Let's Integrate: The Case of Kelowna Flightcraft's ERP Acquisition Decision

Transcription

1 BCIC Case Study Library No November 2008 Let's Integrate: The Case of Kelowna Flightcraft's ERP Acquisition Decision The Kelowna Flightcraft Group of Companies was founded in 1970 by Barry Lapointe and Jim Rogers and is located in Kelowna, British Columbia, Canada. The Kelowna Flightcraft Group of Companies comprises three entities: Kelowna Flightcraft Ltd., Kelowna Flightcraft Air Charter Ltd., and Allied Wings. Kelowna Flightcraft Ltd. is a full-service maintenance and repair organization (MRO) that operates 12 line maintenance facilities across Canada and two full-service maintenance, repair and overhaul facilities in Kelowna, British Columbia and in Hamilton Ontario, Canada. Kelowna Flightcraft Ltd. (hereafter referred to as 'KF') is an award winning Approved Maintenance Organization (AMO). Kelowna Flightcraft Air Charter Ltd. is the air cargo carrier for Purolator Courier, while Allied Wings operates the Canadian Forces Contracted Flight Training and Support Program near Winnipeg, Manitoba. Together, these three companies form the Kelowna Flightcraft Group of Companies with a collective workforce of 1000 employees who fly, maintain, modify, engineer and paint aircraft. KF is a one-stop shop that services the aviation industry worldwide. Up, Up and Away In 2006, Kelowna Flightcraft Ltd. (KF) had realized that its existing systems could no longer support the growth and mission of the company. The systems were comprised of quasiinter- and independent systems, and fragmented databases across the company that could not be integrated. For instance, the MRO, Materials Management and Financials were not linked in any way and this created process issues and problems. This realization led the company (KF's executives, senior managers and project managers that will henceforth be referred to as the Project Executives) to begin a process to seek an integrated software solution that would unify the three main areas of their business, meet the overall goals of the company and also be able to grow with the company. A team was formed to meet this purpose and so began KF's acquisition project for an Enterprise Resource Planning (ERP) software solution that they aptly titled, "Project Unity". The team (also known herein as the project team) determined that the company would benefit from integrating its three main business areas MRO, Materials Management and Financials. Further, the project team also determined that at least 80% of the benefits of the new system would "come purely from the integrated nature" of the system. In addition, as part of its strategic direction, the company was prepared to modify its existing procedures and processes to match those of the selected software. The type of software that the project team would be looking to acquire would be an Enterprise Resource Planning (ERP) software solution. Professor Jacques Verville of the University of British Columbia Okanagan prepared this case with the close cooperation of Kelowna Flightcraft and a generous grant from the British Columbia Innovation Council (BCIC). This case is intended as the basis for class discussion rather than to illustrate effective or ineffective handling of an administrative situation. Copyright 2008 by Jacques Verville. All rights reserved.

2 Anticipated Benefits from the ERP Solution The anticipated benefits from the acquisition of an ERP solution can be divided into two distinct areas: the benefits from the technology itself and the strategic benefits as derived from the technology. Anticipated Technological Benefits The ERP solution would enable the company to: 1. Improve Aircraft Maintenance Engineer (AME) Productivity, such as improve parts forecasting, acquisition and delivery "key was the concept of the process supporting the AME, of keeping the mechanics at the side of the aircraft doing his job as opposed to the AME supporting the process/administration" (Project Manager); 2. Reduce re-keying efforts because of the integrated nature of the software, the application data import features, and bar coding capabilities; 3. Reduce revenue leakage, improve and systemize controls, improve accuracy and timely project accounting; 4. Improve scalability and flexibility; 5. Be easy to learn its processes and systems as well as monitor and control its processes; 6. Improve inventory optimization such as demand forecasting, dependent demand, productivity and service-level reporting and electronic commerce. Anticipated Strategic Benefits The anticipated strategic benefits from the new ERP software would be: 1. Improved control of the business: Compliance: GAAP, governance, internal audit Complex structure multi-company consolidations Speed up reaction time (to negative trends) Provide mandatory reporting as needed (Allied Wings & Purolator) Cost and variance tracking Purolator (cost tracking and audit) 2. Meet the requirements of Allied Wings and Purolator Courier Ltd. (PCL): Enhanced PIF (performance incentive fee) ratings, VIQs (variation in quantities) that generate added revenues New reporting requirements beginning 2009 for Purolator 2

