact that the same situation took place with the NPfIT is of major concern as it is yet another problem within an already failing project and it is only exaggerated by the fact that the customer is the Government as providers know that this customer is highly unlikely to simply scrap a project as it has used taxpayers' money and will do anything to avoid the negative publicity which would come with such a high profile failure.
Another problem with this project is that unlike a company, for example, the NHS is not a single organisation as it consists of thousands of GP surgeries, hospitals, pharmacies and clinics. (The Economist, 2002) This means that implementation at a local level could prove to be a problem as some practices may choose to resist change and this could lead to a situation where millions of pounds have been wasted as there would still be no unity across the NHS and the level of service available to patients could depend upon their location (a problem which currently exists).
Further, the time scale of the project has also come under scrutiny. At present, the programme is already two years behind schedule with no firm implementation date set (House of Commons, Committee of Public Accounts, 2007). At present almost all acute hospital trusts should have the NPfIT patient administration systems implemented however as of June 2006 this was only the case in 13 hospitals with there being a plan to increase this to 22 by October of that year. However, by February 2007 the number was only 18. Therefore, the House of Commons Public Account Committee feels that the department should enforce a robust timetable to ensure greater confidence in the delivery date (House of Commons, Committee of Public Accounts, 2007).
Additionally, this programme is only set to computerise the 50 million NHS patients in England (www.bbc.co.uk). This could be a problem for patients that regularly travel over the borders as no plan has been made in relation to Scotland and Northern Ireland. Further, Wales is in the process of implementing a programme for service and improvement through the use of IT (en.wikipedia.org). The NHS is supposed to be a National Health Service, not a service solely dedicated to serving England. Therefore, it should not only be patients in England that benefit from the increased efficiency of the system. Further, the fact that there are currently two IT improvement schemes running may make it difficult to integrate one system throughout Britain and it is therefore, possibly a wasted investment on the part of the NHS if one of the programmes needs to be scrapped to allow integration.
The project has also been criticised by civil liberties campaigners such as NO2ID who object to the state having so much personal information held on databases and The Big Opt Out who have provided patients with letters to send to their doctors to ensure that their details are withheld from the system. (en.wikipedia.org) By playing on the "Big Brother State" issue which is a hot topic at the moment such groups can ensure that many people will opt out of the system as they look to create panic and claim that the Government will soon know everything about us. Such criticisms are likely to strike a chord with many people and so it is clear that even if the project can overcome its problems it may still fail as it does not have the confidence or trust of the nation it intends to serve.
As previously mentioned, the NPfIT has only begun to look at computerising the NHS in England. One possibility for the future is that this will be rolled out through the whole of the UK. However, the stakes of the project are high. If it succeeds in its aims, the program could revolutionize the way the NHS uses information, and make significant improvements to the quality of patient care. But if it fails, it could set back IT developments in the NHS for years, and divert money and staff time from front line patient services (House of Commons, Committee of Public Accounts, 2007).
Also, in the future, further innovation in the use of IT in the NHS is inevitable. For example, a new invention of electronic patient tagging is being piloted in a hospital in Birmingham (www.mailonsunday.co.uk). This involves digital photos being taken of patients as the come into the hospital who are then tagged with the information being synchronized with their electronic records. It is said to reduce human error with patients being sure that they are going into the right operation, at the right time, with the right surgeon (www.mailonsunday.co.uk). It is estimated that it could save the NHS thousands in litigation. However, in the implementation of further innovation, the NHS should take on board the criticisms of this vast project and learn from the mistakes that they have encountered.
In sum, one can not comment on the over all conclusion of this project as it is not yet finished. However, they have aimed to implement some key pieces of technology designed to improve efficiency and accuracy within the service they provide. Whilst this is valid and beneficial to all those involved in running the NHS, working for the NHS and those using the service, the criticisms outlined above should be taken into consideration firstly, before the project is finished and also in future projects that the NHS and the government as a whole aim to implement. Key to these criticisms is the security of the systems put in place; the escalating costs of the project and the integration of the network throughout the UK. Further, as in a lot of governmental projects, the management of the project has come under scrutiny which should be able to managed efficiently after the lessons the government has learnt from previous projects. Therefore, although the project has already been 'rolled out' in some areas of England, these points should be considered carefully in the further integration throughout the UK.
REFERENCES
Cross, M, National Health Services I/S Network Takes Shape - UK National Health Information Network, Health Management Technology, January 1995
Erskine, R., At last a silver lining around the troubled NATS Air Traffic Control system, 2002, www.cs.mdx.ac.uk/research/SFC/Reports/TR2002-02.pdf, accessed on 3 December 2007
House of Commons, Committee of Public Accounts, Department of Health: The National Programme for IT in the NHS, March 2007, Accessed from:
http://www.publications.parliament.uk/pa/cm200607/cmselect/cmpubacc/390/390.pdf
Shirfrin, T, NHS Data Spine will go Off-line for a Major Upgrade, ComputerworldUK.Com, November 2007, Accessed from:
http://www.computerworlduk.com/management/government-law/public-sector/news/index.cfm?newsid=5977
Spronk, R, An English National Programme, Ringholm Whitepaper, March 2007, Accessed from:
http://www.ringholm.de/docs/00970_en.htm
The Economist, Deja vu all over again?, p.36, 2004, http://proquest.umi.com/pqdweb?index=0&did=715018391&SrchMode=1&sid=1&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1196683068&clientId=46002, accessed 19 November 2007
The Economist, The Health Service's IT Problem, p.29, 2002, http://proquest.umi.com/pqdweb?index=1&did=218613561&SrchMode=1&sid=1&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1196683068&clientId=46002, accessed 19 November 2007
http://en.wikipedia.org/wiki/National_Programme-for_IT
http://news.bbc.co.uk/1/hi/health/6454946.stm
http://www.bbc.co.uk/radio4/news/inbusiness/inbusiness-200405135.html
http://www.connectingforhealth.nhs.uk/systemsandservices/n3/background
http://www.mailonsunday.co.uk/pages/live/articles/health/healthmain.html?in_article_id=323718&in_page_id=1774
At the centre of the technology employed by the NHS is ‘the spine’. This is made up of a set of Care Record Services (en.wikipedia.org). Key to these care record services are a set of systems: the ‘Choose and Book’ hospital appointment booking system; the electronic prescription service; the personal demographic service and the ‘GP2GP’ records transfer system for family doctors (Shifrin, 2007). It will also allow for information from multiple sources to be available to those with authority to use it (Spronk, 2007).
In terms of controlling access to the spine, the NHS has proposed the use of personal authentication devices which will transmit encrypted passwords to ensure security (Cross, 1995). Further, full access to information will only be granted to those clinicians who need it, while administrative staff will only be allowed access to basic patient information (news.bbc.co.uk). On top of this there are plans for a website called ‘My Health Space’ which can be accessed over the internet by patients. This will allow patients to access their personal details from home through the use of ‘highly secure passwords’ (news.bbc.co.uk).
(Spronk, 2007)
Further, crucial to the spine is the Transaction and Messaging Spine (TMS), see above diagram. This is the master ‘router’ of all the messages between the systems and is based on the HL7 Version 3 XML Messaging Standard. Message flows from local systems are routed to the NCR (see diagram above) and oppositely, if so required (Spronk, 2007).
The network that supports the spine is called ‘N3’. This is said to be a ‘fast and efficient’ network that ensures that the new systems and services run smoothly and quickly (www.connectingforhealth.nhs.uk). This network uses a sufficient band-width to implement these new approaches such as transmitting digital images through the system (www.connectingforhealth.nhs.uk).
Implementing IT has not always gone smoothly in the NHS and in 2004 there were worries over the NHS National Project for IT (NPfIT) which was an ambitious project to computerise the NHS. This was billed as "not just another IT project" and promised that lessons had been learned from previous fiascos such as those witnessed at the Passport Office and air-traffic control. (The Economist, 2004) However, as could be expected problems were quickly identified with this project. Computer Weekly were quick to highlight that the cost of this project could rise to £18.6billion or even a massive £31billion, substantially higher than the budgeted cost of £6.2billion (The Economist, 2002) and surely enough to send shockwaves round those in charge. This illustrates the huge problem of keeping any major project on budget. If the NHS is to be successfully computerised, the people in charge will have to ensure that all projected costs are as accurate as possible and this budget must be adhered to.
