Tugas 2

Caselet Bottler
Reservation of Rights @ 2014 ISACA
Student Book

 This caselet was developed to support the

 Basic Foundational Concepts Student Book: Using COBIT 5
 www.isaca.org/basic-concepts-student-book
What is Value Governance?

 Value governance is way for enterprises to manage benefits realized,

resources, value and risk
 Value management is framework that ensures that an enterprise achieves the
maximum value from its investments at an affordable cost and at an
acceptable level of risk.
How does it benefit an enterprise?

 Commonly, most enterprises treat IT and related projects as mainly cost

centers, but by using and looking at value management throughout a project –
from the initial thought, to the start, the implementation and the final
deliverables – it is important to track and understand them.
 It is important to align investments with business objectives. By going through
a value management process, you evaluate whether an investment in
technology and supporting people, process and technology matches the
objective and can deliver the right value or return on investments.
 For example, enterprise resource planning (ERP) projects often fail because
the important risk has not been reviewed properly, which causes the ERP cost
to be oversized (e.g., when a company might only need an invoicing system).
How does it benefit a CIO?

 To be able to show management and senior management that IT investments

are realisable, every effort should be made be made to ensure employer
expectations are met, rather than getting the ‘toy’ you want.
Bottler Company LLC - Profile

 Large corporation that consists of approximately 25,000 employees and

contractors.
 Publicly held company that went public two years ago, after a long tradition
and its foundation in 1935.
Background – What we do?

 Largest independent bottler in the soft drink industry.

 Knows that canning and bottling technology could make or break the bottom
line and it maintains the best and most high-tech equipment.
 On the other hand, information technology was something that had been
swept under the rug for some time and not kept current.
 Since 1935, the bottler has been acquiring territory and expanding the
business. As a result, the need for better information grew.
Background - Financials

 Bottler Company has been profitable ever since its inception.

 Last year, its gross revenue was US$ 180 million dollars, with a profit margin
of slightly less than 2 percent, while it was expecting a 10% profit margin.
 Bottler Company could charge more for bottling and canning and raise its
profit margin, but its competitive advantage would decrease and would affect
its general growth.
 The cost of establishing new products is the main reason profit has still been
quite appreciable, but executive management has made the decision to slow
expansion.
 Territorial growth was not a real consideration at the time, but addition of
new products is a main concern.
 Reducing product development will be bad for the business.
Background – Organization Structure
Background – Organization Structure

 The board of directors:

 Is composed of members from Bottler Company and from other organizations, with
outsiders comprising the majority. Most board members have had some experience
working within the industry and are, the most part, aware of the methods of
operation.
 Has low risk tolerance, although the business risk comfort level of some members
was exceeded by the past initiative to concentrate on expansion rather than
products.
 Has a president who is also the CEO.
Background – Organization Structure

 The executive committee

 Consists of:
 Chief executive officer (CEO)/president
 Chief financial officer (CFO)
 Chief operating officer (COO)
 Vice president (VP) of business
 Vice president (VP) of administration
 Has a low risk tolerance, like the board.
 Has an excellent reputation for hiring top talent, giving broad guidelines and goals
to key individuals, and then later determining how well each person met the goals.
 Has a current major goal of becoming more profitable and competitive to keep to
the innovation edge over the competition.
Background - Operational

 Financial management is the responsibility of the CFO:

 It consists of financial operations, which, amongst other things, handles contracts,
procurement and disbursements, accounting and audit.
 The CFO is under pressure to cut costs to increase profitability.
 Further, the information recovered from actual IT systems does not give a real-
time view of the state of affairs.
 Operations management is the responsibility of COO:
 It consists of plant and facility operations, physical security, logistics (including
transportation), IT and a few other smaller functions.
Background - Operational

 IT management is the domain of the chief information officer (CIO) and is not
one of the four major functions within the enterprise:
 The CIO oversees the IT systems and other ad hoc IT systems by department and
has no overall view of the system. Most of the work is carried out by outside
external consultants on a needs basis
 The CIO is not on par with the other C-level executives. He reports to the COO.
 The CIO is there to run the day-to-day systems of the company and does not have
any strategic view in terms of long-or-short-term strategy all together.
 To keep up with company growth, new computer systems were added in
different departments as the need grew.
 As it grew, the different stand-alone systems became more mismatched and
the need for integrated systems became apparent.
Background - Competition

 Bottler Company is more focused on innovative product development than its

competitors.
 It has organized and expanded massively in North and South America. This
enablers Bottler Company to have constant, reliable fixed costs.
 This cost savings is, in part, passed on to its main customers, thereby making
them the provider with the lowest prices and quality products in the
Americas.
 The product development and innovative focus plus a slight inclination to
expansion has given them the edge on quality and knowing exactly what the
market desires, and it has kept them abreast of everyone in the industry.
 Consumers are always demanding more, and Bottler Company needed and
wanted to be prepared.
Background – Business Goals

 The number one business goal is to become more profitable, because it is now
a public company, and value company for its consumers, who are always
demanding more.
 Proposing new product lines was important, but executives of the company
had continuously expressed their desire for timelier financial information and
decision-making tools from the different departments.
The Problems

 The existing systems were unable to handle requests such as decision making
or timelier financial and other important information.
 Any customized reporting was developed from a multitude of sources and
compiled manually.
 ERP gained recognition over the years. It became the topic of discussion as
alternatives were contemplated and the company tried to formulate a
solution that would meet the needs of the individual departments, be
compatible companywide and facilitate the integrated communication that
was desperately needed.
 These issues were significant enough to warrant an overall re-engineering of
business practices, and the bottler decided to start researching viable
options.
The Problems (cont.)

