Analyzing and Enhancing Harrah’s High Payoff from Customer Information (And Reflection)

Problem/Issue Statement

Although Harrah’s has found great success in its efforts to invest in data warehousing/mining and overall business intelligence to better understand how to market to and capitalize on its customer base, it now is faced with the challenge of improving on flaws in its IT strategy as its competitors have adopted similar techniques and margins in the industry are becoming tighter.  Harrah’s has to update its innovative IT strategy to prepare for future projects that will continue to create a cohesive brand image and provide the greatest ROI for its marketing and IT investments. 

The main problem is that the techniques that Harrah’s first began implementation in 1994 have become less innovative as they have been replicated by competing entertainment and casino firms. 

The symptoms, although not explicitly discussed, are the volatility of the market share and additional internal customer retention and profitability they have gained from their current marketing strategy.

The scope of this problem is the entirety of Harrah’s Entertainment, Inc., its 21 casinos with a site in every legal U.S. gambling market, hotels which combined with the casinos employ over 40,000 people and serve over 19 million customers, and the restaurants that accompany these locations.  (Figures current as of Harrah’s “entry into the new millennium,” latest statistics available from disclosed information).  Any adjustments to the marketing strategy and IT infrastructure that supports this system will have a profound impact on Harrah’s in its entirety.

Situation Assessment

In response the opportunity presented in 1993 by new legislation permitting gambling on Indian reservations and riverboats, Harrah’s rapidly entered new markets and constructed its array of casinos, hotels, and restaurants at various locales across the country.  With the idea of creating the greatest value for its shareholders in mind, Harrah’s sought to forge a national brand approach that would integrate all of Harrah’s venues into the same strategy.  This was a significant paradigm shift from the general sentiment in the industry, where each property generally operated “as its own fiefdom.”

Harrah’s immediately began work on the foundation of its strategy with the creation of WINet, a database of collected customer data from various source systems that would integrate data around the customer, identity key market segments, generate promotional offers to attract visitors to Harrah’s facilities, and make any and all information available to Harrah’s staff for analytical purposes.  Utilizing a patron database  (PDB) as its storage for operational data, Harrah’s created a patented customer loyalty program based on collected data to target key demographics and inspire business through an points system that rewarded gambling activities.  The company used its marketing workbench (MWB) to serve as a data warehouse for its analytical applications, with the capacity to analyze hundreds of customer attributes to determine preferences and project appropriate services and rewards.  One of the greatest drivers of growth was its scientific approach to promoting business through closed-loop marketing.  Through closed-loop marketing, campaigns were employed and then tested and new campaigns were created with the lessons learned from the previous experiments   incorporated into new designs. 

This new way of thinking and operating led to a marked improvement in “same-store sales,” cross-market play, casino foot traffic, and client retention.  With competitors observing these achievements, other players in the entertainment and casino industry are replicating the competitive advantage that Harrah’s has created.  If Harrah’s is to attempt to make its competitive advantage sustainable, it must find a way to expand its current efforts to better market to existing and potential customers and deliver maximum value to shareholders. 

List of Plausible Alternatives and Evaluation of Alternatives

The first approach would be to continue on their current strategic course of utilizing WINet and their closed-loop marketing approach, whose innovation has resulted in the development of a national brand and a valued Total Rewards program with significant increases in gambling activities.  Their strategy has led to a 72% internal rate of return on information technology investments and a growth rate that has outpaced competition in almost every market, in some instances doubling or tripling the market average of “same-store” sales.  Any further investment or alteration to a successful strategy, albeit one that is seen as an appropriate response to competitor activity, could create operational inefficiency and other adverse effects.  If Harrah’s were to undergo any serious IT project, there is always a risk of failure that could negate and impede current gains from its existing strategy.  Harrah’s could play it safe and continue to create new promotions that are built on the results of previous ones and its massive repository of customer data.  This strategy is less than ideal, though, since it ignores the probability that as its techniques become less innovative, competitors are likely to steal its market share.

The second alternative would be to “double down” on its current IT investments, and expand funding for new information technology initiatives to more aptly collect customer data and analyze the benefits of marketing campaigns.  One of the problems with the initial strategy was that the IT department had failed to anticipate the memory requirements for the marketing workbench and the decision was made to switch to Cognos Impromptu and SAS.  Additionally, originally complicated queries failed to fall within the appropriate computing window.  Although these problems were resolved, they reflect the need for fluid alteration to IT infrastructure.  Harrah’s could redesign its data warehouse system to enable greater storage for increased data collection, as well as update its existing analytical software based on current market products.  Considering the tremendous internal rate of return Harrah’s has enjoyed from its IT investments, if it can make measured decisions that are efficient and fundamental to its expansion the company could capitalize on one of its strengths and find a better way of dealing with increased competition.  If the company were better able to analyze its data through more updated software through its own programmers or acquired from a third party, it could better serve its customers through the Harrah’s experience and promotional offers, thus ultimately delivering maximum profit to its shareholders.  The downside of this alternative, as previously mentioned, is the inherent risk associated with any IT project and the possibility of profit lost to downtime and unanticipated system inefficiencies. 

