Richter Information Technology free essay sample

Obviously a significant require for information technology (IT) support exists, due to the organizational expansion. Currently the IT strategic plan covers a one-year stage, IT workers are not centralized and the present constructions are not exploiting overall efficiency and effectiveness of Richter. This case analysis describes four possibilities, which Richter could take in order to develop a system that can supply an IT strategy associated with the firm’s long-term business strategy. The first alternative is simply to maintain the current status quo. The second option recommends developing a decentralized IT system. The third option could be to end the present SAP system and centralize IT with an in-house built ERP system which can be used globally and simply outsource the IT support. The last alternative, which this case analysis discusses, is that Richter should establish a more centralized IT system with all present SAP modules for all global members and have a complete outsourced IT support. This case analysis proposes option four, because a more centralized IT system with global outsourced support can allow the company to set up and regulate their operations so that Richter can complete its global expansion plan more efficiently and effectively and at the same time preserve their competitive advantage. Richter’s Current Situation Richter is Hungary’s biggest pharmaceutical firm and consists of wholly owned subsidiaries in more than 10 countries around the world. The company generates its profits through sales and distribution of drugs and owns production sides in Romania, Russia, Poland and a joint venture partner in India. The company’s lucrative expansion was mostly due to globalizing its business around the world and especially adopting international expansions in its long-term business strategy. Richter’s business strategy also consists of accomplishing larger reliability against materials and production planning. In the last couple of years Richter faced tremendous success in vertical integrating its business operations and therefore probably will also adopt this business model across all its global members. Richter’s current information system is to a small extend incorporated with the installation of an enterprise resource planning (ERP) system, and a SAP across Romania, Poland and Hungary. One striking feature is that not all SAP modules, which are hosted by Hungary, are installed in all countries. Russia and India do not have a SAP system at all, although all members use Microsoft Windows operating systems on their Pc’s, which provides the basis for a SAP system. Richter’s Information Technology Governance Model The firm’s IT governance presently exists of three IT elements: infrastructure, business process support and IT organization. The IT plan is build with the help of IT managers and internal IT specialists. The main task of the plan is to ensure current maintenance projects, alterations to IT infrastructure and investments. Richter’s IT governance model will be clarified with the help of a Strengths-Weaknesses-Opportunities-Threats (SWOT) analysis. 12 SWOT Analysis Strengths as well as weakness can be internally influenced by Richter; therefore the firm’s actions have direct impact on its strengths and weaknesses. However, opportunities and threats can only be influenced through external factors, which Richter is not able to manipulate, and the case does not offer enough inside information, therefore will this part be limited to general opportunities and threats Richter may face. Strengths A strong point of Richter’s is the annually IT governance plan development. This provides Richter various flexibility by discussing present IT issues and concerns. Another advantage of the annual plan is that Richter has the possibility to invest annually in up-to-date technology and be an impersonator of high quality IT strategies of competitors. A second benefit provides the partial integrated system by standardizing Richter’s operations. Richter has the possibility to react fast to external environment changes in each specific market. Due to the partial integration of the system many kinks have been added to the system already. Therefore, it may be also easier for Richter to enter markets, which have not been entered yet. Weaknesses Benefit and weakness at the same time is the IT Governance plan for one year. The problem is that often the complete planning cannot be done within one year and hence the plan may not be in coherence with the overall long-term business strategy. For instance, current decisions are done about types of applications and numbers of servers which are used and this is based on a yearly revision. In the long-run Richter may face serious problems due to extreme high costs in training and implementation, because purchased applications in past years have to meet the increased demand. A possibility to decrease these costs may include smarter planning with special focus on the long-run In Romania Richter is planning an additional opening for 41 pharmacies within the next twelve months. Unfortunately the materials management and business warehouse SAP module is still missing. This fact will definitely increase the level of difficulty for Richter if the firm will not change anything. Since all SAP modules are not completely integrated in all global members’ systems, without standardization, it can become very expensive for Richter to still be able to assist all different systems. Especially, as Richter is increasing. In addition, all information generated by the various systems may not be as helpful if all field definitions differ. The last and very important weakness is that it would be very complicated to implement a sudden change in the process of the IT system across Richter, since all locations use various systems. Since markets are shifting so rapid, this can cause tremendous problems for Richter. Opportunities An opportunity can be to expand the outsourcing decision. This decision may beneficial influence the efficiency and strengthens Richter’s competitive advantage in the pharmaceutical market. Threats An obvious threat is that the pharmaceutical industry is based on fast and continuous improvements. As a result also competitors can invest in new technologies as well and may build a more competent information system and take over the position of Richter to be one of the market leaders. Alternatives and Recommendations The advised information system has to meet the following conditions. The first criterion is that the total cost of the IT department should not be larger than 1. 