ARIBA IMPLEMENTATION AT MED -X
Case Analysis – Information Systems for Managers Submitted to: Dr. Deepa Ray Submitted by: Group 5 Amrita Kumari, Arun Kumar Dev, Praneeth Koti, Shiv Marwah, Vaibhav Baweja
3/13/2012
SUMMARY MED – X Inc. a global pharmaceutical giant has seen a sustained growth ever since its inception in the year 1972. This growth was fueled by a strong and relentless focus on: research and development aimed at introducing new and better products, and the formation of strategic alliances with other major players in the industry, allowing MED – X to license, procure and sell their products as well. As the organization’s operations have spread out and scaled up (with the annual expenditure on indirect goods and services rising to $3 billion), there is a need to closely monitor the procurement process and make it more efficient. MED – X has thus decided to transform the existing set of procurement procedures into a decentralized purchasing model having a selfservice philosophy. For this MED – X has decided to implement “ARIBA Buyer”, an eprocurement solution from ARIBA (leader in ESM market). This would help MED – X streamline its procurement processes, reduce wasteful expenditure, keep a close tab on all its prominent and long term suppliers, reduce purchase related processing costs and improve cycle times.
MED – X hired Implementation Technologies to implement and integrate the ARIBA B2B ecommerce platform. Christopher Martin of Implementation Technologies was the project manager and Terry Baker, CIO, MED – X, was supervising the project. Timely completion of the project is required to give MED – X time to test the new product and provide some latitude to employees to develop functional and technical expertise in the ARIBA. The project was started on May 1, 2001, with successful CRP testing on June 25, 2001, and was supposed to go live on October 1, 2001. As the completion date is one month away, Martin has realized that the project cannot be completed on time. Two major components of the project, technical infrastructure setup and software customization lie on the critical path. Martin is not clear which component is causing the delay. Performing Earned Value Analysis (suggested to him by Baker) appears to be a good option to get a clearer picture of the problem at hand.
ISSUES The issues of project management in Ariba implementation are: 1) There is only one month left for the project completion deadline and Martin feels he cannot deliver it on time. 2) Martin did not communicate initial troubles, which he found out in the early phase of the project to the clients because of his fear on his individual reputation as this is his first end-toend project. 3) There was attention deficit from the resources as some MED-X resources were allocated as and when needed. 4) There was no information flow as Martin liked to maintain the status quo till the last month of the project. 5) There were no proper controls and checks as his team uncovered several things that were not working as designed. 6) There was no effective communication among project teams as we can infer from two incidents. One in which a part time MED-X staffer was repeatedly pulled off the project for other duties. The other one was when there was delay in getting Sun server equipment. These problems have led to the delay in the process of Ariba integration with PeopleSoft. Using the Earned Value Analysis (EVA) we will estimate when and where the above problems have occurred. 1
Defining the important terms in EVA: a) SV: It is scheduled variance; it represents whether the events are ahead or below the schedule. If SV is positive the event is above the schedule and is below if its negative. b) SPI: It is schedule performance index; it represents how much actual work is done in comparison to the planned schedule. c) CV: It is cost variance; it represents the relation between the amounts of work accomplished to the resources allocated. A positive CV indicates that work accomplished costs less resource expenditure than planned and a negative cost variance indicates that work accomplished costs more than planned resource value. d) CPI: It is cost performance index; it represents the amount of work being completed on a project for every unit of cost spent. e) CR: It is control ratio. It is the product of SPI and CPI, which gives an idea of how much work is done compared to both time and cost. Interpretation of EVA as per Exhibit 1 is as follows: 1) SV for all the months is positive for software customization component which means that the events were ahead of schedule all the time, with no problems in this component. Whereas for technical infrastructure set up component SV is negative in all months which means that the events are behind schedule, which is a problem. The combined SV is positive. 2) CV for software customization is positive for all months which explains this work is accomplished for less resource expenditure than planned, whereas CV for technical infrastructure component is negative for 3 months, zero in the 1st month and positive in the last 2nd month which shows more resources were used than planned to complete the work in this process but improved resource usage in the last month. The combined CV is mostly positive. 3) SPI is greater than 1 for all months in software customization which explains that more work is done than scheduled. On average it is 1.13, which means for every estimated hour of work, the project team is completing 67.8 minutes effectively which is a good sign. While SPI for technical infrastructure is less than 1 for all months which means they have done less work then scheduled. On average it is 0.94 which means for every estimated hour of work, the project team is doing only 56 minutes of work which is a problem. The combined SPI is 1.03. 4) CPI is greater than 1 for all months in software customization which means this project is producing more than the cost spent on it. On average it is 1.18, which means for every $1 spent this process is producing $1.18. While CPI is less than 1 for almost all months technical infrastructure. On average it is 0.93, this means for every $1 spent, the project is producing only 93 cents of work. The combined CPI is 1.05. 5) CR is greater than 1 for software component and combined project but less than 1 for technical infrastructure company.
