SLP 4

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The International Journal of Case Studies in Management is published on-line (www.hec.ca/revuedecas/en), ISSN 1911-2599.

This case is intended to be used as the framework for an educational discussion and does not imply any judgement on the

administrative situation presented. Deposited under the number 9 65 2010 009 with the HEC Montréal Centre for Case Studies,

3000, chemin de la Côte-Sainte-Catherine, Montréal (Québec) Canada H3T 2A7.

Volume 4 Issue 1

March 2006

An ERP Story: 1 Background (A)

2, 3

Case prepared by Professors Carmen BERNIER 4 and Vital ROY,

5 as well as

Éric BRUNELLE 6

Business Context

In 1950, when the general insurance company Aux Bons Soins (ABS) was in its early days, it

offered a full range of general insurance products for individuals residing in the province of

Quebec. Over the years, Canada has seen a consolidation of its general insurance industry. Three

years ago, ABS acquired the insurance company General Maritime Protection, serving Eastern

Canada. Last year, ABS seized an opportunity to conquer Western Canada’s market by acquiring

Western General Insurance in Calgary. These acquisitions positioned ABS as a major pan-

Canadian insurer. To date, these three companies have continued to function autonomously.

Six months ago, management at ABS announced that it was bringing these three original

companies under a single legal entity to form ABS Canada. Jean Roberge was appointed Vice-

President of Information Technologies Management and was mandated to develop a strategic IT

plan. During the annual strategic planning meeting of the management committee, held recently

in Calgary, all of the committee members were pleased to see that the company and its two

subsidiaries were in a good position to plan an aggressive strategy for sales growth. This is the

context in which Jean Roberge recently presented a three-year strategic plan for the development

of information systems and technologies.

The plan, developed by a team of internal collaborators from the three original companies with

the support of consultants, was officially presented and approved at the annual management

meeting held in Calgary in March 2009. The main recommendation of the plan is to provide ABS

Canada with an integrated management system and processes that could be shared by the three

constituent entities for financial management, human resource management as well as sales and

1 This case was produced with the support of the Programme de parrainage professoral CGI and the Fonds de développement

pédagogique HEC. The authors would like to thank the evaluators for their valuable comments.

2 Translation from French of “Histoire d’ERP : le contexte (A),” case deposited under number 9 65 2006 005.

3 This project was made possible thanks to funding from the CGI Professorship.

4 Carmen Bernier is an Associate Professor and Director of the Department of Information Technologies at HEC Montréal.

5 Vital Roy is an Associate Professor in the Department of Information Technologies at HEC Montréal.

6 We wish to thank Jean-François Jutras for his collaboration in the writing and layout of the text.

An ERP Story: Background (A)

marketing management. In particular, the team of experts that worked on the IT plan recommend

the acquisition of the ABC software package – specifically, the modules for finance and

accounting, human resources and sales.

Current Systems and Processes

Since the reorganization of the three original companies under the new company ABS Canada,

each company has continued to operate with its own information processes and systems.

Gradually, the controllers and vice-presidents of finance of each entity began to consider how

they could consolidate the accounting aspects and financial statements of ABS Canada. Similarly,

the vice-presidents of human resources met several times to begin harmonizing human resource

management policies and practices. Currently, a great deal of manual work is required to extract

information from the systems of the various companies and to prepare consolidated management

reports that provide an accurate picture of the financial and human resources of the new ABS

entity. As for sales and marketing, efforts to consolidate data have proved very difficult due to

the diversity and quantity of information available in the respective systems of the three original

companies.

The development of a strategic IT plan led to an analysis of the current situation and a discussion

of the desired situation for the new ABS Canada entity. In terms of information systems, the

following observations were made:

Element Current problem Desired situation

Applications  Incompatible in terms of

functionality and architecture: no

possibility of data exchange

between systems;

 Redundant applications and non-

optimal maintenance of various

systems based on different

technologies.

 Identical functionalities for all

ABS components and integrated

applications that enable data

exchange;

 Simplification of system

maintenance and architecture in

order to group original IT

functions into a single IT function

and achieve better management

of costs, expertise and use of IT

potential.

Data The definition of data differs

according to the original company (for

example, the customer identification

data retained is not the same in all of

the systems).

Consistent and accessible in real

time.

Interfaces Differ according to the application and

the original company.

Similar for all applications,

facilitating employee mobility.

An ERP Story: Background (A)

In terms of business processes, the following observations were made:

Element Current problem Desired situation

Accounting

and financial

processes

Processes are specific to the

operations of the three original

companies.

Harmonization of accounting and

financial processes:

 standardized end-of-period

processing;

 accelerated processing cycles by

eliminating duplication and

manual verification;

 consolidation of the three

companies into one in accordance

with provincial and Canadian

regulatory requirements;

 reports for tactical and strategic

financial management rather than

purely operational.

Human

resource

management

processes

Processes are specific to the

operations of the three original

companies. Moreover, the two

acquired companies’ processes are

inefficient due to their obsolescence

and strictly operational style. The

strategic vision of HR management

as a company asset is not part of the

current processes, which make little

use of IT potential.

Harmonization of HR management

processes:

 redefining the human resources

management approach of the new

ABS entity;

 adding activities such as skill

management, skill development

and mobility;

 improving process efficiency.

Sales and

marketing

management

processes

Processes are specific to the

operations of the three original

companies and correspond to a local

vision of the market.

Harmonization of HR management

processes involving:

 creating an integrated marketing

vision for the new ABS entity;

 improving process efficiency by

increased use of Web potential.

