Introduction
The BBC (British Broadcasting Corporation) is the largest broadcasting corporation in the world and holds international respect. In the UK alone it employees over 26,000 people and has an annual budget of £4 billion. It is renowned for its impartial and reliable reporting by broadcasting without political and commercial influence. [1] However the BBC like any other business is always striving to become more efficient and reduce its operating costs. This led the BBC to outsource its technology sector (BBCTL) in October 2004.
Outsourcing is the transfer or delegation to an external service provider the operation and day-to-day management of a business process. [2] In this case SBS (Siemens Business Services) bought the contract from BBC and agreed to provide the company with IT services for the following 10 years. Outsourcing occurs when a company calculates that selling off sections of the business to a external party can reduce operation costs. In addition outsourcing allows employees to concentrate on the core (‘value adding’) functions of the company. By allowing SBS to provide all IT services the BBC expected to save around £35 million per year. With extra funding and employee hours, new and innovative programmes were to be developed during the ten year contract.
The supplier selection process at the BBC.
The process of selling BBCTL began in November 2003. As stated by the European Union Procurement Process (EUPP) the sale of services worth over £154,477 must be advertised on the OJEC (Official Journal of the European Communities) website. By doing so the contract was open to all bidders. The contract stated that the purchasing company had to provide technology support and services to the BBC for ten years. This part of the contract was criticised. Committing itself to ten years with the purchaser the BBC would leave the corporation in real trouble if the service received were poor. A more sensible approach may have been to allow the termination of the contract if the agreed standards were not met, perhaps even including some compensation sum for the BBC if the situation occurred. Due to this ten year deal, the BBC had to be sure they picked the right company for the job.
The sale of BBCTL attracted the interest of 80 companies; these companies were to be evaluated by a team consisting of 26 BBC employees. The bidding companies were sent a questionnaire that looked to analyse the suitability of each firm to the roll. As the BBC historically works to high standards this was an essential step as it allowed the BBC to decide if the purchasing company could continue these standards. By evaluating their financial position and knowledge of the broadcasting market the BBC was able to highlight the firms that were best for the job, not just the firms with the highest bid. After an extensive review of the returned questionnaires a short list of eight bidders was selected.
The nominated eight then had to provide even more information relating to their plan for outsourcing the IT services and their knowledge of broadcasting technology and changes taken place in the market. The purpose of this again was to evaluate how suitable each firm was but instead looking more closely at how the company operates and what beliefs it upholds. This extra information allowed the BBC to cut the list down to three companies (Accenture, SBS, CSC). To make the final decision on who would win the contract the BBC increased the evaluation team to over 100 employees from many different departments. By doing the BBC were able to decide what purchasing firm could be integrated into the BBC and work with their values and standards.
In the end the BBC decided that SBS was most suited to supply the IT services. SBS understood what the BBC was trying to achieve but also had an understanding of the BCC’s culture and values. It took just over 6 months to decide that SBS was the firm for the job which is a relatively short time considering the size of the contract (£1.9 billion). This seems rather hasty due to the complex IT systems being transferred and the length of the contract. The BBC should have maybe spent longer evaluating the different bidding firms to ensure they selected the best one. However according to the BBC’c CTO John Varney “it’s possible to do a complex outsourcing programme rapidly if enough people are put on it”. [3] By increasing the evaluation team to 100 the BCC must have felt they analysed the situation enough to pick the winner of the contract.
Was the outsourcing a success?
The outsourcing to SBS has had mixed results. By transferring over IT services to a technology specialist the BBC has became a forerunner in technology broadcasting in Europe. Working with SBS has allowed the BBC to engage in forward-looking technology projects. [5] Examples include the highly successful 2005 General Election coverage and sports coverage using broadband technology. SBS is meeting almost all of its performance targets showing the switch over has been carried out relatively smoothly. This has resulted in the BBC being able to concentrate on programme development and improving efficiency. Technologically the outsourcing seems to have been a success and this looks to continue and improve over time.
However, according to a report by the National Audit Office financially the contract has not quite delivered. Prior to accepting the project guaranteed savings of £35 million a year was quoted. During the first year of the contract savings of only £22 million were recorded. [6] This has been blamed on higher than expected expenditure and inaccuracy in calculating the variable costs. The use of the word ‘guaranteed’ was in the end not appropriate when putting the contract to the board. That said savings have been made, if not to the calculated rate, and the BBC have forecasted that these savings will increase over the forthcoming years. Another criticism of the contract was that the BBC did not include a clause to allow them to receive a share of SBS’s profits if returns exceeded a certain level. [7] In future the BBC should include a provision in any contract to permit the sharing of profits and the right to open book access of the contract purchaser.
