Erp

AUEB IS Dept - ERP Implementation Failure at HP: Vougiouklidi N. - Raoulis

D. - Papadakis K.

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Motos…• “The best as seen elsewhere,

need not be the best for you.”

• “What is your best is what can be successfully implemented.”

• “IT GOES AGAINST human nature to always expect the worst. But with IT projects, pessimism—otherwise known as contingency planning—is the only way to keep small technology problems from becoming full-blown business disasters.”

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Agenda

• Introduction• The ERP & MySAP Implementation• HP ERP GOALS• HP ERP FAILURE• The Impact of the ERP failure• Learning

WHAT IS ERP SYSTEMWHAT IS ERP SYSTEM

• An Enterprise Resource Planning System, commonly known as an ERP system, is a set of business software tools designed to facilitate the flow of information between all departments or functions within a business.

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Introduction ERP Implementation

Benefits

Streamline different processes and workflows Easily share data across various departments in anorganization Better tracking and forecasting Improve efficiency and productivity levels Lower costs Improve customer service

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Drawbacks

Implementation is more costly than the product itself Customization is limited replace existing information technology architecture Reengineer business processes Technical support can be shoddy ERP's may be too rigid for specific organizations (e.g.new direction in the near

future) Total implementation cost 2% or 3% of company’s revenues 50% of ERP implementations fail

Leaders: SAP, Oracle (PeopleSoft, J.D. Edwards), SSA Global, Microsoft Business Solutions, Geac….

Introduction ERP Implementation

• Founded in 1938 by Bill Hewlett and David Packard as an electronic instrument company

• The company was founded in a one-car garage

Introduction Background

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1938: HP started in California by Bill Hewlett & David Packard (electronic instruments company)1950- HP developed strong technological capabilities in the electronic business. 1951- HP invented the high speed frequency counter. 1957- HP came out with the 1st public issue. 1961- HP ventured into the medical equipment industry by acquiring Sanborn Company. 1966- Established HP Laboratories and also designed its first computer. 1974- Launched 1st minicomputer on 4K DRAM 1977- John Young was named President, a turn from the founder to a new generation of professional managers.

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1980- HP offered full range of computers from Desktop to powerful minicomputers. 1980- Developed Inkjet & Laser printers. 1981- Introduced the 1st Personal Computer. 1982- Introduced Electronic Mail System. 1982- Introduced HP9000 with a 32-bit super chip. 1989- Purchased Apollo Computers and became the leader in Workstations. 1989: close partnership with SAP (consulting services), SAP R\3

•IMAGES

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1992- Acquired Electronic Transaction Co. VERIFONE for $1.2bn 1997- Growth fell to below 20% HP responded by reorganizing its printer & other operations. 1999- Spun off its test-&-measurement division into a $8bn separate business. 2001- Second largest computer manufacturer HP’s businesses were structured into 7 business segments.

Financial year ended October 2004, the company had revenues of $80bn, net profit of $4.2bn, employing 150,000 employees, serving more than 1bn customers in 160 countries.

HP was ranked 11th as per the Fortune 500 ranking in 2004.

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Agenda


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The ERP & MySAP ImplementationSAP R/3 Implementation

HP had close partnership with SAP since 1989 when SAP began developing SAP R/3 product. It was offering consulting services for implementation of SAP’s “supply chain” & ERP software.

The first SAP R/3 was deployed on an HP 9000 Enterprise server in 1992 at Wuerth. HP replace numerous legacy systems with SAP R/3 as a standard ERP solution worldwide.

Why SAP R/3? There were 3 reasons for this: i.e. Goals of Business Process Reengineering:

1. Shorter lead & delivery times2. Costs savings3. Establishment of a goal distribution system

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The ERP & MySAP ImplementationSAP R/3 Implementation

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 completed.

The implementation of SAP Sales Configuration Engine enabled E-commerce for direct consumer selling and HP kept on upgrading the version as the needs changed.

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The ERP & MySAP ImplementationMySAP Implementation

MySAP : • Internet-enabled technology product• Reduce costs everything run on a browser• Provide employees with integrated front end + easier for users to

access right information the right time

2001: demand’s on supply chain increased MySAP APO (Supply Chain Management) link employees, customers, partners

First implement in European Imaging & Printing division success!!

2002: Adaptive Supply Chain (e.g. printers: from contract manufacturers to customers)

MySAP Product Life Cycle Management: integrate product lines of Compaq & HP.(challenge: 200.000 products & 100.000 suppliers)

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Why MySAP?

•By 2000, HP was keen in making the web-based activities simpler to capture the direct to customer market and had over 20 SAP R/3 implementations representing FI, PP, MM, SD, CO, BW, WM & APO.

•HP used different version of SAP & had multiple SAP GUIs with around 10,000 users.

•As HP was using SAP R/3, it considered using MySAP for its Internet Enabled Technology Businesses to be a better fit.

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The following were the benefits of implementing MySAP :

1.Reduce huge cost incurred on IT support (c) Copyright 2.All programs will run on single browser 3.Eliminate need to create custom SAP interface4.Greater speed in implementation 5.It had the option of query which would make it easier to use.

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HP wanted to link its employees, customers & partners. But, HP faced problem in fulfilling orders when any order involved various items from more than one product line.

HP wanted to ship the products faster as the demand placed on HP’s supply chain data workflow increased tremendously.

The main aim was to cut cost, increase transparency & equip itself to the changing business models. Thus, HP decided to implement the APO module, the central element of SCM.

SAP’s APO & SCM software were first implemented in Europe imaging & printing division. It helped to forecast & enabled integration of data in a single system. It was introduced in just 5 months time.

After its merger with Compaq in May 2002, it started repairing the SC of all businesses to create 5 standard SC supported by standard technology platform.

