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C A S E

Asian Journal of Case


Research
4(S): 79 93 (2011)

SAP for ATLAM


AINI AMANa* AND GAZALI JAAFARb

ABSTRACT
It had been December 2001 and the management of ATLAM, a wholly
owned organisation of MICT Berhad, had been asked to upgrade
its accounting system with the PETRA group-wide SAP system.
The move was anticipated to be overwhelming. Zulkifli Osman, the
Finance Manager, had to critically assess the risks associated with
the decision. He remembered a conversation that he had had with the
Senior Finance Manager of PETRA where it had been mentioned that
the costs of implementing SAP in ATLAM was not actually the main
concern. It had been more of whether ATLAMs staff would be ready
to embrace the new system. With these in mind, he had to evaluate the
decision to upgrade ATLAMs current accounting system to the SAP
system. The existing economic crisis acted as an additional element to
the decision as Zulkifli had to ensure the best possible outcome for the
organisation. The proposed SAP system was scheduled to be phased in
by 1 April 2002 i.e. the start of the new financial year.
Keywords: Corporation Sector,
Information Technology/System

Management,

Accounting,

ABOUT ATLAM
The need to train and prepare Malaysians for the maritime industry had been
addressed with the establishment of Akademi Teknikal Laut Malaysia (ATLAM)
on 15 August 1981. It was then subsequently privatised on 1 January 1997. Its
vision was to be a leader in maritime education and training, while its mission
was to facilitate value added learning via a conducive environment and provide
excellent services to its clients. The academy, located in Melaka and Terengganu,
had 195 staff by 2001; 89 of them were in administration and the remaining 106
in training.

School of Accounting, Faculty of Economics & Business, Universiti Kebangsaan Malaysia


A member of the Malaysian Institute of Accountants (MIA) and the Chartered Institute of
Management Accountants (CIMA), UK
*
Corresponding author: E-mail: aini@ukm.my
a

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Asian Journal of Case Research (AJCR)

The management structure of ATLAM (Figure 1) consisted of a Chief


Executive Officer, a Corporate Affairs Director, a Training and Education Director,
a Finance and Accounts Manager, a Registrar, a Head of Marine Engineering,
and a Head of Human Resource Management and Administration. Zulkifli had

Figure 1 Management structure of ATLAM

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SAP for ATLAM

been the Finance and Accounts Manager since 1995. The Finance and Accounts
Department consisted of an Assistant Manager, a Senior Accounts Assistant, a
Finance Executive and three Accounts Assistants (Figure 2). If SAP was to be
implemented in ATLAM, a SAP executive had to be added to the department. This
was to ensure that there would be someone to guide the key users of the system,
who were to be the staff in Finance and Accounts, as well as related personnel
from other departments.

Figure 2 Finance and accounts department structure

IT INFRASTRUCTURE
ATLAM overhauled its Information Technology (IT) facilities in 2000. Before
this, they had been in a very poor state. A study on ATLAM was conducted in
1997 by the World Maritime University and it had deemed ATLAM to be behind
its other compatriots in Europe and Japan in terms of IT infrastructure. The
1997 privatisation of ATLAM resulted in the introduction of new shareholders
and brought the academy into the fold of the PETRA Group of Companies. This
provided ATLAM with the access to better IT facilities. At the same time, it
was identified that all of PETRAs servers had to be consolidated to leverage its
group-wide PETRANET network system. The PETRA IT Centre, based in Kuala
Lumpur, hosted all of PETRAs applications in terms of network utilisation and
other related support resources. As far as ATLAM was concerned, applications
would be resided off-site at the subsidiaries when needed i.e. technology
constraints, insufficient bandwidth, etc.
In addition, ATLAM was to follow PETRAs IT infrastructure standards
where such functions were involved i.e. telecommunications (LAN and WAN),
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Asian Journal of Case Research (AJCR)

network computing, server and desktop administration, and voice and video data
handling and maintenance. It was to use PETRAs standard desktop software
i.e. NADII 2000, SAP, OA, and all relevant intranet applications. ATLAMs IT
solutions were implemented in 2001, based on three objectives that were relevant
to the establishment of a campus-wide network, which had been classified as the
Projects Phase 1:
1. To link core buildings into the network: the Administration Buildings (No.
16 & 17), the Library (No. 27), the Office Block (No. 23), and the Academic
Office (No. 7)
2. To establish networked Office Automation (OA) tools, notes mail, and a
centralised softcopy filing facility for a maximum of 250 users (local area
networks (LAN) and applications), and
3. To link ATLAM to the PETRA Network (PETRANET) so as to allow the use
of group-wide applications such as the Digital Library and the SAP system
(wide area networks or WAN).
The total cost for the implementation of Phase 1, anticipated for completion
in 2002, had been RM1.3 million.

