Eye Opener Series: Latest ERP Disasters

Well....yes it is a scapegoat and that is what everybody starts finding out when a large size project like ERP implementation goes wrong. Isnt it...? ERP is one of those IT initiatives that has the ability to provide most number of tangible benefits to the organizations and it does not disappoint often. It is often seen as a panacea for all organizational transformation related issues. On the other side, it is one initiative that needs to be handled with extreme care while deploying so that the organizations are able to realize the benefits. If you are ill prepared for an ERP in terms of data quality or change management issues or inconsistent processes etc., then it not only bring you down on ground but also will show its impact on the bottomline health quite quickly.

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Given the frequency of failed projects, it’s not surprising some companies blame business or financial issues on IT. Large software deployments are complex by their nature, especially when an organization uses the implementation to change and improve business processes while integrating legacy systems. This complexity leads to high project failure rates and creates the opportunity for scapegoating and misdirected blame.

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For private companies, the IT blame game is a political maneuver used by an individual or group to push culpability onto others. Public companies may sometimes use IT scapegoating to shift investor attention away from strategic management or financial challenges toward narrow technical issues.

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Let us see some of the failed ERP deployements in recent times:

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Overstock.com

The Project: A mistake-laden Oracle implementation rolled out in October 2005, which caused the company’s order tracking system to go down for a full week and contributed to a Q3 2005 loss of $14.2 million.
The Problems: A rush to implement caused early design problems, putting the ERP package out-of-sync with accounting software. In October 2008, Overstock had to restate more than five years of earnings, with a revenue reduction of $12.9 million and an increase in losses by $10.3 million.
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Levi Strauss

The Project: A multinational effort to migrate Levi Strauss’ heterogeneous and geographically dispersed systems onto a uniform SAP system
The Problems: Difficulties with the complicated U.S. SAP implementation in 2007 and 2008 caused shipping errors and problems with financial control systems. A July 2008 SEC filing cited the difficulties as major contributors to the company’s 98% decrease in net income in Q2 2008.
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City of San Diego

The Project: A $41.8 million rollout of SAP to consolidate City of San Diego applications, some of which are currently decades old
The Problems: After hiring consultants at HCL Axon in September 2007, San Diego’s ERP implementation ran off the rails. The city canned Axon in November 2008 as a result of an $11 million project overrun as of the termination and project delays causing certain components to come in more than a year late.
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Avis Europe

The Project: A massive PeopleSoft implementation carried out by consultants with Atos Origin, designed to improve business process efficiencies and punch up profit margins by 1%.
The Problems: Project delays and cost overruns caused the company to completely cancel the project in 2004, taking a £28 million hit in the process.
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Hershey Foods

The Project: In 1999, Hershey Foods installed a $112 million SAP system in an accelerated 30-month timeframe; the project was initially supposed to take four years.
The Problems: Hershey’s flipped the switch right during its busiest ordering season, before Halloween. Issues with inventory and ordering processes held up orders and contributed to a 19% drop in revenue during Q3 1999. It took a full year for the company to bounce back.
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All above cases show that pre-work is the most activity that will make sure that how you reap the benefits from your ERP.