References
[1] Wikipedia article on the BBC. http://en.wikipedia.org/wiki/BBC
[2] The Outsourcing Management Zone http://www.theoutsourcerzone.com/index.htm
[3] BCC taps Siemens in $3.7B outsourcing pact http://www.sharedxpertise.com/file/1954/bbc-taps-siemens-in-37b-outsourcing-pact.html
[4] Information Technology Outsourcing at BBC (2006) by M Vinaya Kumar
[5] National Audit Office: BBC Outsourcing: The contrast between the BBC and Siemens Business Services for the provision of technology services. (2006) http://www.bbcgovernorsarchive.co.uk/docs/reviews/vfm_outsourcingreport.pdf
[6] BBC’s £1.5B outsourcing costs under fire (2007) by Andy McCue http://www.silicon.com/publicsector/0,3800010403,39167659,00.htm
[7] House of Commons Committee of Public Accounts: BBC Outsourcing: the contract between the BBC and Siemens Business Service (2007) http://www.publications.parliament.uk/pa/cm200607/cmselect/cmpubacc/118/118.pdf
Friday 30 November 2007
Sunday 18 November 2007
Case Study 1 - SAP R/3 Implementation at Sandoz (formerly Geneva Pharmaceuticals)
Geneva Pharmaceuticals (now rebranded as Sandoz), a subsidiary of Novartis, is one of the world’s foremost manufacturers of generic drugs and operates within the North American market. The company has a large portfolio of generic drugs and outputs in excess of seven billion units annually (as of 2007). However, prior to 1996 the company’s computer systems were outdated, unreliable and no longer met the future ambitions of the company.
The company relied on various computer systems for different functions and due to this there was a lack of integration. This resulted in data having to be entered manually more than once and often led to the risk of dirty data. As a result the company decided to invest in a new system that would be better integrated, more efficient, reduce error rates, reduce maintenance costs and generally be flexible enough to meet any future requirements. Eventually the company decided to adopt the SAP R/3 system.
2 – Phase I
Sandoz looked to implement the chosen ERP system R/3 in three phases. Phase I concentrated on the supply side processes which included purchase management, supply capacity etc. Before R/3 these processes were handled manually which was labour intensive, this resulted in the risk of input error and large costs. The implementation of R/3 looked to automate the supply side process and integrate all supply-side data into a single real time database.
To implement R/3 Geneva set up a team of 20 full and part time employees from within Sandoz (all of whom had no R/3 experience) and a team of 5 consultants from Whitman-Hart who had previous R/3 experience. Verne Evans, Director of Supply Chain Management, was assigned project leader. The team decided to use SAP’s implementation methodology Accelerated SAP (ASAP) for its promised quick results.
The consultants Whitman-Hart were technology specialists and had an understanding of R/3 but they had little business experience. They therefore did not know how to customise the system properly in order to meet the required needs of Sandoz. There was a lack of communication between the different groups that lead to problems defining the system as the requirements were not clear or shared between parties. The ASAP methodology was also a mistake, as it did not allow time for the system to be modified which was essential due to Geneva’s extremely complex manufacturing process.
To resolve the situation Geneva appointed a new project leader Randy Weldon, Weldon had implemented an R/3 system in his previous job. Weldon knew that successful implementation relied on the different groups collaborating together. His new team consisted of one IS manager, one functional manager and a senior R/3 consultant. The smaller team allowed for better communication, which resulted in faster progress. He also recruited a team of employees that all had R/3 experience. This team of R/3 professionals were able to customise the system to get it ready for implementation. The new team did not agree with the ASAP methodology but were brought in too late to enforce a change.
Within a year Weldon’s new look team had the MM (Materials Management) module of R/3 up and running. The successful implementation resulted in an improved performance in Sandoz's manufacturing sector. In addition, as data did not need to be retyped or checked the inventory control unit was shut down and the unit’s employees were taught new skills to help in other areas.
3 – Phase II
The purpose of the second phase was to implement new demand-side processes like accounts receivable and order fulfilment. This phase had to take into account the many variables (such as customer production combinations and customer rebates) that would have to be included in the system.