Lastly, Harrah’s could seek to enhance its marketing strategy by expanding the amount of data it collects and the ways in which it is collected.   Currently, hotel system, tournament, and general gambling records are used as source systems for data collection.  The patron database primarily consists of these internal sources.  However, Harrah’s could better attract potential customers by incorporating data from external data points.  Phone and online surveys could be conducted to gauge the general demographic data in the markets it currently operates casinos, and the potential efficacy of promotional activities geared at improving foot traffic through an augmented customer base.  Harrah’s could reach out to gambling websites that could provide contact information potentially for customers in a general proximity to existing casino locations, and reach these people through direct mailings or online surveys (maybe with some kind of reward for a response such as meal vouchers or a set level of gambling chips).  Additionally, Harrah’s could attempt to learn more information about its existing customer base with similar incentives through in-room surveys at its hotels or even at various locations around its casinos.  Details like household income, occupation, and greater information on gaming preferences could prove invaluable in promotions and marketing campaigns.  This would allow Harrah’s to increase its efficiency in its current promotional campaigns and more accurately identify customer segments.  There is, however, the possibility that attempts to learn additional information from existing customers could be irritating and detract from their enjoyment of Harrah’s facilities as well as their enthusiasm for Harrah’s services.  Also, if investments in obtaining information on and reaching out to people outside the existing customer base provide little ROI, this could end up as a waste of time and resources. 

Recommendation

I would recommend that Harrah’s avoid the first alternative of inaction.  The company has worked so hard to create a competitive advantage and to let it dissipate in the face of increasing competition would negate the progress made by its comprehensive IT reforms and innovations.  Harrah’s should implement some combination of the second and third alternative, with resources being dedicated towards new IT investment to increase its data storage and collection capacity as well as better market towards its existing and potential customers through improved knowledge of demographic and preference information.  Harrah’s cannot “sit on its laurels” in a industry of tight margins.  It should employ the same philosophy it had executed in rolling out its new marketing strategy to better categorize, understand, and then market to potential and existing customers.  Through an improved IT backbone for data collection and analysis and an enlarged pool of data, Harrah’s can compete against other casinos and entertainment centers by better understanding customers and thus more effectively promoting its services to them. 

Presentation

The consulting team should make sure that any proposals should not neglect the progress our company has made by shifting the paradigm to create a national brand and cohesive marketing approach.  While new ideas and attempts at innovation are welcome, they should not conflict with our existing marketing philosophy.  Additionally, the team should recognize our existing IT infrastructure that has served us well for almost two decades, and use this as a means to facilitate any suggested courses of action.  The loyalty program that has been supported by WINet and our marketing workbench has functioned properly due to our IT systems, which can be improved upon but should not be dismissed.  Lastly, I would personally appreciate if the presentation addressed the possibility that our competitors could once again replicate any changes to our marketing strategy, and include in their plan an explanation of how these proposed actions can be as inimitable as possible.  

Reflection

Sir,

While we are all extremely proud of the success that Harrah’s has enjoyed as a result of our innovative marketing IT-supported approach, the consultants provided an interesting portrait of how we could further build upon our existing gains in market share and retain the competitive advantage we have established.   I appreciated that the proposals we are to consider seem to utilize the same philosophies and core strengths that previously netted us significantly increased cross-market pay, casino foot traffic, and client retention.

The first solution discussed of increasing resources devoted to data mining makes complete sense in my mind.  The 62% internal rate of return on IT investments achieved since the inception of our new marketing strategy in 1997 is fundamental to the progress Harrah’s has made in insuring that every customer is as profitable as possible.  Along these lines, targeting 25,000 consumers at a rate of $210 per person seems extremely sensible after we have defined these consumes to be part of a desirable and profitable segment through our data analytics.  Although I am unsure that the projected profit increase of $3 million is completely realistic considering that it is based on a 50% response rate, I am convinced that this effort will convert enough quality customers (defined as generating revenue of at least $1500 per year in 3 visits) to make it a worthwhile initiative.

The second proposal  is one that I am surprised we have not already enacted.  The consultants’ idea to implement an online reservation and concierge service is one that fits very well into our existing marketing philosophy.  In advance of a customer’s stay, we will now have an abundance of personal information that could include age, party size, e-mail address, phone number, and gambling/entertainment preference.  This is in line with what I had originally thought should be Harrah’s direction, which would be to accumulate as much customer information as possible to derive the greatest benefit from our existing closed loop marketing tests and overall data analytics infrastructure.  I was slightly disappointed that more emphasis was not placed in the presentation on the importance of increasing our data collection efforts.  I definitely agree with the proposal, but feel that the consultants should recognize that our success has been achieved through a scientific approach that demands accurate and significant quantities of marketing and demographic data.   