ACCOUNTING SYSTEM
Before 2001, ATLAM relied on a customised single-user system bought from
a vendor. The academys desktop computers (PCs) were solely used to enter
accounting entries. The system had not been functioned to produce financial
reports. In light of the circumstances, ATLAM needed to look for alternatives to
upgrade its accounting system. At that point, the ones available had been ACCPAC,
an accounting package, and PETRAs group-wide SAP system. Table 1 shows the
preliminary study conducted by the top management on the functionalities.
SAP stood for Systems, Applications and Products in data processing. It was
an integrated business applications package that covered most functions of an
organisation. SAP had been created by SAP AG, founded in Germany in 1972.
The SAP R/2 version was released in 1975. This was followed by SAP R/3 version
in 1992. The SAP R/3 core modules had the following: Financial Accounting (FI),
Controlling (CO), Asset Management (AM), Sales & Distribution (SD), Materials
Management (MM), Human Resources (HR), Plant Maintenance (PM), Project
Systems (PS), BASIS System. ATLAM had the alternative to implement all of
SAP R/3 or exclude the Plant Maintenance, Project System and BASIS System
modules. Table 2 shows costs analysis of implementing SAP.

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SAP for ATLAM

Table 1 ACCPAC vs. Petras group-wide SAP


ACCPAC

SAP

A fast track implementation software that was


ready for use within a short period of time.

Implementing the system involved a


number of months.

Had vendor-ready support; systems how-to


limitation did not represent obstacle.

Had in-house support from SBS team


of Petra Group; systems operational
how-to limitation was negligible.

A close resemblance to the standard


PETRA Chart of Accounts, requiring slight
modification to account codes.

The standard Chart of Accounts was


applicable to all companies within the
PETRA Group under the SAP system.

The system could run segmental reporting


- account codes would be used to reflect the
respective accounts to the corresponding
segments (e.g. by department). No provision
for separate cost centres. Complex segmental
reporting was possible but required add-on
software to produce the necessary results.

Cost centres could be maintained


separately, allowing for complex
segmental reporting e.g. divisional
profit and loss, variance analysis etc.
A development of the cost centre
hierarchy was necessary.

No provision for integration of accounting data


with other PETRA units.

Provision for integration of data


e.g. inter-company invoicing, made
possible via Electronic InterCompany Billing (EIB).

System maintenance e.g. data backup,


hard disk space etc. would have to be done
manually by staff.

System maintenance and support


were possible. IT Support, providing
leeway for quick resolutions.

Audit points raised during procurement process Audit points raised during
might not be resolved.
procurement process might be
resolved with the provision of the
Materials Management Module
(MMM).

Zulkifli believed that implementing SAP involved unique risks and challenges.
He knew that it was important to have a defined project scope. It made it necessary
to keep the entire project focused on delivering the implementation with the
identified functionalities. This would ensure that the new solution would fit with
the existing business model. A change in current business rules was anticipated to
be necessary to ensure a smoother transition to the SAP system.

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Asian Journal of Case Research (AJCR)

Table 2 Estimated costs (RM) of PETRAs group-wide SAP system


Year

Accountants time and


efficiency

400,000

Technical expertise cost


savings

800,000 1,200,000 1,600,000 2,000,000

600,000 1,200,000 1,400,000 1,600,000 1,800,000 2,000,000

Process and procedures


cost savings

500,000

900,000 1,200,000

1,5000

1,800,000

150,000

200,000

225,000

250,000

250,000

Cost to convert old data


to new data

100,000

160,000

180,000

560,000

600,000

640,000

Cost of overheads

300,000

420,000

490,000

560,000

600,000

640,000

Cost of system
maintenance and
firewalls

60,000

120,000

130,000

140,000

150,000

160,000

260,000

300,000

340,000

380,000

400,000

500,000

800,000

900,000 1,000,000 1,100,000 1,300,000

Average SAP license


cost

Cost of hardware
expansion
Cost of training

THE FIRST MEETING: FRIDAY, 22 JANUARY 2002


Zulkifli scheduled a meeting to discuss on the new system upgrade on 22 January
2002. He had invited Sani (Project Manager), Gopal (User Project Manager),
Lim (User Representative) and Kamal (Functional Analyst) to discuss about
implementing SAP in ATLAM.
Zulkifli : Good morning, guys! Our main agenda today is
to decide on whether we can implement SAP as
our new accounting system. As youd probably
remember, it was back in December 2001 that
the management decided to switch to the PETRA
group-wide SAP system. This new system should
be ready for total cutover by 1 April 2002.
Lim