A major point for the NHS to consider when implementing a computerised system is the security of the system. The data which will be held on this system is extremely sensitive and people will understandably want assurance that their personal medical records will not fall into the wrong hands. (Cross, M., 1995) Unfortunately this point appeared to have fallen on deaf ears within the NHS as in 2000 there were concerns over the security, or rather the lack of security, in place and it was claimed that the NHS was paying insufficient attention and care to patient privacy and security. (http://en.wikipedia.org/wiki/National_Programme_for_IT#Criticisms_of_the_programme) Furthermore, in 2004 the NPfIT won the "Most Appalling Project" Big Brother Award from Privacy International because of its plans to "computerise patient records without putting in place adequate privacy safeguards". (http://news.bbc.co.uk/1/hi/technology/3933679.stm)
However, despite the existence of evidence which would suggest that computerised systems within the NHS are lacking in security this does not necessarily mean that the project will be a disaster. If immediate action is taken to correct the problems there is actually the possibility that the new system will be more secure than those used previously as currently patient notes can often be left unattended in hospital wards or consulting rooms. (Cross, M., 1995) A computerised system would therefore solve this problem because all records would be held electronically and would require the use of passwords or other personal authentication devices in order to be viewed.
The security which would be employed should be given careful consideration to ensure that it is as useful as possible. Passwords are likely to be a measure used as they can limit access to information by requiring both a unique user name and password. However, staff must be made aware of basic principles such as never writing down a password and refraining from using words or phrases which can be easily guessed i.e. names of family members or favourite sports teams. (http://en.wikipedia.org/wiki/Password#Security_and_convenience) Another aspect to consider which would make the system more secure would be to time-out after a period of inactivity and require the password to be re-entered. This would be useful because if a computer was accidentally left unattended no unauthorised personnel could gain access to the system under the guise of the original user.
A point to remember is that this is a Government project and these have a long history of failure due to their tendency to be over-ambitious and are often poorly managed. (The Economist, 2002) One only has to consider the air-traffic control NATS system to illustrate this point as this project finished millions of pounds over budget, was years late being delivered (Erskine, R., 2002) and, most worryingly, it was obsolete by the time it was fully implemented. (The Economist, 2002) Most commentators believe that the main reason for this disaster was the fact that it was poorly managed and this can most obviously be highlighted by the fact that the project made use of 3 service providers. (Erskine, R., 2002) This shows a lack of consistency and a complete failure to get the correct people on board from the beginning which ultimately led to its failure. The fact that the same situation took place with the NPfIT is of major concern as it is yet another problem within an already failing project and it is only exaggerated by the fact that the customer is the Government as providers know that this customer is highly unlikely to simply scrap a project as it has used taxpayers' money and will do anything to avoid the negative publicity which would come with such a high profile failure.
Another problem with this project is that unlike a company, for example, the NHS is not a single organisation as it consists of thousands of GP surgeries, hospitals, pharmacies and clinics. (The Economist, 2002) This means that implementation at a local level could prove to be a problem as some practices may choose to resist change and this could lead to a situation where millions of pounds have been wasted as there would still be no unity across the NHS and the level of service available to patients could depend upon their location (a problem which currently exists).
Further, the time scale of the project has also come under scrutiny. At present, the programme is already two years behind schedule with no firm implementation date set (House of Commons, Committee of Public Accounts, 2007). At present almost all acute hospital trusts should have the NPfIT patient administration systems implemented however as of June 2006 this was only the case in 13 hospitals with there being a plan to increase this to 22 by October of that year. However, by February 2007 the number was only 18. Therefore, the House of Commons Public Account Committee feels that the department should enforce a robust timetable to ensure greater confidence in the delivery date (House of Commons, Committee of Public Accounts, 2007).
Additionally, this programme is only set to computerise the 50 million NHS patients in England (www.bbc.co.uk). This could be a problem for patients that regularly travel over the borders as no plan has been made in relation to Scotland and Northern Ireland. Further, Wales is in the process of implementing a programme for service and improvement through the use of IT (en.wikipedia.org). The NHS is supposed to be a National Health Service, not a service solely dedicated to serving England. Therefore, it should not only be patients in England that benefit from the increased efficiency of the system. Further, the fact that there are currently two IT improvement schemes running may make it difficult to integrate one system throughout Britain and it is therefore, possibly a wasted investment on the part of the NHS if one of the programmes needs to be scrapped to allow integration.
The project has also been criticised by civil liberties campaigners such as NO2ID who object to the state having so much personal information held on databases and The Big Opt Out who have provided patients with letters to send to their doctors to ensure that their details are withheld from the system. (en.wikipedia.org) By playing on the "Big Brother State" issue which is a hot topic at the moment such groups can ensure that many people will opt out of the system as they look to create panic and claim that the Government will soon know everything about us. Such criticisms are likely to strike a chord with many people and so it is clear that even if the project can overcome its problems it may still fail as it does not have the confidence or trust of the nation it intends to serve.
As previously mentioned, the NPfIT has only begun to look at computerising the NHS in England. One possibility for the future is that this will be rolled out through the whole of the UK. However, the stakes of the project are high. If it succeeds in its aims, the program could revolutionize the way the NHS uses information, and make significant improvements to the quality of patient care. But if it fails, it could set back IT developments in the NHS for years, and divert money and staff time from front line patient services (House of Commons, Committee of Public Accounts, 2007).
Also, in the future, further innovation in the use of IT in the NHS is inevitable. For example, a new invention of electronic patient tagging is being piloted in a hospital in Birmingham (www.mailonsunday.co.uk). This involves digital photos being taken of patients as the come into the hospital who are then tagged with the information being synchronized with their electronic records. It is said to reduce human error with patients being sure that they are going into the right operation, at the right time, with the right surgeon (www.mailonsunday.co.uk). It is estimated that it could save the NHS thousands in litigation. However, in the implementation of further innovation, the NHS should take on board the criticisms of this vast project and learn from the mistakes that they have encountered.
In sum, one can not comment on the over all conclusion of this project as it is not yet finished. However, they have aimed to implement some key pieces of technology designed to improve efficiency and accuracy within the service they provide. Whilst this is valid and beneficial to all those involved in running the NHS, working for the NHS and those using the service, the criticisms outlined above should be taken into consideration firstly, before the project is finished and also in future projects that the NHS and the government as a whole aim to implement. Key to these criticisms is the security of the systems put in place; the escalating costs of the project and the integration of the network throughout the UK. Further, as in a lot of governmental projects, the management of the project has come under scrutiny which should be able to managed efficiently after the lessons the government has learnt from previous projects. Therefore, although the project has already been 'rolled out' in some areas of England, these points should be considered carefully in the further integration throughout the UK.
REFERENCES
Cross, M, National Health Services I/S Network Takes Shape - UK National Health Information Network, Health Management Technology, January 1995
Erskine, R., At last a silver lining around the troubled NATS Air Traffic Control system, 2002, www.cs.mdx.ac.uk/research/SFC/Reports/TR2002-02.pdf, accessed on 3 December 2007
House of Commons, Committee of Public Accounts, Department of Health: The National Programme for IT in the NHS, March 2007, Accessed from:
http://www.publications.parliament.uk/pa/cm200607/cmselect/cmpubacc/390/390.pdf
Shirfrin, T, NHS Data Spine will go Off-line for a Major Upgrade, ComputerworldUK.Com, November 2007, Accessed from:
http://www.computerworlduk.com/management/government-law/public-sector/news/index.cfm?newsid=5977
Spronk, R, An English National Programme, Ringholm Whitepaper, March 2007, Accessed from:
http://www.ringholm.de/docs/00970_en.htm
The Economist, Deja vu all over again?, p.36, 2004, http://proquest.umi.com/pqdweb?index=0&did=715018391&SrchMode=1&sid=1&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1196683068&clientId=46002, accessed 19 November 2007
The Economist, The Health Service's IT Problem, p.29, 2002, http://proquest.umi.com/pqdweb?index=1&did=218613561&SrchMode=1&sid=1&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1196683068&clientId=46002, accessed 19 November 2007
http://en.wikipedia.org/wiki/National_Programme-for_IT
http://news.bbc.co.uk/1/hi/health/6454946.stm
http://www.bbc.co.uk/radio4/news/inbusiness/inbusiness-200405135.html
http://www.connectingforhealth.nhs.uk/systemsandservices/n3/background
http://www.mailonsunday.co.uk/pages/live/articles/health/healthmain.html?in_article_id=323718&in_page_id=1774
MySQL Open Source Database – The Advantages and Disadvantages
Open source software is computer software for which the human-readable source code is made available under a copyright licence (or an arrangement such as in the public domain) that meets the open source definition. This permits users to change and improve the software, and to redistribute it in a modified or unmodified form. It is most often developed in a public, collaborative manner (http://en.wikipedia.org). One example of a company that produces open source software is MySQL. This is the world’s most popular open source database software, with over 100 million copies of its software downloaded or distributed throughout history (http://www.mysql.com). However, this software is in competition with closed source software produced by companies such as Microsoft, IBM and Oracle (Case Study). Therefore, it is important to look at the advantages and disadvantages of using open source software in a business to determine whether its use should be adopted.