 A great deal of time and money was spent to research options, outline
necessary attributes and perform feasibility studies. Employees spent several
months completing a study justify expenditures for the new system, and this,
along with the inherent need for a new, integrated systems, led to the
decision to implement ERP.
 After a great deal of research and discussion, an executive steering
committee, with the guidance of outside consultants and the COO with the
indirect help of the CIO/IT Department, decided to implement an ERP system.
 The idea was that the new system would be capable of handling company
growth, communicating between departments and producing customisable
robust reports.
The Problems (cont.)

 The ERP vendor was ‘slicing and dicing’ capabilities for reporting that
accompanied the software.
 The ERP vendor offered other features that were very attractive to the
bottle. The financial module, with its abilities to track profit, forecast sales
and manage cash flow, was also a feature the executives liked.
 They also liked the fact that the human resources and payroll modules would
feed benefits and compensation and time and labor information as much as
manufacturing and distribution information to the profit reports.
The Problems (cont.)

 Management appreciated the fact that production scheduling, cost of goods

and inventory would all automatically update to the income statement.
 Once sold on the overall package, the executive committee gave a green light
to go ahead with ERP implementation.
 Although the ERP product seemed to be the solution to its problem, the
bottler still had an enormous amount of work to do. No matter the size of the
company, implementing an ERP system is not a trivial project.
 The bottler chose not to take the advice of the independent consultants it
hired during the ERP product evaluation and recommendation phase and
instead chose its own path for the implementation effort.
The Problems (cont.)

 This lack of faith in the consultants’ advice made the implementation process
even more challenging.
 With a young, inexperienced professional staff and a very limited IT staff, the
undertaking was more than everyone bargained for.
 Too much time-consuming and technical work was assigned to employees who
did not have ERP expertise or the proper training.
 In addition to this lack of expertise, employees were not provided assistance
when it came to keeping up with their regular job duties.
 The bottler had a history of a ‘do-it-yourself’ philosophy for all projects
undertaken.
The Problems (cont.)

 Due to enormous workload of the ERP implementation effort, a great deal of

strain was placed on the employees involved in the project.
 Communications problems increased. Roles and responsibilities that had not
been defined clearly started posing a problem, and the CIO had to take the
driver’s seat without the right support to steer the project.
 Communication issues, including employee encouragement concerns, also
added to the burden of the human resources problem. Due to breakdowns in
the channel of communication and the lack of management support, many
constituents, including high-level employees, resigned. Some were voluntary,
many others were not.
 With already-looming challenges, the project was off to a shaky start.
Choosing the proper project team and planning its involvement would be the
next major issue at hand.
Your Role
 Position : CIO
 Experience: Worked in the IT arena for more than 10 years
 Training: Completed the Bottler Company LLC internal management training
programme within three months of starting your position and you plan to
enroll in IT management and financial courses soon.
 Your team: The information technology department consists of two technical
staff members and an assistant who report to you
 The team’s role: They deal with change requests, configuration management,
and day-to-day report building and IT support issues, amongst other duties.

 The previous contractor/consultant in the recommendation phase suggested

part-time help be provided to your IT department and other departmental
employees in the project, which was ignored by the executives because of the
‘do-it-yourself’ philosophy.
Your Tasks

1. Design a business process for enterprise, list the workings and challenges of
the enterprise, and understand its vision, mission and challenges/objectives.
2. Identify the relationships amongst principles, processes and practices.
3. Establish the pain points signaling the need for better value management as
well as trigger events that would compel business leaders to begin building on
value
4. Outline a typical future state – what the common characteristics and
outcomes of a value driven enterprise look like
5. Build a set of instruction on how to conduct an assessment of the enterprise’s
current state
6. Identify the most critical elements in managing organizational change that
are required to sustain value over time
Notes

 Many enterprises choose to acquire an ERP system to serve as a common

system for their wide range of daily operations.
 Various business benefits can be realized from ERP investments due to
operational performance improvements. For instance, ERP systems embed
industry best practice processes, which enterprises can leverage to achieve a
discontinuous improvement in performance.
 However, many ERP investments fail to deliver on their promised benefits due
to deficient ERP investment appraisals caused by inflated expected benefits
and underestimated cost and risk.
Notes (cont.)

 Therefore, improved governance of interprise IT (GEIT) in general, and

governance of ERP system acquisitions in particular are crucial for success.
One of GEIT’s key practices is the development, maintenance and utilization
of a proper business case throughout an investment’s economic life cycle.
 What are the key elements of an ERP investment business case and which
GEIT best practices are relevant? Furthermore, do such practices resonate
with management and finance best practices, which are expected by
executive business leaders who control access to funds?
Discussion Questions

 Some of questions that should be asked include:

1. What issues is the CIO facing?
2. Why have these issues surfaced?
3. Using the key components of a business case, define how you would use them
to define the key areas of benefits, risk, appraisal and cost
4. Using COBIT 5 as a guide, identify the core domains that you would use to
manage and drive your project and then map them to the real-life actions you
would need to get the job done.
Report to Lecture

 After reading this caselet, please make a report contain of 6 tasks.

 Minimum 10 pages, Maximum 15 pages (A4), Space 1, 12pt Times New Roman,
2cm margins, single column, full justify text.
 Cover must includes Title, Class, NIM.
 Reference should uses IEEE style for making citations for bibliography.
 Team should be the same with “Tugas 1”
 Send your report in softcopy form (.pdf) to link that will be make in your
elearning. Before 1st June 2019 (At 7 PM).
 File name is Tugas2_Kelas_Sore_NIM_NIM_NIM_NIM_NIM.pdf