The central problem that Vodafone was facing was its extreme decentralization that made it difficult for the company to compete. Prior to the technological overhaul, every subsidiary company across the world had unique systems and processes (Uhl & Gollenia, 2016). Vodafone was a parent company of independent businesses. The challenges of running a global corporation in such a manner were perhaps not clear to the management at the founding of Vodafone. Restaurant chains are famed for standardizing their products and services by installing the same systems and processes across all their branches. Failing to do so makes specific branches or businesses to perform exemplarily well and others dismally, even with open seamless data sharing (Chatfield, 2009). Another problem that Vodafone faced was lack of the management expertise necessary to handle a project of such magnitude as ERP implementation. Since it was the first time it was carrying out such a project, their lack of expertise is justifiable. Furthermore, the cost-related consequences of each company handling their own procurement were extreme (Uhl & Gollenia, 2016). Although their systems worked for individual businesses across the world, Vodafone lost potential profit. Therefore, the SAP ERP system they intended to roll out would reduce the inefficiency and high costs caused by multiple procurements globally.
The ERP was a critical information system because it targeted procurement, an area that had been costing Vodafone substantial potential profit until then. Since the founding of the company, each subsidiary business carried out their own procurement (Uhl & Gollenia, 2016). The gap that this introduced was that it made it difficult to use its purchasing power and benefit from economies of scale. Vodafone would have been making their periodic purchases as a single entity, which would have reduced the number of vendors with which the subsidiaries have to deal with regularly. There exist secondary advantages of centralizing procurement. For instance, dealing with a single entity would enable suppliers to manage and predict their sales in the short term (Reiss, 2012). Both parties are therefore able to plan their finances and other affairs quite well. The ERP platform was also intended to streamline invoicing (Chatfield, 2009). In most cases, invoicing can be a long arduous process starting from purchase to pay. The ERP system centralizes invoicing and everything is done automatically. Communication from the point of purchase to the payment becomes significantly faster because payment is automatically approved through an electronic matching of orders with receipts.
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Vodafone’s implementation plan was relatively successful, although they had their fair share of challenges. Their decision to start with Hungary before moving on to a larger market was well-informed. They carried on this process with the same philosophy – introducing changes incrementally, rather than all at once (Uhl & Gollenia, 2016). In this regard, it would have been better to implement the ERP in a slightly larger country than Hungary. Instead, Vodafone aimed for Germany and, while they were successful at it, was not particularly rational based on the need to make gradual transformations. However, implementation was rolled out on the basis of additional parameters. Receptability was a crucial factor, for instance. Even if a country had a small population, a society that was too conservative would have been less of a priority. One positive aspect of the implementation process is that when they encountered a challenge, such as the resistance in Hungary, they addressed it almost immediately (Uhl & Gollenia, 2016). Furthermore, the allocation of responsibilities to various people in the company to each relevant official made a global team that incorporated the input of everyone in the process. Organizations work best when employees contribute to something great (Reiss, 2012). The mere publicity of being part of the team that role out ERP at Vodafone is quite a big deal, even if just in Vodafone offices across the world.
The value of the ERP system to Vodafone was quite significant. The first and most notable is the tremendous impact on cost. ERP, in combination with the new business strategy, has enhanced operational efficiency and saved the company $719 million (Uhl & Gollenia, 2016). Although the company does not disclose the exact point of business responsible for the cost reduction, one can guess it to be procurement. The increasing bargaining and purchasing power as well as the streamlining from which the department has benefited has made such savings possible. Secondly, a more uniform structure in all offices across the world. Vodafone’s approach is likely to promote a more systematic and homogenous process throughout the world because the company has implemented the same processes and platforms used everywhere (Uhl & Gollenia, 2016). The negative aspect of this strategy is that decision-making will be more unilateral, making adaptation to local environments substantially more difficult (Uhl & Gollenia, 2016). Also, the fast rate at which technology moves demands fast learning and adoption. Larger organizations take longer to install change than smaller companies. Therefore, if a technology that could improve a particular aspect of Vodafone business is developed today, it would be slower than a smaller company at learning about it and putting it in place. In the meantime, however, it is likely that their profits will be predictably high if uniformity is maintained.
References
Chatfield, C. (2009). Implementation factors that affect ERP system success. Qualitative Case Studies on Implementation of Enterprise Wide Systems. doi:10.4018/9781591404477.ch014
Reiss, M. (2012). Change management: A balanced and blended approach. New York, NY: BoD – Books on Demand.
Uhl, A., & Gollenia, L. A. (2006). Business transformation essentials: Case studies and articles. New York, NY: Routledge.
