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ERP Implementation Failure


Submitted to:
Submitted by:
Deepak kr. Gupta

Nisha Prasad
• HP announced that its revenues has gone
down by 5% to $3.4bn for the 3rd quarter
ended July 2004.
• The reason proposed was due to the
problem faced during the migration to
the centralized ERP system
• The total financial impact due to the
failure was $160mn.

• Questions were raised on failure of HP
implementing ERP, as it was a consultant
for SAP ERP implementation.
• HP’s responsibility as a consultant was to
prevent the execution problems faced by
the implementing Co. on which it itself
• While conducting an internal serve, HP
revealed that there has been execution
problem and not the fault of SAP.
• Technical glitches were small but
contingencies planning wasn't addressed

SAP R/3 Implementation
• Objectives:
 1) Shorter lead & delivery
 2) Cost Saving
 3) Global Distribution System
• In 1993, HP’s BCMO unit began with the
implementation with several modules
like- MM, PP, FI, CO.
• FI & CO modules were implemented on
global basis & SD was implemented as
part of pilot project.
• By 1998, major migration to SAP R/3 was
o Reduce huge cost incurred on IT

o All programs will run on single

o Eliminate need to create custom SAP

o Greater speed in implementation

o It had the option of query which

would make it easier to use.

• The following are the causes of the
migration failure:
1.Project Team Constitution
2.Data Integration Problem
3.Demand Forecasting Problems
4.Poor Planning & Improper Testing
5.Inadequate Implementation
• Analysts commented that the Co.’s
culture did not support the much
active involvement of employees also
Co. ignored valuable suggestion from
• Co. staff had warned HP but it was not
possible for it to continue with the
tradition system and also suggested
for a back-up system but Co. turned
deaf ears over that.
• Many Vice-President had joined the rival
Co. and also many employees had a
fear of been layed off.
• Implementation failure can impact
overall business performance.
• There is no standard approach to
implement ERP, many times it involves
a business change in many
departments. Therefore a detailed
mapping is essential otherwise it might
miss out the objectives.
• The success of implementation depends
upon the planning, which considers the
business process along with the
technical aspects.
• “The potential benefits to the supply chain
are much bigger than the IT costs and the
potential risk to the supply chain is also
much bigger”.
• The success of ERP implementation depends
upon the ability to align IT along with the
business management objectives, Program
Management Skills and a well defined
• There should be a manual back-up as a
contingency plan.
• There should be no cross-functional
barriers and should create effective
Question 2:

Critically analyze the HR issues

involved in HP’s ERP migration failure.
How can companies ensure that
corporate culture supports their ERP
HR issues in ERP migration failure at HP

Ø Inadequate Training time to develop ones skill in

the new system
Ø Refresher training was of no use because of
Ø Active involvement of employees was not allowed
in the Company
Ø Valuable suggestions from the employee was
Ø Distrust of Upper Management
HR issues in ERP migration failure at HP

Ø These ignorance created dissatisfaction among

Ø Upper Management percieved to be overpaid and
Ø Cultural divide within the company
Ø Non Co-operation within IT Team & Business Team
Ø Work culture differences between HP & Compaq
leading to incompatibility between departments

Ø Encourage employee to participate and take their

suggestions seriously
Ø Make them feel to be valuable assets
Ø An equal merge of culture and remove cultural
Ø Motivate them to work for the company as one’s
own and not to treat work as series of assigned
Ø Co-operation between Front end & Back end
Ø More time imparted to Training Programs &
Motivate them to learn more
 Realize the fact

 “An Employee is a valuable ASSET”

 &

 “A Satisfied Employee is a

 Productive Employee”
Qs. 3. Examine the
implications of the ERP
migration failure considering
HP’s role as a consultant for
SAP’s supply chain
Can HP use this ERP
implementation failure to its
strategic advantage?
Why/why not? Give reasons
Implications are as
• About 20% of the orders failed to
move from the legacy system to
the new one due to programming
• HP was able to fix this within a month
but orders began to backlog.
• Backlogs counted to US$ 160 mn.
Revenues down by 5%.
• Analysts raised credibility of HP as a
consultant for SAP.

• The company had to direct orders
through distributers and other
orders through flight to speed up
order fulfillment.
• Hence added expenses.
• Customers were unhappy and there
were continuous complaints about
delayed processing, configuration
and duplicated orders.
• Hence HP could not prove itself in
this field.
ERP implementation
failure-strategic advantage
• If HP blamed all the of the failure at SAP
then HP would loose its edge over
• The company’s corporate strategic
policy was based on the “Adaptive
Enterprise Concept” and its rival IBM
concept was based on “On-Demand
• The Adaptive Enterprise from HP is
designed to assist organizations with
their RTI to harmonize the processes
between the core business and IT

• Constant retooling of the corporate

infrastructure to meet the demands
of a dynamic enterprise has led to
the evolution of real-time
• Developed contingency plans to
devise solutions for upcoming
• Hence development of contingencies
plans for ERP projects is a must.

Qs.4. Industry analysts
expressed concerns
regarding the re-occurrence
of his failure in the ERP
implementation by HP in
future. What according to
you should HP do to prevent
such failures? Explain giving
Following are the methods
to prevent the
reoccurrence of such a
• There was a need to integrate business
and technology.
• The company ought to encourage
dialogue that would motivate
employees to have a focused
approach and help in early
identification of problem and
satisfaction of customers.
• Company should remove barriers to
create effective and crossfuntional
processes and teams that were truly
• increase dependency between among
• Approach should be afresh and
should not try to map with previous
• Well planned, appropriate training
and Better employment.
• Implement with technology
• Improve the planning and the
• More effort and better forecasting
Qs.1.) Analyze the limitation of IT

project management. Do you think

business contingency plans are
necessary for all enterprise projects?
Project management is a term

including scheduling, cost control

and budget management, resource
allocation, collaboration software,
communication, quality management
and documentation or administration
systems, which are used to deal with
the complexity of large projects.

Limitation of IT Project management

1)It requires proper training and

knowledge about the project
2)With single backbone, failure would
be severe
3)Difficulty in finding out programming
errors and their rectification

4) For successful implementation of IT
project management ,defining the
requirement developing a plan, and
implementing it with technology is a
difficult task
5)Creating a cross-functional team is a

difficult task
• A Contingency plan is a plan
devised for a specific situation
when things could go wrong.
Contingency plans are often
devised by businesses who want to
be prepared for anything that could
happen. They are sometimes
known as "Back-up plans", "Worst-
case scenario plans", "Scrap
Stituation" or "Plan B" .
• Contingency plans include specific
strategies and actions to deal with
specific variances to assumptions
resulting in a particular problem,
emergency or state of affairs. They also
include a monitoring process and
“triggers” for initiating planned actions.
They are required to help governments,
businesses or individuals to recover from
serious incidents in the minimum time
with minimum cost and disruption.
Thank you!