If this phase was to be successful it was clear project management would have to face a fundamental shake up from phase I. As such Anna Bourgeois was assigned overall responsibility for this stage of the project. Whitman-Hart were replaced by Arthur Andersen Business Consulting to assist. Given the complexities involved with designing the system to meet Sandoz’s manufacturing needs Oliver White (another consulting firm) were brought in due to their experience in the field.
A team of twenty full-time IS employees were initially committed to this phase along with thirty users on a part time basis. The full-time team were split into groups of five to look at the various functions. This process identified thirteen areas (with four in particular) as needing improvement. A conference room was used to display the system plan on a wall (using “post-it” notes). This allowed others to view it and make comments.
This phase also involved the training of staff. Advertisements were posted around the company to make employees aware of the new system. Each employee received between three and five days of training although the process itself revealed that a large majority of users were not fully aware of what their actual job description was and as such the process had to take account of this. The company also sought to educate its customers upon its new system.
4 – Phase III
The final phase of the project involved integrating supply and demand side processes. In 1999 SAP released a new Advanced Purchase Optimiser module that met the company’s requirement for a SOP (sales and operations planning process) module that would integrate with the company’s R/3 implementation. Successful implementation of this module finally allowed the company to provide accurate real-time information to its customers on stock levels and better predict when backorders should be filled. The company saw improving the reliability of stock and backorder information as ones of the key ways of improving customer satisfaction levels.
5 – Conclusion
The implementation of the R/3 system has been a huge success for Sandoz. The company has become far more efficient enabling it to reduce costs and improve customer service. However, the implementation process could have been better thought out. A more suitable methodology and original IS team structure are areas that could have been improved. These changes would have allowed the system to be implemented quicker and perhaps with even more success.
References
This is the company's (which has changed its name to Sandoz) "about us" page on their website:
http://www.us.sandoz.com/site/en/company/profile/about_us/content.shtml
This is a brief history of the company:
http://www.us.sandoz.com/site/en/company/profile/history/content.shtml
SAP R/3 Implementation at Geneva Pharmaceuticals (2005) Alan Wilson
This project was a collaboration between Rory Linwood and Stuart Nibloe
The company relied on various computer systems for different functions and due to this there was a lack of integration. This resulted in data having to be entered manually more than once and often led to the risk of dirty data. As a result the company decided to invest in a new system that would be better integrated, more efficient, reduce error rates, reduce maintenance costs and generally be flexible enough to meet any future requirements. Eventually the company decided to adopt the SAP R/3 system.
2 – Phase I
Sandoz looked to implement the chosen ERP system R/3 in three phases. Phase I concentrated on the supply side processes which included purchase management, supply capacity etc. Before R/3 these processes were handled manually which was labour intensive, this resulted in the risk of input error and large costs. The implementation of R/3 looked to automate the supply side process and integrate all supply-side data into a single real time database.
To implement R/3 Geneva set up a team of 20 full and part time employees from within Sandoz (all of whom had no R/3 experience) and a team of 5 consultants from Whitman-Hart who had previous R/3 experience. Verne Evans, Director of Supply Chain Management, was assigned project leader. The team decided to use SAP’s implementation methodology Accelerated SAP (ASAP) for its promised quick results.
The consultants Whitman-Hart were technology specialists and had an understanding of R/3 but they had little business experience. They therefore did not know how to customise the system properly in order to meet the required needs of Sandoz. There was a lack of communication between the different groups that lead to problems defining the system as the requirements were not clear or shared between parties. The ASAP methodology was also a mistake, as it did not allow time for the system to be modified which was essential due to Geneva’s extremely complex manufacturing process.
To resolve the situation Geneva appointed a new project leader Randy Weldon, Weldon had implemented an R/3 system in his previous job. Weldon knew that successful implementation relied on the different groups collaborating together. His new team consisted of one IS manager, one functional manager and a senior R/3 consultant. The smaller team allowed for better communication, which resulted in faster progress. He also recruited a team of employees that all had R/3 experience. This team of R/3 professionals were able to customise the system to get it ready for implementation. The new team did not agree with the ASAP methodology but were brought in too late to enforce a change.
Within a year Weldon’s new look team had the MM (Materials Management) module of R/3 up and running. The successful implementation resulted in an improved performance in Sandoz's manufacturing sector. In addition, as data did not need to be retyped or checked the inventory control unit was shut down and the unit’s employees were taught new skills to help in other areas.
