6_guest lecture_ibs blr_erp – a competitive advantage_session iii_2009
DESCRIPTION
Case Discussion –Session II ‘ERP Implementation Failure at HP’ 10.30am –11.45am ICFAI Business School –Executive MBA Subhajit Mazumder Email: [email protected] Views expressed are personal and do not include any point of view of the speaker’s organization — Case Analysis — Learning AgendaAgendaTRANSCRIPT
ERP ERP –– A competitive advantageA competitive advantageCase Discussion – Session II‘ERP Implementation Failure at HP’10.30am – 11.45amICFAI Business School – Executive MBA
Subhajit MazumderEmail: [email protected]
Views expressed are personal and do not include any point of view of the speaker’s organization
AgendaAgenda
� Case Analysis� Learning
Business ImpactBusiness Impact� Revenues for 3rd quarter ending 31st July
2004 from HP’s ESS division gone down by 5% to $3.4bn� Backorders till Aug / Sep 2004� Loss of sales� Impact on other divisions as well� Unhappy customers and continuous
complaints� Credibility as an Implementation Partner for
SAP
About HPAbout HP
� 80 years of business operations since 1938 (Ex II)� 7 business segments
◦ TSG - ESS (Enterprise, storage and servers)◦ TSG - HPS (HP Services)◦ TSG - Software◦ PSG (PC group)◦ IPG (Imaging and printing)◦ HPFS (HP FS)
About HPAbout HP
� Fin yr. end Oct 2004, overall revenues of $80bn and net profit of $4.2bn� Decreasing revenues in TSG yoy 8%
(2004, 2003) (Ex III)� Segment-wise revenues / losses (Ex III)� Close partnership with HP since 1989
when SAP began developing SAP R/3� Go to market strategy (HP server + SAP
application) since 1992
About HPAbout HP� Traditionally had a highly de-centralized
structure� Every business unit independently
designed, marketed and manufactured its own products� After witnessing huge increase in sales
volumes in 1992, decided to implement SAP R/3 to manage its complex mfg. and logistics operations – phase out legacy systems
The ERP ImplementationThe ERP Implementation� Goals set for the BPR (Competitive
advantage aspired):◦ Shorter lead times and delivery times◦ Cost savings◦ Establishment of a global distribution system
� Functional scope◦ FICO◦ MM◦ PP◦ SD (e-commerce enabled) (Table I)
The ERP ImplementationThe ERP Implementation
� By Dec. 1998 HP completed its major deployment and migration to SAP R/3 in HP’s BCMO unit� Further incremental deployments of
upgraded versions of SAP R/3� By 2000, 20 implementations with FICO,
MM, PP, SD, BIW, APO and WM◦ Different versions, multiple GUIs◦ User base 10,000+
Transition to mySAPTransition to mySAP� Move to fully internet enabled platform mySAP
◦ Reduce costs on IT support and deployment◦ Single tightly integrated front-end◦ Would be easier to access right information at the
right time� mySAP (SCM – APO) successfully implemented in
IPG in Europe◦ Completed in 5 months◦ Achieved benefits
� After Compaq acquisition, also implemented mySAP PLM◦ To integrate product lines of the two merged
companies
ERP migration failureERP migration failure
� In 2004, Bouchard, CIO proposed a new organizational model◦ Merging of business and IT groups at both
regional and country levels◦ Led to increased interdependencies between
groups ◦ Consolidation of systems – 4 ERP code bases
from 35 ERP systems� Single order mgmt. system
ERP migration failureERP migration failure� Contingency plan (both business and
technical aspects)� Anticipated disruption of 3 weeks� Problems after go-live
◦ 20% of customer orders could not be moved from legacy order system
◦ HP took 1 month to resolve the issues – orders began to backlog
◦ No parallel manual processes to keep business going
◦ Inability of the team to comprehend business impact
Root cause analysisRoot cause analysis
� Problems faced in migrating to centralized ERP system in spite of ‘Adaptive Enterprise Concept’ (Ex I)� Project execution related issues� Project team constitution
◦ High level of interdependencies◦ Communication problems
� Data integration problems◦ Faulty acceptance of data conversion
Root cause analysisRoot cause analysis� Training
◦ Lack of adequate SAP training� Poor planning and testing
◦ Pre-implementation planning not done properly
◦ No parallel run plan to take care of such contingencies
◦ UAT not done adequately◦ Inadequate support / training / business
blueprint envisioning
Root cause analysisRoot cause analysis
� Personnel◦ Many key personnel from ESS had left the
company to join rival firms◦ Lack of people who were conversant with the
business cycles
� Post merger integration◦ May not have been smooth
LearningLearning� Details of implementation not mapped out – lack
of planning� Business change and therefore no standard
approach to implementation� Inadequacy of existing business processes (order
processing)� Additional manufacturing capacity required before
ERP roll-out� Supply chain risk was not mitigated� User training a CSF� Order configuration complexities – could not be
envisioned and hence safety stocked
