The Inside Truth of Avis Europe PLC - Essay Example

Inside Truth of avis Europe PLC 5 March, Executive Summary Information systems are needed by all types of organization to assist them in meeting their business objectives and acquiring higher profits. Despite the need for such systems and their ability to organize workflows in organization there have been many reported failures of such software which have resulted in heavy losses for the businesses. ERP system is a multi module system which integrates various component of management information system to coordinate functions and activities across the organization. If the system is successfully implemented it can help an organization collaborate its functions across various departments while at the same time organizing other functions of the organization. Avis Europe had planned to implement this same system for their enterprise but the implementation of the project was cancelled after a $54.5 million investment. The lack of planning and inability to indentify requirements led to the failure of the ERP system even before it was officially implemented. By remaining focused on the objectives and careful planning the failure at avis Europe could have been avoided. The information technology industry has seen rapid growth over a period of time. Organizations are continuously looking for excellent quality software to enhance their productivity and profits. Despite the millions of dollars invested in implementing various information systems, organizations still encounter serious problems and failures during as well as following the implementation. Management Information System (MIS) failures occur all around the world in all kinds of organizations ranging from retailers to government organizations. There is a list of such failures which occurred in history and cost organizations millions of dollars in losses. some of the most notable IT failures in history include Hudson Bay Co. (Canada) which faced inventory problems which led to losses of over $33.3 million; Hewlett-Packard Co. (UK) which suffered $160 million loss as a result of a faulty ERP system; McDonald’s Corp. spent $170 million on information system purchase but later cancelled the project, Hershey’s faced an ERP failure which cost the company heavily, and the list goes on. Another such company to face information technology implementation failure for the Enterprise Resource Planning system is Avis Europe. This project aims to analyses the need for the implementation of the Enterprise Resource Planning system at Avis Europe and to study the problems faced by the company in the implementation which eventually resulted in failure prior to operation, despite the huge sum of investments made by the company. This project will look at the importance of management information systems and how they benefit different types of companies in today’s rapidly changing and technologically advancing world. It will also provide an overview of the reasons which result in information technology failure and analyze which of these factors contributed to the failure of ERP systems implementation at Avis Europe and explain in detail the measures which could have been taken to prevent such a costly failure for the company. The project explains the Enterprise Resource Planning system in details to explain the benefits and the challenges presented for the organization by the system and will also examine the causes of failure of such systems in organizations. The project will attempt to uncover the root causes for implementation failure using literature from various sources as supporting information. For the purpose of this project mostly secondary data was used to gather information about the failure on the ERP system implementation at Avis Europe along with information used to supplement and analyze the situation. By uncovering the causes of the failure and identifying the key contributing factors the project will further explain what the management could have done to ensure better results which would have led to achieving the organization objectives. This report also to answers questions about the implementation challenges faced and how they can be overcome. It aims to provide a better insight into the problems faced and the possible steps which could have been taken to avoid the situation. After a complete evaluation of the Avis Europe implementation failure recommendations will be provided for ensuring better and more effective future implementations. Avis Europe is one of the continent’s leading car rental services which also offer services to customers in Africa and the Middle Eastern region. The company serves over 7 million customers with Europe as its leading market. In an effort to increase efficiency across the company and to merge the various functions of the company into one Avis Europe management team decided to implement Enterprise Resource Planning (ERP) system. However the results of this implementation were not what management had expected. The Enterprise Resource Planning system generally consists of numerous software components with their own specific functionality. These systems are designed to serve an all in one purpose for the organization. ERP systems allow the management to view the enterprises as a whole enhancing collaboration and coordination between various functions and departments in the organization. This system also serves to automate and integrate the business practices related to the operations and production aspects of the company. ERP systems are known to have expensive installation and therefore can usually only be afforded by large enterprises willing to spend on such information systems (Abramowicz, 2007). The extensive components of the ERP systems make it very complex and therefore implementation may face various challenges. These problems commonly include expensive customization, requirement of high end computer hardware, unnecessary installed system components and the dependency of the price to performance ratio on the potential