One of the advantages of using open source software that may appeal to those starting up a business, where cost can be a major factor, is the fact that the core software is free (http://tamingthebeast.net). Companies that have used such an approach are Google, Yahoo and Sabre Holding’s Travelocity (Case Study). In using this approach companies have a lower cost advantage and therefore can utilize their cash in other aspects of the business.
Further, the above companies also took advantage of the ability to modify parts of the underlying software to differentiate themselves in their own markets (Case Study). For those who understand this process, it is a very low cost way of improving and expanding the business which can be seen from the prime example of Google which is becoming ever more dominant. Additionally on this point, the fact that the source code is available in the public domain means that a business owner can take a more hands on approach to the software used on site (http://tamingthebeast.net). If the owner understands a little of the ‘voodoo’ that goes behind the scenes, it may help when trying to solve problems.
Another benefit of using open source software in business is that many employees can work from home. This point is demonstrated in MySQL where seventy percent of their staff work from home (Case Study). As the source code is available in the public domain, programmers can work anywhere in the world on a project over the internet. This not only allows freedom for employees but, saves on office costs further reducing the outgoing costs to a business.
Additionally, a gain in business in using open source software is the support that can be offered. In the case of MySQL, they introduced a network support offer for end users. Although a subscription was required it provided updates, alerts, notifications, knowledge base and production level support (Case Study). A key aspect in this is that those offering the support may be known as ‘ugrammers’. These are programmers who are also users of the software they develop. This has high advantages as the programmer-user communication gap is eliminated which can often result in better specifications in the software (http://en.wikipedia.org).
However, there are disadvantages for a business in adopting open source software. One of these disadvantages relates to the fact that companies such as MySQL are in competition with closed software producers (Case Study), the largest of these being Microsoft. And as open source software tends to be created by people who do not want to work with Microsoft, the products that they do create tend to integrate poorly with windows and therefore their users can not take full advantage of the ‘Windows Environment’ (http://www.gismonitor.com).
Another drawback in using open source software is that it can often rely on further technology provided by another party (Case Study). In looking at MySQL, this was a problem when Oracle – a closed source software supplier – bought over Innobase, which exclusively provided a key input component – a transactional engine – for MySQL. This could have caused serious harm to one of MySQL’s major customers, Travelocity. This point will affect users in different ways; it will depend upon how much the business relies on certain software and how often it is used as to whether this would affect the business.
An additional weakness related to support, as discussed above, is that without some kind of support network, for example the subscription service provided by MySQL, no-one is responsible for resolving problems. Therefore, there is no incentive or guarantee that it will be fixed (http://en.wikipedia.org). This is a major problem in business as if the problem does go unanswered, the business will need to pay some one to fix it. If this is the case, it may have been cheaper to buy a mature and developed closed application (http://en.wikipedia.org).
A further problem to note in business is that in this market – databases, there is fierce competition to improve companies with many being pushed out the market or being bought over (Case Study). This could be a problem in choosing either open or closed source software. Therefore, it may be beneficial to look at the proposed software and the competitors around the company that produce it. As if it goes out of business, there will be no opportunity to receive a support service.
In summary, I feel that there are many advantages and disadvantages in the use of open source software. However, I do not feel that I can come to one overall conclusion recommending whether or not to use it in business. I believe that it depends on the nature of your business on whether it would be effective. It can be seen that its’ innovative side has highly benefited Google, Yahoo and Travelocity however; they have the expertise to run it. If you, as a business, have the expertise to use the underlying technology I would advise its use as it is innovative and modern however, if not I feel that it depends on the strategy and the cost implications to the business.
REFERENCES
MySQL Open Source Database in 2006 (B), Case Study, Stanford Graduate School of Business
http://en.wikipedia.org/wiki/Open-source_software
http://tamingthebeast.net/articles5/open-source-software.htm
http://www.gismonitor.com/articles5/comment/061903_Dmitri.php
http://www.mysql.com/company/
One of the advantages of using open source software that may appeal to those starting up a business, where cost can be a major factor, is the fact that the core software is free (http://tamingthebeast.net). Companies that have used such an approach are Google, Yahoo and Sabre Holding’s Travelocity (Case Study). In using this approach companies have a lower cost advantage and therefore can utilize their cash in other aspects of the business.
Further, the above companies also took advantage of the ability to modify parts of the underlying software to differentiate themselves in their own markets (Case Study). For those who understand this process, it is a very low cost way of improving and expanding the business which can be seen from the prime example of Google which is becoming ever more dominant. Additionally on this point, the fact that the source code is available in the public domain means that a business owner can take a more hands on approach to the software used on site (http://tamingthebeast.net). If the owner understands a little of the ‘voodoo’ that goes behind the scenes, it may help when trying to solve problems.
Another benefit of using open source software in business is that many employees can work from home. This point is demonstrated in MySQL where seventy percent of their staff work from home (Case Study). As the source code is available in the public domain, programmers can work anywhere in the world on a project over the internet. This not only allows freedom for employees but, saves on office costs further reducing the outgoing costs to a business.
Additionally, a gain in business in using open source software is the support that can be offered. In the case of MySQL, they introduced a network support offer for end users. Although a subscription was required it provided updates, alerts, notifications, knowledge base and production level support (Case Study). A key aspect in this is that those offering the support may be known as ‘ugrammers’. These are programmers who are also users of the software they develop. This has high advantages as the programmer-user communication gap is eliminated which can often result in better specifications in the software (http://en.wikipedia.org).
However, there are disadvantages for a business in adopting open source software. One of these disadvantages relates to the fact that companies such as MySQL are in competition with closed software producers (Case Study), the largest of these being Microsoft. And as open source software tends to be created by people who do not want to work with Microsoft, the products that they do create tend to integrate poorly with windows and therefore their users can not take full advantage of the ‘Windows Environment’ (http://www.gismonitor.com).
Another drawback in using open source software is that it can often rely on further technology provided by another party (Case Study). In looking at MySQL, this was a problem when Oracle – a closed source software supplier – bought over Innobase, which exclusively provided a key input component – a transactional engine – for MySQL. This could have caused serious harm to one of MySQL’s major customers, Travelocity. This point will affect users in different ways; it will depend upon how much the business relies on certain software and how often it is used as to whether this would affect the business.
An additional weakness related to support, as discussed above, is that without some kind of support network, for example the subscription service provided by MySQL, no-one is responsible for resolving problems. Therefore, there is no incentive or guarantee that it will be fixed (http://en.wikipedia.org). This is a major problem in business as if the problem does go unanswered, the business will need to pay some one to fix it. If this is the case, it may have been cheaper to buy a mature and developed closed application (http://en.wikipedia.org).
A further problem to note in business is that in this market – databases, there is fierce competition to improve companies with many being pushed out the market or being bought over (Case Study). This could be a problem in choosing either open or closed source software. Therefore, it may be beneficial to look at the proposed software and the competitors around the company that produce it. As if it goes out of business, there will be no opportunity to receive a support service.
In summary, I feel that there are many advantages and disadvantages in the use of open source software. However, I do not feel that I can come to one overall conclusion recommending whether or not to use it in business. I believe that it depends on the nature of your business on whether it would be effective. It can be seen that its’ innovative side has highly benefited Google, Yahoo and Travelocity however; they have the expertise to run it. If you, as a business, have the expertise to use the underlying technology I would advise its use as it is innovative and modern however, if not I feel that it depends on the strategy and the cost implications to the business.
REFERENCES
MySQL Open Source Database in 2006 (B), Case Study, Stanford Graduate School of Business
http://en.wikipedia.org/wiki/Open-source_software
http://tamingthebeast.net/articles5/open-source-software.htm
http://www.gismonitor.com/articles5/comment/061903_Dmitri.php
http://www.mysql.com/company/
Thursday 6 December 2007
IT Outsourcing at the BBC
Background
On 1st October 2004, the BBC signed an IT outsourcing contract with Siemens Business Services (SBS). It sold BBCTL which provided content management solutions to media enterprises in North America and the BBC. This contract was one of its kind in the media industry and the largest secured by SBS. The main reason for signing this contract was cost reduction, largely being pushed by the UK government (Case Study). However, there were other reasons to outsource, with the process of selecting a supplier being particularly interesting.