3 3. Competitiveness Capacity (optimized) Costs (controlled, analyzed and lowered) Quality (maintained and enhanced) Aircraft maintenance turn times (generate new customers and business opportunities) 4. Growth enablement/scalable processes and systems 5. Alignment with industry trends 6. Future value of the business Overview of the ERP Acquisition The Kelowna Flightcraft Ltd. (KF) Project Executives viewed the planning scenario as a roadmap that would lead them to the selection and acquisition of an ERP system. The roadmap that KF's steering committee laid out included specific activities that the project team would complete to meet its objectives. These set of activities consisted of a series of processes that were based on formally defined procedures and routine project management protocols. The KF project executives also designed its roadmap to be sufficiently flexible so as to accommodate unknown circumstances that might arise during the selection process. Also, because this was KF's first time purchase, they (KF's executives and project management team) did not know what to expect. Although their Project Managers had previous experience with this type of acquisition, since they were new to the aircraft industry, KF's project executives could not predict the challenges that might arise during this acquisition. The ERP acquisition project roadmap began in the Fall of Given the broad scope of the proposed purchase, KF's project executives put together a team that was comprised of individuals from the various enterprise areas that would be affected by the new technology. These individuals would not only be part of the acquisition phase, but would, for the most part, continue on to the implementation phase of the software. The project team would be overseen by the Steering Committee who would provide governance for the overall project. During the planning phase, as part of KF's roadmap, KF's project executives broke down the acquisition and implementation of the ERP software solution into three (3) phases: 1. Financial systems (mandatory for Allied Wings reporting) 2. Materials Management 3. MRO (Maintenance, Repair & Overhaul) In addition to the ERP technology, wireless technology was to be installed in the hangers. Under this plan, the implementation of the new ERP would take place over a three (3) year period and would allow KF's project team to manage the process and mitigate risk. As part of their plan to mitigate risk, a disaster recovery strategy was drawn up to minimize the risk following the implementation of the new technology. With regard to post implementation issues, a plan was developed for the maintenance of the new applications and the level of vendor support that was required for KF to remain current with its ERP system. 3

4 The project team's first activity (task) would be to establish the requirements that would eventually be part of the Request for Information (RFI) and that would subsequently be forwarded to vendors. To do so, the project team identified KF's critical processes, its existing technological architecture/infrastructure and critical elements. The team then put together a list of requirements that included KF's key business functions. Once completed, the team created a request for information (RFI) that outlined who KF was, its business, its existing infrastructure and what KF's was looking for. Approximately, ten RFIs were sent out to various ERP vendors. Included in the ten were a number of MRO point solution vendors. These vendors were required to include integration details to third party modules (i.e., Finance package) and told that the responsibility for contracting and delivery would remain with them as prime contractor. Eliminating Prospects From the initial group of 10 vendors, the list was brought down to three vendors Lawson Software 1, RAMCO Aviation 2 and IFS North America Inc. 3. Subsequently, in the Winter of 2008, a more in-depth evaluation of each of these three vendors solutions was undertaken. Each vendor was invited to put together a three to four day session for which Kelowna Flightcraft brought in approximately 20 of its users to evaluate the functionality aspects of the software. These individuals were drawn from "across the business, and the purpose behind that really was the main issue that we got ownership of the final selection back very early on and that everybody felt that they were actively participating in the selection of this vendor" (Project Manager). As part of their evaluation strategy, KF supplied each of the chosen vendors with scripted scenarios in which specific functions needed to be demonstrated. This was important to KF because they wanted the vendors to understand their business. KF felt that they "were going to get the maximum data if they [the vendors] understood the nature of our business, where we were in our business, the challenges with the business, in essence, all of the issues related to our business". From these sessions, KF wanted to gain a better understanding of each vendor s proposed ERP software and see how their proposed system would perform. Furthermore, KF wanted to evaluate and validate the information that was provided in the vendors RFI responses with what was shown in the scripted demonstrations. Analysis of the ERP Acquisition Process "...Selection is driven by business needs and benefits...the methodology will focus on the best fit package while managing resources (people, cost, time) to reach the best possible decision..." This section presents a detailed account of the processes and activities that Kelowna Flightcraft completed for the acquisition of Lawson s ERP Software solution. 1 Lawson Software provides software and service solutions to 4,000 customers in manufacturing, distribution, maintenance and service sector industries across 40 countries. Lawson s solutions include Enterprise Performance Management, Supply Chain Management, Enterprise Resource Planning, Customer Relationship Management, Manufacturing Resource Planning, Enterprise Asset Management and industry tailored applications. Lawson solutions assist customers in simplifying their businesses or organizations by helping them stream line processes, reduce costs and enhance business or operational performance. Headquartered in St. Paul, Minnesota, with offices around the world. 2 RAMCO Aviation is a global provider of Maintenance & Engineering (M&E) and Maintenance, Repair & Overhaul (MRO) software. Its headquarters are in Lawrenceville, N.J. 3 IFS North America Inc. is a global enterprise application company that provides software solutions. IFS pioneered component-based ERP software with IFS applications, now in its seventh generation. North American operations are located in Battle Ground, Washington. 4

