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ERP Implementation Failure at HP

In 2004, HP's revenue from its Enterprise Servers and Storage segment declined 5% due to problems implementing a centralized ERP system at a North American division. The total financial impact of the failed implementation was $160 million, over five times the cost of the project. An internal investigation found the major issues were related to poor execution and contingency planning rather than SAP software flaws. Industry analysts questioned HP's credibility for consulting on SAP implementations given its own failure to prevent significant execution problems during its project.

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1K views

ERP Implementation Failure at HP

In 2004, HP's revenue from its Enterprise Servers and Storage segment declined 5% due to problems implementing a centralized ERP system at a North American division. The total financial impact of the failed implementation was $160 million, over five times the cost of the project. An internal investigation found the major issues were related to poor execution and contingency planning rather than SAP software flaws. Industry analysts questioned HP's credibility for consulting on SAP implementations given its own failure to prevent significant execution problems during its project.

Uploaded by

soumyaroyc
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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ERP Implementation Failure at HP

2004, from its Enterprise Servers and Storage (ESS) segment had gone down by
5% to $3.4 bn, as compared to the same quarter the previous year. The
company attributed this revenue shortfall mainly to the problems faced in
migrating to a centralized ERP system at one of its North American divisions. The
total financial impact of the failure including backlogs and lost revenue was
pegged at $160 million, more than five times the cost of implementing the ERP
project.

Industry analysts raised questions as to


HP's credibility as a consultant for SAP
ERP implementations. In the role of a
consultant, HP's primary responsibility
was to prevent exactly such execution
problems on which it had faltered. Its
"Adaptive Enterprise" concept focused
on the use of IT to help companies
adapt to change in a quick and effective
way (Refer Exhibit I for details).

The failure demonstrated the adverse


financial and business impact of poor
ERP implementation for an IT company,
especially if it took on the role of a
consultant for implementations.HP
conducted an internal investigation to
review the causes of failure of the ERP
project. The report revealed that the
major problem did not relate to SAP
software but to execution related issues.

It was found that the technical glitches were small but the contingency planning
for the ERP project implementation had left many issues unaddressed. HP
claimed that the data modeling problems between the new SAP software and the
legacy system involved were of a minor nature, and it did not hold SAP
responsible for the failure. Commenting on the debacle, Joshua Greenbaum,
Consultant at Enterprise Applications Consulting, California, said, "It's surprising
that good software could take a company down like this. It doesn't get more
embarrassing than that."

BACKGROUND NOTE

Stanford engineers Bill Hewlett and David Packard started HP in California in


1938 as an electronic instruments company. Its first product was a resistance-
capacity audio oscillator, an electronic instrument used to test sound equipment.
During the 1940s, HP's products rapidly gained acceptance among engineers and
scientists. HP's growth was aided by heavy purchases made by the US
government during the Second World War.

electronics business. In 1951, HP invented the high-speed frequency counter,


which significantly reduced the time required to measure high frequencies. The
company came out with its first public issue in 1957.

HP entered the medical equipments industry in 1961


through its acquisition of Sanborn Company. In 1966,
the company established HP Laboratories, to conduct
research activities relating to new technologies and
products. During the same year, HP designed its first
computer for controlling some of its test-and-
measurement instruments. During the 1970s, HP
continued its tradition of innovation. In 1974, HP
launched its first minicomputer that was based on 4K
dynamic random access semiconductors (DRAMs)
instead of magnetic cores.

In 1977, John Young was named HP president, marking a transition from the era
of the founders to a new generation of professional managers.

In the 1980s, HP emerged as a major player in the computer industry, offering a


full range of computers from desktop machines to powerful minicomputers. This
decade also saw the development of successful products like the Inkjet and
LaserJet printers. HP introduced its first personal computer (PC) in 1981,
followed by an electronic mail system in 1982. This was the first major wide-area
commercial network that was based on a minicomputer. HP also introduced its
HP 9000 computer with a 32-bit super chip. HP became a leader in workstations
with the purchase of market leader, Apollo Computers, in 1989. ....

More...

THE ERP IMPLEMENTATION

SAP R/3 IMPLEMENTATION

TABLE I - R/3 INSTALLATION AT HP (BCMO)

IMPLEMENTATION OF MySAP

ERP MIGRATION FAILURE

THE IMPACT

THE LEARNING

TABLE II - BUSINESS CONTINGENCY PLANNING


EXHIBIT I - HP - THE ADAPTIVE ENTERPRISE CONCEPT

EXHIBIT II - HP SEGMENT DESCRIPTION

EXHIBIT III - HP'S SEGMENTWISE REVENUES AND PROFITS

EXHIBIT IV - HP'S PRODUCT LEADERSHIP POSITION (2004)

EXHIBIT V - BENEFITS OF MySAP SCM IMPLEMENTATION AT HP

EXHIBIT VI - HP AND SAP SCM COLLABORATION

EXHIBIT VII - TOP 10 ERP PROJECT MANAGEMENT ISSUES

ADDITIONAL READINGS AND REFERENCES

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