Introduction
Outsourcing involves the transfer of management and/ or the day to day execution of an entire business function to an external service provider. The client organization and the supplier enter into a contractual agreement and under that agreement the supplier acquires the means of production in the form of a transfer of people, assets and other resources from the client. The client then agrees to procure the services from the supplier for the term of the contract (en.wikipedia.org). In terms of the contractual agreement between the BBC and SBS, the BBC transferred 1,400 staff and access to £20 million worth of contracts with the agreement that SBS would provide technology support and services (Case Study).
Reasons for the BBC to Outsource
It could be said that the BBC outsourced for one reason – cost reduction via pressure from the UK Government. In order to achieve this, the BBC started BBCTL. The aim of this was to increase revenues for the parent company by providing technology services to the third party media enterprises (Case Study). This was the latest in a range of innovative ideas implemented by the BBC since its origin in 1922. However, pressure from the UK Government began to mount which led the CTO, John Varney, to consider outsourcing their IT (Case Study).
The BBC projected that it would save approximately £20 to £30 million per year through outsourcing (Case Study). However, mistakes were made when estimating cost reduction with the BBC Governors being briefed on yearly savings of £35.2 million. In the first year of the contract there were savings of £22 million, £13.4 million lower than the guaranteed level however, the BBC now expects to make savings of £40 million per year for the remainder of the contract, though the Government remain speculative on this (House of Commons, Committee of Public Accounts, 2007).
Another reason that John Varney gave for outsourcing was that BBCTL deserved to belong to a ‘technology parent’ rather than a ‘content parent’. He felt that there were views that the BBC should not be investing in speculative technology (Case Study), as the BBC was a media company.
Further, if the BBC decided against outsourcing, the pressure it was under from the government may have led it to cut up to 300 jobs in a project named Project Leo (Case Study).
The Positive Aspects in Selecting a Supplier
The process of selecting a supplier was co-ordinated particularly well with a team of 26 core members looking after the deal (Case Study). From a pre-qualifying questionnaire, nine suppliers were short-listed with eight entering the bidding process. The information that they were asked to supply was: their process for providing outsourced services and the requirements for the transformation at the BBC. In using this information, three preferred bidders were announced with one pulling out leaving Accenture and SBS. Finally, SBS were chosen as the preferred bidder due to their knowledge of the BBC’s culture (Case Study). I feel that the process of selecting a supplier was undertaken meticulously with right down to the detail of aligning the two companies’ cultures to ensure the best transition possible.
Also, throughout the bidding process, the BBC used a criteria for evaluation (Case Study) to best ensure the right supplier was chosen. I feel that this further enforces the point that they spent a great deal of time and effort ensuring that they got the right supplier to meet their needs.
The Negative Aspects in Selecting a Supplier
In relation to the employees of BBCTL, the bidding process was not managed well. The decision to sell came as a shock and throughout the bidding process right to the decision to sell, the issue of job cuts was handled poorly. Industrial action was planned by the union, BECTU, which was only called off due to a legal technicality (McCue, 2004). This problem was further inflamed when the BBC gave the final two bidders Project Leo. Luke Crawley, a BECTU official, commented that: “we always knew that there was a risk of staff being fired once the sale went through but, it’s astonishing that the current management are not just making the bullets but, loading them into the new employer’s gun” (Oates, 2004).
Another problem when negotiating with SBS is they signed a contract for 10 years which may be too long as this type of contract had not yet been tested, if it was to fail, the BBC would be locked into the contract for a huge length of time.
Also, the BBC did not include profit sharing in the company if SBS’ returns exceeded a specific level (House of Commons, Committee of Public Accounts, 2007). If the return does exceed a specific level, the BBC may have been able to increase its revenues to the governments desires by gaining from SBS’ investments.
Further, in outsourcing, the BBC has lost intellectual property rights over some of its award-winning technologies and has lost its ties with the latest technology innovations in an industry that is increasingly using IT (Case Study). This could be a major problem in the future for the BBC as up to the present date the BBC has stayed in line with its competitors by being innovative.
In relation to this, SBS has become one of the leading IT vendors in the broadcasting industry, with the potential to substantially expand outside of its core BBC market (Case Study). This may be seen as a foregone opportunity for the BBC to have increased revenues. However, it may also be noted that the BBC is a media company, not a technology company and it may not have had the expertise to expand in the way that SBS has.
Conclusion
In conclusion, I feel that the BBC has made a bad decision in the way it has outsourced its IT services. This is mainly due to the fact that it has lost the potential to innovate through IT especially since most of the media industry is increasingly using IT. Further, through selling off its IT subsidiary, it has lost valuable intellectual property rights over its award winning technologies and did not even include a profit sharing clause into the contract. I believe that this decision will only benefit the BBC in the short-term in cost reductions and they may have been better off investing in BBCTL to gain further revenues.
References
Case Study – Kumar, K, V, Information Technology Outsourcing at the BBC, ICFAI Centre for Management Research, 2006
House of Commons, Committee of Public Accounts, BBC Outsourcing: the Contract between the BBC and Siemens Business Service, June 2007
www.publications.parliment.uk/pa/cm200607/cmselect/cmpubacc/118/118.pdf
McCue, A, BBC Completes £1.9 billion IT sell-off to Siemens: Union Accuses the BBC of selling off its ‘Crown Jewels’ to the Private Sector, Silicon, October 2004
http://management.silicon.com/government/0,39024677,39124584,00.htm
Oates, J, The BBC Outsource Deal Includes Staff Black List, The Register, June 2004
www.theregister.co.uk/2004/06/16/bbc_strike/
http://en.wikipedia.org/wiki/Outsourcing
On 1st October 2004, the BBC signed an IT outsourcing contract with Siemens Business Services (SBS). It sold BBCTL which provided content management solutions to media enterprises in North America and the BBC. This contract was one of its kind in the media industry and the largest secured by SBS. The main reason for signing this contract was cost reduction, largely being pushed by the UK government (Case Study). However, there were other reasons to outsource, with the process of selecting a supplier being particularly interesting.
Introduction
Outsourcing involves the transfer of management and/ or the day to day execution of an entire business function to an external service provider. The client organization and the supplier enter into a contractual agreement and under that agreement the supplier acquires the means of production in the form of a transfer of people, assets and other resources from the client. The client then agrees to procure the services from the supplier for the term of the contract (en.wikipedia.org). In terms of the contractual agreement between the BBC and SBS, the BBC transferred 1,400 staff and access to £20 million worth of contracts with the agreement that SBS would provide technology support and services (Case Study).
Reasons for the BBC to Outsource
It could be said that the BBC outsourced for one reason – cost reduction via pressure from the UK Government. In order to achieve this, the BBC started BBCTL. The aim of this was to increase revenues for the parent company by providing technology services to the third party media enterprises (Case Study). This was the latest in a range of innovative ideas implemented by the BBC since its origin in 1922. However, pressure from the UK Government began to mount which led the CTO, John Varney, to consider outsourcing their IT (Case Study).
The BBC projected that it would save approximately £20 to £30 million per year through outsourcing (Case Study). However, mistakes were made when estimating cost reduction with the BBC Governors being briefed on yearly savings of £35.2 million. In the first year of the contract there were savings of £22 million, £13.4 million lower than the guaranteed level however, the BBC now expects to make savings of £40 million per year for the remainder of the contract, though the Government remain speculative on this (House of Commons, Committee of Public Accounts, 2007).
Another reason that John Varney gave for outsourcing was that BBCTL deserved to belong to a ‘technology parent’ rather than a ‘content parent’. He felt that there were views that the BBC should not be investing in speculative technology (Case Study), as the BBC was a media company.
Further, if the BBC decided against outsourcing, the pressure it was under from the government may have led it to cut up to 300 jobs in a project named Project Leo (Case Study).
The Positive Aspects in Selecting a Supplier
The process of selecting a supplier was co-ordinated particularly well with a team of 26 core members looking after the deal (Case Study). From a pre-qualifying questionnaire, nine suppliers were short-listed with eight entering the bidding process. The information that they were asked to supply was: their process for providing outsourced services and the requirements for the transformation at the BBC. In using this information, three preferred bidders were announced with one pulling out leaving Accenture and SBS. Finally, SBS were chosen as the preferred bidder due to their knowledge of the BBC’s culture (Case Study). I feel that the process of selecting a supplier was undertaken meticulously with right down to the detail of aligning the two companies’ cultures to ensure the best transition possible.
Also, throughout the bidding process, the BBC used a criteria for evaluation (Case Study) to best ensure the right supplier was chosen. I feel that this further enforces the point that they spent a great deal of time and effort ensuring that they got the right supplier to meet their needs.