The consultants’ last suggestion to upgrade our IT infrastructure and analytics seems prudent considering their correct understanding that there is a delay in the communication and updates of our systems that is detracting from our ability to quickly collect and analyze data.  This was all similar to what I had initially thought would be reasonable to improve our analytics capability, although my original thought also connected to increased storage capacity.  Again, I am unsure that the simply by adopting this solution we will be able to net a 1% increase in retention, however, I agree with the spirit of the idea.  I would like to see this upgrade in analytics coupled with a greater focus on data collection, specifically the extraction of data from sources external to Harrah’s properties.  While it is imperative that we maximize the revenue from existing consumers, there are a number of ways that we could engage third party vendors to secure demographic data on potential customers who would expand our client base markedly.  Whether contracting a third party marketing company or simply reaching an agreement with online gambling sites, I believe that the proposal of improving our data analytics would be that much more powerful if we were to expand our customer base by marketing to customers outside of our existing network.

Ultimately, I was impressed with the presentation and felt it was in same direction Harrah’s should be heading to make its competitive advantage sustainable.  I feel comfortable adopting all three of the recommendations.  However, I would add some modifications to each suggestion.  I would like our analysts to take a better look at the response rate expected from increasing data mining to see if it falls in line with our previously tested marketing campaigns.   I would suggest that we conduct a search of vendors that could provide the online concierge service and see how the costs and benefits compare to those associated with a Planyo partnership.  Lastly, I would explore whether we might consider going even further in upgrading our analytics capability beyond the proposed Instant Saneness Test and improvements to virtual analytics to see the tangible benefits of further upgrades to both analytics and storage.  

Thank you for your time and consideration.  

 

Contemplating a New Project

Mr. Smith,

The technological product I am evaluating for our firm today is one that is being increasingly utilized in the legal community, Microsoft Project.  Microsoft Project is a project management software program designed to aid in the development of a plan, assigning resources to tasks, tracking progress, and analyzing workloads.  A recent survey by ALM legal intelligence reports that 56% of respondents were either currently using or seriously considering using professional project management software.  Among those surveyed, MS Project was the most popular selection with many citing their familiarity with Microsoft products as the impetus for purchase.  

It is true that in the past our attorneys have been resistant to the implementation of a project management software because of the increased scrutiny from being tracked and the level of detail they were required to disclose in order to properly delineate effective project milestones and planned completion dates.  However, the changing demands by clients for accountability and alternative fee structures makes a tool like Microsoft Project more relevant than ever.  The goal of our attorneys historically to increase billable hours has led to a philosophy that efficiency takes a backseat role to increasing the quantity of work done.  The emergence of alternative fee arrangements that cap billables, assign a flat payment, or penalize case resolutions past a specified deadline have created a very significant incentive for our firm to increase our productivity.  Micorsoft Project is a tool we should consider to increase our productivity and ability to work together as a cohesive office unit to fulfil client obligations in a tighter timeframe with set resource constraints.  

One of the benefits of using Microsoft Project as a project management solution is its integration with other products from the Microsoft product suite that we already employ, such as being able to easily transition data from Word or Excel into MS Project.  Additionally, Microsoft Project uses an interface very similar to its other programs such as the proprietary ribbon tool, which would make it easier to acclimate our administrators and lawyers to this new piece of software.  Having a tool in place to create case-specific project plans that fully illustrate what every portion of the case demands with regards to actual tasks and necessary resources could be a way for our firm to become better organized internally and possibly demonstrate the efficacy of our operations to our clients.  Also, using a program like MS Project would enhances communication and clearly depict a centrally managed schedule.  This collaborative and easily located schedule would be our alternative to relying on shared schedules through outlook and should generate greater overall efficiency in our case management.  

The cost of adopting Microsoft Project is relatively straightforward with the standard version costing $589.99 per installation and the Professional edition increasing to $1159.99.  Although in my previous technology recommendations I have generally opted for purchasing the Professional edition of products(Ubuntu Desktop for Business, professional premium themes for blogging, etc.), after analyzing the differences in the two programs I feel confident in saying that the features that accompany the standard product should satisfy our project management needs.  The capability to build scalable solutions or use enterprise outline codes to analyze time-phased data seems to be superfluous for our organization.  If we were to acquire licenses for all 20 of our employees it would sum to a total of $11,799.80.  Considering that managing attorney resources falls under the auspices of our current administrators, I do not feel it would be necessary to enlist outside help to manage Microsoft Project.  However, we should allocate 5 hours per administrator and attorney to become comfortable with the software and any new functions they would have to perform while using it.  With 11 combined paralegals, secretaries, and general office workers making an average of $16/hour that would create a cost of $880.  For our 9 attorneys who would potentially not be able to generate billable hours at  an average billable rate of $200 per hour would create a total cost of $9,000.  This brings the total cost for a Microsoft Project implementation to $21,679.80.

