In June 2004, Hewlett Packard started the implementation of a new Enterprise Resource Planning Software in its North American Enterprise Servers and Storage (ESS) division. HP, known for its expertise in a lot of product fields and consulting capabilities, especially in the segment of SAP ERP implementations, faced several severe problems during the execution of the project.
After two months, the result of the migration of the new ERP had a decrease in revenues of about 5 percent (total financial impact: $160 million) during the third quarter compared to the same period of the previous year. The initial estimation of the cost by AMR Research has been $30 million.
Two questions were raised concerning this project. On the one hand, whether the problems and aspects which endangered the project could have been avoided and on the other hand, what possibilities and threats can be assessed in the implementation of the project? The following two sections of this case study will answer these questions.
While the question about the potential avoidance of the problems discusses HP's weaknesses from an internal point of view, the second question discusses the opportunities and threats from an external point of view. The answer to these questions can be given by accomplished SWOT-Analysis.
[...] The ERP implementation project requires an accurate communication to ensure the exact and prompt completion of the project. These requirements were fulfilled by the HP team, so that communication training or at least a precise plan about the knowledge and information transfer should have been developed. The requirement definition for the project leader was also not accurate. The project leader has to be objective and must have the ability to plan the project precisely, while being able to handle the difficult corporate culture problems. [...]
[...] The failure of the ERP implementation might easily lead to a bad reputation especially in the field of consulting. If a company offers consulting services in the ERP implementation market and is not able to implement its products in its own company, customers will start thinking about the quality of service offered by the company. It is very bad for the business; HP had enough experience in the ERP field and still was not capable to implement it efficiently. This bad reputation might lead to a loss of customers and a decrease of contracts. [...]
[...] The HP management planned to implement the ERP software during the third quarter, which was the slowest period for HP. At the same time, they organized some resources to overcome some bottle-necks if minor problems might appear. The planning of these precautions was not enough, since the number of orders increased by one third. During the planning and implementation, an adequate business contingency plan would have been necessary to be prepared to face any problem. This plan would include a cross functional team, which is responsible for educating the business people about the supply chain-risks during a major system rollout. [...]
[...] The reason for the failure of implementation of the ERP project cannot be found at SAP, because the software was running well, only the project management was inefficient. This may cause to the breakup of their relationship, because SAP is not depending on HP, due to their excellent market figures. The breakup of the co-operation could be the worst case for HP because this would also lead to a distrust among other customers and partners and weaken HP's powerful position in the market. [...]
[...] The partnership was already well running, but due to the problems regarding the implementation of ERP project, both parties will feel responsible in some way for the failure and want to improve the relationship. This might result in better and higher quality products, which will certainly improve the competitive advantage for HP in the market. Another advantage for HP is the fact that the market for ERP implementations is dominated by SAP. SAP is the leading software supplier in this field with about 62 percent market shares in the fourth quarter of 2005. [...]
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