The Negative Aspects in Selecting a Supplier
In relation to the employees of BBCTL, the bidding process was not managed well. The decision to sell came as a shock and throughout the bidding process right to the decision to sell, the issue of job cuts was handled poorly. Industrial action was planned by the union, BECTU, which was only called off due to a legal technicality (McCue, 2004). This problem was further inflamed when the BBC gave the final two bidders Project Leo. Luke Crawley, a BECTU official, commented that: “we always knew that there was a risk of staff being fired once the sale went through but, it’s astonishing that the current management are not just making the bullets but, loading them into the new employer’s gun” (Oates, 2004).
Another problem when negotiating with SBS is they signed a contract for 10 years which may be too long as this type of contract had not yet been tested, if it was to fail, the BBC would be locked into the contract for a huge length of time.
Also, the BBC did not include profit sharing in the company if SBS’ returns exceeded a specific level (House of Commons, Committee of Public Accounts, 2007). If the return does exceed a specific level, the BBC may have been able to increase its revenues to the governments desires by gaining from SBS’ investments.
Further, in outsourcing, the BBC has lost intellectual property rights over some of its award-winning technologies and has lost its ties with the latest technology innovations in an industry that is increasingly using IT (Case Study). This could be a major problem in the future for the BBC as up to the present date the BBC has stayed in line with its competitors by being innovative.
In relation to this, SBS has become one of the leading IT vendors in the broadcasting industry, with the potential to substantially expand outside of its core BBC market (Case Study). This may be seen as a foregone opportunity for the BBC to have increased revenues. However, it may also be noted that the BBC is a media company, not a technology company and it may not have had the expertise to expand in the way that SBS has.
Conclusion
In conclusion, I feel that the BBC has made a bad decision in the way it has outsourced its IT services. This is mainly due to the fact that it has lost the potential to innovate through IT especially since most of the media industry is increasingly using IT. Further, through selling off its IT subsidiary, it has lost valuable intellectual property rights over its award winning technologies and did not even include a profit sharing clause into the contract. I believe that this decision will only benefit the BBC in the short-term in cost reductions and they may have been better off investing in BBCTL to gain further revenues.
References
Case Study – Kumar, K, V, Information Technology Outsourcing at the BBC, ICFAI Centre for Management Research, 2006
House of Commons, Committee of Public Accounts, BBC Outsourcing: the Contract between the BBC and Siemens Business Service, June 2007
www.publications.parliment.uk/pa/cm200607/cmselect/cmpubacc/118/118.pdf
McCue, A, BBC Completes £1.9 billion IT sell-off to Siemens: Union Accuses the BBC of selling off its ‘Crown Jewels’ to the Private Sector, Silicon, October 2004
http://management.silicon.com/government/0,39024677,39124584,00.htm
Oates, J, The BBC Outsource Deal Includes Staff Black List, The Register, June 2004
www.theregister.co.uk/2004/06/16/bbc_strike/
http://en.wikipedia.org/wiki/Outsourcing
Wednesday 21 November 2007
Geneva Case Study
Introduction
Geneva Pharmaceuticals are one of the world's largest generic drug manufacturers with revenues in excess of $300 million in 1998. Until 1996 Geneva's information systems were incompatible across business areas; for example, the accounts department could not be made available to manufacturing without re-keying the data manually. This was a major problem for Geneva because it meant that time was being wasted reproducing data and there was a high incidence of 'dirty data' - factors which lead to inefficiency and inevitably the loss of profits. Management at Geneva realised that such problems existed in their company which led to their belief that they needed a "common, integrated company-wide solution to improve data and reduce costs". Their solution? Deploy SAP's R/3 system.
Enterprise Resource Planning (ERP) systems integrate (or attempt to integrate) all data and processes of an organisation into a unified system (www.wikipedia.org). Due to the desire within Geneva for applications to be compatible across business units it is possible to see the attraction of SAP R/3.
Phase One
The main aim of this phase was to reduce the cost of operations. The SAP R/3 system would require data to be entered only once - thus saving time and money, with efficiency greatly increased.
However, despite such suitable objectives many key problems occurred. There was little communication or co-ordination amongst the team implementing the system which is clearly a recipe for disaster and it was actually necessary to bring in a new CIO in order to provide the project with better leadership. As witnessed in the London Stock Exchange it is very difficult to implement changes if you fail to consider organisational feasibility and fail to communicate effectively (Taurus v Crest) and it is likely that this contributed to these problems.
Another major decision and, ultimately, a problem at this stage is the fact that Accelerated SAP (ASAP) was chosen due to its promise of a short implementation cycle of only 6 months. This appears to be a valid decision because any company would want their systems to be running as quickly as possible in order to reap the maximum benefits however, 4 months down the line very little progress had been made; Geneva was therefore well behind schedule and this could have knock-on effects for future stages. The following quote appears to embody the thought process at Geneva: "some people want to do everything in one or two months and underestimate the time it takes for proper development and employee comprehension"(McCabe, R., 2007). By considering such an attitude it is easy to see why problems occurred because by trying to do things too quickly one can fail to notice areas which are actually struggling.
Finally, at this stage it emerged that the new system provided Geneva with problems that had not existed within the original system. This was a major blow because the system was designed to be better and more efficient than its predecessor, not worse and after so much time and money had been spent on the system it is reasonable to expect it to carry out its function properly.
Phase Two
A key point to note at this phase is the fact that it was far more challenging than the previous phase due to the complex nature that Geneva used in dealing with customer orders, rebates and chargebacks. Due to this, a decision was made to change those managing the project as the first phase had suffered from so many set backs. Whitman-Hart was replaced by Arthur Andersen and Oliver White, consulting firms, due to Arthur Andersen’s knowledge in the technical configuration aspects of SAP implementation and Oliver Whites’ reputation.
On top of this, Anna Bourgeois was assigned the overall responsibility for this phase due to her extensive knowledge in this field.
Another point that was raised at this stage was the conceptual design of the system in which thirteen areas for improvement were highlighted with four emerging repeatedly. This stage was carried out by the key users who were most knowledgeable with the existing processes with help from Oliver White. The use of expertise here was important to ensure that the best design possible was established. To further this point, prototypes were used to test these emerging areas of conceptual design against any emerging problems.
Also, in this phase a lot of attention was paid to the management of change in relation to the staff and training. This process was taken extremely seriously with posters, surveys and even a telephone line implemented for staff to call in relation to their worries. Further, three full weeks were devoted to training. This point of the project was undertaken meticulously possibly, with a little too much emphasis.
Phase Three
A key decision of this phase was the fact that they reinstated the project manager from phase one. This could be seen as a problem as in phase one there were problems relating to communication, co-ordination and time scale.
A key benefit of ERP systems highlighted in this phase is they can save a lot of time. It was estimated that using the R/3 model for sales and operational planning (SOP) would cut this process from 20 to 10 days - an important selling point of these systems. Further, at the time of this case SAP brought out a new module - Advanced Purchase Optimiser which combined with SOP would answer the unique business needs of the company. This will then go on to help meet Geneva's targeted business improvement of having their orders 'ready to promise' which will help improve its customer service levels.
Conclusion
In conclusion, there are a number of things we can learn from this ERP implementation. Firstly, it is necessary to have the correct people on board from the start as Geneva had to implement personnel changes during the project and ERP is as much about people as it is about systems. It is also necessary to have a realistic view of the time frame required as phase 1 ran over schedule which had knock-on effects for the other stages and staff are likely to be demotivated if they are continually told different finishing dates. However, we can also learn from Geneva's successes such as spending a large amount of time and effort making staff receptive to change and training staff to ensure that they are confident in using the system, as one of the main reasons for failure is that staff often feel scared of the technology and fail to make the best use of it in their day-to-day work.
REFERENCES
McCabe, R., How to recover from a failed ERP implementation, http://www.microsoft.com/canada/midsizebusiness/businessvalue/local/failederp.mspx, accessed 14 November 2007
SAP R/3 implementation at Geneva Pharmaceuticals, Case Study
Taurus v Crest, Case Study
This post was created in collaberation with Lynsey Smith
Geneva Pharmaceuticals are one of the world's largest generic drug manufacturers with revenues in excess of $300 million in 1998. Until 1996 Geneva's information systems were incompatible across business areas; for example, the accounts department could not be made available to manufacturing without re-keying the data manually. This was a major problem for Geneva because it meant that time was being wasted reproducing data and there was a high incidence of 'dirty data' - factors which lead to inefficiency and inevitably the loss of profits. Management at Geneva realised that such problems existed in their company which led to their belief that they needed a "common, integrated company-wide solution to improve data and reduce costs". Their solution? Deploy SAP's R/3 system.