5 KF's Planning The Roadmap KF's planning encompassed all the activities deemed necessary to complete both the acquisition and implementation of an ERP software solution. In broad terms, planning included meetings to determine schedules, priorities, participants, and resources that would be required; activities and tasks that would need to be completed; and so forth. The planning phase laid the foundation for undertaking the acquisition of the ERP solution. The planning addressed the following issues: Participants who would participate in the different phases of the process? Strategies how would the company approach/deal with the vendors? Evaluating current infrastructure what is our current technological infrastructure? Establishing requirements what are our organizational needs in each of the areas that would be affected by the software? Establishing evaluation criteria how would we evaluate the software and against which criteria. Participants Individuals were recruited from within the company. These individuals were from Finance, Materials Management, and Maintenance, Repair and Overhaul departments. One of the Project Managers' objectives in recruiting individuals for this acquisition project had to do with his concern for the long-term buy-in and support of the users for the chosen software. As per one of the project managers: "...these individuals were drawn from right across the business and the purpose behind that...we got ownership of the final selection and everybody felt that they were actively participating in the selection of this vendor..." This approached ensured user buy-in of the chosen solution. Consequently user participation played an important role in KF s decision process. It was important that users buy into (actively endorse and support) the new ERP solution. Without this buy-in, KF's management felt that the acquisition project would be at risk. Strategies for Success KF had several strategies that impacted their selection process. One such strategy that KF used was for the dissemination of information about each of the vendor s products. To do so, KF invited the three short-listed vendors to present, over a three-day period, their proposed technological solutions. For their presentations, each vendor would be required to use predetermined scenarios (scripts) supplied by Kelowna Flightcraft. Another strategy that KF planned was to have, prior to each vendor s presentations, a training session for all project team members on how to evaluate and score each of the vendor s presentations. Yet another strategy concerned long-term user buy-in and support. KF's strategy in this regard was to make certain that many of the individuals on the core team participated not only in the acquisition phase of the ERP project, but continued on to participate in the implementation phase of the technology. 5

6 Establishing Requirements KF's ERP project team established evaluation criteria for three types of evaluation: Vendor Functionality and Ease of Use Technical The vendor evaluation criteria consisted of size, financial stability, reputation, product risks, etc. Functionality and Ease of Use criteria dealt with the features of the proposed software solution and included functionalities specific to front-end interfaces, user-friendliness and so on. Technical criteria dealt with the specifics of system architecture, performance, security, database, scalability, to name but a few. Selection Phase Subsequent to the planning process, the selection process began upon receipt of the RFI responses from the vendors. With these responses in hand, KF then preceded with the paper evaluation of the vendors proposed solutions. This evaluation allowed KF's project team to compare the vendors' solutions against their needs and to eliminate those that did not appear (at least on paper) to meet them. In doing so, KF reduced its list of 10 vendors to a short list of three vendors. Herein, we have chosen to demarcate the selection process as beginning with the activities following the return of the RFI responses from the vendors. The objectives of this process were to evaluate the RFIs and derive a short-list of vendors. Evaluation Phase KF s evaluation process focused on three areas: the vendor, the software s functionality, and technical aspects of the proposed ERP software solution. Project Unity Vendor Selection Training Prior to the in-house evaluation of the vendors and their technologies, members of KF's project team participated in a training program Project Unity Vendor Selection Training that incorporated all of the main elements and objectives of the evaluation phase which were: (1) to understand the needs of Kelowna Flightcraft Ltd.; (2) to know the three final vendors (based on the RFIs and other pertinent information); (3) to be well prepared for the vendors presentations; and, (4) to be well prepared for scoring each of the critical areas. "...Success is hinged on an expert team with clear goals..." (Project Manager) Each of the main elements and objectives were broken down as follows: 1. Understanding the needs of Kelowna Flightcraft Ltd.: A fully integrated set of applications with growth potential: o Major benefits come from industry standard, state of the art systems, not having to transfer, manipulate/validate data and systems which provide value added work Comprehensive applications with depth: o Capable of handling most of our current & future business requirements o Scalable Simple to understand and use o Makes training easier and work flow quicker/accurate 6