: Sorry to interrupt, but why SAP? Why not any


other software package? Why not ACCPAC?

Zulkifli : Well, blame it on time constraint. At the moment,


its viewed as urgent that we implement a new
system since the decision to upgrade has already
been made.
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SAP for ATLAM

Lim

: ATLAM had been billed by the hour when the


SAP Business Support Team came over. It wasnt
cheap! We should be thinking of saving money. If
we implement SAP, we need to consider beyond
those numbers that we have. We should consider
both financial and non-financial information and
their strategic implications in the long-run.
From what I hear, with ACCPAC, it costs
approximately RM50,000. This depends on
the scope of functions, the number of users, its
installation costs, the training required etc. With
SAP, the initial software itself (inclusive of project
expenses and the PIFS and MMM modules) will
cost us about RM1,000,000.

Zulkifli : Well ... .


Lim

: What about the annual license fees? The license is


based on a oneuser per-task formula. So each user
will have to be given an ID1. And dont forget, it is
a security issue. For all internal control and audit
purposes, we have to allocate one ID per user per
task. Thats going to cost us.
Our 2001 capital expenditure came to
RM6,703,570, of which RM5,000,000 was for
this SAP implementation. Its huge! Lets see.
The hardware had been RM2,000,000, the initial
software license another RM1,000,000, the
training costs went up to RM1,271,550, and the
customisation work totalled to RM72,840.

Zulkifli : I know. Dont think weve not given any thought


about it. The only way to cut the cost of licenses
would be to limit the number of users. In fact, (he
refers to the figures before him) RM1,188,841 of
our capital expenditure would be financed by
internal funds; the balance would be coming from
the PETRA group. Our working capital savings
have been estimated to be at RM900,000 in Year 1,
RM1,200,000 in Year 2, and RM1,500,000 in Years
3, 4, 5 and 6.
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Asian Journal of Case Research (AJCR)

Lim

: At this moment, its impossible for ATLAM to


bear the SAP implementation costs and the
accompanying operational costs. ATLAMs cash
flow as at December 2001 was at a deficit. I mean,
take a look at this (he waves a note on Appendix
A)! Plus, I dont think its viable to implement
SAP in ATLAM. As far as I know, SAPs suitable
for the manufacturing industry, not the education
industry.

Zulkifli : How can you say that? Ive been running one-toone SAP demos with some of our staff. They seemed
alright. All I know is that we need to make this SAP
project come alive and the only way to do that is to
ensure good project planning and scheduling.
Gopal : You make it seem all too easy. Look, you havent
even discussed about the SAP implementation
since the initial announcement last month!
Anyway, I agree with Lim. We just cant get the
users to use SAP now. They will not be able to see
how its going to help them within this short time.
Sani

: Hold on, everyone. We, at SAP Business Support,


have worked on several SAP projects in other
PETRA units before, and we know where youre
coming from. What we usually do is that we get
the senior accounts clerks to participate in a pilot
session so that theyll learn how to use it first
before rolling it out to the others. Yes, I admit, at
first, the response will seem miserable, but from
past experiences, we know we can manage it. We
just need to figure out on how to ease them into it.
Before that, you guys really need to agree on this ACCPAC or SAP? Lets take a 10 minute break
its hot in here!

Lim

: Agreed. But Ive another meeting. Lets meet again


tomorrow. We may think differently then.

