Ikon’s Attempt at ERP
A. COMPANY BACKGROUND
Ikon Office Solutions is one of the world’s leading office technology companies, with revenues exceeding $5 billion and operations in the US, Canada, Mexico, UK, France, Germany and Denmark.
B. GROWTH STRATEGY, GOALS AND OBJECTIVES AND ACTION PLANS TO ACHIEVE THESE OBJECTIVES
I. Growth Strategy
Ikon is pursuing a growth strategy to move from what what more that 80 individually operating copier dealers to an integrated company twice that size in the next 4 years.
• Its goal is to provide total office technology solutions, ranging from copiers, digital printers, and document management services to systems integration, training and other network technology services.
• The Company has rapidly expanded its service capability with an aggressive acquisition effort that has included technology services and document management companies.
III. Solution Implemented to Achieve Goals and Objectives
Piloting of SAP
• Given the above goals and objectives, the Company seemed to need ERP software. A few years ago, Ikon began a pilot project in Northern California district to assess the possibility of using SAP’s enterprise software application companywide.
• CIO David Gadra, who joined Ikon about a month ago after the pilot system was turned on, however, decided not to roll it out.
Cost of dropping SAP
Ikon will take a 25 million write-off on the cost of the pilot.
1. Consultant fees - The vast majority of the $25 milion loss represents consultant fees. At any given project, Ikon was paying 40 to 50 outside consultants $300 an hour.
2. Cost of software - Less than 10% went to pay for the software itself.
3. Cost of implementation - Ikon budgeted $12 million to get the system running. That cost came inat over $14 million, including $8 million paid to IBM for consulting.
Problem Areas or Issues with SAP
There are a number of factors that Ikon considered in dropping SAP (Gadra said that SAP was more challenging than beneficial to Ikon)
1. Ikon’s environment was ill-defined for SAP considering human factors, functionality gaps and cost incurred. Ikon made errors in estimating the amount of business change they have to make as part of the implementation.
2. A big reason that Ikon decided to drop SAP was its conclusion that the software didn’t sufficiently address the needs of a service company like Ikon as opposed to manufacturers. For example, SAP didn’t have an adequate feature for tracking service calls.
3. Ikon also had a difficulty assembling an internal team of SAP experts. Ikon’s cost were high because the firm relied heavily on consultants.
Does Ikon have the right reasons of dropping SAP?
• SAP America president Jeremy Coote was extremely disappointed at Ikons announcement of dropping SAP. He is of the belief that Ikons earlier pilot was on time and extremely successful.
• Coote calls Ikon’s decision to scrap the project as “an example of what happens when one doesn’t sell at corporate level “ as well as the divisional level.
• A newer version of SAP is to include a service management module.
Home grown application systems - The Best solution to Ikon’s problems?
• Instead of rolling out SAP, Ikon is bringing all the 13 of its regional operating operations into a home-grown application systems.
C. DISCUSSION QUESTIONS:
1. What are the information needs at Ikon and what alternatives does Ikon have to meet these needs
2. What are the advantages and disadvantages of ERP software in meeting these needs?
3. What risks did the company take in selecting SAP software for evaluation?
4. Why did Ikon cancel the SAP project?
D. CONCLUSIONS AND RECOMMENDATIONS
BASIC CONCEPTS ABOUT ERP
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