How would you advise Macharia to proceed on the issue of upgrading the B1 System? Should they upgrade to higher version of SAP or should they just improve the B1? What criteria would you use as a basis for your decision/recommendations?

 

  

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Zaidi Oil: the SAP ERP dilemma Freddie Racosas Acosta and Arlene Suson Acosta On a beautiful October morning in 2011, Mr Abbas and Ms Kariuki were seated facing each other in the Zaidi Oil Group boardroom in the presence of the CEO and five other company directors in Nairobi. They were debating whether or not to upgrade their current B1 system to a bigger version of SAP. Freddie Racosas Acosta is a Senior Lecturer based at Strathmore University, Nairobi, Kenya. Arlene Suson Acosta is a Managing Abbas was the new ICT Director of Zaidi Group, an oil marketing company (OMC) operating in East Africa. The fact that he had been with the company barely three months did not prevent Abbas from voicing his opinion and even disagreeing with the directors around the table as they discussed the B1 system. Kariuki, the Finance Director, saw the USD400,000 price tag for system licenses alone as very impractical. However, unable to hedge quickly enough, the company had lost a substantial amount of money due to the 20 per cent depreciation of the Kenyan shilling against the dollar in just three months: Director based at FilCom Traders and Consultants Ltd., Nairobi, Kenya. It's time to upgrade it, said Abbas. No, it's not. Was the emphatic reply from Kariuki: "Yes, it is! We have outgrown the system and it is risky to remain with B1". "No, it's riskier to upgrade to A1 since it is too big for us, not to mention the other costs involved. B1 software can be improved to accommodate our additional needs": But its architecture, not to mention its functionalities, is meant to serve the needs of small companies (see Exhibit 1). We are no longer a small company, replied Abbas. It is not good practice to keep on building and adding modules on top of B1 to meet our growing needs. It is as folly as adding 10 more floors to a building whose architecture was meant for a one-storey building. "But other large entities are on B1 as it is more cost effective. And let me tell you why we shouldn't abandon B1 unless we absolutely have to", Kariuki stated: The success of the integration of the B1 with other modules from other vendors (approved by SAP) is proven through success stories such as Kenya Paint Company which RedLock implemented and supported. I'm also certain that Kenya Paint is not just relying on the standard B1 but have integrations with other modules to enable them managed their operations better (see Exhibit 2). The integration will only be done with other modules approved by SAP - i.e. already proven - where's the problem? Disclaimer. This case is written solely for educational purposes and is not intended to represent successful or unsuccessful managerial decision-making. The author/s may have disguised names: financial and other recognizable information to protect confidentiality. One problem is that Kenya Paint is operating in Kenya only with very few branches. Secondly, SAP has no more responsibility on us if RedLock[1] do extensive customization of the system. We are in the hands of RedLock, who in the past, did not deliver a customized system and failed to provide support services, Abbas went on further. DOI 10.1108 EEMCS-01-2014-C023 VOL. 4 NO. 8 2014, pp. 1-18, O Emerald Group Publishing Limited, ISSN 2045-0621 EMERALD EMERGING MARKETS CASE STUDIES PAGE 1 Zaidi Oil: the SAP ERP dilemma Freddie Racosas Acosta and Arlene Suson Acosta On a beautiful October morning in 2011, Mr Abbas and Ms Kariuki were seated facing each other in the Zaidi Oil Group boardroom in the presence of the CEO and five other company directors in Nairobi. They were debating whether or not to upgrade their current B1 system to a bigger version of SAP. Freddie Racosas Acosta is a Senior Lecturer based at Strathmore University, Nairobi, Kenya. Arlene Suson Acosta is a Managing Abbas was the new ICT Director of Zaidi Group, an oil marketing company (OMC) operating in East Africa. The fact that he had been with the company barely three months did not prevent Abbas from voicing his opinion and even disagreeing with the directors around the table as they discussed the B1 system. Kariuki, the Finance Director, saw the USD400,000 price tag for system licenses alone as very impractical. However, unable to hedge quickly enough, the company had lost a substantial amount of money due to the 20 per cent depreciation of the Kenyan shilling against the dollar in just three months: Director based at FilCom Traders and Consultants Ltd., Nairobi, Kenya. It's time to upgrade it, said Abbas. No, it's not. Was the emphatic reply from Kariuki: "Yes, it is! We have outgrown the system and it is risky to remain with B1". "No, it's riskier to upgrade to A1 since it is too big for us, not to mention the other costs involved. B1 software can be improved to accommodate our additional needs": But its architecture, not to mention its functionalities, is meant to serve the needs of small companies (see Exhibit 1). We are no longer a small company, replied Abbas. It is not good practice to keep on building and adding modules on top of B1 to meet our growing needs. It is as folly as adding 10 more floors to a building whose architecture was meant for a one-storey building. "But other large entities are on B1 as it is more cost effective. And let me tell you why we shouldn't abandon B1 unless we absolutely have to", Kariuki stated: The success of the integration of the B1 with other modules from other vendors (approved by SAP) is proven through success stories such as Kenya Paint Company which RedLock implemented and supported. I'm also certain that Kenya Paint is not just relying on the standard B1 but have integrations with other modules to enable them managed their operations better (see Exhibit 2). The integration will only be done with other modules approved by SAP - i.e. already proven - where's the problem? Disclaimer. This case is written solely for educational purposes and is not intended to represent successful or unsuccessful managerial decision-making. The author/s may have disguised names: financial and other recognizable information to protect confidentiality. One problem is that Kenya Paint is operating in Kenya only with very few branches. Secondly, SAP has no more responsibility on us if RedLock[1] do extensive customization of the system. We are in the hands of RedLock, who in the past, did not deliver a customized system and failed to provide support services, Abbas went on further. DOI 10.1108 EEMCS-01-2014-C023 VOL. 4 NO. 8 2014, pp. 1-18, O Emerald Group Publishing Limited, ISSN 2045-0621 EMERALD EMERGING MARKETS CASE STUDIES PAGE 1

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How would you advise Macharia to proceed on the issue of upgrading the B1 system Services are needed to improve information systems and they can be very expensive and they require investment in areas ... View the full answer