OilCO & ExploreCO Case Study

CASE 4-2 Real-World Case

Two Short Cases: OilCO & ExploreCO

Source: Based on article by Parr, A., and Shanks, G. (2000). A Model of ERP Project Implementation. Journal of Information Technology, 15, 289–303.

The first company, OilCO, is a refiner and marketer of a broad range of petroleum products in Australia and 11 countries in the Pacific. As one of Australia’s major industrial companies, OilCO directly employs more than 2,000 people and owns assets valued at approximately $2 billion. OilCO is the Australian subsidiary of one of the world’s largest multinational oil companies. It has a nationwide network of 1,800 locations, is one of the four major oil companies in Australia, and enjoys a substantial market share. When the global oil industry underwent significant restructuring and increasing competition, OilCO decided to implement a new system to achieve full process integration and automation, improve customer service, and facilitate planned business restructuring. To meet these complex business requirements the company selected a mainframe-based ERP solution. With 1,600 users in Australia, NewZealand, and the Pacific Islands, this ERP system became one of the largest and most complex mainframe implementations in the world. Itprocessed 25,000–35,000 transactions per hour and handled more than 1,000 orders per day across the country.

The implementation of the system at OilCO involved major change to the company’s business processes, so they matched the ERP’s processing methods. Even though they recognized that some existing business process changes were necessary, OilCO aimed to maximize the integration benefits of the ERP while simultaneously streamlining the company’s existing processes. The implementation also involved the development of an oil industry–specific module. The ERP (referred to here as ERP-1) implementation resulted in substantial business benefits for OilCO. They included better sales forecasting, fully automated ordering and delivery processes, real-time financial data, improved data quality, and streamlined business processes. Like any other ERP project, however, ERP-1 went significantly over budget and over time.

The second company, ExploreCO, is an oil and gas exploration and production company in southwest Australia. ExploreCO is an affiliate of OilCO. The company is involved in offshore gas and oil exploration and production. When OilCO acquired another oil exploration company that had an operational resource system it became the ExploreCO operational system; however, there was substantial dissatisfaction with this system within the ExploreCO system. ExploreCO had to decide either to rework and upgrade the existing system or to replace it. They chose a new system and conducted a feasibility analysis of several ERP systems. For budgetary reasons and, because it suited their exploration business, they decided to implement an ERP system (referred to here as ERP-2). The budget and project scope were considerably more modest than the OilCO implementation, so they planned to implement and “Go Live” with the system in 11 months.

Documentation on the existing system indicated that an understanding of the requirements was already advanced, but they took the opportunity to renew and reengineer the system, particularly given the level of dissatisfaction with the old system. Moreover, they needed to align the new system (ERP-2) with OilCO’s existing ERP (ERP-1). The implementation project was driven by OilCO’s head office, which performed cost analysis, set the scope, made recommendations, and provided leadership on the steering committee. System goals were set via performance indicators. For example, the indicators included the number of check runs in a given period, a measured reduction in off-system payments, and a reduction in suppliers from 6,000 to 600. Given the lessons learned in the OilCO implementation, the steering committee insisted that the best people be released full time for the life of the project and a “project champion” (that was the official title) placed on the steering committee.

The project was completed on time and on budget and was described by the highly experienced project manager as the “easiest implementation” he had “ever been involved in” (from an interview with the project manager in December, 1999). The business benefits of the ERP-2 system were significant. These include (1) a measured reduction in manual processes, manual transactions, and the number of suppliers, which has led to improved procurement and inventory systems; (2) streamlined, real-time accounting systems; (3) a reengineering of processes that involved a devolution of responsibility back into the hands of the operators; and (4) improved time accounting (to 15-minute intervals). This last benefit has been particularly important since this company had many joint ventures. The critical success factors (CSFs; Table 4-5 ), identified in ERP-1, were used to augment the second project.