RECOMMENDATION From earned value analysis we can find that software customization component is doing good on both cost and time parameters but the problem is with technical infrastructure, which is a runaway project in both time and cost. But there is no need to worry as the combined project is on track on both time and cost parameters. So the project can be completed on schedule as it is still in control. We recommend Martin to concentrate more on technical infrastructure component as it is the bottleneck. He should allocate more resources and monitor closely this project at the same time 2
not neglect good work done in software customization component. He should also ask MED-X to allocated full time resources to prevent attention deficit issue. Apart from this, as the project is in the final stage he should put controls and checks, have effective information sharing, formalize channel for dissonant information and be alert to prevent biasing for conforming evidence and find problem if any.
EXHIBIT Exhibit 1: Earned Value Analysis Monthly Plan
Monthly status
Plan Actual burn
BCWS ACWP
$ 120,000.0
Actual performance
BCWP BCWP
Schedule impact
SV SPI CV CPI CR
Rolling ratio
Cost impact Control ratio
May
Earned Value Analysis June
Software Customization Customization
July
August
September
$ 192,000.0 $ 187,000.0
$ 192,000.0 $ 165,000.0
$ 192,000.0 $ 189,000.0
$ 192,000.0 $ 186,000.0
$ 133,250.0
$ 197,000.0
$ 220,000.0
$ 215,000.0
$ 240,000.0
$
$ 5,000.0 1.02604167 $ 10,000.0 1.05347594 1.0809102
$ 28,000.0 1.14583333 $ 55,000.0 1.33333333 1.52777778
$ 23,000.0 1.119791667 1.119791667 $ 26,000.0 1.137566138 1.273837081
$
$
$
119,000.0
13,250.0 1.110416667 14,250.0 1.119747899 1.24338673
June
Plan Actual burn
BCWS ACWP
$ 120,000.0 $ 120,000.0
$ 192,000.0 $ 215,000.0
$ 192,000.0 $ 192,000.0
$ 192,000.0 $ 216,500.0
$ 192,000.0 $ 170,000.0
Actual performance
BCWP BCWP
$ 120,000.0
$ 170,000.0
$ 173,000.0
$ 190,000.0
$ 185,000.0
Schedule impact
SV
$
-
$ (22,000.0)
$ (19,000.0)
$
$
SPI CV
1 $
-
0.88541667 $ (45,000.0)
0.90104167 $ (19,000.0)
0.989583333 $ (26,500.0)
0.963541667 $ 15,000.0
0.94
Cost impact
CPI CR
1 1
0.79069767 0.7000969
0.90104167 0.81187609
0.877598152 0.868456505
1.088235294 1.048560049
0.93
Control ratio
August
Average
(7,000.0)
Combined Projects
Monthly Plan
Monthly status
Plan Actual burn
BCWS ACWP
$ 240,000.0 $ 239,000.0
$ 384,000.0 $ 402,000.0
$ 384,000.0 $ 357,000.0
$ 384,000.0 $ 405,500.0
$ 384,000.0 $ 356,000.0
Actual performance
BCWP BCWP
$ 253,250.0
$ 367,000.0
$ 393,000.0
$ 405,000.0
$ 425,000.0
Schedule impact
SV
$
13,250.0
$ (17,000.0)
$
$ 21,000.0
$
SPI CV
$
1.055208333 1.05520833 3 14,250.0
0.95572917 $ (35,000.0)
1.0234375 $ 36,000.0
1.0546875 $(500.0)
1.106770833 $ 69,000.0
1.03
Cost impact
CPI CR
1.059623431 1.118123475
0.91293532 0.87251892
1.10084034 1.12664128
0.998766954 1.053387022
1.193820225 1.321285405
1.05
Control ratio
Rolling ratio
July
(2,000.0)
September
1.18
Monthly status
June
August
1.13
Monthly Plan
May
July
48,000.0 1.25 $ 54,000.0 1.290322581 1.612903226
Technical Infrastructure Infrastructure
Rolling ratio
May
Average
9,000.0
September
Average
41,000.0
REFERENCES Awazu, Y., Desouza, K. C., Evaristo, J. R. (2004). Stopping runaway IT project. Sharma, R. (2010, April 23). Earned Value Analysis in Project Cost Management: Calculate Cost Performance Index (CPI) and Schedule Performance Index (SPI), Retrieved April 12, 2012 from http://www.brighthub.com/office/project-management/articles/57944.aspx. N.A. (n.d.). Data Analysis, Retrieved April 12, 2012 from http://guidebook.dcma.mil/79/evhelp/var.htm. 3
