The cost of change

If you have an enterprise resource planning system, do not underestimate the costs and complexity of changing operations, warns MidCentral Health IS manager Chris Dever.

If you have an enterprise resource planning system, do not underestimate the costs and complexity of changing operations, warns MidCentral Health IS manager Chris Dever.

Y2K issues forced the Palmerston North-based health body to spend more than $1 million switching from a long-established AS/400-based accounting package called BPCS to the JD Edwards suite of products.

MidCentral Health says the system runs well today but is costly to run. “It came as a shock to me how expensive it is to maintain,” Dever says, declining to divulge exactly how much.

Because the system is “complex”, repairs and upgrades usually require the services of a consultant, whose time is expensive.

Dever says by the late 90s, the BPCS system, which has been used since the 1980s was no longer mainstream and had not been well maintained. A RFI/RFP tender process led to a recommendation to choose JD Edwards. But at the time, New Zealand was suffering from a lack of appropriate people to install the system, because “everybody” had Y2K projects.

“It took us some time to bed the system down and get it running the way we wanted. It took maybe six months and we had lots of consultants working on it,” he says.

Since then, the system has worked well, he says, and is used for financial modules, such as general ledger and payrolls. But next year MidCentral plan to add the JD Edwards modules for purchasing, warehousing and materials management.

Dever says his staffing requirements for the system are the same as its predecessor as it is more complex, but combined with best-practice methodologies, he would like to think the system presents an improvement and MidCentral can better understand the state of its finances.

The actual software costs were only a ‘small” part of the implementation as many costs were for changing businesses processes. Dever adds implementing ERP or financial software projects are no different to any other scheme.

“You need to plan the project properly, you need to carry out best practices and manage the project tightly — usual project management skills,” he says.

Fellow JD Edwards user is Nelson-Marlborough Health who also installed the system in 2000, spending $250,000 on its implementation and about $560,000 overall, which it believes is “reasonable” for the project’s size because it was “well project-managed”.

NMHS chose the OneWorld software for its core new financial system because other health agencies were too. Previously it had used CA Masterpiece for about ten years, but the license came up for renewal and the health sector was undergoing further restructuring.

“There was some grumbling in the organisation about CA Masterpiece, general licensing issues, but nothing specific. We were also the only DHB with CA Masterpiece, so we though we would go with safety in numbers,” says NMHS general manager of finance and commercial services Nigel Trainor.

The JD Edwards system is used for all financials — accounts payable, receivable, purchasing and inventory, fixed assets, general ledger and jobcosting.

Trainor says the system is easier to use in terms of applications and is Windows-based so it links into spreadsheets. It also makes reporting much easier.

The health body plans to use the asset management module and start using JD Edwards for electronic requisitioning, orders for purchasing and the like, which will accrue “big savings”, says Trainor.

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