In the year 2004, failure of ERP implementation of HP resulted in 5% decline with revenue amounting to $3.4 billion in the third quarter ended on July 31,2004 as compared to same quarter previous year. HP intended to not only support change but to embrace and assert the change, however, it ended up with a loss of $160 million instead. HP’s primary responsibilities was to ensure a smooth execution of ERP software in all phases. This was 35th transition where HP faced many challenges contributed to a bigger complication than the company presumed. When HP did a root cause analysis, it was discovered that the issue was not with the SAP software, however, with the execution and technical difficulties. HP, as a consultancy services, needed to focus on addressing the issues that may come up in execution phase and should have a better contingency planning. There were several other issues such as data integration issues, demand forecasting, poor planning and improper testing.

“ERP Implementation Failure at HP -Hewlett Packard-

It must use size 10 or 12 fonts, single spaced. I copy and past the case analysis below. You need to answer two questions based on this case analysis. Also you can use another reference s online.

1- case analysis- alternative solutions to the above problems with pros and cons for each alternative using relevant IT management frameworks in the analysis.

2- management recommendations – recommended solution and rationale

CASE ANALYSIS

Enterprise Resource Planning (ERP)

In the year 2004, failure of ERP implementation of HP resulted in 5% decline with revenue amounting to $3.4 billion in the third quarter ended on July 31,2004 as compared to same quarter previous year. HP intended to not only support change but to embrace and assert the change, however, it ended up with a loss of $160 million instead. HP’s primary responsibilities was to ensure a smooth execution of ERP software in all phases. This was 35th transition where HP faced many challenges contributed to a bigger complication than the company presumed. When HP did a root cause analysis, it was discovered that the issue was not with the SAP software, however, with the execution and technical difficulties. HP, as a consultancy services, needed to focus on addressing the issues that may come up in execution phase and should have a better contingency planning. There were several other issues such as data integration issues, demand forecasting, poor planning and improper testing.

Problems and Key Issues raised in the case (4 Questions

Analyze the limitations of IT project management. Do you think business contingency plans are necessary for all enterprise projects? Justify your answer

IT Project management focus on planning, organization and completion of organizations specific information technology goals. It does not take into account Sales, Forecast, Marketing, accounting, Inventory and other segments of a business. Also, any IT project requires a lot of brainstorming before you can start a project and lack of knowledge of the business processes and operations in other segments of the business can cause failure resulting in massive losses in large scale projects. In this case, HP failed to integrate business along with technology in their contingency plan

Other limitations in IT project management are-

It requires proper training and knowledge about the project

With single backbone, failure would be severe

Difficulty in finding out programming errors and their rectification

For successful implementation of IT project 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

Developing a contingency plan is critical for all big businesses to mitigate possible risks. Contingency planning is developing response in advance for various situations that might impact businesses. The plan must address both negative as well as positive events that might disrupt operations. Every business has the possibility of a situation that can adversely impact operations. If the response to the situation is poor it might have a dramatic impact on the future of the business such as loss of customer, loss of data or even loss of business. Thus, contingency plan is vital for any business and should take into account any events that might disrupt operation.

For example-

Natural disasters- Fires, hurricanes, earthquake

Crisis such as threatening employees or customers, on site injuries, work site accidents

Personnel- Death of senior manager or union members going on strike

Data loss due to natural disaster, sabotage or unlawful criminal action such as attack on the website

Mismanagement such as theft, neglect of critical duties or accidental destruction

Product issues such as a huge order requires a reallocation of plant resources or a plant recall

Contingency planning involves steps such as, analyzing risks, determining the likelihood and impact of risks and focus on most critical events and finally develop a process for each Item.

2) Critically analyze the HR issues involved in HP’s ERP migration failure. How can companies ensure that corporate culture supports their ERP implementation? Explain

HR issues involved in HP’s ERP mitigation failure are-

Inadequate training time to develop one’s skills 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 employee was ignored

Distrust of upper management

Ignorance created dissatisfaction among employees

Upper Management perceived to be overpaid and inefficient

Cultural drive within the company

Non Co-operation within IT & Business Teams

These led to high Attrition

Work culture differences between HP and Compaq leading to incompatibility between departments

Dealing with the issue-

Encourage employee to participate and take their suggestion seriously

Make them feel to be valuable assets

An equal merge of culture and remove cultural differences

Motivate them to work for the company as one’s own and not to treat work as series of assigned jobs

Co-operation between Front end & Back end

More time imparted to Training Programs & Motivate them to learn more

Employers should also realize the fact that employee is a valuable asset and a satisfied employee is a productive employee

3) Examine the implications of the ERP migration failure considering HP’s role as a consultant for SAP supply chain implementations. Can HP use this ERP implementation failure to its strategic advantage? Why/why not? Give reasons

Implications are as follows

About 20% of the orders 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$ 160 mn.Revenues down by 5%.

Analysts raised credibility of HP as a consultant for SAP

The company had to direct orders through distributors 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 lose 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 organizations with their RTI to harmonize the processes between the core business and IT operations

Constant retooling of the corporate infrastructure to meet the demands of a dynamic enterprise has led to the evolution of real-time infrastructure.

Developed contingency plans to devise solutions for upcoming problems.

Hence development of contingencies plans for ERP projects is a must.

  1. Industry analysts expressed concerns regarding the recurrence of the failure in the ERP implementation by HP in future. What according to you should HP do to prevent such failures? Explain giving reasons.

Following are the methods to prevent the recurrence of such a failure

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 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.

Case analysis

Management Recommendations

 

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