ERP Case Study

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Case Study Vodafone: A Giant Global ERP Implementat ion Vodafone Group PLC is the largest mobile service provider by revenue in the world, with 400 million customers across Europe, the Middle East, Africa, Asia Pacific, and the United States. In 2013, it had revenues of $64.6 billi on and more than 86,000 employees working in over 30 countries. Since its founding nearly 30 years ago, the business has experienced phenomenal growth, largely by establishing l ocal operating companies that provides products and services to their local markets.

As a result, the company was very decentralized, lacking comm on practices, centralized operations, and data sharing among its various operating companies. Most of Vodafone’s mobile subsidiaries operated as independent companies wi th their own business processes. Vodafone was a network of individual businesses, bu t it wanted to function more like a single global firm to better deal with com petitive pressures. Management called for a major business transformation to make this ha ppen.

In 2006, Vodafone’s board of directors approved the “ Evolution Vodafone” Business Transformation Program” (EVO) designed to refashion Vo dafone into a truly global company, with a centralized shared services organization and common worldwide business processes in finances, human resources, and supply ch ain management for all of the operating companies. (Shared services refers to th e consolidation of business operations that are used by multiple parts of the same organization in order to reduce costs and redundancy.) A common SAP ERP system would provide the technology platform for these changes by supporting information-sha ring and common business processes that would simplify and speed up work throughout the company. Additional software tools from Informatica, Opentext, Readsoft, Sab rix, Redwood, HP, and Remedy that could integrate with SAP were added to the mix.

Vodafone’s system turned out to be one of the biggest SA P ERP implementations in the world. How did Vodafone pull it off? First of all, Vodafone’s management realized the company lacked the expertise and resources to manage such a complex project entirely Page 2 of 8 8/7/2017 https://jigsaw.vitalsource.com/api/v0/books/9781323309568/print?from=376&to=378 on its own. It enlisted the consulting firms Accenture and IBM to provide skills and services that this ambitious project required and which wer e not available inside the company.

The company spent a year identifying and designing its new business processes and establishing the scope of this project. The management team wanted to limit risks to non- customer-facing processes that were nevertheless important so urces of value for the firm. Customer-facing front-end processes were excluded fro m the first phase of the rollout to keep the transformation more manageable.

Procurement was targeted as the first set of processes to b e transformed using the new ERP system. Vodafone had been allowing each of its local companies to manage its own procurement, which prevented it from leveraging the massi ve purchasing power the company could obtain by managing relationships with mate rial and service suppliers from a single entity. By generating savings from centralized p rocurement, the transformation project would be able to quickly show a return on investme nt and win further support.

Vodafone did not establish a centralized procurement department but instead created a centralized procurement company based in Luxembourg that uses the SAP ERP platform. Most of the company’s spending goes through thi s central organization.

Suppliers benefit because the system helps them plan their sales to Vodafone and they only need to work with a single purchaser instead of many . This new way of doing business included a new purchase-to-pay process in which invoi ces are approved automatically for payment by matching them with purchase orders and receipts.

Once the new procurement process and organization were ru nning, Vodafone started creating a centralized shared services organization based on the SAP ERP system. It selected Budapest, Hungary as the pilot location for thi s new arrangement. Vodafone Hungary is a mid-sized company with 2,000 employees with a small IT platform based on Oracle software. This made Vodafone Hungary more recepti ve to changing its information system and business processes than Vodafone org anizations in larger countries, and Hungary had already been using Oracle system s. There, Vodafone built an entire shared services organization from scratch while simultaneously implementing the SAP ERP system. Vodafone then set up two more shared services organizations in India running on SAP. Page 3 of 8 8/7/2017 https://jigsaw.vitalsource.com/api/v0/books/9781323309568/print?from=376&to=378 After Hungary, Vodafone implemented the new procurement process and SAP software for its Page 4 of 8 8/7/2017 https://jigsaw.vitalsource.com/api/v0/books/9781323309568/print?from=376&to=378 PRINTED BY: [email protected]. Printing is for personal, private use only. No part of this book may be reproduced or transmitted without publisher's prior permission. Violators will be prosecuted.

German operating company. Germany is Vodafone’s largest m arket, and accounts for more than 20 percent of Vodafone’s total revenue. Vod afone Germany is a much larger organization than Vodafone Hungary, with 13,000 emplo yees, over 130 local legacy systems, and many customized business processes to replace. Work h abits were more deeply entrenched, and Vodafone encountered some emplo yee resistance as it tried to implement the new systems and processes. To minimize risk, Vo dafone used a phased, incremental implementation, did a tremendous amount o f testing, and made all the necessary system modifications before the system went live. Spe cial support teams were dispatched to work with all the employees affected by the transition. These efforts helped address problems and employee resistance before they got out of hand. Once the German implementation was deemed successful, Vodafone r olled out the new system at many more operating companies, prioritizing the implem entations based on each operating company’s size, complexity, and willingness to chan ge.