Enterprise Resource Planning (ERP) systems integrate (or attempt to integrate) all data and processes of an organisation into a unified system (www.wikipedia.org). Due to the desire within Geneva for applications to be compatible across business units it is possible to see the attraction of SAP R/3.
Phase One
The main aim of this phase was to reduce the cost of operations. The SAP R/3 system would require data to be entered only once - thus saving time and money, with efficiency greatly increased.
However, despite such suitable objectives many key problems occurred. There was little communication or co-ordination amongst the team implementing the system which is clearly a recipe for disaster and it was actually necessary to bring in a new CIO in order to provide the project with better leadership. As witnessed in the London Stock Exchange it is very difficult to implement changes if you fail to consider organisational feasibility and fail to communicate effectively (Taurus v Crest) and it is likely that this contributed to these problems.
Another major decision and, ultimately, a problem at this stage is the fact that Accelerated SAP (ASAP) was chosen due to its promise of a short implementation cycle of only 6 months. This appears to be a valid decision because any company would want their systems to be running as quickly as possible in order to reap the maximum benefits however, 4 months down the line very little progress had been made; Geneva was therefore well behind schedule and this could have knock-on effects for future stages. The following quote appears to embody the thought process at Geneva: "some people want to do everything in one or two months and underestimate the time it takes for proper development and employee comprehension"(McCabe, R., 2007). By considering such an attitude it is easy to see why problems occurred because by trying to do things too quickly one can fail to notice areas which are actually struggling.
Finally, at this stage it emerged that the new system provided Geneva with problems that had not existed within the original system. This was a major blow because the system was designed to be better and more efficient than its predecessor, not worse and after so much time and money had been spent on the system it is reasonable to expect it to carry out its function properly.
Phase Two
A key point to note at this phase is the fact that it was far more challenging than the previous phase due to the complex nature that Geneva used in dealing with customer orders, rebates and chargebacks. Due to this, a decision was made to change those managing the project as the first phase had suffered from so many set backs. Whitman-Hart was replaced by Arthur Andersen and Oliver White, consulting firms, due to Arthur Andersen’s knowledge in the technical configuration aspects of SAP implementation and Oliver Whites’ reputation.
On top of this, Anna Bourgeois was assigned the overall responsibility for this phase due to her extensive knowledge in this field.
Another point that was raised at this stage was the conceptual design of the system in which thirteen areas for improvement were highlighted with four emerging repeatedly. This stage was carried out by the key users who were most knowledgeable with the existing processes with help from Oliver White. The use of expertise here was important to ensure that the best design possible was established. To further this point, prototypes were used to test these emerging areas of conceptual design against any emerging problems.
Also, in this phase a lot of attention was paid to the management of change in relation to the staff and training. This process was taken extremely seriously with posters, surveys and even a telephone line implemented for staff to call in relation to their worries. Further, three full weeks were devoted to training. This point of the project was undertaken meticulously possibly, with a little too much emphasis.
Phase Three
A key decision of this phase was the fact that they reinstated the project manager from phase one. This could be seen as a problem as in phase one there were problems relating to communication, co-ordination and time scale.
A key benefit of ERP systems highlighted in this phase is they can save a lot of time. It was estimated that using the R/3 model for sales and operational planning (SOP) would cut this process from 20 to 10 days - an important selling point of these systems. Further, at the time of this case SAP brought out a new module - Advanced Purchase Optimiser which combined with SOP would answer the unique business needs of the company. This will then go on to help meet Geneva's targeted business improvement of having their orders 'ready to promise' which will help improve its customer service levels.
Conclusion
In conclusion, there are a number of things we can learn from this ERP implementation. Firstly, it is necessary to have the correct people on board from the start as Geneva had to implement personnel changes during the project and ERP is as much about people as it is about systems. It is also necessary to have a realistic view of the time frame required as phase 1 ran over schedule which had knock-on effects for the other stages and staff are likely to be demotivated if they are continually told different finishing dates. However, we can also learn from Geneva's successes such as spending a large amount of time and effort making staff receptive to change and training staff to ensure that they are confident in using the system, as one of the main reasons for failure is that staff often feel scared of the technology and fail to make the best use of it in their day-to-day work.
REFERENCES
McCabe, R., How to recover from a failed ERP implementation, http://www.microsoft.com/canada/midsizebusiness/businessvalue/local/failederp.mspx, accessed 14 November 2007
SAP R/3 implementation at Geneva Pharmaceuticals, Case Study
Taurus v Crest, Case Study
This post was created in collaberation with Lynsey Smith
Tuesday 20 November 2007
How will Offshoring Affect UK Accountants?
Offshoring happens when a company relocates internal business processes to a foreign country. The company either manages these processes internally in the new country or contracts an offshoring service provider (www.accountancy.com). The process of globalisation and the increased use of IT have led to offshoring affecting the services industries (Giddens, 2006). In particular, offshoring has the potential to greatly affect the work done by UK accountants.
Giddens, (2006), stated that any service job can be offshored that displays four characteristics: it involves the heavy use of IT; its output is IT transmittable; it compromises tasks that can be codified and it needs little or no face-to-face interaction. Many accounting functions consist of the above characteristics in which can therefore be offshored including: purchasing and sales transaction processing; financial management and project accounting; payroll processing and expenses (www.personneltoday.com) and a number of tax services. An important example of this in relation to UK accountants is the fact that the BBC has outsourced its finance and accounting services saving £200 million over the lifetime of their ten year contract with Indian based Xansa (www.personneltoday.com). As this is a highly publicised company in the UK this could serve as publicity in favour of offshoring to the detriment of UK based accountants.
Further, in a report provided by PWC, it is estimated that the US financial services sector is set to double offshoring by 2008 with approximately 360,000 returns prepared by Indian vendors, garnering $40 million in revenues. The prime reasons stated for offshoring were the shortage in accountants, the gruelling tax season and the fact that there is a saving of 40 – 60% (www.valuenotes.biz). These are all valid reasons in business that favour offshoring and with the US a similar market to the UK, not a lot may be able to be done to prevent tax services being offshored, especially due to the fact that deadlines are often struggled to be met due to the end of year practice associated with tax.
Giddens (2006), states that the consequences of offshoring will depend upon the actual task that is being carried out, not the overall competitiveness of the firm or the industry in which they work or their level of education. The point that tax services may be largely offshored may be counteracted by the fact that auditing services may not be susceptible to this. This is due to the fact that this service line relies on a lot of face-to-face contact between the auditor and the customer and the auditor is often required to visit the premises of the business which is being audited.
One of the ‘pull-factors’ of offshoring is the potential monetary saving. However, if this process is used extensively it is important to consider that as a nation matures economically that the arbitrage between costs in these locations and the US/ UK will tighten. At some point, the differences could narrow to the point where no arbitrage exists at all (www.accountancy.com). While it is unlikely that the gap will close altogether it should pointed out that at a further point in time, the gap may be so small to benefit from the cost savings occurring at present. If this does turn out to be the case, there could be a potential shortage of accountancy based skills in the UK to meet the reinstated demand for services.
Continuing on from this point, the education system in the UK for potential accountants could be dramatically altered to accommodate only the services that will provide employment to graduates therefore; there could be a huge gap in the knowledge of future accountants – if they will even receive this title.
However, there are some constraints that may prevent the offshoring problem. In several countries, there are legal constraints which prevent firms from sending work outside the geographic or national boundary (infosysblog.com). Also, if the UK considers that the potential job losses could be too high, it may be possible to pass a law to make offshoring illegal (www.accountancy.com). However, I find this highly unlikely due to Gordon Brown’s favour of globalisation, Giddens (2006). UK jobs could also be protected through the use of licences to undertake a specific job, as in the US.
Similarly, there may be some reasons in which not to offshore. For example, compared to the UK, the quality of undergraduate education in India is poor and the teaching method and two-tier system have been largely criticised (Giridharadis, 2006). As a result of this, UK businesses may want to weigh up the opportunity to reduce costs with the quality of work that may be produced.
Finally, there are some survival skills that UK accountants can use to their advantage to secure their jobs. One of the most important ones may be loyalty to a company with a proven track record. UK companies are said to look favourably upon this. Also, marketing and renewal of business processes can help businesses or specific jobs being offshored (blog.fastcompany.com). However, with cost reductions a prime reason for offshoring these points may be overlooked.