benefit the ERP system is able to generate (Abramowicz, 2007). An implementation project can be considered a failure when it is unable to deliver the promised results to the organization or if the implementing party is unable to meet the obligations of the project. One of the main sources of project failure is poor planning by the management. This includes planning the overall project as well as the resources required for proper implementation of the information technology systems. Avis Europe faced this every problem. According to Norman (2004) software management planning can help control costs, quality as well as the duration of the project. The failure rate of ERP system implementations is very high as a result of the numerous obstacles which the implementation has to face including both technical and people related issues. Failure of ERP system implementations may even lead to bankruptcy. Other such problems include the misfit of the ERP system with the organization. Customization is another problem companies face with the ERP system implementation. Each organization has its own set of requirements which it expects the ERP system to fulfill. Customization allows the ERP systems to comply with the current workflow of the organization, which in turn produces better results (Bomarius, Ovio & Jaring, 2009). Olson (2004) also highlights other factors which make the ERP system implementation unsuccessful. These include a supplier and consultant driven ERP system implementation which does not take into consideration the organizations CIO and the IT department. This usually happens when the top management does not consider the IT department and their efforts significant in meeting the business objectives. This means that ERP systems are generally imposed on the organization without consulting all who are concerned with it. On the other hand problems in implementation also occur when the technical portion of the organization is fully focused on the technical aspects of the implementation without taking the business interests of the company into consideration. When Avis Europe ran into trouble with the new information system, it blamed the failure of the ERP system on the poor design and implementation of the system. Costs and substantial delays in implementation were some of highlighted key factors which contributed to the failure of the project. Another reason for unsuccessful implementation was the IT portions of the project which were not providing satisfactory return on investments and were not producing the expected results while at the same time the company had to incur heavy costs. By that time the company had invested in this project to enhance its operations but eventually had to cancel the ERP system implementation after spending $54.5 million on the project. As a part of its recovery strategy in 2004 the implementation was cancelled even before the ERP system went live. A look at the situation at avis Europe reveals several factors which resulted in the failure of the ERP system implementation. The two main reasons presented by the company to explain the failure included time and cost but these were accompanied by several other factors. One of the problems faced by Avis Europe in the implementation of the ERP system was the time it was taking. ERP systems are complex and require a great deal of time to be fully implemented. The complex nature of the implementation stretched the process beyond the specified time to the extent that it resulted in significant delays and higher costs for the company. At Avis Europe the software design issue also entailed was improper requirement definition. The requirements of the system were not defined initially and therefore became barriers at later stages. Without proper software design requirements it becomes impossible for the implementation team to proceed with the project. The best package for implementation can only be chosen when the requirements are clearly defined (Leon, 2007). Another issue with the design of the software faced by Avis was the selection of an in appropriate ERP package. This again led the company into a great deal of customization therefore increasing both cost and time for implementation. Choosing a package which is ideal is would have saved Avis the hassle of additional customization and the organization would have been able to meet its business requirements without the additional costs and time delays. The package selected should be the one which best suits the business and strategy needs of the organization (Leon, 2007). Another factor contributing to the failure of the ERP system implementation was the process redesign. The new ERP system was different in its functions than the original processes which were taking place in the organization. The implementation of the ERP system was carried out by Avis without giving further consideration to the ongoing processes in the organization. One of the other reasons for the implementation failure at Avis Europe can be attributed to the in appropriate fit between those who developed the software and those who would be using it. The software design issues faced by the company meant that the company would be forced to change its processes to bring them in line with the new ERP implementation. This, though, is not an easy assignment. Bringing the ERP systems to adjust with the company’s work processes meant a great deal of customization which in turn resulted in higher costs of implementation. The need to over-customize also meant more time for implementation. The management at Avis Europe was also focused on going live with the implementation. This is not a good approach since the core focus should be on what the ERP system will deliver after implementation rather than its early implementation. If the management at Avis Europe had been ready with careful planning and pre planning the implementation might have been completed and successful. They would have been able to identify the problems before the occurred and had a chance to make improvements