7 A vendor who we believe we can work with comfortably o Committed to KF for long term, knowledgeable, flexible, experienced in successful implementation and support High volume processes which are quick and easy Complexity is only where it needs to be Work flow to track the progress of activities o To support KPI s and continuous improvement 2. Get to know the three final vendors 3. Prepare for the vendors presentations Remain discreet and respect vendor information as confidential (not to share one vendors info with another) Do not discuss scoring with anyone outside the scoring team Keep all documentation safe and confidential Expect possibly longer days during vendor presentation sessions Attend one vendor session attend them all Strict time keeping for each meeting be 5 minutes early there will be no delays in start times Attend the entire meeting Time keeping and be prepared: maximum use of time is critical; keep focused on what s critical to the business ; do not discuss other vendors presentations or systems specifically (it is ok to say how would you system process... ) Allow others time to speak: everyone wants to get their questions answered Adopt the parking lot for unanswered questions Try not to tell the vendor in too much detail how we do it today (vendors look for weaknesses and exploit them) Do not strike up relationship with vendors that may be perceived to influence our decision making Do not personally accept any gifts from a vendor Do not express your personal system preferences to vendors Stay engaged even though the presentation may not be covering your specific area of responsibility Be aware of sales tactics (functionality, not presentation skills) 4. Scoring We will score during the presentation(s) Listen and look carefully as the vendors cover each script Make a note if you don t see a script Ask clear, simple questions We will hand in our score sheet at the end of each scoring day We will capture your questions and points of clarification including missed scripts at the end of each day You will score only your area of expertise (FIN/MM/MRO) o Functionality (how well does it do the job) o Ease of use (how easy is the system to use) Make sure you put your name clearly at the top of the scoring sheet 7

8 All scoring information will be held securely until all vendor presentations are completed From the perspective of KF's Project Executives, another objective of the pre-evaluation training was to prepare the project teams sufficiently well so that they could garner the most from the vendor s demonstrations. The Project Executives went a step further to establish for the team basic rules of conduct for and a definition of what it deemed as a good demonstration: Keep focused on what we need to see (so as to minimize questions when the vendor leaves) You will have learned more about the overall business and how integrates the main business areas and functions Ask only relevant questions Remember the vendor is new to our business (avoid the use of Flightcraft terminology) Moreover, the Project Executives also included what a good demonstration should not do: Time out the vendor by asking too many questions Take a stump the vendor approach asking difficult questions Try to solve your current problems Save all your scoring until the end you will forget Spring 20 topics on the vendor at the evening session Be late for anything Disengage when the topic discussed is not your field Talk or whisper whilst the vendor is talking The overall objectives, then, of the pre-evaluation training were to emphasize several points with the project team, namely: (1) the importance of the evaluation phase of the acquisition; (2) that confidentiality was critical; (3) the importance of time keeping and professional conduct; (4) the need for a firm grasp of the principles of each of the 3 vendors' products (how they work); (5) the need to remain focused on the product and not the sell ; (6) to know their scripts very well; (7) to look for simplicity, ease of use, and ease of training others; (8) to look for value added activities; and (9) to think of how they could improve the business by using these new tools. Functional Evaluation The functional evaluation was a key component of the acquisition process for KF. For the functional evaluation of each of the vendors proposed ERP solutions, the users participated in the decision process. Functional criteria, questionnaires and scripted scenarios were used that had been developed in the earlier pre-evaluation training phase of the process. Short-listed vendors Lawson, RAMCO and IFS were invited to participate in a three-day demonstration of their technological solutions. For the functional evaluation, Project Unity Scoring Scripts were used by the team members to score various aspects of the technology during each vendor s presentation. 8

