Examine the buying decisions involved in this situation

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Reference no: EM133294880

Business-to-Business Marketing - How Business Organisations Buy

Case Study: New ERP System

A large public university with more than 20 locations through a major city currently has nearly 100 different computer and software systems to manage functions such as student registration, billing and collections, purchasing, human resources and payroll. Some of these systems run on "legacy" mainframe computers while others can be accessed on personal computers throughout the
university. The university has appointed a new Chancellor, Dr Lijuan Zhang, and she believes this is an area where huge savings might be realised. While she is no computer expert, Dr Zhang has read extensively about ERP systems and found a definition online - "enterprise resource planning (ERP) systems integrate internal and external management information across an entire organisation." Major ERP system components include a central database that stores and manages the key information of the institution. It should also include report generators, and analytical tools. From her discussions with other administrators in large organisations, it seems like this new system might cost as much as $500 million. Therefore, she feels it will be important to involve all interested people to be sure that they feel involved in the decision.

During the past three years, local and national governments have been cutting back on their expenditures for education. Due to the recent economic downturn, tax revenues have been lower and legislatures have been less willing to appropriate funds or to raise tax rates. Because the university is a public institution, it has established strict ethical rules - no employee is permitted to
receive anything of value from a potential supplier. Since the university is a very large organisation with more than 200,000 students, she also has a significant staff to help her. This includes a large Management Information Systems (MIS) Department who would probably take the lead in this kind of change. Dr Zhang understands that implementing new ERP system will require new changes throughout the entire institution. The university has many component divisions, including each individual college and cross-college discipline committees. Naturally, the Computer Science Department in each college would want to have a say in any decision relating to changing computer system. A simple organisational chart is presented below. Since this is a university
organisation, it is important to note that the faculty (teaching staff) enjoy a high level of independence from both the individual college presidents and the Chancellor of the entire university.

Zhang has found from her reading that acquiring a new ERP is extremely complex. Especially important is the formation of the acquisition team. According to experts (Verville et al., 2007), the team should be multi-disciplinary. The head of this team may be chosen from inside or outside the organisation and must be a strong leader. A steering committee consisting of senior level individuals should be selected from the acquisition team. Two of the major firms that provide ERP systems are Oracle and SAP. Assume that you are the director of marketing for the education division of SAP. You see this as a very large potential client. The university will not only make a very large initial purchase but continue an ongoing relationship for the foreseeable future.

Case Study Questions

Question 1. Analyse the political and economic environment and discuss how they might impact the university's purchase of the ERP system.

Question 2. Discuss the likely members and their roles who might form the DMU or buying centre.

Question 3. Discuss the likely buying situation the university is faced with for the purchase of the new ERP system. Examine the buying decisions involved in this particular buying situation.

Reference no: EM133294880

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