3 – Phase II
The purpose of the second phase was to implement new demand-side processes like accounts receivable and order fulfilment. This phase had to take into account the many variables (such as customer production combinations and customer rebates) that would have to be included in the system.
If this phase was to be successful it was clear project management would have to face a fundamental shake up from phase I. As such Anna Bourgeois was assigned overall responsibility for this stage of the project. Whitman-Hart were replaced by Arthur Andersen Business Consulting to assist. Given the complexities involved with designing the system to meet Sandoz’s manufacturing needs Oliver White (another consulting firm) were brought in due to their experience in the field.
A team of twenty full-time IS employees were initially committed to this phase along with thirty users on a part time basis. The full-time team were split into groups of five to look at the various functions. This process identified thirteen areas (with four in particular) as needing improvement. A conference room was used to display the system plan on a wall (using “post-it” notes). This allowed others to view it and make comments.
This phase also involved the training of staff. Advertisements were posted around the company to make employees aware of the new system. Each employee received between three and five days of training although the process itself revealed that a large majority of users were not fully aware of what their actual job description was and as such the process had to take account of this. The company also sought to educate its customers upon its new system.
4 – Phase III
The final phase of the project involved integrating supply and demand side processes. In 1999 SAP released a new Advanced Purchase Optimiser module that met the company’s requirement for a SOP (sales and operations planning process) module that would integrate with the company’s R/3 implementation. Successful implementation of this module finally allowed the company to provide accurate real-time information to its customers on stock levels and better predict when backorders should be filled. The company saw improving the reliability of stock and backorder information as ones of the key ways of improving customer satisfaction levels.
5 – Conclusion
The implementation of the R/3 system has been a huge success for Sandoz. The company has become far more efficient enabling it to reduce costs and improve customer service. However, the implementation process could have been better thought out. A more suitable methodology and original IS team structure are areas that could have been improved. These changes would have allowed the system to be implemented quicker and perhaps with even more success.
References
This is the company's (which has changed its name to Sandoz) "about us" page on their website:
http://www.us.sandoz.com/site/en/company/profile/about_us/content.shtml
This is a brief history of the company:
http://www.us.sandoz.com/site/en/company/profile/history/content.shtml
SAP R/3 Implementation at Geneva Pharmaceuticals (2005) Alan Wilson
This project was a collaboration between Rory Linwood and Stuart Nibloe
Friday 16 November 2007
Will offshoring affect UK based accountants?
In today’s highly competitive market accountancy firms are constantly trying to drive down costs and overheads this has lead firms into introducing offshoring. Offshoring is a technique where firms outsource particular business processes to countries where labour is cheaper and overhead costs are lower. Blue collar offshoring (manufacturing sector) is already well established and it has had a huge affect on the world’s economy, with a significant percentage of industrial manufacturing now taking place in China. Recently white collar offshoring (service sector) has started to be introduced and this move has the potential to greatly affect UK accountants.
The catalyst for this growth in offshoring has been the advancement in communication technology. The world has effectively become a “smaller” place and this means jobs are no longer geographically dependent. With the Internet, files and applications can be easily shared resulting in offices throughout the world being able to use the same tools and programmes. The education of the developing world has also been a factor in the increase of offshoring. India for example has an abundance of well-educated, English speaking young people who will work for a salary far less than that of their European or American counterparts (on average an annual salary for a person working in India is 4 times less than a worker in the UK) [5]. In addition there are businesses that are solely dedicated to help companies outsource their business processes e.g. Outsource Partners International (OPI). Companies like OPI are only going to encourage more outsourcing in the future.
These factors would suggest that offshoring is only going to increase. In fact a report by PricewaterhouseCoopers (PWC) says the U.S. financial sector is set to double offshoring by 2008 [1] Deloitte also stated in 2003 that it was looking to move 2 million jobs offshore by 2008 with estimated savings in the millions. [2] It is inevitable that offshoring is going to result in decline in job opportunities for UK accountants.
The benefits for companies that outsource business processes are numerous. Offshoring is a relatively painless process because for the most part a full integrated IT system is not required. [3] Very quickly a company can start to outsource to a cheap and reliable workforce with almost instantaneous savings. The main driver for offshoring is obviously reducing costs but there are other advantages. If labour intensive functions i.e. audit checks, tax returns are being outsourced this gives the UK based accountant more time for ‘value adding’ activities. The accountant can now spend time maintaining client relations, looking for new contracts, finding ways to improve efficiency. These tasks can be carried out freely because of offshoring and thus increasing the overall potential of an accounting firm. Time differences could also be a benefit to a company offshoring. USA and UK based companies could leave work to be done overnight letting them move forward the following day. An almost 24 hour continuous service could be provided by the firm which no doubt would be appreciated by the firms clients.