Zulkifli : Ok. In that case, perhaps we should stop now. Lets


get together again tomorrow and, hopefully, all of
us can come to an agreement. Thanks, guys!
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THE SECOND MEETING: SATURDAY, 23 JANUARY 2002


Zulkifli : Hey everyone. I ... (before Zulkifli finishes his lines,
Lim interrupts).
Lim

: Zul, I couldnt sleep a wink last night. All I did was


think about this SAP implementation business
You have no clue about whats been happening in
the Finance and Accounts Department at ATLAM.
Weve been trying so hard to get some corporate
attention. SAP is impractical here, it is impossible!
We dont even have enough PCs in the department!
How on earth are we to use SAP? I mean, we cant
be saying to them that they can use the PCs from
the other departments. Thats just not practical!
Some of the staff have never used a PC before. Its
just crazy to think that all of ATLAMs staff will
need to use SAP.

Zulkifli : Look. We will give them time to adjust. Sooner or


later, theyll eventually learn to use the system with
the right data to produce the right report. Theyll
quickly see that their lives are going to be made
easier by using SAP. I mean, before they know it,
theyll learn to use the PC too! Youre supposed to
be thinking about turning ATLAM around. Its not
about you, you know.
Gopal : Lets face it, were an old division. We just dont
have enough PCs in the department to make this
practical. We dont even have the space available
to house them if we had any. No way can we roll
out SAP by the end of April. Were already in our
third week of January. No way!
Lim

: Thanks, Gopal. Zul, remember pre-2001? ATLAM


had this customised system bought from a vendor.
It was a single user system. The PCs were only
used to enter debits and credits.

Zulkifli : Lim, just so you know that this plan for the new
Information Technology (IT) infrastructure in
ATLAM started out in 2000. This need for SAP is
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Asian Journal of Case Research (AJCR)

more critical now and, since ATLAMs privatisation,


the focus is moving no longer towards reporting on
expenses but more of reporting on profit and loss.
Furthermore, we are a PETRA subsidiary and, like
it or not, ATLAM has to link its system to PETRAs
to match with the group reporting structure.
Lim

: But, SAP cant produce an accounting report


anyway. And the end report that its able to manage
will not meet ATLAMs requirement for internal
reporting. If you want to request for a customised
report, its going to cost about RM10,000 per
report. The only way to save cost is to transfer the
data from the SAP database to Excel and produce
the report via Excel. Whats the point then?

Zulkifli : Look, Lim Gopal, its a little late to be


complaining now that you dont have the resources
to do your job!
Youre this close to learning about the best software
known to the industry and youre complaining?
What happened between now and when you first
accepted to be in the project? You want out of
SAP? Go talk to Faris, the project sponsor. Tell
him that ATLAM is not ready for SAP! Until then,
SAP stays.
Kamal : Cool down, Zul. Guys (looking at Lim and Gopal),
personally, with SAP, well still going to be doing
the same type of work; its just that well be doing
them better, faster, and needing fewer resources.
Well be able to better integrate our operational
data, and access that data quicker, and thats
good for decision making. At the same time,
implementing SAP will put us in a strong position
to leverage future technological improvements and
process innovations. I anticipate that well grow
with the system over time.
Lim

: I hope thats true, Kamal. The thing is, the SAP


database is pretty much centralised across all
PETRA subsidiaries. I foresee problems in dealing
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SAP for ATLAM

with centralised data in that massive volumes of


data are likely to lead to traffic jams with the
thousands of users using the system at the same
time.
Sani

: No worries about that, Lim. PETRA has a policy.


If any of us want to run a report, we must run the
report after 4pm to avoid the traffic jam.

Gopal : What about back-ups? What if the system


crashes? With all the transactions going on at
one time, theres a possibility of losing data, you
know.
Zulkifli : Thats good input, Gopal. Thanks. Well definitely
take that into consideration. Now, going back to
that issue about user rejection issues. I suggest
we train them.
Sani

: True. We can always train the users. Training


full-time takes about three weeks. Each user will
probably receive about 3-5 days of training on
process and system aspects. Training will be handson, team-oriented, and continuously mentored,
and oriented around employees job roles like
processing customer orders, moving inventory
around, and making general ledger entries, rather
than just using the R/3 system.

Gopal : You do know that traditional systems training will


not work very well for the SAP implementation,
right? This is not about a technology change
but its also about a change in work processes,
culture, and habits. These are very difficult
things to change. Youre talking about changing
attitudes and job roles that have been ingrained
in employees minds for years and, in some cases,
decades. Systems training will likely overwhelm
less sophisticated users and theyll think, Dear
God, Ive no clue to what this is all about. What
am I to do if the screen freezes? How do I handle
exceptions? Im sure to fail.