It introduced the “ADAPTIVE SUPPLY CHAIN”. It also implemented PLM (Product Life cycle Management) module to integrate the product lines of the 2 merged Companies.

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Agenda


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In 2003 Gilles Bouchard becomes the project manager of the supply chain and the ERP software implementations.

In 2004 led to create a new organizational model. The aim was to reduce the ERP systems. migrating the ISS (Industry Standard Server) onto an ERP system

The ambition was to implement a single order management system (SAP FOM) with the following attributes :

1) Forecasting ability. 2) Short lead and delivering product times . 3) Increase efficiency and flexibility.

Unification of HP’s legacy SAP order management systems with those of Compaq.

HP ERP GOALS

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Agenda


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HP ERP FAILURE

In Dec 2003 Gilles Bouchard, the CIO & EVP created a model to merge the Business and IT group of HP at regional & country level. This operation along with the ISS (Industry Standard server) was completed by on May 2004 & that led to increased interdependencies between groups in the company.

This was 35th Migration and was a part of the Business Process Architecture. HP wanted to reduce the 35 ERP systems implemented worldwide to four along with reduction in application from 3500 to 1500.

HP wanted to implement a single Order Management System & successfully reduced the no. to 7 but still wanted further efficiency & flexibility with the implementation of SAP FOM platform. With the FOM, HP wanted to unite the SAP of Compaq with itself.

It involved migration from separate HP & Compaq legacy SAP R/3 to a new Broad-Based SAP ERP system & this involved more than 70 supply chain & up gradation to SAP R/3 Version-4.6C.

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HP ERP FAILURE The Symptoms

1. HP took over an empty factory at Omaha to frame the contingency plan to include both the technical and business aspects so as to provide buffer stock for customized order. But as soon as the project went live in June 204, Migration problems began surfacing.

2. About 20% of the orders failed to move from the legacy system to the new one due to programming errors.

3. HP was able to fix this within a month but orders began to backlog.

4. Dwindling manual processes were not able to meet the demand

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1. Project team constitution.

2. Data integration problem.

3. Demand forecasting problems.

4. Poor planning and Improper Testing.

5. Inadequate Implementatiuon Support/Training.

6. Project execution problems and not problems with the SAP software.

HP ERP FAILURE CAUSES

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Ultimately SAP was not a good choice.

The experts of HP didn’t predict the impact in the supply chain.

Employees of HP aware of SAP Fusion Order, suggested that there is a high risk of this migration. Despite this fact, they were ignored by the company.

The implementation was not designed in detail.

Bad collaboration among IT & Business groups.

HP ERP FAILURE Why didn’t it work ?

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Agenda


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The Impact of the ERP failure

Dissatisfied employees. Employees had to hand label shipments of products

Dissatisfied customers due to:• delayed delivering, • bad configuration, • duplicate orders(!!!)

Bad reputation.

Unstable order system of ISS (IndustryStandard Server): problems with data integrity simultaneous increase in

demands for HP’s standard Servers

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The Impact of the ERP failure

HP unable to fulfill all orders Loses according to HP

• $400m in revenue.• $160m during the implantation.

Lost market share to IBM, Dell.

Doubtful future for next SAP implementations

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Agenda


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Learning

ERP involved a business change in many divisions of an organization.

there could be no standard approach to its implementation

Always consider Business aspects along with Technical aspects Business and IT alignment

Make sure to have additional manufacturing capacity ready, BEFORE the ERP rollout.

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Learning

Decide upon all 3 basic factors before migrating:• Define the requirements• Develop a plan• Implement the plan using IT integration & user training

Consider time and resources to maintain and reconcile two different systems. Data Integration Systems

No need for merges with Companies of “unhealthy”financial status…

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Learning

The least you can do to a group (managers or staff) that have obsolete ideas when dealing with a huge task is not to assign a similar one to them…

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Agenda

• Introduction• The ERP & MySAP Implementation• HP ERP GOALS• HP ERP FAILURE• The Impact of the ERP failure• Learning• Present Scenario

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Present Scenario Learning from its previous mistakes HP has tried to overcome its failure in previous implementation and thus have improved on the following in the present dateHP is certified global SAP Partner HP is a worldwide leader in SAP operations - over 1.7M users worldwideHP has thousands of SAP experts supporting users worldwideHP Support Services manage selected portions of SAP IT infrastructureHP Support Services provide mission-critical services to SAPNearly one in every two SAP installations runs on an HP server platformWhen HP and SAP join together, the result is a wider world of possibility based on a firmer grasp of what's happening, real-time. This means a clear view of what is to come and what is possible, creating an opportunity to thrive like never before.

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Present Scenario The present ERP System Package is provided by SAP and was implemented in 2005. The major modules in the package used by the company are SD (Sales and Distribution), FI (Finance), MM (Materials Management). It took the company 2 years for the implementation and another 2 years for the stabilization and deployment. The reason for adopting the SAP ERP system has been cited as the following by an ERP Consultant in the company,

“Hewlett Packard’s global parts supply chain is a 20 billion dollar organization. The business function involves multiple suppliers and partners and huge amount of transactions on a daily basis. To manage such a huge business, it needs a robust IT solution. The solution should be capable of managing the complete business functionality such as integrating different partner systems, do order management, perform financial accounting functions, manage inventory etc. Rather than building solutions from scratch in silos, the best approach is to implement an already established packaged application. “

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SUMMARY The project report highlighted the key points which resulted in the failure of the first ERP System in Hewlett Packard. We started off by presenting a brief introduction and the timeline of the company. The report covered extensively about the causes that led to the failure, the impact it had on the market and the lessons that the company learnt along the way. Finally we discussed the present ERP System scenario in the company.

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