When evaluating ERP (Enterprise Resource Planning) vendors, the subject of implementation is sure to come up. Specifically, how they handle it with their staff and how they plan to work on your IT infrastructure. One thing they never discuss though, is the possibility of failure, and for good reason. Failed IT implementations have been so bad that they have cost company’s millions of dollars and led to multi-million-dollar lawsuits as well against the ERP provider. Given how crucial the implementation is, let’s look at three companies that had failures and see what we can learn from them.
1. Hewlett-Packard and SAP
In 2004, HP decided to swing big with SAP. The goal was to centralize all their locations in North America onto one system so there could be uniformity throughout the company. They had many project managers, IT coordinators, and countless manhours on the project. However, that still was not enough to make a successful transition.
In this case, there was no one issue that caused the downfall as are most cases with ERP implementations. In fact, it was quite the opposite. It turns out, there were so many minor issues with the software at the many locations that it was spiraling out of control and became too overwhelming for even a company of HP’s size to handle.
160 million dollars later, which was five times the estimated cost, they finally gave up and called it quits. The CIO of HP’s global operations said, “We had a series of small problems, none of which individually would have been too much to handle. But together they created the perfect storm.” So, what is the lesson to learn here? Perhaps, sweat the small stuff, when there is a lot of it. Do not overlook and let seemingly small details pile up to a point where they become significant.
2. Nike and i2
Four years before HP & SAP, Nike had an even more brutal failure with i2 software. In 2000, Nike wanted to upgrade their supply chain management and manage their explosive growth. Going from a variety of software systems to one was a huge task, and although Nike thought it was possible, it did not go the way they wanted it to.
Managing so much inventory, so many locations, and so much transactions became too much to handle while still running the business. Nike spent 400 million and ended up losing 100 million in sales and saw their stock drop 20% in that time frame. While those numbers were not enough to bankrupt Nike, it sure did set them back for years.
Clearly, Nike has shown us through the failure that throwing money at a problem does not fix it. You need proper staff, planning, and execution. This can be very time consuming and have little room for error, but that is just the reality when we are talking about software as crucial as an ERP solution.