I recently pulled up an old article from CIO.com, '10 Famous ERP Disasters, Dustups and Disappointments,’ providing a history of “the complex and expensive enterprise software market, packed with tales of vendor mud-slinging, outrageous hype and epic failures.”
Yikes! I thought. What a truly scary title for anyone involved in the world of shared services - where ERP implementation can be just as much a rite of passage as a Bar Mitzvah. But, on second glance, and with a little bit of background research, it appears that in most cases these ‘epic failures’ were just down to classic misjudgement on the part of management, smattered with a bit of over-ambition.
So, for your interest here are my top three ERP disasters and what you can do to avoid making these Rookie-errors:
No Kisses for Hersheys
In September 1999, former CEO and Chairman of Hersheys Foods, Kenneth L. Wolfe told Wall Street analysts during a conference call that the company had issues with its $112m order-taking and distribution computer system, implemented by SAP, Siebel and supply chain software provider, Manugistics. Such issues, in fact, that Hersheys were unable to deliver $100m worth of Kisses and Jolly Ranchers for Halloween the next month, causing outrage amongst America’s youth and the company’s stock price to plummet by over 8%.
Despite much of the mystery surrounding Hershey’s terrible situation, the truth of its failure apparently lies in the timing. The system went live before the crucial month of Halloween, one of the most profitable periods for any US candy manufacturer. Studies suggest that for most companies that engage in enterprise software implementation, business processes suffer temporarily which can affect revenue for anywhere up to six months.
Lesson number one to be learned – schedule your installation for a less-demanding period during the year, and don’t expect to hit the ground running.
Freshers’ Failure
When the University of Massachusetts-Amherst’s new online registration system, Spire, crashed the day before classes commenced, all 24,000 students found themselves unable to register for classes, access timetables or perform any online activities at all. Pandemonium broke out amongst disoriented first-years and classes were disrupted for the first three days of term.
But the chaos didn’t stop there. At Stanford University students started the new school year with a dead web portal and no clue where their classes were meant to be, and at Indiana University, 3,000 students were denied financial aid by the faulty new ERP system, rushing financial aid administrators off their feet to scramble together food and short-term loans.
You may be wondering the cause of such widespread disaster. Could it have been a sorority Ouija session or a practical joke gone-wrong? The truth lies in the rushed installation of software that included a PeopleSoft Web portal implementation.
University administrators may be drawn to the organizational features of ERP systems but often fail to remember that they have been designed to centralize corporate business processes. According to CIO.com, recent studies have shown that not only do ERP implementations take far longer to install at Universities, but they usually cost up to five times more than the original quote which is rather a problem when you’re running a college and not a profit spinning corporation.
Lesson number two - the moral of the story: if you don’t have the talent, experience or financial capability to manage a sturdy enterprise system, it’s better to leave it alone, in particular if you are a non-profit organization.
An uncomfortable SAP experience
In 2008, Select Comfort, maker of the “Sleep Number” bed announced its sudden decision to stop all work associated with their wide-ranging SAP ERP implementation plans which had included ERP, CRM and SCM modules among many more.
What went wrong? Select Comfort had originally expected the move to “provide greater flexibility and functionality” for their “growing and evolving business model” as well as becoming “less expensive to maintain over the long-term.”
But, the truth was inevitably revealed after the company then went on to cut 22% of its workforce. A range of SEC filings showed that Select Comfort officials had really been under pressure for months from one of its shareholders, The Clinton Group, to quit the project citing it as both hugely over budget and behind schedule.
According to the Clinton Group, $12m was spent on the initial implementation in 2007 with a further $8m (sans additional costs) anticipated in 2008. “It is difficult for us to envision, given the size of the company, that the company could ever achieve cost savings to justify such as large expense” said the shareholder.
“Particularly in light of the departure of the company’s Chief Information Officer” not only was the Clinton Group unamused at a lack of any attempt by Select Comfort to undertake a detailed review of their IT needs through an independent consultancy, but they were deeply concerned by the company’s decision to implement the ERP software using their own internal resources which had “at best, limited experience.”
The very fact that the end of Select Comfort’s ERP journey colluded with the axing of 120 jobs speaks volumes about the severe misjudgement (a kind understatement) of management in regard to the company’s priorities. What on earth were they thinking?
Lesson number three - If you can’t do it properly. Don’t do it at all! If you’re lacking the funds or the management to execute such an intensive project as SAP ERP implementation there should be no doubt in your mind to leave it well alone!
Although there is no question that the technology industry has evolved massively since the earlier years, there will always be somebody, somewhere that needs a gentle reminder of the basic requirements for ERP implementation success. Know anyone that suffered at the hands of Enterprise Resource Planning? Share this article, and why not share the story with me too? I’d love to hear!
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