Implementing an enterprise resource planning (ERP) system is one of the biggest IT nightmares many organisations will face. The cost of failing is often disastrous.
There’s nothing like a bungled IT project to make a company gun shy on making purchase decisions. Duncan Jones, senior analyst, Forrester says: “I have seen examples of enterprise resource planning (ERP) projects, where companies bought brand name products that didn’t fit the vertical they were buying in, and there was no track record in that industry. The decision came down to the brand name. That’s why there were so many high-profile ERP failures only a few years ago.”
Jones cited the example of an automotive manufacturer that bought an ERP product around six years ago. “It was a disaster. The solution didn’t have the capabilities for their industry, and the company had spent a lot of money on licenses, but couldn’t make the project a success. Now they are in the process of doing it again, but the business is wary about making the wrong decision.”
Computerworld UK compiled a list of famous failed ERP projects.
Hershey’s In November 1999, Hershey’s reported a 19% drop in third quarter net earnings, and placed part of the blame on "computer problems". The chocolate bar maker was having problems with its new order-taking and distribution computer system, a $112 million combination of software from ERP maker SAP, customer relationship management (CRM) provider Siebel and supply chain software from Manugistics. The problems meant Hershey was unable to deliver $100 million worth of Kisses and Jolly Ranchers for Halloween that year, and also impacted performance through the high margin seasons of Christmas and Easter. SAP has since worked with Hershey’s to fix the problems.
Whirlpool In early November 1999, Whirlpool blamed a shipment delay in part to its SAP implementation which went live two months prior. Apparently, orders for quantities smaller than one truckload had faced snags in the areas of order processing, tracking and invoicing. SAP reportedly said Whirlpool went live with the software before adequately testing it, and preparing their supply chain.
Invacare Medical care company Invacare lost $30m as a result of a bungled Oracle ERP implementation. Invacare said the fault lay with its specific set-up rather than faults with the software. When the implementation went live in October there were problems with the order-to-cash process, despite it having been tested prior to the system going live.
W.L. Gore and Associates W.L. Gore and Associates filed a lawsuit against consulting firm Deloitte & Touche and PeopleSoft over an allegedly botched attempt to install PeopleSoft’s HR module. The makers of Gore-Tex, a waterproof fibre used in outdoor wear, claimed it ended up paying the consultancy twice Deloitte & Touche’s original estimate, and in the end had to bring in another firm to "re-implement" the system. Gore also sued PeopleSoft suit, alleging the vendor sent in unqualified consultants to do the job, by recommending Deloitte & Touche. The report stated: "Gore seeks compensation in the millions of dollars for damages it suffered because of PeopleSoft’s and Deloitte & Touche’s scheme to defraud and failure to perform as promised".