Subject: Managing The Value Chain Name: ALOK KUMAR GUPTA Enrollment No. 6010091106380 ERP IMPLEMENTATION FAILURE AT HP (ITYS045) a. Analyze the limitation of IT project management. Discuss the importance of business contingency plans for enterprise projects. Justify your answer taking the example of HP b. Examine the implementation of the ERP migration failure considering HP’s role as a third party implementer of SAP’s supply chain solutions. Can HP use this ERP implementation failure to its strategic advantage? Why / why not?
Give reason for your answer HP announced that their revenue 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 Project management is a term including scheduling, cost control and budget management, resource allocation, collaboration software, communication, quality management and documentation of administration systems, which are used to deal with the complexity of large projects.
Limitation of IT project management: It requires proper training and knowledge about the project With single backbone, failure would be service Difficulty in finding our programming errors and their rectification For successful implementation of IT projects management, defining the requirement developing a plan, and implementing it with technology is a difficult task Creating a cross-functional team is a difficult task A contingency plan is a plan devised for a specific situation when things ould go wrong. Contingency plans are often devised by business who wants to be prepared for anything that could happen as “Back-up plans” “worst-case scenario plans” Scrap situation 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.
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They are required to help governments, business or individuals to recover from serious incidents in the minimum time with minimum cost and disruption. Technical glitches were small but contingencies planning were not addressed appropriately on SAP R/3 Implementation. Original Objectives were: Shorter lead & delivery time, Cost saving and 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 implementation on global basis & SD implemented as part of pilot project.
By 1998, major migration to SAP R/3 completed. Major benefit are (i) Reduce huge cost incurred on IT support, (ii) all programs run on single browser, (iii) Eliminate need to create custom SAP interface, (iv) Greater speed in implementation and (v) With an option of query which would make it easier to use. 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 implementation Co. n which it itself failed While conducting an internal serve, HP revealed that there has been execution problem and not the fault of SAP ERP Migration Failure: There are several reasons for failure but the most popular one is project management. To justify this argument a study by Sweat (1998) revealed that despite project managers knowing the importance of considering critical success factors in ERP implementations, 75% of the implementations were regarded as failure by the organizations themselves. This is purely because roject managers give least importance to these critical success factors during the implementation of an ERP package. Being an ERP project manager is very challenging and literature shows us there have been many cases where things have gone wrong because of incorrect approach. According to Scott (1999) FoxMeyer was the fourth largest drugs distributor in the United States with a turnover of $5. 5 billion dollars, in 1996 FoxMeyer claimed bankruptcy and in 1998 sued the ERP vendor for causing its bankruptcy.
The problem with them was they did not adopt many of the critical success factors required in the implementation of an ERP project. The following are causes of the migration failure Project team constitution Date integration problem Demand forecasting problems Poor planning & improper testing Inadequate implementation support / training Analysts commented that the HP’s culture did not support the much active involvement of employees also company ignored valuable suggestion from employees.
Company 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 company turned deaf ears over that many Vice-president had joined the rival Company and also many employees had a fear of been laid off. Learning from Failure: 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 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 also depends upon the ability to align IT along with the business management objectives, program management skills and a well defined process. There should be a manual back-up as a contingency plan and There should be no cross-functional barriers and should create effective processes and teams creative team.
HR issues in ERP migration failure at HP Inadequate training time to develop ones skill in the new system, Refresher training was of no use because of Backlogs, Active involvement of employees was not allowed in the company, Valuable suggestions from the employees was ignored, Distrust of upper management. This ignorance created dissatisfaction among employees; Upper management perceived to be overpaid inefficient; Culture divide within the company Non Co-operation within IT team & business team. These all led to High Attrition Work culture differences between HP & Compaq leading to incompatibility between departments.
Dealing with the issue: Encourage employees to participate and take their suggestions seriously, make them feel to be valuable assets, an equal merge of culture and remove cultural differences, Co-operative between front end & back end, More time imparted to training programs & motivates them to learn more. Conclusion: Am employee is a valuable Assets & “A satisfied employee is a productive employee” Examine the implementation of the ERP migration failure considering HP’s role as a consultant for SAP’s supply chain implementations. Can HP use this ERP implementation failure to its strategic advantages?
Why / why not? Implementations are as follows: About 20% of the orders failure failed to move from the legacy system to the new one due to programming errors. HP was able to fix this within a month but orders began to backlog. Backlogs counted to us $ 160mn. Revenues down by 5% Analysts raised credibility of HP as a consultant for SAP. The company had to direct 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 failure at SAP then HP would loose its edge over IBM. The company’s corporate strategic policy was based on the adaptive enterprise concept and its rival IBM concept was based on On-demand computing The adaptive enterprise from HP is designed to assist organization with their RTI to harmonize the processes between the core business and IT operations Constant retooling of the corporate infra-structure to meet the demands of a dynamic enterprise has led to the evaluation of real-time infrastructure.
Developed contingency plans to devise solutions for upcoming problems. Hence development of contingencies plans for ERP project is a must To prevent the reoccurrence of such a failure, there was a need to integrate business and technology. Customers Company should remove barriers to create effective and cross-functional processes and teams that were truly integrated. Increase dependency between among teams’ i. e. front end and back end. Approach should be afresh and should not try to map with previous implementation.
Well planned, appropriate training and better employment Implement with technology integration. Improve the planning and the testing More effort and better forecasting needed. Remarks: Having discussed failures and implications, we have also looked at the benefits ERP can bring and that is the reason organizations still prefer to adopt an ERP system but there is a problem. As we have reviewed the literature, it is evident that there is still a gap in successful ERP implementations.
The gap mainly stands from the perspective of project management and in particular from the project manager’s perspective. This review has produced the main research question that requires an answer: "How can we implement ERP successfully" The answer to this question depends on what research methodology we adopt in order to produce our primary and secondary analysis so that we can carry out an assessment of our findings to be able to answer this question from theory and practice.
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