before the implementation went wrong. This would have helped the organization in keeping both costs and time under control. Once the system has been implementing, user acceptance is also one of the crucial factors which determine the success of the ERP system. Since the ERP system modifies the practices occurring in the organization it changes the processes that the employees or users are familiar with. There is a need for ongoing training to make the users comfortable with the newly developed processes so that the organization can achieve the desired results. The delay in implementation time faced by Avis Europe could have been handled effectively to avoid the costly failure. According to Olsen (2004) in order to overcome the issues of time in implementation, the ERP system should be broken down into smaller fragments which are capable of producing tangible results. When each portion of the ERP system is broken down into smaller segments the risk of project failure is reduced while at the same time meeting the business and strategy requirements of the organization. In doing so Avis Europe could have selected those specific components which were most needed and used those to pursue business goals while continuing with the implementation of other components. According to Leon (2007) careful project planning is the most crucial factor in determining the success of an ERP system implementation. Management at Avis Europe needed to pre-plan the ERP system implementation and should have had an idea about the possible obstacles the implementation would run into. Managers responsible for watching over the implementation need to keep their eye on problems before they appear so that they can be handled in a timely manner before they result in significant losses. This would have helped management understand the design requirements in a better manner to avoid costly delays. While selecting the ERP system to implement companies should be careful about the implementation approach they opt for since each organization is different and has different business needs and requirements. By understanding their requirements the company would have been able to select a more appropriate approach to implementation. There was a need for managers at Avis Europe to redesign the processes and to develop new ones prior to the implementation of ERP systems. By doing so managers would have been able to ensure that the ERP systems are in line with the current processes and will produce expected satisfactory results. This way the existing business practices can be effectively supported rather than introducing newer processes (Fawcett, 2006). Aligning of the ERP system implementation objectives with the organization’s goals, business strategies and the overall architectural design of the project also determine its success. A successful implementation also requires ongoing and active executive direction while at the same time focusing on the capabilities and benefits of the system rather than completion of the implementation alone. Management information system implementation is necessity for organizations operating in the current technology environment. Despite heavy investments many companies still fail to implement these software effectively, resulting in millions worth of damage .The ERP system is one such information system which enterprises implement to integrate functions across the organizations for better business performance. The implementation of an ERP system is a crucial activity for any company and requires a great deal of money, time and adjustment from the organization. However, there are various factors which involved in the implementation which determine whether the project will be successful or not. Implementation of the ERP at Avis Europe was cancelled even before the system was implemented resulting in $54.5 million loss but this situation could have been avoided by the organization for improved business process and better profits. The implementation at Avis Europe failed as a result of poor planning by the management in terms of requirements and software design and excessive emphasis on going live with the system rather than selecting the appropriate approach for effective implementation. There was also failure to understand the complexity of the implementation and ongoing need for customization which led to delays in implementation and heavy costs for the company. The Avis Europe management could have avoided the failure in implementation by paying attention to details in planning and project design. Choosing the right product and remaining focused on objectives would have led the company towards successful and profitable implementation. Careful planning and pre-planning by the management is one of the factors which determine the success. Cautious planning and vigilance ensure that the organization is aware of the steps they are taking and are geared to deal with any problems which may occur. The success of the project also depends on the extent to which the implementation goals and purpose are in line with the business objectives of the organization so that desired results are produced. References Abramowicz,W. (2007). Business information systems: 10th international conference, BIS 2007, Poznań, Poland, April 25-27, 2007. Proceedings. Springer. Avis PLC Annual Report 2004. Retrieved 5 March,2010 from http://ir.avis-europe.com/avisplc/reports/2004/ar2004/ar2004.pdf Fawcett. (2006). Supply Chain Management. Pearson Education India Bomarius,F., Ovio, M.,& Jaring,P. (2009). Product-Focused Software Process Improvement: 10th International Conference, PROFES 2009, Oulu, Finland, June 15-17, 2009, Proceedings. Springer Olsen. (2004). Managerial issues of enterprise resource planning systems. Tata McGraw-Hill Leon, A. (2007). Enterprise Resource Planning. Tata McGraw-Hill Norman, F. (2004). Making Resource Decisions for Software Projects. Department of Computer Sciences. Queen Mary University of London. 26th International Conference on Software Engineering. Read More