Tabular summary of the importance of each CSF is then presented in Tables 4-6 and 4-7 . Table 4-6 represents the OilCO case study findings and Table 4-7 the ExploreCO findings. The tables show the CSFs in a particular phase. The number of dots in each cell represents the strength of the participants’ consensus that that particular CSF was necessary in that phase. Four dots indicate that the particular CSF was considered to be of major importance in that phase of the PPM. Three dots indicate that the CSFs were considered very important. Two dots indicate that the CSFs were considered important. One dot indicates that the CSFs were considered to be of minor importance. No dots indicates that the CSFs were considered to be unimportant. We have not included “smaller scope” as a CSF in Table 4-7 because one implementation was clearly large in scope and the other smaller in scope.

Table 4-5 CSFs for ERP Implementation

Critical Success Factors	Description
Management Support	Top management advocacy, provision of adequate resources, and commitment to project
Release of Full-Time Subject Matter Experts (SME)	Release full time on to the project of relevant business experts who provide assistance to the project
Empowered Decision Makers	The members of the project team(s) must be empowered to make quick decisions
Deliverable Dates	At planning stage, set realistic milestones and end date
Champion	Advocate for system who is unswerving in promoting the benefits of the new system
Vanilla ERP	Minimal customization and uncomplicated option selection
Smaller Scope	Fewer modules and less functionality implemented, smaller user group, and fewer site(s)
Definition of Scope and Goals	The steering committee determines the scope and objectives of the project in advance and then adheres to it
Balanced Team	Right mix of business analysts, technical experts, and users from within the implementation company and consultants from external companies
Commitment to Change	Perseverance and determination in the face of inevitable problems with implementation

Table 4-6 OilCO—ERP Implementation Incorporating CSFs

Phase Project
Factor	Planning	Setup	Reengineering	Design	Configuration Installation and Testing	Enhancement
Management Support	...	...	·	·	·	...
Champion	...	·		·			·
Balanced Team		...	· ·	· ·			· ·
Commitment to Change	...	·		·			· ·
Vanilla ERP	...			· ·	· ·
Empowered Decision Makers		·		·
Best People Full Time		·	·	· ·	· ·	· ·
Deliverable Dates		·					·
Definition of Scope and Goals	·	· ·	· ·	·			·

Table 4-7 ExploreCO—ERP Implementation Incorporating CSFs

Phase Project
Factor	Planning	Setup	Reengineering	Design	Configuration Installation and Testing	Enhancement
Management Support	... .	· ·	...	...	...	...	· ·
Champion	...	· ·	·	·	·	·	·
Balanced Team		· ·	...	· ·	· ·	· ·	·
Commitment to Change	...	·	·	· ·	·	·	·
Vanilla ERP	...	· ·	· ·		· ·
Empowered Decision makers	·	·	...	· ·	·	·
Best People Full Time	...	·	·	·	·	·	·
Deliverable Dates	...	· ·	·	·	·	·	·
Definition of Scope and Goals	...	· ·	· ·	·	·	·	· ·

Even when both companies identified what appeared to be the same CSF, they differed in that ExploreCO devised a process and structures in order to facilitate its achievement. The starkest example of this concerns their recognition that a project champion was crucial. In ExploreCO the champion was actually known by that title, was allocated to the project for its duration, had defined responsibilities, and, most importantly, was a member of the board (called the leadership council) of the company. This level of seniority, plus the daily hands-on approach, proved to be invaluable. In contrast, in OilCO this person was not officially recognized and the person in the role changed over time. The drive for the system initially came from a U.S. managing director who promoted the ERP as a global strategy. The venture manager (brought in from the United Kingdom) subsequently became the de facto champion, and there later was an in-house senior ERP “convert.” There was no defined role, nor were there processes or structures via which his influence could be conveyed.

There is considerable variation in the pattern of CSFs between the two companies. Both companies adopted a policy of minimal customization and deliverable dates; however, OilCO was forced to commission an oil industry–specific module, and they generated endless reports because it was often possible rather than desirable (according to the project manager). These changes were accompanied by extensive company restructuring, and it is unclear which of these caused them to go years beyond their projected end date. ExploreCO adhered to the principles of minimal customization and deliverable dates until their project was well advanced in the configuration and testing phase, when it became clear that the interfaces were unacceptable to the users, at which time they brought in Lotus Notes and wrote the necessary interfaces. This meant they ran two weeks past their “rock-solid end date.”