References
Accountancy Q&A, November 2005, Accessed from:
www.accountancy.com.pk/articles.asp?id=161
Berry, M, BBC to Send Finance and Accounting Services Offshore to India with Xansa, Personnel Today, Assessed From: www.personneltoday.com/articles/2006/10/23/37882/bbc-to-offshore-to-india-with.html
Giddens, A, The New Globalisation – Electronic Offshoring Marks a Distinct and Challenging Phase in the Evolution of Global Economic Independence, Guardian Unlimited, November 2006
Giridharadis, A, A College Education Without Job Prospects, The New York Times – World Business, November 2006
http://blog.fastcompany.com/archives/2003/12/17/surviving_the_offshoring_trend.html
http://infosysblog.com/managing-offshore-it/2006/12/when_a_project_manager_should.html
http://www.valuenotes.biz/bpo/tax.asp
Giddens, (2006), stated that any service job can be offshored that displays four characteristics: it involves the heavy use of IT; its output is IT transmittable; it compromises tasks that can be codified and it needs little or no face-to-face interaction. Many accounting functions consist of the above characteristics in which can therefore be offshored including: purchasing and sales transaction processing; financial management and project accounting; payroll processing and expenses (www.personneltoday.com) and a number of tax services. An important example of this in relation to UK accountants is the fact that the BBC has outsourced its finance and accounting services saving £200 million over the lifetime of their ten year contract with Indian based Xansa (www.personneltoday.com). As this is a highly publicised company in the UK this could serve as publicity in favour of offshoring to the detriment of UK based accountants.
Further, in a report provided by PWC, it is estimated that the US financial services sector is set to double offshoring by 2008 with approximately 360,000 returns prepared by Indian vendors, garnering $40 million in revenues. The prime reasons stated for offshoring were the shortage in accountants, the gruelling tax season and the fact that there is a saving of 40 – 60% (www.valuenotes.biz). These are all valid reasons in business that favour offshoring and with the US a similar market to the UK, not a lot may be able to be done to prevent tax services being offshored, especially due to the fact that deadlines are often struggled to be met due to the end of year practice associated with tax.
Giddens (2006), states that the consequences of offshoring will depend upon the actual task that is being carried out, not the overall competitiveness of the firm or the industry in which they work or their level of education. The point that tax services may be largely offshored may be counteracted by the fact that auditing services may not be susceptible to this. This is due to the fact that this service line relies on a lot of face-to-face contact between the auditor and the customer and the auditor is often required to visit the premises of the business which is being audited.
One of the ‘pull-factors’ of offshoring is the potential monetary saving. However, if this process is used extensively it is important to consider that as a nation matures economically that the arbitrage between costs in these locations and the US/ UK will tighten. At some point, the differences could narrow to the point where no arbitrage exists at all (www.accountancy.com). While it is unlikely that the gap will close altogether it should pointed out that at a further point in time, the gap may be so small to benefit from the cost savings occurring at present. If this does turn out to be the case, there could be a potential shortage of accountancy based skills in the UK to meet the reinstated demand for services.
Continuing on from this point, the education system in the UK for potential accountants could be dramatically altered to accommodate only the services that will provide employment to graduates therefore; there could be a huge gap in the knowledge of future accountants – if they will even receive this title.
However, there are some constraints that may prevent the offshoring problem. In several countries, there are legal constraints which prevent firms from sending work outside the geographic or national boundary (infosysblog.com). Also, if the UK considers that the potential job losses could be too high, it may be possible to pass a law to make offshoring illegal (www.accountancy.com). However, I find this highly unlikely due to Gordon Brown’s favour of globalisation, Giddens (2006). UK jobs could also be protected through the use of licences to undertake a specific job, as in the US.
Similarly, there may be some reasons in which not to offshore. For example, compared to the UK, the quality of undergraduate education in India is poor and the teaching method and two-tier system have been largely criticised (Giridharadis, 2006). As a result of this, UK businesses may want to weigh up the opportunity to reduce costs with the quality of work that may be produced.
Finally, there are some survival skills that UK accountants can use to their advantage to secure their jobs. One of the most important ones may be loyalty to a company with a proven track record. UK companies are said to look favourably upon this. Also, marketing and renewal of business processes can help businesses or specific jobs being offshored (blog.fastcompany.com). However, with cost reductions a prime reason for offshoring these points may be overlooked.
References
Accountancy Q&A, November 2005, Accessed from:
www.accountancy.com.pk/articles.asp?id=161
Berry, M, BBC to Send Finance and Accounting Services Offshore to India with Xansa, Personnel Today, Assessed From: www.personneltoday.com/articles/2006/10/23/37882/bbc-to-offshore-to-india-with.html
Giddens, A, The New Globalisation – Electronic Offshoring Marks a Distinct and Challenging Phase in the Evolution of Global Economic Independence, Guardian Unlimited, November 2006
Giridharadis, A, A College Education Without Job Prospects, The New York Times – World Business, November 2006
http://blog.fastcompany.com/archives/2003/12/17/surviving_the_offshoring_trend.html
http://infosysblog.com/managing-offshore-it/2006/12/when_a_project_manager_should.html
http://www.valuenotes.biz/bpo/tax.asp
Monday 5 November 2007
Why Did TAURUS Fail and CREST Succeed?
In 1989 the London Stock Exchange (LSE) put forward a proposal for a computerised system to ensure that share certificates and cash changed hands between the interested parties after the trading transaction, implicit in this was the dematerialisation of stock certificates. It was a big project with hundreds of staff contracted in and lots of external pressures from various different stakeholders. The project was scrapped in 1993 at a cost of £75 million to the LSE. However, the LSE still needed a computerised system and took up the project of CREST (Head, 2001). This project learnt from TAURUS’ failures and went ‘live’ in July 1996. There are many differences between the TAURUS and CREST projects that led to the eventual downfall of TAURUS and the success of CREST.
One of these problems was that TAURUS wanted to be “all things to men” and with the pressures from the companies that were members of the LSE, they included 21 Corporate Actions or Events to deal with the different business approaches (Head, 2001). Due to the amount of modification that had to be done to the software, this is one of the reasons the system failed. CREST learned from this and included only 2 business functions. However, these business functions made up 85-90% of the business transactions. It was the Pareto effect that was used here: the two business functions were only 10-15% of the total 21 functions set out by TAURUS however, adding the extra functions the system became overloaded (Head, 2001).
Another problem that TAURUS suffered from was the software package that it chose. It needed heavy modification due to the 21 different business transactions. This software had not previously been tested and resulted in a downfall. This was much the same as the problems that FoxMeyer found when installing an ERP system. It used an untried system that it was ill-equipped to install and failed disastrously (Buss, 1997). CREST did not replicate this problem and opted for a tried and tested method in which the Bank of England had experience in (Head, 2001). By drafting in the IT manager from the Bank of England the CREST project had experience on its side.
A further point that separates the failure of TAURUS and the success of CREST was the project structure. TAURUS was marred by ad-hocracy, fragmentation and mismanagement (Currie, 1997). This was due to the hundreds of contract staff it hired in, the consultations with the member firms, the legal aspects drafted by the government and the pressures of a project team repeatedly crossing the Atlantic (Head, 2001). CREST on the other hand was seen to be highly structured and controlled (Currie, 1997). It had a 20 member strong design team with four or five managers to constantly overlook the project. This highlights that although both the projects were high scale and using sophisticated technology, the management and co-ordination of the project is a key to its success.
Additionally, the budget and time constraints of the projects were seen to be a differentiator to their success. Goulielmos (2003) states that of the four concepts of failure in Information Systems is process failure where the project over runs its budget or time constrictions. TAURUS did both incurring increasing media attention and scrutiny, which led to an increase in pressure on the project team (Head, 2001). CREST again, learnt from this mistake by being highly structured and controlled. It was within its original budget and went ‘live’ at its target date. The CREST team also learnt to establish press relations and brief them about the progress of the project (Head, 2001). Therefore, they did suffer from general scrutiny about the project but, had a reduced amount of pressure compared to the previous project, TAURUS.
In sum, the TAURUS project implemented by the LSE suffered many downfalls and eventually was scrapped however, the success of CREST may be largely down to learning from previous mistakes. As highlighted above, from the downfalls of TAURUS, CREST has implemented a solution or more basically avoided these problems.
References
Buss, D, Nightmare, Context Magazine, 1997
Currie, W, Computerising the Stock Exchange: a Comparison of Two Information Systems, 1997
Goulielmos, M, Outlining Organisational Failure in Information Systems Development, Disaster Prevention and Management, 2003
Head, C, TAURUS and CREST, Failure and Success in Technology Project Management, 2001
One of these problems was that TAURUS wanted to be “all things to men” and with the pressures from the companies that were members of the LSE, they included 21 Corporate Actions or Events to deal with the different business approaches (Head, 2001). Due to the amount of modification that had to be done to the software, this is one of the reasons the system failed. CREST learned from this and included only 2 business functions. However, these business functions made up 85-90% of the business transactions. It was the Pareto effect that was used here: the two business functions were only 10-15% of the total 21 functions set out by TAURUS however, adding the extra functions the system became overloaded (Head, 2001).