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Asian Journal of Case Research (AJCR)

Sani

: I understand. But trainings not about how they


should use the system; its about how they should
do their job while using the system. In our case,
its going to be more of a regular on-the-job
training rather than systems training. Employees
are expected to approach this as something thats
going to help them do their jobs better.

Kamal : Agreed. At least, 35 of them need to be trained to


ensure that they are able to use SAP. The training
should not be limited to just Finance and Accounts
but we should also include other departments.
Zulkifli : Thanks. Weve taken that into consideration. What
we need to do is to develop a training schedule and
I think we can discuss that and other related issues
in the next meeting. Are we agreed that the users
who are going to be using the system will have to
be trained? I think one to two weeks of training
will do. For those who do not have an accounting
background, their training is going to need more
than two weeks.
Lim

: Its not going to be that easy, especially since


ATLAM was previously a government agency.
These individuals are strong characters and are
quite conservative. They went through a bad
experience during ATLAMs privatisation exercise.
Some of the positions had to be cut off to save
costs. Theyre afraid that the same things going to
occur here.

Sani

: Please tell them, not to worry. Their positions


are not going to be affected. Ive talked to the
top management. Theres not going to be any
cost cutting in terms of human resources. In fact,
implementing SAP will allow us to save more in
terms of increasing effectiveness and efficiency of
accounts and report preparation.

Zulkifli : Agreed. I propose for a cost-benefit analysis so that


we can ensure that the benefits of implementing
SAP will be higher than ACCPAC.
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Let me summarise what we need to do before the


next meeting. We must outline our implementation
strategies with regard to staff, financial position
and organisational infrastructure to ensure the
best possible outcome for ATLAM.
Firstly, we need to perform a feasibility study
of SAP and a cost benefit analysis in order to
ensure that the decision to implement SAP is
viable. Assuming that depreciations going to be
at 34% for six years, the internal rate of return
at 25% with a discount rate of 10%, well need
to compute the following as part of the analysis:
initial investment, after-tax cash flows for Years 1
through 6, payback period, net present value and
internal rate of return.
Secondly, we need to prepare a working schedule
lets use a Gantt chart or a Pert Chart for this - to
ensure a timely and successful implementation.
And, finally, we need find ways on how to overcome
staff resistance to this SAP implementation.
Suddenly, Alice, the secretary knocked at the door
of the meeting room. She said that their meeting
room had been scheduled for another meeting and
they have to end the meeting soon. Many people
were gathering outside the door. Zulkifli ended the
meeting on the spot. The team members collected
their papers and left the room.

TWO WEEKS AFTER THE MEETING


Kamal met Zulkifli at the corridor.
Kamal : What happened to Lim?
Zulkifli : It had to be done. Time wasters cannot simply be
tolerated in the project team.
Kamal : Wait. I thought, officially, he withdrew from the
project.

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Asian Journal of Case Research (AJCR)

Zulkifli : No, not exactly. I regret that it had to end the way
it did. He was very upset about SAP. He raised too
many issues and asked too many questions into the
reliability of the system. I was afraid that he would
influence the others with his views.
Kamal : Wait a minute. I disagree. Hes very experienced
and he knew what he was doing. He was critical
but his ideas should have been taken into
consideration. There was no need to get him out
from the project team!
Kamals comments hit Zulkifli hard that he took another look at his action of
terminating Lim from the project team. Did he do the right thing?

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APPENDIX A
Cash Flow As at 31 December 2001
Net cash inflow from operating activities
Return on Investment and servicing of finance
Income from endowments received
Other income from investments and interest received
Interest paid
Net cash inflow from return on investments and servicing of finance
Taxation
Capital expenditure and financial investment
Net acquisition or tangible fixed assets
Net acquisition of endowment asset investments
Endowment received
Net cash outflow from capital expenditure and financial investment
Net Cash inflow before use of liquid resources and financing
Management of liquid resources
Net disposal of short term investment
Financing
(Decrease)/Increase in cash

RM 196,000
386,000
114,000
(71,000)
431,000
(411,000)
(409,000)
766,000
(54,000)
573,000
(644,000)
(309,000)
(380,000)

Reconciliation of net cash flow to movement in net debt


(Decrease)/Increase in cash for the year
Management of liquid resources
Financing
Change in net debt
Net debt at 1 January

(380,000)
644,000
309,000
573,000
(4,038,000)

Net debt at 31 December

(3,465,000)

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