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Copy of Copy of mis2

mis2
by

arghavan f

on 4 January 2013

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Transcript of Copy of Copy of mis2

ennametal, a $2 billion maker of construc tools, has spent $10 million on ERP maintenance contracts during the past 13 years and not once could the
company take advantage of upgrades, says CIO Steve Hanna. The company’s implementation was too customized: The time and effort needed to tweak and test the upgrade outweighed any benefits, he says. But Hanna kept trying. Recently, he priced the cost of consultants to help with an ERP re-implementation and was shocked tionby estimates ranging from $15 million up to $54 million. CAS The major ERP suites are “old and not as flexible as some newer stuff, and they can’t build flexibility in,” Hanna says. “Modifying it takes our time and money and training.” His ears practically steam from frustration. “You tell me: What am I missing here?” l but, unlike when it was new, it now offers scant opportunity for a business to set itself apart from its competition. It certainly doesn’t help bring in new revenue, and running it eats up an increasing share of the IT budget. Yet longtime ERP users aren’t pitching the technology. Kennametal will also take on the implementation itself. Hanna hired IBM to consult about requirements definitions and to identify business processes that must be revamped to conform to SAP’s procedures. Meanwhile, Kennametal staff will do the legwork. New ERP license revenue dropped by about 24 percent, according to Forrester Research—one effect of the general decline in software spending during 2009. This means vendors are hungry for new business. They’ll offer software deals to tempt CIOs who had put off upgrades or who want to install completely new systems to get the latest capabilities Steve Stanec is vice president of information systems at Piggly Wiggly Carolina, a privately held supermarket chain with 105 stores, most in the southeast United States. Stanec says he and other CIOs must depart from the traditional ERP script, where, after lengthy negotiations, vendors hand over software and charge hefty ongoing fees. CIOs must avoid falling into the same ERP traps they once did, he says Buying and installing ERP was never a cakewalk. Today, though, ERP is the Jack Nicholson of software: With a hackneyed repertoire, the old and expensive dog finds it hard to learn new tricks. It’s become a legacy technology, and CIOs are now finding new ways to manage ERP projects and the ongoing upkeep. Their best advice: Draw a clear project map and modify the software only as a last resort. Kennametal will also take on the implementation itself. Hanna hired IBM to consult about requirements definitions and to identify business processes that must be revamped to conform to SAP’s procedures. Meanwhile, Kennametal staff will do the legwork.
1. Why does ERP customization lead to so many headaches when it is time to upgrade?

2. Why were the systems customized in the first place?
3. Cutting payments outright to ERP vendors may not be
possible for smaller companies without the in-house resources that larger organizations have. Are they at the mercy of the software providers? What other alternatives do small companies have? Provide some recommendations. 4. Kennametal CIO complains that they “paid maintenance for nothing.” Who do you think is responsible for that state of affairs? Kennametal? The ERP vendor? Both? Justify your answer. Arghavan fakoor
mana latifi
setareh mohammadi
Full transcript