The services that offshoring threaten most are the labour and time intensive processes. These low skilled and highly repetitive services can easily be offshored as places like Mumbai are ideally equipped to deal with such workloads. Bookkeeping, VAT preparation, tax returns, payroll services and the preparation of financial statements are prime services that would suit offshoring. [4] These more tedious jobs of an accountant do not need the full level of training other services do so by offshoring these jobs it leaves the UK trained accountant ready to focus on more skilled tasks.
Table 1: American tax returns prepared in India
2002 ..... 1,000
2003 ..... 20,000
2004 ..... 150-200,000
2006 ..... 360,000
This table illustrates the exponential growth in the number of American tax returns prepared in India. Tax returns are a service ideal for offshoring and based on this table India will be providing this service to a large percentage of the world in the near future.
Companies are online to save too much money for the amount of offshoring to slow down, it is more than likely going to increase. The service sector is just like any other; it will look to drive down costs, as competition remains fierce.
The key to UK accountants surviving offshoring is to change the way they operate. As mentioned not all services are suitable for outsourcing so it therefore these areas that UK based accountants should focus on. By acting in a more strategic way an accountant can be used as a consultant helping with decision making and the efficiency of clients firms. This is a move away from the stereotypical number cruncher but the modern accountant should aim to use his time performing ‘value adding’ activities to maximise his potential and help the growth of his firm.
References
[1] Offshoring Opportunities: Strategies and Tactics for Global Competitiveness (2005) by John Berry
[2] Deloitte Says 2 Million Jobs Moving Offshore by Sharon Gaudin (2003) http://itmanagement.earthweb.com/career/article.php/2196601
[3] Offshore Accounting Bpo - Myths and Realities by Mani Malarvannan http://www.articlesbase.com/advice-articles/offshore-accounting-bpo-myths-and-realities-211753.html
[4] Top 5 Services Your Company's Accounting Department Should Outsource by Vinodh Pushparaj http://ezinearticles.com/?Top-5-Services-Your-Companys-Accounting-Department-Should-Outsource&id=46112
[5] http://tcpmag.com/international/
The catalyst for this growth in offshoring has been the advancement in communication technology. The world has effectively become a “smaller” place and this means jobs are no longer geographically dependent. With the Internet, files and applications can be easily shared resulting in offices throughout the world being able to use the same tools and programmes. The education of the developing world has also been a factor in the increase of offshoring. India for example has an abundance of well-educated, English speaking young people who will work for a salary far less than that of their European or American counterparts (on average an annual salary for a person working in India is 4 times less than a worker in the UK) [5]. In addition there are businesses that are solely dedicated to help companies outsource their business processes e.g. Outsource Partners International (OPI). Companies like OPI are only going to encourage more outsourcing in the future.
These factors would suggest that offshoring is only going to increase. In fact a report by PricewaterhouseCoopers (PWC) says the U.S. financial sector is set to double offshoring by 2008 [1] Deloitte also stated in 2003 that it was looking to move 2 million jobs offshore by 2008 with estimated savings in the millions. [2] It is inevitable that offshoring is going to result in decline in job opportunities for UK accountants.
The benefits for companies that outsource business processes are numerous. Offshoring is a relatively painless process because for the most part a full integrated IT system is not required. [3] Very quickly a company can start to outsource to a cheap and reliable workforce with almost instantaneous savings. The main driver for offshoring is obviously reducing costs but there are other advantages. If labour intensive functions i.e. audit checks, tax returns are being outsourced this gives the UK based accountant more time for ‘value adding’ activities. The accountant can now spend time maintaining client relations, looking for new contracts, finding ways to improve efficiency. These tasks can be carried out freely because of offshoring and thus increasing the overall potential of an accounting firm. Time differences could also be a benefit to a company offshoring. USA and UK based companies could leave work to be done overnight letting them move forward the following day. An almost 24 hour continuous service could be provided by the firm which no doubt would be appreciated by the firms clients.