5% or less of Richter’s total sales. (Mitchell, Drotos, Incze Vas, 2008) The second criterion states the IS has to be coherent with the firm’s overall business strategy. The third condition is that the IS should offer a high level of standardization for all vertically integrated operations and global operations. And lastly the IS has to support the larger demand for support services. The first decision Richter may do is simply remaining its current status quo. The company has the decision to remain the present information system, the current IT governance system and the half-centralized information system. Main disadvantage of this option is that Richter’s IT costs will mostly increase due to additional support required and will avoid the firm from maximizing their profit and may even growth. By not acting as efficient and effective anymore Richter may face the chance of losing its competitive advantage. The second alternative for Richter can be to decentralize IT. Clearly decentralizing IT may be attractive to some workers, but would not be alignment with the overall organization’s business plan and would also not support Richter’s global expansion strategy. The partly integrated SAP system has supplied the company with competitive advantage over its competitors in the last years. Therefore, decentralizing the IT system would decrease the standardization, limit the pace of growth and may take the market leader position of Richter away. The third alternative is to dispose the current SAP system and centralize IT with an in-house built ERP system, which may be used globally and outsource the IT support. This option may seem perfect at first glance for the firm to start from scratch and invest in an in-house system that is custom designed in order to address all of Richter’s needs. Nevertheless, it is not realistic, because it would be too expensive, time consuming and the risk of lacking behind in the pharmaceutical market is too big. The last alternative states that Richter should develop a more centralized IT system with its current SAP modules and only outsource the IT support of all members around the globe. Mayor benefit will be that the organization has greater control over the information system and can ensure certain that IS is coherent with the overall long-term business plan. The system will distribute permanently reliable information, which will be more helpful for planning purposes and assessing performance across Richter. Another advantage is that outsourcing SAP support will allow Richter to concentrate on its sales and production performance, expand operational efficiency and effectiveness, rather than dealing with IT issues which do not belong to the area of Richter’s expertise. It is proposed that Richter should choose alternative four since it will allow the IT strategy to be coherent with the firm’s plan for a global expansion. As a result, Richter has the possibility to allow them to experience growth, increase revenues and to keep its current position as a pharmaceutical leader in the market. Outsourcing the IT support will eliminate the cost of twelve SAP support workers and these savings will cover the outsourcing costs, maintaining the overall IT budget still under 1. 5% of total sales. Implementation Plan The general success of the implementation plan calls for complete support from all management levels and clear communication through updates and even worker discussion forums where various questions and fears can be discussed. This case advises Richter to take immediate action to begin with the process of centralization in three phases, as described below. Also a weekly plan is provided. 15 PHASE I – Ground Work In week one till eight, Richter should contact a consultancy firm that will work with the senior and executive management team to identify the long-term IT strategy, which will meet the coming needs of Richter. Next the consultant will conduct a study assessing the current IT system in order to identify necessary improvements for a successful operational system. This step includes setting up field definitions and required level of support in order to implement the centralized IT system. After that, the consultant will obtain a variety of SAP support options and submit these to the executive team and CIO in order to receive a decision. During the second step, which will take place during week 9, Richter has to organize a navigation committee, which will focus on the IT centralization attempt. The main intention for the committee is to monitor the centralization attempt and to address any unexpected matters and concerns occurring from the proposal. The committee may exist of the CIO, the associated IT leaders and senior management. In week 10- 11 Richter should communicate to the human resource department the long-term business and IT plans and should host the first open discussions for workers regarding any concerns that may arise. The senior management will explain these plans in a more detailed view to all workers. The next step will be to carry out the required alterations for the more centralized IT Governance model right away. According to the organizational structure, it will not be a problem that all IT leaders of all foreign partners report straight to the CEO in Hungary. Additionally to the one year IT governance plan, the CIO evaluates the long-term IT strategic plan every three years with the executive and senior management team to guarantee overall coherence. The last step of phase one would be to lay off the twelve SAP support workers and to outsource the function of this department. The provided schedule allows outsourcing to begin on the same day but barely at half capacity till all other global members are completely integrated within the system. 16 PHASE II – Hungary Central and Romania Integration The second phase includes week twelve till fourteen. Human Resource will host another employee information and discussion session in order to evaluate the new IT system in Hungary and eventually adopt changes when necessary. Next the consultant will start working on all required alterations to the system in Hungary and starts arranging the completion of the Business Warehouse, Material Management and Human Resource SAP in Romania. Next, the SAP support capacity should be increased to 80% by implementing the system in Hungary and Romania. The final step of phase two will be that the consultant evaluates and prepares an internal report concerning the centralization process for the steering committee. The steering committee will have the possibility to point out to any concerns or current problems may have arisen and can guarantee an efficient standardization of the system. 17 PHASE III –Implement SAP in Poland and Russia During the third phase a SAP system should be implemented in Poland and Russia. The first step will be that Richter’s human resource has to host employee information and discussion meeting. The determined alterations from the post Romanian activation will be added to the implementation plan for Poland and Russia. After the adoption of the changes, the plan will be executed in Poland and Russia. As a result the outsourcing service for SAP support is then running at full capacity, which is 100%. The final step will include the closing status report from the consultant for the executive management and steering committee. After that the human resource department will host its final employee information and discussion meeting concerning the overall status of the implementation plan and the company’s vision of going forward. Conclusion In order for Richter stay profitable also in the future, the company has to adopt a centralized IT strategy, which ensures that all affiliates work with the same system and SAP modules. Bu outsourcing the IT support on a global each affiliate in each country has the chance of receiving the best-quality service which is provided in their native language. In addition, Richter will also have more control over the overall information system and therefore easier ensure that the IT is in coherence with the overall business strategy of the firm. Another key benefit is that the new system will be effective when it comes to planning purposes and assessing performance among the affiliates. By starting with a step by step implementation Richter also ensures that the system can be improved every time and workers also have time to get used to the system and have discussions with the IT department concerning potential problems they see in the system. Furthermore, the above explained option is not only for the current problem the best solution but it also ensures that Richter can adopt this IT strategy to new unexplored markets. It is easy to implement and with an outsourced customer service unique at the same time.