The Decision to Launch the IMSP Project

In the conclusion to his presentation of the IT strategic plan to the management committee, Jean

Roberge stressed the unique potential of an integrated management system for the development

of ABS Canada. He pointed out that managers at all levels as well as senior management could

track in real time the financial and marketing progress of the growth plan for the entire company,

from both a cost and profit perspective. Moreover, this system enables proactive decision-making

An ERP Story: Background (A)

that takes into account the company’s global financial picture as well as its human resource

potential, which are key to the success of any service-oriented company.

Therefore, decision-makers can and must concentrate on the more lucrative activities or those

that are the most important strategically in terms of short- and medium-term growth. Lastly, a

shared management system for marketing initiatives and financial and human resources will

enable the implementation of a more efficient mode of operation by promoting better use of

expertise throughout the company. The forecasted financial benefits of the project are reduced

operating costs in the order of 10%, which could be achieved at the end of the second year

following implementation of the new system. The total cost of the project is evaluated at

$50 million spread out over the duration of the project, estimated at 24 months. A vanilla

implementation strategy is planned, which means minimum changes to the software package (if

possible, no changes at all) and standardization of the processes of the new ABS entity, based on

the processes inspired by best practices and proposed by ABC. Moreover, the system would be

delivered in three phases: 12 months for the finance, accounting and auditing module; 18 months

for the human resource module; and 24 months for the sales and distribution module.

On the basis of these advantages and this vision of IT aligned with business objectives, the

management committee that met in Calgary unanimously approved the recommendation to

launch the Integrated Management System and Processes (IMSP) project.

Back in Montréal, Jean Roberge is very pleased with the support of the management committee.

From his perspective, the potential of an integrated software package will pave the way for the

true integration of the information systems and technologies at ABS Canada. This will make it

easier for him to re-engineer the main management systems (finance/accounting, human

resources, marketing) of the three companies, while preserving specific applications that give the

company a clear competitive edge. In fact, interfaces can be developed between ABC’s modules

and the company’s legacy systems that the company wishes to preserve. Moreover, this

technological renewal includes a systematic review of various disparate, and sometimes obsolete,

processes, in favour of better business practices. This exercise should lead to real progress in the

company’s practices, both in terms of its business practices and skills. This will help ABS to

maximize its IT potential so that it can do business throughout Canada and North America.

With the adoption of a new integrated software package, Jean Roberge is aware that the IT

function he is managing is profoundly changing his role, from the development of applications to

the flexible and rapid delivery of technological software solutions. The IT professionals at ABS

are concerned about the change in direction of the IT department. Jean Roberge believes that

these changes in the nature of the IT function will present several new challenges. Already hard

at work in his new functions, he knows that he cannot manage the ERP project single-handedly

despite its importance for the company. He must quickly find a project leader who has the skills

and experience to lead such an important project.

The Search for a Project Manager

Jean Roberge understands the enormous importance of ABS Canada’s first major IT project. Its

success is crucial in order to establish his credibility as a manager and in his new IT function.

An ERP Story: Background (A)

Selecting a project leader is therefore extremely important. For Mr. Roberge, the ideal candidate

for this position should master the ABC software package and have excellent knowledge of the

systems being replaced and their functionalities. This candidate should also be able to exercise

his or her authority over the project team and have enough experience managing large-scale

projects to stay within the budgets and schedules set out by management.

Aware that the company does not have all the skills needed to take up the challenges that lie

ahead, Mr. Roberge has asked François Caron, from the firm GTI, a preferred supplier of ABS

for 10 years, to meet with him. Mr. Caron is a seasoned consultant who has been the technical

expert, analyst and project leader on several development and implementation projects of

financial and insurance systems over the last 20 years. He is currently the vice-president of

business development at GTI and has been in charge of the ABS Canada account for six years.

He regularly meets with the IT manager of ABS to discuss the company’s changing needs as well

as IT trends in the insurance industry. He asks Luc Martin, an expert in the delivery of ABC

solutions, to join him for the meeting with Jean Roberge.

The following afternoon, Jean Roberge presents the new IT direction of ABS Canada to François

Caron and Luc Martin. He discusses in more detail the urgent need to find a suitable project

leader for this major IMSP project. Jean Roberge believes that the IT function should assume

ownership of the project, since the proper technical functioning of this complex software package

will ensure its success. Moreover, he expects that the software package will be implemented

within the set timeframe and budget. With regard to employee adaptation to the new system, he is

confident that an effective and well-targeted training plan will allow employees to quickly

understand the system and resume their productivity.

This is not the first time the company is introducing a new information system. Employees expect to

have to change the way they do their work since the three companies are being merged into one.

However, the main change will be a new software package that users will have to learn.

In terms of project management, Jean Roberge stresses the fact that management expects

compliance with the set budget and schedule. He hopes that the project leader will prioritize the

quality of the product and effective management of its development. Since the project team

should, in his opinion, be comprised primarily of IT specialists, a homogeneous team like this

will require a project leader with extensive technical knowledge. Moreover, if the project is to

stay on schedule, Jean Roberge considers it crucial that the project leader exercise firm authority

in order to quickly resolve any conflict between the parties involved in the project. Lastly,

Mr. Roberge plans to lend strong support to this project as he has always done for other IT

projects, well aware that proper follow-up and a lot of technical support will be needed to ensure

the project’s success.

He asks François Caron to recommend three qualified candidates for the management of the

IMSP project.

The next day, François Caron and Luc Martin meet to discuss their meeting with Jean Roberge.

They discuss his expectations and examine the following points:

An ERP Story: Background (A)

Questions:

1. What are the project’s main characteristics and challenges identified by Jean Roberge?

2. In your opinion, does the project have other characteristics or challenges that Jean Roberge did not identify that should also be taken into account?

2010-06-14