While this cost of adoption is significant, it is overshadowed by the potential income our firm could generate by creating greater efficiency in project management and the additional business we could attract by demonstrating to clients our firm’s ability to better meet deadlines with a more proper management of our resources.  If using a comprehensive project management tool could eliminate administrative redundancies in case management and scheduling to make our administrative staff overall 1% more efficient, our firm would maintain a savings of 0.01*288,000=$2,880 (11 workers at an average hourly rate of $16/hour for a combined 360 hours per week or 18,000 hours totalling 288,000).   Understanding that many of our clients such as school boards are dividing their work between us and our competitors and that they are under increasing pressure to only enlist the services of resource efficient firms that can effectively resolve cases in a minimal timeframe, if our dedication towards MS project could influence our clients to hire our firm for 125 more hours a year that would create revenue of 125 hours X $200/hour average billable rate=$25,000.  This sum estimated revenue of $27, 880 would be a recurring benefit each year, while the $21,679.80 would be a one time expenditure and loss of productivity that would be isolated to the date of implementation.  

The figures that I have postulated may be rough sketches as to how the adoption of MS Project would create a net benefit for the firm, but they also represent a significant and necessary shift in our operations to accommodate a shifting landscape.  As alternative fee assessments become more prevalent, it only creates a greater impetus for our firm to be able to have a streamlined project management system that could most greatly profit under a fixed fee or missed timeframe penalty fee structure.  I recommend that we begin acquiring the licenses and software for Microsoft Project and start to introduce our administrative staff to its interface.  Although there is always risk in integrating a new technical component into the daily responsibilities of our legal staff, this particular program will lead us towards being more cost, time, and resource effective, and ultimately of better service to our clients.

Thank you for your time and consideration.  

1.  http://adverselling.typepad.com/how_law_firms_sell/2012/09/new-legal-project-management-survey-provides-data-on-the-best-way-to-make-progress.html

Successfully Navigating the Skies of a Large-Scale ERP Implementation (with reflection)

Problem/Issue Statement

The problem in this case is that Bombardier has already experienced two-full scale ERP rollouts first in its Mirabel plant and then in its Saint-Laurent location that were of increasing success but still flawed.  For its third ERP installation the company needs to correct the gaps between its processes in implementation and the standard of best practices illustrated by companies, consultants, and the press. 

The main problem in this case is that although the implementation at Saint-Laurent represented a much more efficient deployment including ability to meet deadlines, appropriate involvement of management, and a simpler and more practical training program, there still does exist disagreements between the project team and the company employees over the validity of certain processes and the necessity and scope of some methodologies.  Some of the symptoms of this problem include an improper concentration of knowledge in a narrow set of users, a project structure perceived as overly complicated, the absence of contingencies or “shadows” for specific key employees, and the sense from some users that the new system did not apply to enough of that person’s responsibilities. 

The scope of the problem is the ERP systems in place at Mirabel and Saint-Laurent, as well as the locations where the ERP system at the next plant where Bombardier is planning to transition from a legacy system to an ERP platform. 

Situation Assessment

The context of this problem is that Bombardier Limited is a leading international manufacturer aerospace and transportation products with its aerospace division reporting $8.2 billion in 2007.  In an increasingly competitive aerospace manufacturing industry, Bombardier recognized that it needed to transition its legacy information systems towards an ERP system.   Although technically a success according to management due to its ability to reduce inventory by $1.2 billion without jeopardizing operations or production, the first rollout of ERP at the Mirabel plant was extremely frustrating to users due to a large communication gap between the project team and employees and the mismanagement of user input and expectations by executives and the project team.  The second roll-out was a much smoother transition that trained employees more adequately and was the result of a clear vision and unified message from senior management as to employee involvement and the priority placed on a company-wide support of the new system’s implementation.  This third foray into ERP deployment should build on the successes of Saint-Laurent and improve on its failings by adhering to ERP best practices.

The decision criteria should be how well the determined solution can adhere to the established ERP best practices.  In line with these guidelines, an ideal ERP implementation would have:

• Sponsorship of the project by executive management and implementation by VPs
• Active involvement by executive management in the implementation process
• Shared responsibilities in the deployment between the IT department and functional areas where the system is being installed
• Executive management that fully understand the company’s ability to adapt to changes brought by the new system
• A project manager who is assigned full-time to the implementation
• A project team that represents all the functional areas where ht software is being deployed
• A project team whose normal duties have been reassigned to different personnel during the project
• Training for staff on successful teamwork before implementation commences
• A retention of ownership of the deployment process by the institution wherein skills have been fully transferred from consultants to employees
• Training for all users of the new system
• A reformation of administrative processes by the company to fit the new system
• Appropriate communication of deployment details to the business community

List of Plausible Alternative Courses of Action and Evaluation of Alternatives

The possible courses of action would be to either change the implementation process to more closely reflect the ERP best practice standards with several alterations in the company’s transition approach or to simply follow an implementation that closely resembles the deployment in Saint-Laurent without any serious adjustment.  Understanding that historically many ERP implementations within and beyond our industry have come in over budget past deadlines and with subpar performance, maintaining the status quo with our existing ERP transition procedures could potentially avoid any disruptions in normal business activities and serious financial losses resulting from these changes.  Keeping essentially the exact same ERP transition process would most likely give Bombardier another successful roll-out leading to  cost reductions and greater efficiency, albeit without any attention to the flaws observed in the previous two roll-outs. 

