The case gives a detailed account of the failure of an ERP migration project at the US-based HP, a leading computer

hardware and information technology company. The case traces the history of ERP implementations at HP and presents the rationale behind the decision to migrate to a centralized ERP system. It details the circumstances that led to the ERP migration failure and also examines the damage control efforts made by the company. The case highlights the barriers to successful ERP migrations including project management issues, poor contingency planning and cultural issues. Finally, the case explores whether there are chances of re-occurrence of such failures within the company.

Issues:
Understand the rationale for implementing ERP software. Study and analyze the problems faced in an ERP migration project. Examine the reasons for ERP rollout failures. Analyze the role of cultural issues in ERP implementation. Critically examine the strategic impact of ERP implementation failures.

Contents:
Page No. 1 2 4 5 6 7 7

Introduction Background Note The ERP Implementation ERP Migration Failure The Impact The Learning Exhibits

Keywords:
Hewlett-Packard Enterprise Resource Planning ERP Migration Failure Adaptive Enterprise Centralized ERP System

In August 2004, HP announced that its revenues for the third quarter ended July 31, 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.
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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 SAP4 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."5... Excerpts >>

4] SAP is an acronymn for Systems Applications Products. It is the biggest European software company headquartered in Germany. It had revenues of Euro 9.76 bn and profits of Euro 1.70 bn in fiscal 2004. 5] Marc L. Songini, HP Puts Part of the Blame on SAP Migration, Computerworld, August 16, 2004.

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...

The ERP Implementation

HP's products were known for excellent quality and reasonable prices. HP had a highly decentralized organizational structure and every business unit independently designed, marketed and manufactured its own products...

ERP Migration Failure

In December 2003, Gilles Bouchard (Bouchard) became the CIO and Executive Vice-president (EVP) of global operations at HP. He was made responsible for both the supply chain and ERP software implementations...

The Impact
The ISS division's order system became unstable due to problems with data integrity and a simultaneous increase in demand for HP's Standard Servers. This technical glitch led to improper routing of orders and caused backlogs to escalate till the end of August 2004...

The Learning
Analysts commented that ERP implementation failure at HP was a demonstration of how such failure could impact overall business performance. HP had spent huge amounts of money in speeding up delayed orders...

Exhibits
Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit I: HP - The Adaptive Enterprise Concept II: HP Segment Description III: HP's Segmentwise Revenues and Profits IV: Hp's Product Leadership Position (2004) V: Benefits of Mysap SCM Implementation at HP VI: HP and SAP SCM Collaboration VII: Top 10 Erp Project Management issues

In June 2004, Hewlett Packard started the implementation of a new Enterprise Resource Planning Software in its North American Enterprise Servers and Storage (ESS) division. HP, known for its expertise in a lot of product fields and consulting capabilities, especially in the segment of SAP ERPimplementations, faced several severe problems during the execution of the project. After two months, the result of the migration of the new ERP had a decrease in revenues of about 5 percent (total financial impact: $160 million) during the third quarter compared to the same period of the previous year. The initial estimation of the cost by AMR Research has been $30 million. Two questions were raised concerning this project. On the one hand, whether the problems and aspects which endangered the project could have been avoided and on the other hand, what possibilities and threats can be assessed in the implementation of the project? The following two sections of this case study will answer these questions. While the question about the potential avoidance of the problems discusses HPs weaknesses from an internal point of view, the second question discusses the opportunities and threats from an external point of view. The answer to these questions can be given by accomplished SWOTAnalysis.

[...] The ERP implementation project requires an accurate communication to ensure the exact and prompt completion of the project. These requirements were fulfilled by the HP team, so that communication training or at least a precise plan about the knowledge and information transfer should have been developed. The requirement definition for the project leader was also not accurate. The project leader has to be objective and must have the ability to plan the project precisely, while being able to handle the difficult corporate culture problems. [...]

[...] The failure of the ERP implementation might easily lead to a bad reputation especially in the field of consulting. If a company offers consulting services in the ERP implementation market and is not able to implement its products in its own company, customers will start thinking about the quality of service offered by the company. It is very bad for the business; HP had enough experience in the ERP field and still was not capable to implement it efficiently. This bad reputation might lead to a loss of customers and a decrease of contracts. [...]

[...] The partnership was already well running, but due to the problems regarding the implementation of ERP project, both parties will feel responsible in some way for the failure and want to improve the relationship. This might result in better and higher quality products, which will certainly improve the competitive advantage for HP in the market. Another advantage for HP is the fact that the market for ERP implementations is dominated by SAP. SAP is the leading software supplier in this field with about 62 percent market shares in the fourth quarter of 2005. [...]

[...] Project Management Problems Next to the corporate culture, which is a precondition for the well execution of the project, project management is probably the most important task during an ERP implementation. experts opined that business evolution of ERP was more about project management rather than software tools.[6] The most important steps to implement an ERP successfully are: 1. Defining requirements 2. Developing a plan 3. Implementation with technology integration and organize user training[7]. In this context, it is again necessary to identify the problems regarding these aspects and to find solution to the problems. [...]