AUEB IS Dept - ERP Implementation

Failure at HP: Vougiouklidi N. - Raoulis

D. - Papadakis K.

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, pessimismotherwise known as
contingency planningis 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 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.

Introduction
ERP Implementation
Benefits
Streamline different processes and workflows
Easily share data across various departments in an
organization Better tracking and forecasting
Improve efficiency and productivity levels

Lower costs
Improve customer service

Introduction
ERP Implementation
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 companys revenues
50% of ERP implementations fail

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

Introduction
Background
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
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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Introduction
Background
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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Introduction
Background
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 HPs 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

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

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The ERP & MySAP Implementation

SAP 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
SAPs 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 times
2. Costs savings
3. Establishment of a goal distribution system
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The ERP & MySAP Implementation

SAP R/3 Implementation
In 1993, HPs 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 Ecommerce for direct consumer selling and HP kept on upgrading the version
as the needs changed.

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The ERP & MySAP Implementation

MySAP 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: demands 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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The ERP & MySAP Implementation

MySAP Implementation
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 ERP & MySAP Implementation

MySAP Implementation
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 interface
4.Greater speed in implementation
5.It had the option of query which would make it easier to
use.

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The ERP & MySAP Implementation

MySAP Implementation
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 HPs 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.
SAPs 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

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

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HP ERP GOALS
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 HPs legacy SAP order management systems with those of Compaq.

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Agenda

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

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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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HP ERP FAILURE
CAUSES
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.
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HP ERP FAILURE
Why didnt it work ?
Ultimately SAP was not a good choice.
The experts of HP didnt 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.

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Agenda

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

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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 (Industry
Standard Server):
problems with data integrity
simultaneous increase in
demands for HPs 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

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

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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 date
HP is certified global SAP Partner HP is a worldwide leader in SAP
operations - over 1.7M users worldwide
HP has thousands of SAP experts supporting users worldwide
HP Support Services manage selected portions of SAP IT infrastructure
HP Support Services provide mission-critical services to SAP
Nearly one in every two SAP installations runs on an HP server platform
When 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 Packards 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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