9 Scripted Presentations and Scoring Each vendor's proposed technological solution was presented over a three-day period at the Kelowna Flightcraft centre in Kelowna, British Columbia. Prior to the vendor s presentation, as aforementioned, each team member received training on the evaluation protocols that were to be used to evaluate the vendors' technologies. As a strategy, KF elected to use pre-determined scripted scenarios that were scored by each team member (including users) during the presentation and handed in immediately following the presentation. Each scripted scenario encompassed all three areas where the technology impacted the company: Finance, Materials Management, and Maintenance, Repairs and Overhaul (MRO). For example, for MRO, under the heading of Estimating and Maintenance, the scripted scenario was the following: Demonstrate the ability of the system to analyze historical information (completed work) in order to provide estimates/bids for potential future work. In this instance, the objective for each team member was to evaluate the systems' capabilities to average past work for estimating future work, evaluate the flexibility and sophistication of the analysis capabilities, and evaluate how well the system could compile/create a bid from the analysis. In another example, this time from Materials Management, under the heading of Requisitions, the scripted scenario was the following: Demonstrate how electronic requisitions are: 1. created, 2. approved and, 3. actioned by the purchasing department for routable/repairable items (including warranties); Then, subsequently, how an electronic purchase/repair order is: 4. created, 5. amended, 6. cancelled. In this scenario, the objective was to evaluate the systems capabilities to track repair order requisitions. This function, due to the high volume of transactions, carries significant financial responsibilities and so approval and authorization are important (serial number tracking is critical). Another example in Finance under the heading of Accounts Receivable Billing highlighted the following scripted scenario: Support identification of contract type for reporting purposes (fixed versus Time & Materials and percentage of completion). In this scenario, the objective was to evaluate the systems capabilities in handling various contract types and methods of billing customers, its flexibility and versatility with 9

10 regard to different customer types. The ability of the software to report based on fixed contract and time and materials performance was a requirement that the project team looked for as well as its ability to do percentage of completion reporting. Functionality was scored as follows: an ease of use score: o o o 0 = looks complex, busy screens, not intuitive; 1 = not Windows but not too complex/difficult; 2 = it s like Windows, i.e., everyone will be comfortable with using it functionality score: o 0 to 4, where: 0 = no capability; 1 = minimal capability; 2 = basic capability; 3 = meets all requirements; 4 = exceeds requirements. As for ease of use, a score of 0 would be interpreted as 'the software looks really complex to use, training would be hard and it would be slow to operate ; a score of 2 would be interpreted as 'the software looks easy, it has simple screens, and it is intuitive. Vendor Evaluation The vendor evaluation was completed from the information that was gathered on each of the three short-listed vendors. The information came from references, site visits and input from the visits. Each vendor was also evaluated in terms of its financial stability, reputation, creditability, success history, a Dunn & Bradstreet report and other, similar types of information. Technical Evaluation The technical evaluation was performed on the major technological components needed by the proposed ERP solution: the servers, workstations, network components (line and/or wireless), database management systems, and so forth. Further probing was done to evaluate the level of maintenance required for the applications, the total cost of ownership, the scalability of the software, etc. In addition, the technical evaluation determined KF's volume of data (current and projected), the processing time, and the size of the various components that would be necessary to support all the processing and data that would reside on them. In addition, the team looked at the software s security from the standpoint of how it was defined and how it would need to be managed. Down to the Wire the Final Choice When everything was said and done, the final selection culminated in the choice of the ERP system that Kelowna Flightcraft determined was right for them. When the presentations were done, the in-depth evaluations and analyses completed and the scores tallied, the results were very close, which meant that any one of the three short-listed vendors' ERP solutions would do what was needed for KF. As one of project managers noted, In the process of elimination, we realized that any one of the vendors will do the job. 10