Changes that could be made that would allow Bombardier to follow an implementation governed by ERP best practices would be:

-Enlist more employees to become team members that possess the specialized knowledge required to insure the continuity and stability of the project.  One of the major challenges faced in the second roll-out was the dearth of team members with specialized knowledge needed to work intensively on each deliverable.  By being better prepared to meet the demands of the project with greater resources, Bombardier would be better able to retain ownership of its own implementation process by having enough internal employees with the requisite skills to facilitate deployment.  Additionally, this would represent a better cognizance by management of the company’s ability to adapt to changes that occur through implementations, as more team members with the requisite skill set could meet the rigorous informational demands of ERP implementation.

-Clearly inform the project team that any communication with the users and management must be transparent and that any overt embellishments will be punished.  In order for the implementation to have productive communication between the project team and the business community, there has to be a trust that develops through the transaction of truthful and accurate information.  Although the project team may be tempted as in the Saint-Laurent deployment to exaggerate certain details to keep the business side from worrying, any false information from either side is unacceptable and must be addressed as such by top management to allow for the smoothest transition.

-Train employees prior to project initiation and then add them to the team during the course of the implementation.  One of the major issues in the Mirabel deployment was that the quality of the support was not adequate because the team members were too far removed from the everyday business responsibilities (some of the team members during the Mirabel implementation had not had business responsibilities separate from the project in over 10 years).  To meet the best practices of training for employees on teamwork prior to the project and insuring the project team’s composition represents all functional areas where the software will be implemented, Bombardier could give the project team a more updated sense of how the implementation could reflect functionality over process and the actual daily business tasks. 

-Change training program to be less rigorous before the Go Live period and more advanced shortly after the Go Live period.  This would respond to the complaints of users who felt that by having a base knowledge of the system prior to the Go Live and then learning more of the advanced SAP functions once they were familiar with the tool they would better be able to fully take advantage of the new system.  If done properly, this would qualify the project better under the best practice standard of all employees using the software receiving thorough training.

-Maintain a project manager that is assigned full-time to the deployment.   In order to insure that this project costing hundreds of millions of dollar is functioning as perfectly as possible, the lead project manager must be dedicating his entire workday and necessary overtime to the implementation.  This would be a clear message to the entire staff that this project is a top priority and is being handled with the necessary attention. 

Recommendation

My recommendation upon preparing for the consultants’ presentation is to adopt the five proposed alterations to the implementation process based upon their feasibility and net impact.  From my perspective, none of these changes would demand an inordinate amount of resources, although some merit more than others. Having a full-time project manager, adjusting the training program’s depth before and after the Go Live, and setting a clear standard for the veracity of communication all can be done with relatively little constraint on the budget.  However, increasing the quantity of team members with specialized knowledge of the project and injecting additional staff into the project team during the project would represent additional investment for Bombardier as well as a shift of human capital away from actual business related responsibilities.  Considering the hefty sum invested in an implementation and the potential cost savings associated with inching this process towards perfection, I would recommend that we adopt all five of the proposed changes in order to better align the deployment process with ERP best practices.

Presentation

The consultants’ presentation should be both educational about the best practices they have chosen as their world class standards and as specific as possible in what activities in our company’s prior implementations should be modified to better meet these practices.  I would suggest that the consulting team propose several adjustments to our current policies and inform us as to which ones will be most costly and what will be their ultimate impact in terms of improving profitability, efficiency, sustainability, and/or morale.  Since our company does consider that our previous two ERP implementations were successful (although we do recognize the capacity for improvement), the burden of proof rests on the benefits of any proposed shifts in process.  I would hope that the consultants offer a balanced view that gives proper credit to the improvements made during the Mirabel roll-out instead of simply advocating for change without recognizing Bombardier’s progress in transitioning its legacy systems.  

Reflection

Sir,

After processing last night’s presentation by the consultants I remain adamant in my belief that although management has considered the first roll-out of our ERP system a technical success and our second-roll out at Saint-Laurent a significant improvement, there are several steps Bombardier can take to optimize its implementation procedure. 

I tend to agree with he consultants decision that there existed deficiencies in the implementation in adhering to the best practices of sharing responsibilities between IT department and functional areas where software is being deployed, maintaining a project team fully represented in all functional areas where the software is implemented, having our company retain ownership of the implementation process, and adequately changing internal administrative processes to fit the software.