The services that offshoring threaten most are the labour and time intensive processes. These low skilled and highly repetitive services can easily be offshored as places like Mumbai are ideally equipped to deal with such workloads. Bookkeeping, VAT preparation, tax returns, payroll services and the preparation of financial statements are prime services that would suit offshoring. [4] These more tedious jobs of an accountant do not need the full level of training other services do so by offshoring these jobs it leaves the UK trained accountant ready to focus on more skilled tasks.
Table 1: American tax returns prepared in India
2002 ..... 1,000
2003 ..... 20,000
2004 ..... 150-200,000
2006 ..... 360,000
This table illustrates the exponential growth in the number of American tax returns prepared in India. Tax returns are a service ideal for offshoring and based on this table India will be providing this service to a large percentage of the world in the near future.
Companies are online to save too much money for the amount of offshoring to slow down, it is more than likely going to increase. The service sector is just like any other; it will look to drive down costs, as competition remains fierce.
The key to UK accountants surviving offshoring is to change the way they operate. As mentioned not all services are suitable for outsourcing so it therefore these areas that UK based accountants should focus on. By acting in a more strategic way an accountant can be used as a consultant helping with decision making and the efficiency of clients firms. This is a move away from the stereotypical number cruncher but the modern accountant should aim to use his time performing ‘value adding’ activities to maximise his potential and help the growth of his firm.
References
[1] Offshoring Opportunities: Strategies and Tactics for Global Competitiveness (2005) by John Berry
[2] Deloitte Says 2 Million Jobs Moving Offshore by Sharon Gaudin (2003) http://itmanagement.earthweb.com/career/article.php/2196601
[3] Offshore Accounting Bpo - Myths and Realities by Mani Malarvannan http://www.articlesbase.com/advice-articles/offshore-accounting-bpo-myths-and-realities-211753.html
[4] Top 5 Services Your Company's Accounting Department Should Outsource by Vinodh Pushparaj http://ezinearticles.com/?Top-5-Services-Your-Companys-Accounting-Department-Should-Outsource&id=46112
[5] http://tcpmag.com/international/
Friday 2 November 2007
Taurus & Crest case - why did Taurus fail and Crest succeed?
For the London Stock Exchange to run effectively it must have the right technology put in place. However, this has been a problem for the LSE and has greatly damaged its reputation around the world since the early 1990's.
In 1986 the "Big Bang" changed the way the stock market operated. There were less regulations to follow and deals were now performed through automated systems instead of face-to-face on the trading floor. This increased the trading volume of the LSE dramatically but they now had to improve the business behind the scenes. After a deal was struck the share certificates and money still had to change hands, which could take weeks using the LSE system at the time. The LSE quickly decided to develop an automated system to tackle this problem.
In 1989 there was a proposal to develop a system called TAURUS (Transfer and Automated Registration of Uncertified Stock). This system looked to automate the settlement business transactions. It would also aim to dematerialise stock certificates and instead stock ownership would run on a computer database. If TAURUS were successful it would have saved the LSE millions per year and decreased the risk of purchasers going bankrupt before settlement. However, the implementation of TAURUS did not go according to plan.
The main factor that resulted in TAURUS's failure was that the design team tried to adhere to too many needs. All firm members would have to use TAURUS so each firm demanded that the system was designed to allow them to trade using their individual methods. This was on top of the huge size and complexity of system needed to deal with so many transactions. This lead to the design team trying to design a system that carried out the standard method but also performed differently for the multiple firms. In addition the government wanted their say in the design of TAURUS, which resulted in the design team being issued a 150 page legal document of complex regulations to follow. The end result was the TAURUS tried to meet to many needs and ended up meeting none. Delays occurred as the system was constantly getting redesigned because of outside pressure. Delays obviously lead to mounting costs that did not look like slowing. During this time other bourses were successfully implementing automated systems so eventually the project was terminated in 1993.
Another mistake made by the design team was that the software they choose to operate TAURUS needed extensive modification to meet all the different demands. Due to all these modifications TAURUS was basically relying on unproven software, which is obviously very risky. This also added to the extra costs and delays that lead to termination. The size of the project team was also criticised as they had hundreds of staff working on the design. With so many staff it is important to have rigorous structure to prevent coding mistakes this was not done in the case of TAURUS.
With the failure of TAURUS the problem of implementing an electronic processing system was still there. The Bank of England now looked to solve the problem and regain the credibility of the LSE. Learning from the mistakes made by the LSE the Bank of England set up a small ten-man task force and within 3 months they had come up with a new system called CREST.