11 Even so, the consensus of the majority of the participants favoured Lawson Software. To ensure that Lawson was the final choice, Project Managers did a hands in the air, five minute voting session with the project team, along the lines of Okay, so who would vote for IFS? Who would vote for RAMCO? Who would vote for Lawson? The users and project team members from MRO, however, seemed to favour IFS. Since IFS's presentation was particularly designed for the aviation industry, with pictures of airplanes put directly into their software screens (dashboards), for example, the individuals from MRO were convinced that IFS was the best choice of vendor/software. According to one Project Manager, the MRO people (the actual mechanics, the hands-on aircraft people) went for IFS. The reason is that IFS had shown aircraft speed and had shown airplanes on their dashboard. [Plus,] they had all the right words. To the MRO group, IFS focused on the aviation and appeared to be more industry focused which gave them credibility in the eyes of this group [thus, the MRO group was] gravitating towards what was known to minimize the risk to the project. The challenge for the project team was then to draw out specific areas of concerns [to the MRO group] so that we could very carefully evaluate these concerns against the other short-listed vendors products and remove the 'gloss' of the presentation [that focused] on the comparability and performance of each system to perform specific functionality. Since the MRO group is critical to the operation of the KF business, the successful outcome of this project depended on the group's full buy-in. The final decision would be made beyond this evaluation point. (Project Manager) Hence, the KF project team provided Lawson with a list of the MRO group's concerns and gave Lawson the challenge to demonstrate to the full satisfaction of the MRO group, beyond reasonable doubt, that their proposed system could successfully meet the business requirements (Project Manager). This would provide the MRO team with further opportunity to investigate and become comfortable with what Lawson proposed over IFS (Project Manager). KF project managers were certain that Lawson would be able to satisfy the MRO group concerns. So we said to Lawson, if you want this business, you have to prove to these people...[(mro group)]...and convince them, including the nay-sayers (Project Manager). In January 2008, Lawson returned and addressed these key issues directly with the MRO group. They began by addressing the issues from an aviation perspective and got people on the implementation team that had aviation experience. Although they were not able to get everyone on board, Lawson was able to alleviate the concerns of most from the MRO group, much to the relief of KF's project executives and project team. Other factors also needed to be considered before a final choice could actually be made. After some debate, the factors that the KF project team realized they needed to consider were the less tangible, softer issues of the long-term relationship with the vendor namely compatibility, that is, could they work with the vendor and trust. As one of the Project Managers noted: 11

12 The interesting thing was that once [we] got the scoring out of the way, the softer issues became more important... [The KF project team] had realized the subtleties of the presentations and which vendor was going to support their business in the long-term. [Through] the process of elimination, the realization came that anyone of the vendors will do the job. It took awhile to get everyone on this same playing field. [Then], each participant began to ask themselves What would the long-term relationship look like with vendor such and such? Are they the kind of people that we could work with over the long-term? Do we trust them? These were the questions that began to arise in the final days before the final choice. Another factor that played its part in KF's final choice of vendor/software dealt with the issue of implementation, specifically with assistance and support during the implementation of the software. According to one Project Manager, One influencing factor on the final decision was that one of the vendors came in and, kind of at the last minute, said, This is our product, but we will not actually be implementing it.... The impression that gave us was this kind of a cut and run, we will drop the product with you and then we will be off. The vendor in question, it turned out, could not provide local support for implementation of their software, and had withheld this information from KF until the presentation. Implementation would have needed to be carried out by an outsourced third-party provider. This was another factor that contributed to KF's final choice. Another factor that KF was concerned with was training. Here, Lawson came out ahead of the other vendors. As per one of the project managers: With Lawson products, what they seemed to bring out that the other vendor[s] did not was their emphasis on training, on the dissemination of knowledge. This was another critical point [for us]. Lawson continued to provide the KF team with more reasons, more evidence, to reaffirm the team's choice. Lawson provided the definite impression that they were there for the long haul...they would be helping with the implementation...providing the support and that added a lot of credibility... That was a critical point. Subsequent to further investigation and evaluation by the MRO group of Lawson's ERP solution, and assessment of the other factors by the project team, namely those of long-term relationship, compatibility, trust, implementation, support, and training, the final choice of software and vendor was made Lawson Software. All-in-all, KF's choice of Lawson was not only based on the technology side, but was also based on the soft issues, especially the non-aviation reasons the long-term relationship with the vendor and the implementation strategies. It was these softer issues that swayed the majority of the participants (Project Manager). The final choice or recommendation was conveyed to the Steering Committee for final approval. 12