 

I completely concur with their suggestion to include functional specialists in the project management team in order to create a greater synergy in the implementation process between the project team and end users.  This action is completely in line with what I had originally thought would be a solution as to enlisting the help of more internal employees for the project team so that specialized knowledge would not be so heavily concentrated in just a few individuals.  Although I believe this also applies to the best practice of management fully understanding the company’s ability to adapt to changes brought by the new system, I definitely believe that this is the best way to improve a project structure that has been perceived as overly complicated and slightly malformed by the business end.  I do feel, however, that the cost cited by the consultants might be understated, as it simply addressed the opportunity cost of reassigning the functional specialists to the project team with a tacked on $11,000 for “additional costs.”  However, these functional specialists happen to represent some of our most knowledgeable and thus valuable company resources, and consequently I cannot foresee how Bombardier would be able to operate properly without hiring suitable replacements in the interim.   Truthfully, even acquiring the best possible replacements would not be ideal since they would not be versed in internal procedure so as to fully offset the loss of these functional specialists.  While I believe the cited figure of a $560,000 efficiency benefit is well worth the 2 month absence of some of our greatest talent, I do feel that it is more costly than explained by the consulting team.  The team’s other suggestions on this topic of revising scorecard reporting and diversifying the project support team were satisfactory and represent a far lower cost to enact. 

The presenters’ proposal to hire IT specialist experts and phase out Bombardier’s reliance on consultants in order to bridge our knowledge gap in internal SAP support was intriguing.  I had not previously assumed that we had any issues with our external SAP support, however I can understand how this does not align us with the principle of retaining ownership of the implementation process.  Although I understood there were problems with the support, I had head more complaints that the support was inadequate because of the composition of the project team in which a gap existed between business knowledge of the support team and current business employees created by the lag in non-implementation related responsibilities for project team members.  I still believe that my proposal to cycle in business employees periodically to the project support team would help to resolve this issue.  I see the value of hiring SAP subject matter experts (SME), although I do not feel that they can necessarily replace the 400 SAP developers we have on staff.  The savings analysis by the consultants implies that the SMEs would completely replace the 400 developers and I am not convinced that 3 SMEs could fully handle the workload.

Lastly, the consultants’ accurately illustrated the problems with our contract management processes.  I do believe as the asserted that simply rewarding contract agents for negotiating the cheapest contracts creates an inefficiency resulting from lengthier contract negotiations.  The two suggested courses of actions in either completely fitting SAP to the process or fitting the process to SAP are unrealistic and create unnecessary limitations.  I have no issues with adopting a hybrid approach that would both standardize the process and expand SAP features, although I would first like to get the input of the contract agents as to their interpretations of this solution’s impact on their daily responsibilities to ascertain whether they believe this alternative would resolve their complaints about the new contract management procedures.

In summary, I largely agree with the proposed solutions of the consulting team, however would accept them with some modifications.    I would recommend that we do include functional specialists in the project management team, however, in preparation for this we should properly train replacements in advance of their displacement.   I would also recommend that we revise scorecard reporting to create greater transparency and take the necessary actions to diversify our project support team.  We should further explore the idea of hiring SMEs to replace our SAP developers to insure that the suggestion is feasible, in addition to altering the project support team composition to include business employees that are less removed from non-implementation related responsibilities.  Finally, we should adjust our contract management system by creating a standardized process and expanding the SAP features after first consulting with the contract agents themselves.  Taking these actions will achieve significant progress in aligning Bombardier’s  ERP implementation processes  with established best practices. 

Thank you for your time and consideration.  

Strategic IT Transformation at Accenture Case Preparation and Reflection

Problem/Issue Statement

After experiencing a radical IT transformation in the past decade that saw a successful realignment of IT governance, integration, maintenance, and approach, Accenture is now considering adopting COBIT 5 IT standards as its business framework for the governance and management of its enterprise IT.  Although the company has already accomplished greater efficiency and accountability in its IT, the adoption of COBIT 5 could potentially lead toward better information for business decisions, a more efficient application of its IT systems and projects, and a mitigation of risk associated with regulatory and compliance laws.

The scope of this issue is the entirety of Accenture’s operations in hundreds of locations across over 50 different countries, all supported by Accenture’s IT systems and all affected by any changes made necessary by the implementation of COBIT 5.

Situation Assessment

The proposal to adopt COBIT 5 comes 5 years after the completion of a holistic overhaul of Accenture’s IT practices that the company has been able to both maintain and even enhance.  This change was performed on the principles of:

-Running IT like a business within a business rather than as a cost center
-A single-vendor approach to meet application needs through economies of scale
-Reduced technology costs by implmenting a web-enabled enterprise technology solution (SAP through Microsoft technologies)
-A new IT governance system where high-level management and senior IT staff ;prioritized projects on the basis of ROI and corporate strategic objectives

The COBIT 5 framework seeks to improve the governance and management of enterprise IT through meeting stakeholder needs, covering the enterprise end-to-end, applying a single integrated framework, enabling a holistic approach and separating governance from management.  It recognizes seven categories of enablers that are integral to the realization of these 5 principles seen in the graphic below:



As depicted in the image, principles, policies and frameworks are at the core of implementing COBIT 5 since they are the medium by which strategic objectives can be converted to specific daily processes.

