ERP Implementation Failure at HP
HP is an American multinational corporation
headquartered in Palo Alto, California, US.
It provides products, technologies, software, solutions and services to consumers
including government, health and education sectors. Stanford engineers Bill Hewlett and David
Packard started HP in California in 1938 as an electronic instruments company. The first product was a resistance-capacity
audio oscillator, an electronic instrument used to test sound equipment.
In 2004, HP reported financial loss that
was attributed by issues faced by the migration to a centralized ERP
system. The loss was five times the cost
of implementing the ERP project. An
internal investigation took place to reveal the cause was not related to
Systems Applications Products (SAP) software, but to the execution of the
project to migrate to a centralized ERP system at the North American
division. The main issue was that the contingency
planning had glitches in it that were not addressed properly in the
pre-planning.
The project goal was to allow customers to
place one order from different systems and combine these orders into one order
with one delivery date and invoice. HP
ignored valuable suggestions from employees that the migration was high-risk,
which became apparent once problems were challenging to resolve. Data from the old system didn’t transfer
properly to the new system resulting in a backlog of orders. They ended up
spending more money on fulfilling order by way of flights and direct orders
through distributors to speed things up.
Empty promises to customers that the problem was under control did not
get resolved and were still continuing a couple months later. They should have collaborated the IT and
Business groups better.
Some other issues were:
- Data Integration;
- Demand Forecasting Problems;
- Poor Planning & Improper Testing;
- Project Team Constitution; and,
- Inadequate Implementation Support/Training.
The impacting issues of this failure
were:
- Dissatisfied employees;
- Dissatisfied customers;
- Bad reputation;
- Loss in revenue ($400M) and cost of implementation loss ($160M);
- Loss of market share with IBM, Dell; and,
- Doubtful future for next SAP implementations.
The success of the ERP implementation
depended upon the planning, which should have considered the business process
along with the technical aspects. HP
didn’t build into their contingency plan to have a manual backup plan to keep
orders flowing.
