ERP Implementation Failure At HP

Submitted to: Submitted by:Prof. D.N VERMA Deepak kr. Gupta Nisha Prasad Rajat wadhwa Vandana Puri

INTRODUCTION

• HP announced that its revenues has gone down by 5% to $3.4bn for the 3rd quarter ended July 2004.

• The reason proposed was due to the problem faced during the migration to the centralized ERP system

• The total financial impact due to the failure was $160mn.

Conti…

• Questions were raised on failure of HP implementing ERP, as it was a consultant for SAP ERP implementation.

• HP’s responsibility as a consultant was to prevent the execution problems faced by the implementing Co. on which it itself failed.

• While conducting an internal serve, HP revealed that there has been execution problem and not the fault of SAP.

• Technical glitches were small but contingencies planning wasn't addressed appropriately.

SAP R/3 Implementation

• Objectives: 1) Shorter lead & delivery time 2) Cost Saving 3) Global Distribution System• In 1993, HP’s BCMO unit began with the

implementation with several modules like- MM, PP, FI, CO.

• FI & CO modules were implemented on global basis & SD was implemented as part of pilot project.

• By 1998, major migration to SAP R/3 was completed

• BENEFITS OF MySAP:o Reduce huge cost incurred on IT supporto All programs will run on single browsero Eliminate need to create custom SAP interfaceo Greater speed in implementationo It had the option of query which would make

it easier to use.

ERP MIGRATION FAILURE

• The following are the causes of the migration failure:

1.Project Team Constitution2.Data Integration Problem3.Demand Forecasting Problems4.Poor Planning & Improper Testing5.Inadequate Implementation Support/Training

• Analysts commented that the Co.’s culture did not support the much active involvement of employees also Co. ignored valuable suggestion from employees.

• Co. staff had warned HP but it was not possible for it to continue with the tradition system and also suggested for a back-up system but Co. turned deaf ears over that.

• Many Vice-President had joined the rival Co. and also many employees had a fear of been layed off.

LEARNING

• Implementation failure can impact overall business performance.

• There is no standard approach to implement ERP, many times it involves a business change in many departments. Therefore a detailed mapping is essential otherwise it might miss out the objectives.

• The success of implementation depends upon the planning, which considers the business process along with the technical aspects.

• “The potential benefits to the supply chain are much bigger than the IT costs and the potential risk to the supply chain is also much bigger”.

• The success of ERP implementation depends upon the ability to align IT along with the business management objectives, Program Management Skills and a well defined process

• There should be a manual back-up as a contingency plan.

• There should be no cross-functional barriers and should create effective processes and teams to integrate the entire business at all levels.

Question 2:

Critically analyze the HR issues involved in HP’s ERP migration failure.

How can companies ensure that corporate culture supports their ERP

implementation?

HR issues in ERP migration failure at HP

Inadequate Training time to develop ones skill in the new system

Refresher training was of no use because of Backlogs

Active involvement of employees was not allowed in the Company

Valuable suggestions from the employee was ignored

Distrust of Upper Management

HR issues in ERP migration failure at HP

These ignorance created dissatisfaction among employees

Upper Management percieved to be overpaid and inefficient

Cultural divide within the companyNon Co-operation within IT Team & Business TeamThese led to HIGH ATTRITIONWork culture differences between HP & Compaq

leading to incompatibility between departments

DEALING WITH THE ISSUE

Encourage employee to participate and take their suggestions seriously

Make them feel to be valuable assetsAn equal merge of culture and remove cultural

differencesMotivate them to work for the company as one’s

own and not to treat work as series of assigned jobsCo-operation between Front end & Back endMore time imparted to Training Programs &

Motivate them to learn more

Realize the fact

“An Employee is a valuable ASSET”

&

“A Satisfied Employee is a

Productive Employee”

Qs. 3. Examine the implications of the ERP migration failure considering HP’s role as a consultant for SAP’s supply

chain implementations.Can HP use this ERP implementation

failure to its strategic advantage? Why/why not? Give reasons

Implications are as follows:

• About 20% of the orders failed to move from the legacy system to the new one due to programming errors.

• HP was able to fix this within a month but orders began to backlog.

• Backlogs counted to US$ 160 mn. Revenues down by 5%.

• Analysts raised credibility of HP as a consultant for SAP.

• The company had to direct orders through distributers and other orders through flight to speed up order fulfillment.

• Hence added expenses.• Customers were unhappy and there were

continuous complaints about delayed processing, configuration and duplicated orders.

• Hence HP could not prove itself in this field.

ERP implementation failure-strategic advantage

• If HP blamed all the of the failure at SAP then HP would loose its edge over IBM.

• The company’s corporate strategic policy was based on the “Adaptive Enterprise Concept” and its rival IBM concept was based on “On-Demand Computing”

• The Adaptive Enterprise from HP is designed to assist organizations with their RTI to harmonize the processes between the core business and IT operations

• Constant retooling of the corporate infrastructure to meet the demands of a dynamic enterprise has led to the evolution of real-time infrastructure.

• Developed contingency plans to devise solutions for upcoming problems.

• Hence development of contingencies plans for ERP projects is a must.

Qs.4. Industry analysts expressed concerns regarding the re-

occurrence of his failure in the ERP implementation by HP in future. What according to you should HP

do to prevent such failures? Explain giving reasons.

Following are the methods to prevent the reoccurrence of such a failure:

• There was a need to integrate business and technology.• The company ought to encourage dialogue that would

motivate employees to have a focused approach and help in early identification of problem and satisfaction of customers.

• Company should remove barriers to create effective and crossfuntional processes and teams that were truly integrated.

• increase dependency between among teams i.e. front end and back end.

• Approach should be afresh and should not try to map with previous implementation.

• Well planned, appropriate training and Better employment.

• Implement with technology integration.• Improve the planning and the testing.• More effort and better forecasting needed.• Realize the inadequacy of existing business

processes.

Qs.1.) Analyze the limitation of IT project management. Do you think business contingency plans are necessary for all enterprise projects?

Project management is a term including scheduling, cost control and budget management, resource allocation, collaboration software, communication, quality management and documentation or administration systems, which are used to deal with the complexity of large projects.

Limitation of IT Project management1) It requires proper training and knowledge

about the project2) With single backbone, failure would be

severe3) Difficulty in finding out programming errors

and their rectification

4) For successful implementation of IT project management ,defining the requirement developing a plan, and implementing it with technology is a difficult task

5)Creating a cross-functional team is a difficult task

• A Contingency plan is a plan devised for a specific situation when things could go wrong. Contingency plans are often devised by businesses who want to be prepared for anything that could happen. They are sometimes known as "Back-up plans", "Worst-case scenario plans", "Scrap Stituation" or "Plan B" .

• Contingency plans include specific strategies and actions to deal with specific variances to assumptions resulting in a particular problem, emergency or state of affairs. They also include a monitoring process and “triggers” for initiating planned actions. They are required to help governments, businesses or individuals to recover from serious incidents in the minimum time with minimum cost and disruption.

Thank you!

Questions??????