This decision must be made on the criteria of whether or not altering Accenture’s management framework to accommodate COBIT 5 standards will improve the objectives achieved through its IT restructuring over the past 13 years.  COBIT 5 standards should be adopted if doing so would streamline operations, align IT objectives with general corporate strategies, and make better use of existing resources without creating significant disruptions to the company.

List of Plausible Alternatives Courses of Action and Evaluation of Alternatives

Maintain Existing IT Management Framework:  Accenture can choose to keep on the path it has started by continuing to improve its already successful restructuring.  From 2001 to 2008, Accenture was able to reduce its spending per employee by 60 percent and reduce overall IT expenses as a percentage of net revenue by 57 percent and at the same time improving the satisfaction of Accenture employees with IT tools and services.  Accenture could decide to continue its IT strategy of leveraging its global presence through the use of a “core-light” personnel policy that relies primarily on outsourced staff proficient in their own portion of the global chain.  By embracing and even enhancing its reformed IT architecture and management, Accenture can keep the status quo that has reduced necessary applications, integrated its technology platform, and facilitated significant revenue growth and IT cost reduction.

Adopt COBIT 5 Framework:

The other approach would be to implement a COBIT 5 framework by altering existing controls, IT enterprise architecture, project decision methodologies, applications and general IT processes to satisfy the COBIT 5 standards.  The goals and objectives of COBIT are similar in many respects to the ones we have enacted recently such as the connection of IT processes to business procedures and the application of a single integrated framework through a holistic approach.  If Accenture was to enact COBIT 5 standard, however, its IT infrastructure would have to be altered to accommodate for principles such as the separation of governance and management and compliance mechanisms.

 Although the framework for COBIT is available free online, the in-depth training materials required to fully understand the standards can be purchased through ISACA, the non-profit entity that developed the framework, for a cost of $175 per reference volume with 5 volumes available spanning the topics of general principles, enabling processes, implementation, information security, and assessment of the program.   Additionally, courses are offered to accompany the training materials spanning from 1-4 days with costs ranging from $200-$1000 at various locations globally, mainly in the United States and England.  The full depth of these costs would be dependent upon how many of our employees would be required to learn the entirety of COBIT 5 and to what extent they could both train themselves and our own internal employees.  The real cost, however, would be the time and energy lost due to the interruption of integrating a new IT model and any failure in IT processes accompanied by such a complete reformation.

Recommendation

Understanding the inherent risk of initiating any IT project, much less a complete restructuring to meet a new set of standards, I would recommend against the adoption of COBIT 5 standards.  Perhaps changing our IT systems to meet COBIT standards would have been practical in 2001 as a means to “achieve operational excellence” or “optimize the cost of IT services” as ISACA’s website promises, but in 2013 Accenture has already accomplished these goals through its own internal development procedures.  Using COBIT’s principles as guidelines towards the improvement or enhancement of our existing IT infrastructure would be reasonable, seeing as how much of what it promotes is already in sync with our existing system.  However, a complete full-scope adoption of COBIT standards would threaten the revenue expansion and operational efficiency Accenture has enjoyed since its successful IT transformation.

Presentation

The presentation should make sure to take note of Accenture’s IT evolution but not excessively describe it in its entirety.  The focus should remain on what COBIT 5 actually is, what its costs and constraints are in defensible and concrete figures, what benefits could be achieved through adopting COBIT 5 and a realistic timeframe for the realization of those benefits, and how the implementation of a COBIT 5 framework would co-exist/replace/reconcile with the current IT enterprise architecture.  The consultants must keep in mind  that there is a heavy burden of proof necessary for implementing COBIT 5 practices considering that Accenture’s IT recent restructuring is seen as a model for the industry.  

Reflection 
 
Mr. Smith,

After careful consideration of yesterday’s evaluation of COBIT 5 by the hired consulting team, I am satisfied to reject the implementation of COBIT’s IT governance and management framework.  The presentation affirmed what I had already concluded in my preparation that the robust IT governance model Accenture has initiated is far too valuable as a successful customized framework to discard in favor of or be superseded by an external set of controls and processes.

The consulting team addressed three achievements in particular that are telling of the achievement of our company’s IT transformation.  They are that in comparison to the world’s largest IT services companies Accenture was ranked the best in the measurements of IT expense as a percentage of net revenue, IT workforce as a percentage of headcount, and IT expense per employee.  What the consultants did not stress was that all of the success from our IT reformation took place as Accenture was in a state of significant expansion.  

One of our greatest feats is that an almost doubling of revenues from 2001 to 2010 from $11.44 billion to $21.6 billion and a more than doubling of workforce from 75,000 to 180,000 employees was accompanied by a 22% reduction in overall IT expenditures. Revenue increase and cost reductions were made possible through greater simplicity in governance and enterprise management,  executed through actions like using a single-vendor approach for application needs and adopting server virtualization for greater efficiency and fewer e-mail servers.  Complexity is something the consultants stressed was a major pitfall with COBIT 5, warning us that the system’s 5 principles, 7 enabler categories and 37 processes that are all cross referenced to IT related goals would unnecessarily complicate our governance procedures.  Personally, I feel that addressing the importance of efficiency and streamlined processes in Accenture’s growth is a primary argument against COBIT 5 that needs to be emphasized.  

