Caso de Estudo 2

WHY NOVARTIS BACKED OFF FROM ENTERPRISE SOFTWARE

(Laudon, K. C. & Laudon, J. P. Management information systems, Pearson Prentice Hall)
Novartis A.G. is a leading global pharmaceutical and health care company headquartered in
Basel, Switzerland. It operates in more than 140 countries around the world, employing about
77,200 people and producing nearly US$25 billion in revenue in 2003.

Novartis is replacing legacy systems at Novartis offices in more than 50 countries with
SAP enterprise software for human resources, supplier relationship management, and supply
chain management. Management believes the SAP software will help the company cut down
system integration costs as well as standardize and streamline administrative processes, work
flow, and reporting in its worldwide operations. The SAP software would also help the company
comply with U.S. Food and Drug Administration regulations on electronic records and
signatures for the pharmaceutical industry.

A research survey conducted by Frost & Sullivan, a global consulting company

specializing in emerging high-technology and industrial markets, recognized SAP as the
dominant enterprise resource planning and supply chain management vendor for the global
pharmaceuticals industry. Pharmaceutical companies seeking a single system that could tie
together their operations in various countries were impressed by SAPs ability to address their
industry-specific business requirements as well as the vendors superior global service and
support network.

Novartis had already adopted SAPs R/3 enterprise resource planning and financial
modules for many of its operating units. Given the companys enthusiasm for enterprise systems
and SAP, it was surprising to learn that the accounts payable department at Novartis
Pharmaceuticals, the U.S. arm of the company, was having problems with its SAP enterprise
system. Somewhere in the process of paying invoices, payments were being held, and a backlog
of overdue bills was building. A few vendors even withheld credit from the company.

The accounts payable and strategic sourcing departments fingered a recent upgrade to the
SAP R/3 financial modules as the source of their financial crisis. Novartis had insisted that SAP
be its global standard and the software just wasnt working for them. In frustration, these groups
began meeting to figure out a way to redesign their requisition-to-pay process, even if it meant
scrapping SAP modules that did not meet their needs. They did not want to work with the
Novartis information systems department.

Novartiss information systems staff, on the other hand, believed the unpaid invoices were
not entirely caused by the SAP software. The companys existing process for invoicing was
inefficient, requiring manual approvals from many different managers. It was not a true
integrated requisition-to-pay process. Work was still structured into silos and no one knew what
was going on.

The information systems staff thought a recent implementation of the SAP R/3 software
would solve the problem. It believed that if it let the SAP software handle as many business
processes as possible, it would not have to deal with so many interfaces between different
information systems. The information systems department had assigned special staff members to
serve as business information managers (BIMs) who could work more closely with end user
departments to clarify and support business goals. Nevertheless, because of tight deadlines and
limited budget, information systems specialists scrimped on training and did not pay sufficient
attention to the new systems impact on business processes.

Antnio Carvalho Brito PGITM Evoluo Tecnolgica e Aceleradores de Inovao 2017

 Caso de Estudo 2
WHY NOVARTIS BACKED OFF FROM ENTERPRISE SOFTWARE
(Laudon, K. C. & Laudon, J. P. Management information systems, Pearson Prentice Hall)
Something had to be done to get user and information systems groups to cooperate. Ray
Pawlicki, Novartiss vice president for information and chief information officer, invited
accounts payable and information systems groups to a sixmonth program to foster joint
leadership. The groups met many times. Eventually, both groups finally started listening to each
other and committed to two outcomes.

One was to create a new way for the information systems, accounts payable, and strategic
sourcing departments to work together to facilitate rapid business transformation. The other
outcome was a proposal to improve the purchasing process for Novartis departments so that they
would no longer make independent purchases. Instead, all requisitions would be channeled
through the strategic sourcing department. By centralizing purchases, the company would be
able to obtain larger discounts from suppliers because it was buying in larger quantities. About
US$4 million to $5 million could be saved annually this way.

Business information managers (BIMs) from the information systems department

emerged with a deeper appreciation of business requirements and how these matched up with
SAP and other software providers. In the end, the information systems group agreed to what
accounts payable and strategic sourcing had originally requested: a solution that was the best of
breed, irrespective of the software vendor, that would best support the companys redesigned
purchasing process.

In May 2003 the information systems department agreed to update an old system from
Ariba that would reduce late payments by automatically reconciling sourcing and accounts
payable. The Ariba upgrade improved Novartiss purchasing process so much that US$4 to $5
million in savings were achieved within six months.

Sources: Stephanie Overby, Cant We All Just Get Along? CIO Australia, March 10, 2004 and
SAP Chosen by Novartis as a Major Building Block, EETimes, June 16, 2003.

To Think About:
Why was Novartis having trouble with its requisition-to-pay process?
What management, organization, and technology factors were involved?
Was the solution to this problem a good one? Why or why not?

Antnio Carvalho Brito PGITM Evoluo Tecnolgica e Aceleradores de Inovao 2017