No two rollouts proceeded the same way because each oper ating company had unique challenges and demands. Many of these companies had grow n rapidly, and had numerous legacy systems based on local requirements. There w ere large numbers of users, interfaces, and legal requirements to deal with. Vodafone’s project team had to balance the need to proceed rapidly with the need to ensure that the system was implemented carefully.

Vodafone’s implementation plan called for a core proje ct team to visit each individual operating company and implement the new processes locally, assisted by a systems integrator and local resources. Local teams and senior man agement met with the global teams, IT consultants, and local IT vendors in a friendly environment to encourage knowledge-sharing and openness to change. The success of eac h rollout was based on multiple factors, including the number and complexity of each unit’s legacy systems, the skills of each local project team, and the willingness of each local organization to embrace change. Vodafone enlisted the services of the glob al consulting firm Accenture to provide skills where needed and assist with change mana gement in the local companies. Over time, the Vodafone project team and th e Accenture consultants learned how to tailor their activities to the needs of each ope rating company. For example, if no Page 5 of 8 8/7/2017 https://jigsaw.vitalsource.com/api/v0/books/9781323309568/print?from=376&to=378 representatives from an operating company showed up for the project launch meeting or they attended but showed little interest, the project t eam knew that company might be less cooperative. In such cases, the project would require m ore resources and attention.

The project team also had to be sensitive to local trends as system rollouts took place.

For instance, if an operating company was located in a cou ntry experiencing economic downturn, its employees might be more resistant to the r ollout. Some might see a major business and technology change as an improvement in thei r situation, while others might see it as another thing to cope with during a very stres sful time.

As it finished rolling out the system to its remaining operating companies, the Vodafone project team used what it had learned to make improveme nts to its earlier ERP implementations. For example, testing and employee feed back revealed that more attention should be paid to usability. So, the project team enhanced the system’s interfaces to make them more user-friendly.

Given the nature of the business, Vodafone’s management wants about 80% of the company’s internal transactions to take place on a mobile device. According to Niall O’Sullivan, Vodafone’s Global Finance Transformation Di rector, management believes mobile apps will be a major advantage in driving compl iance, increasing ease of use, and reducing resistance to the actual processes themselves. The goal is to have the vast majority of user interactions with the system take place on a mobile phone. According to O’Sullivan, mobility provides easy access for employees who don ’t typically engage with the SAP system, so more employees are using the system. The m ore people use the system, the greater the return on investment. Over 60,00 0 employees around the world now use the new system, with 80,000 expected by the end o f 2014.

Vodafone is now rolling out some of its enterprise applications for mobile devices, and so far, four have been selected. The first to go mobile was a travel and expense reporting application. Employees are able to take a photo of thei r receipts and get reimbursed without using any paper, and they can issue or approve req uests for leave on their mobile phones all at one time. This application has reduced the time required to file travel expenses from 30 minutes to 10 minutes, with 7,500 expense claims filed each week, resulting in 300 person-days’ potential savings per week. Vodafone’s future mobile plans Page 6 of 8 8/7/2017 https://jigsaw.vitalsource.com/api/v0/books/9781323309568/print?from=376&to=378 call for the development of a mobility portal and the integration of approval applications with finance, HR, and electronic sourcing. Page 7 of 8 8/7/2017 https://jigsaw.vitalsource.com/api/v0/books/9781323309568/print?from=376&to=378 PRINTED BY: [email protected]. Printing is for personal, private use only. No part of this book ma y be reproduced or transmitted without publisher's prior permission. V iolators will be prosecuted.

Vodafone’s business process transformation and ERP system have increased business efficiency and produced annual cost savings of $719 million. The total cost of ownership (TCO) of information technology has been lowered. Thro ughout the world, Vodafone has a consistent way of working and a more unified organizat ional structure. Getting the various operating companies to think and act more uniform ly and to adopt a shared service model has produced benefits that are not immediat ely quantifiable, but should lead to further profitability in the long run.

Sources: “Customer Journey,” Vodafone Group PLC. www.mysap.com , accessed May 28, 2014,” www.vodafone.com , accessed May 29, 2014; Derek DuPreez, “Vodafone H ANA Project Moves Beyond Trial Despite Skills Challenge,” TechW orld, March 11, 2013; “Using SAP MaxAttention to Safeguard the Global Rollout of SAP ERP,” www.mysap.com , accessed April 8, 2013; and David Hannon, “Vodafone Walks the Talk,” SAP InsiderPROFILES, October-December 2012. Case Study Questions 9-13 Identify and describe the problem discussed in this case. What management, organization, and technology factors contributed to the problem?

9-14 Why did Vodafone have to spend so much time dealing with change during its business transformation?

9-15 Why was an ERP system required for Vodafone’s globa l business transformation?

9-16 What management, organization, and technology issu es had to be addressed by the Vodafone project team to ensure the tra nsformation would be successful?

9-17 What were the business benefits of Vodafone’s glob al business transformation? How did it change decision making and th e way the company operated? Page 8 of 8 8/7/2017 https://jigsaw.vitalsource.com/api/v0/books/9781323309568/print?from=376&to=378