I was less intimidated by the $48.9 million price tag of COBIT adoption than the consultants, considering that our company’s revenue for 2010 was just under $22 billion.  If I truly believed that COBIT would provide greater operational efficiency than our existing framework, I would be inclined to think that our company could absorb the temporary negative cash flow.  However, I concur with the presenting team that Accenture has already developed a set of processes personalized to the company that provide greater value to ourselves and our clients than the system that would emerge from a complete redevelopment  under COBIT 5 guidelines.  Additionally, reworking our IT governance could be extremely disruptive for a marginal benefit, and might incur the same disruption if Accenture were to implement the next iteration of COBIT when it is released.  

Ultimately, our current IT governance methodologies have supported the company’s growth and should continue to successfully do so in the future without the rigid constraints COBIT 5 would impose.  The consultants may have highlighted some flaws in our current infrastructure such as our IT staff’s sentiment that their requirements have been unjustly increased to be more than a support staff  and managerial discontent with the time required for internal audits, but COBIT is definitely not the answer to these minor shortcomings.  I would recommend that our Senior IT management make a comprehensive review of our current procedures for assigning responsibility to staff and the requirements for an audit of past projects.  However, any changes to processes should be made according to our internal management’s own sense of what is most efficient and productive for the company, and not in accordance with the strict set of guidelines that a framework like COBIT would require. At this time, our company is best suited to maintain the existing IT infrastructure that has served as a model for the industry.  


 

Measuring the Benefits and Costs of Implementing an Ubuntu Operating System

Mr. Smith,

The technological product I am evaluating for you today is the Ubuntu operating system, a Linux-based free open source software that is an alternative to our current OS of Windows XP.  I’m sure you are aware how reliant our law firm has been on the Microsoft products and this is typical in the American business community, as over 80% of business desktops are running some variation of a Windows OS1.  However, the trend of business OS purchases towards open source software is growing, with an estimated 25% of all new operating systems adopted in the next 5 years expected to be some form of open source software2  

Ubuntu specifically is a user-friendly OS that is very similar to the Windows interface.  It comes pre-installed with many of the programs that our administrative staff frequently use, including its own word processing application similar to MS Word, presentation program application similar to MS PowerPoint, and spreadsheet application similar to Microsoft Excel.  The Ubuntu Software Center offers thousands of applications that could be utilized by our firm such as internal accounting software or picture editing for our marketing releases, many of which are available for free.  However, there are certain applications like TurboTax that really have no proper equivalent in Ubuntu.  We could possibly employ a multi-boot utility to run both Ubuntu and a Windows OS, but this would negate any savings from adopting a free open source software like Ubuntu.

There could be significant cost savings from transitioning to Ubuntu, considering our current aging IT infrastructure.  Although most of our attorneys and administrative staff are currently running Windows XP, a number of our computers were purchased over 10 years ago and are experiencing less than ideal operating speeds with many of our attorneys and staff members needing to reset their systems after running simultaneous applications.  Based on the estimates of several models of desktops and laptops we have considered purchasing, each new computer system would cost approximately $650.  About half of our 20 computers should be replaced and we should purchase the Microsoft Office 2013 professional suite at a cost of $400 per license.  This would sum to a total cost of $10,500.  Transitioning to an Ubuntu system would negate that expense, as our layers and administrative staff would be using the free version of Ubuntu or Ubuntu Desktop for Business for a total of $1,050 per system, along with the free Ubuntu application suite.  

On the surface it would seem that we would be saving the firm $9,450.  However, there is a hidden cost associated with decline in productivity.  Considering that most of our administrative employees, including senior staff, are generally computer savvy, we could assume that they would be able to handle a transition with little to no productivity loss.  However, since many of our attorneys are over the age of 55 and very resistant to new technology, even a 1% decline in their productivity would result in a loss for the firm of $31,500  (9 attorneys X 35 billable hours per attorney per week X 50 weeks X $200 average billing rate X 0.01).  Our attorneys would not only have to learn a new operating system, but also each new application and how to obtain the necessary applications that are not pre-installed from the software center.  Understanding that I have personally seen some of our lawyers waste hours in frustration formatting briefs, I feel that a 1% average loss in productivity is fair.  

The Ubuntu OS and its accompanying application suite is a viable alternative to Windows, if it can be transitioned with little production loss.  With each new generation of Windows products, we are required to invest additional funds and Ubuntu does provide free updates.  I would recommend that on a trial basis we migrate two of our administrative staff’s computers to Ubuntu and determine the practical benefits of its implementation.  If little productivity is lost or even gained with the user-friendly interface, we can then at that point measure the merits of a full transition for our administrators.  

Thank you for your time.

1. http://www.maximumpc.com/article/news/vast_majority_big_businesses_still_rocking_windows_xp_claims_browsium

2. www.linxus.comnews/featured-blogs200-libby-clark