13 Negotiations A Two Prong Process KF's Project Executives began negotiating with Lawson Software once they received the approval from the Steering Committee. Two types of negotiations took place: (1) business negotiations; and (2) legal negotiations. According to one of the Project Managers, the legal negotiations were a pretty stale process that focused on the terms and conditions of the contract. These were conducted between KF's legal team and Lawson s legal team. The major issue in the negotiations was pricing. KF had a budget that they quite naturally wanted to be kept secret from the vendor. They requested a bid from the vendor so as to have a point of reference for pricing. However, during the business negotiations, the vendor announced a new price that was higher than the original bid. Not only was the new price higher than the original bid (because the pricing was adjusted for the number of KF users, etc.), but it included some variable pricing, pricing that could fluctuate based on a number of factors such as the number of licenses. It was in the middle of the negotiations that a key advisor to Mr. Lapointe informed Lawson that they (KF) wanted a firm, fixed price. In the middle of the negotiations, a key advisor to Mr. Lapointe, dropped a bombshell on them (Lawson) when he stated that they wanted a fixed price. (Project Manager) This, in effect, was like changing the rules of the game in the middle of the game, and it put some strain on the newly burgeoning relationship between KF and Lawson Software. You see,] KF did not go out initially and ask for a fixed price...we asked for a bid,... [so,] to introduce that at that point was fairly late in the discussions with them. Nevertheless, Lawson did what was needed with the pricing in order to satisfy KF's request. Negotiations then continued based on Lawson's fixed quote. When all was said and done, at the end of the day, after all the planning, we needed a product. We needed a good product and a successful implementation... (Project Manager) In addition to this, one of the project managers summed up what he considered to be the makings of a successful acquisition: It is the successful deployment of any chosen system and adoption by the users that will ultimately decide the final benefits to the company. You can select the best system in the world, but if you can't get users to become personally comfortable with the transition, learn, accept and use the software to its maximum, then it is for naught. Critical Success Factors The factors that were important and deemed critical to the success of KF's software acquisition project were as follows: Clear roadmap A clear vision and careful thought and planning laid the roadmap for this acquisition project. 13

14 Buy-in User buy-in was deemed as critical to the long-term success of this project. It was so important to KF that even following the choice of Lawson's software solution, efforts were still made to alleviate the MRO group's concerns and convince them of the worthiness of this choice. The MRO group's concerns were presented and addressed by the vendor and even though a few of its members did not change their opinions, many of the group's members did, and bought into the final decision. Ability to deploy the system effectively This factor dependent on user buyin, sufficient resources, a deployment/implementation plan, vendor support during the implementation, and post-implementation assistance in the way of training and technical support. Vendor support and training KF defined the type of support they wanted for the software from the vendor, which was, on-site support during implementation, training in the use of the software, post-implementation technical support. Scalability of the technology The chosen software would need to be scalable to match the growth of KF over the next several years. Ability to work with vendor Through working with the three short-listed vendors, KF was able not only to view their products, but to interact with the vendors teams and was able to get a feel for the humanistic elements that would influence their prospective long-term business relationship. Integration The chosen software would need to be able to integrate KF's main business areas and functions. Scripted scenario Another important element to making certain that the software could and would meet the needs of the company. Code of conduct So as not to be thwarted by attitudes, behaviours, egos, and bad habits, guidelines were established for the type of behaviour that was to be exercised or avoided during the vendors presentations. It was not by chance, but rather, through careful planning that all of these factors were identified and pulled together for this project. No single factor alone could make this project work. It was the combination of all of them, together, that brought about the successful completion of this acquisition. Lessons Learned Kelowna Flightcraft's ERP acquisition process was a learning experience for the company. Some of the lessons that were learned from this experience were: No two projects are the same. Each project is unique due to the uniqueness of the issues pertaining to the company itself. Although the project team had managers on it that had participated with other companies in ERP acquisitions, the experiences they had with this acquisition turned out to be different. While several issues may have been similar to the other ERP acquisitions that they were involved with before, the differences in people, environment, needs, etc., made for a sufficiently different 14

15 experience as to call it unique. Hence, the uniqueness lies in the particularities and subtleties of each company. The need to be very clear on what you need, without knowing exactly what you need. Planning: The roadmap was the anchor for the project in terms of where they needed to get to. The need to stand firm on the issue of getting the scripts as part of the statement of works for the project team and the main business areas for which the software was being sought. The scripts were a divine form. They selected the supplier on the basis of how they performed based on the scripts. Therefore, they contracted with them based on the software's performance, and thus knew that that was what they would get delivered. 15