Another problem that TAURUS suffered from was the software package that it chose. It needed heavy modification due to the 21 different business transactions. This software had not previously been tested and resulted in a downfall. This was much the same as the problems that FoxMeyer found when installing an ERP system. It used an untried system that it was ill-equipped to install and failed disastrously (Buss, 1997). CREST did not replicate this problem and opted for a tried and tested method in which the Bank of England had experience in (Head, 2001). By drafting in the IT manager from the Bank of England the CREST project had experience on its side.
A further point that separates the failure of TAURUS and the success of CREST was the project structure. TAURUS was marred by ad-hocracy, fragmentation and mismanagement (Currie, 1997). This was due to the hundreds of contract staff it hired in, the consultations with the member firms, the legal aspects drafted by the government and the pressures of a project team repeatedly crossing the Atlantic (Head, 2001). CREST on the other hand was seen to be highly structured and controlled (Currie, 1997). It had a 20 member strong design team with four or five managers to constantly overlook the project. This highlights that although both the projects were high scale and using sophisticated technology, the management and co-ordination of the project is a key to its success.
Additionally, the budget and time constraints of the projects were seen to be a differentiator to their success. Goulielmos (2003) states that of the four concepts of failure in Information Systems is process failure where the project over runs its budget or time constrictions. TAURUS did both incurring increasing media attention and scrutiny, which led to an increase in pressure on the project team (Head, 2001). CREST again, learnt from this mistake by being highly structured and controlled. It was within its original budget and went ‘live’ at its target date. The CREST team also learnt to establish press relations and brief them about the progress of the project (Head, 2001). Therefore, they did suffer from general scrutiny about the project but, had a reduced amount of pressure compared to the previous project, TAURUS.
In sum, the TAURUS project implemented by the LSE suffered many downfalls and eventually was scrapped however, the success of CREST may be largely down to learning from previous mistakes. As highlighted above, from the downfalls of TAURUS, CREST has implemented a solution or more basically avoided these problems.
References
Buss, D, Nightmare, Context Magazine, 1997
Currie, W, Computerising the Stock Exchange: a Comparison of Two Information Systems, 1997
Goulielmos, M, Outlining Organisational Failure in Information Systems Development, Disaster Prevention and Management, 2003
Head, C, TAURUS and CREST, Failure and Success in Technology Project Management, 2001
Sunday 21 October 2007
Permalink to Accounting and Finance Database
http://creator.zoho.com/lynz29/form/1/O0SEJvGt5WMEYPZpVKf3zCCswD6ZwOTPWzEtrvN3Ak4DfpjFJb1jB1PK60BSO6JUz4ggCYTj6u0pk61U7VJ9zQ5BJvFYmJ6Cb3yB/
The ICAS Website - How it Could be Improved
Unless a website meets the needs of the intended users, it will not meet the needs of the organisation providing the website (Bevan, 2004). Therefore, the importance of providing a good website is paramount. This is particularly true in the case of the ICAS (Institute of Chartered Accountants of Scotland) website (www.icas.org.uk) as here the website is generally provided for the use of its members, students and potential students. As a result of this, ICAS could do a number of things to improve its’ website.
At first glimpse of the home page there is a lot to take in. However, one specific problem is evident. The majority of the website that is shown on the average screen, the top half of the website, is taken up by two prominent adverts – one for the CA magazine and one detailing the ‘mission’ for ICAS. Although these adverts may be relevant, you can not pick up any other important information from the homepage. Therefore, ICAS may want to reconsider the positioning of these.
“Information on the homepage should be arranged according to what the visitors need to know… This should drive an interactive process of design and evaluation.” (Bevan, 2004, p2). Consequently, ICAS may want to look at the design of the ICAEW website (www.icaew.co.uk). Here the needs of the user are met immediately – there are specific sections for members, students, learning and professional development and technical and business topics. These sections are separated into boxes each with a different header colour for ease of reference. This is one thing that ICAS have not done. On their website you need to scroll to the bottom of the page before finding a link for members and students. This is something that they may want to think about improving.
Following on from this, they may consider the use of tabs along the top of the screen instead of down the left hand side. This is also a format used in the ICAEW website and it immediately lets the user see the menu of services on offer instead of scrolling down to find their preferred service.
The overall look of a website should be clean, uncluttered, professional and attractive (www.write101.com). The way the words look on the page should mirror the concept of the billboard – the words need to stand out. This is definitely not the case in the ICAS website. The font size is too small for some readers to use and the way the text is laid out is not the easiest to read with it in paragraphs. There can be advantages of putting the text in columns as in newspapers and the use of colour can draw attention to headings or important articles.
ICAS use the one colour, blue, throughout their website. Although uniformity can be important, colour stimulation is been seen as important – red and orange are seen to excite whereas blue and green are seen to be soothing (www.write101.com). As in the ICAEW and the ACCA website colour is used intelligently, ICAS may want to take advantage of this to break their information up slightly.
Another problem with the ICAS website is the time it takes to load. This is important as research shows that visitor’s fingers start to move after 8.6 seconds (www.warthog.co.za). Should this statistic be true, ICAS need to reduce the number of pictures as this can substantially reduce the loading speed (http://news.zdnet.co.uk). At present they have pictures of champagne glasses and a picture of their head office on their homepage. They could think about loosing the glasses as this is not really necessary.
Bevan, Nigel, Serco: Usability in Website Design, 2004
www.serco.com/Images/Web%20Paper_tcm3-2251.pdf
www.icaew.co.uk
www.icas.org.uk
http://news.zdnet.co.uk/internet/0,1000000097,39284187-2,00.htm
www.warthog.co.za/news-speeds.htm
www.write101.com/101web.htm
At first glimpse of the home page there is a lot to take in. However, one specific problem is evident. The majority of the website that is shown on the average screen, the top half of the website, is taken up by two prominent adverts – one for the CA magazine and one detailing the ‘mission’ for ICAS. Although these adverts may be relevant, you can not pick up any other important information from the homepage. Therefore, ICAS may want to reconsider the positioning of these.
“Information on the homepage should be arranged according to what the visitors need to know… This should drive an interactive process of design and evaluation.” (Bevan, 2004, p2). Consequently, ICAS may want to look at the design of the ICAEW website (www.icaew.co.uk). Here the needs of the user are met immediately – there are specific sections for members, students, learning and professional development and technical and business topics. These sections are separated into boxes each with a different header colour for ease of reference. This is one thing that ICAS have not done. On their website you need to scroll to the bottom of the page before finding a link for members and students. This is something that they may want to think about improving.
Following on from this, they may consider the use of tabs along the top of the screen instead of down the left hand side. This is also a format used in the ICAEW website and it immediately lets the user see the menu of services on offer instead of scrolling down to find their preferred service.
The overall look of a website should be clean, uncluttered, professional and attractive (www.write101.com). The way the words look on the page should mirror the concept of the billboard – the words need to stand out. This is definitely not the case in the ICAS website. The font size is too small for some readers to use and the way the text is laid out is not the easiest to read with it in paragraphs. There can be advantages of putting the text in columns as in newspapers and the use of colour can draw attention to headings or important articles.
ICAS use the one colour, blue, throughout their website. Although uniformity can be important, colour stimulation is been seen as important – red and orange are seen to excite whereas blue and green are seen to be soothing (www.write101.com). As in the ICAEW and the ACCA website colour is used intelligently, ICAS may want to take advantage of this to break their information up slightly.
Another problem with the ICAS website is the time it takes to load. This is important as research shows that visitor’s fingers start to move after 8.6 seconds (www.warthog.co.za). Should this statistic be true, ICAS need to reduce the number of pictures as this can substantially reduce the loading speed (http://news.zdnet.co.uk). At present they have pictures of champagne glasses and a picture of their head office on their homepage. They could think about loosing the glasses as this is not really necessary.
Bevan, Nigel, Serco: Usability in Website Design, 2004
www.serco.com/Images/Web%20Paper_tcm3-2251.pdf
www.icaew.co.uk
www.icas.org.uk
http://news.zdnet.co.uk/internet/0,1000000097,39284187-2,00.htm
www.warthog.co.za/news-speeds.htm
www.write101.com/101web.htm
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