The CREST system looked to follow a minimal approach using tried and tested software. CREST was designed independently from the LSE so unlike TAURUS the design team had no need to adhere to the different firms needs. Their minimalist approach meant they designed CREST to perform only 2 processes, which made up nearly 90% of all transactions of the LSE. This compared to the 21 attempted by TAURUS. They also had a smaller design team of just 20 with 4 more experienced members supervising the whole project. This resulted in all modifications being closely examined before getting turned into code.
CREST went live on 1996 on schedule and within budget and it is still being used today. Other stock exchanges have tried to buy the system as a result of its effectiveness but it is not for sale. Keeping to a minimal approach and using tested software meant the system was implemented with only a few problems that were solved. TAURUS tried to be too many things to too many people, which resulted in its failure. Constant modification lead to delays and increasing costs resulting in the LSE terminating the project.
References
TAURUS and CREST, Failure and Success in Technology Project Management by Christopher H Head
http://www.practicallaw.com/7-100-4206
http://commentisfree.guardian.co.uk/daniel_davies/2006/09/dont_just_do_something_stand_t.html
In 1986 the "Big Bang" changed the way the stock market operated. There were less regulations to follow and deals were now performed through automated systems instead of face-to-face on the trading floor. This increased the trading volume of the LSE dramatically but they now had to improve the business behind the scenes. After a deal was struck the share certificates and money still had to change hands, which could take weeks using the LSE system at the time. The LSE quickly decided to develop an automated system to tackle this problem.
In 1989 there was a proposal to develop a system called TAURUS (Transfer and Automated Registration of Uncertified Stock). This system looked to automate the settlement business transactions. It would also aim to dematerialise stock certificates and instead stock ownership would run on a computer database. If TAURUS were successful it would have saved the LSE millions per year and decreased the risk of purchasers going bankrupt before settlement. However, the implementation of TAURUS did not go according to plan.
The main factor that resulted in TAURUS's failure was that the design team tried to adhere to too many needs. All firm members would have to use TAURUS so each firm demanded that the system was designed to allow them to trade using their individual methods. This was on top of the huge size and complexity of system needed to deal with so many transactions. This lead to the design team trying to design a system that carried out the standard method but also performed differently for the multiple firms. In addition the government wanted their say in the design of TAURUS, which resulted in the design team being issued a 150 page legal document of complex regulations to follow. The end result was the TAURUS tried to meet to many needs and ended up meeting none. Delays occurred as the system was constantly getting redesigned because of outside pressure. Delays obviously lead to mounting costs that did not look like slowing. During this time other bourses were successfully implementing automated systems so eventually the project was terminated in 1993.
Another mistake made by the design team was that the software they choose to operate TAURUS needed extensive modification to meet all the different demands. Due to all these modifications TAURUS was basically relying on unproven software, which is obviously very risky. This also added to the extra costs and delays that lead to termination. The size of the project team was also criticised as they had hundreds of staff working on the design. With so many staff it is important to have rigorous structure to prevent coding mistakes this was not done in the case of TAURUS.
With the failure of TAURUS the problem of implementing an electronic processing system was still there. The Bank of England now looked to solve the problem and regain the credibility of the LSE. Learning from the mistakes made by the LSE the Bank of England set up a small ten-man task force and within 3 months they had come up with a new system called CREST.
The CREST system looked to follow a minimal approach using tried and tested software. CREST was designed independently from the LSE so unlike TAURUS the design team had no need to adhere to the different firms needs. Their minimalist approach meant they designed CREST to perform only 2 processes, which made up nearly 90% of all transactions of the LSE. This compared to the 21 attempted by TAURUS. They also had a smaller design team of just 20 with 4 more experienced members supervising the whole project. This resulted in all modifications being closely examined before getting turned into code.
CREST went live on 1996 on schedule and within budget and it is still being used today. Other stock exchanges have tried to buy the system as a result of its effectiveness but it is not for sale. Keeping to a minimal approach and using tested software meant the system was implemented with only a few problems that were solved. TAURUS tried to be too many things to too many people, which resulted in its failure. Constant modification lead to delays and increasing costs resulting in the LSE terminating the project.
References
TAURUS and CREST, Failure and Success in Technology Project Management by Christopher H Head
http://www.practicallaw.com/7-100-4206
http://commentisfree.guardian.co.uk/daniel_davies/2006/09/dont_just_do_something_stand_t.html
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