HP is struggling to complete a planned SAP software rollout in its Global Supply Operations unit. This is the second time the company has had difficulties with a planned ERP migration - last year, it suffered a major black eye from a poorly-executed migration in its server division.
The completion of the Global Supply Operations project has already been delayed by two years. HP officials acknowledged that an aggressive schedule early on didn't allow for adequate mapping of business processes or the implementation of change management capabilities.
"The obvious object lesson is that the complexity of these projects requires even tech-savvy companies like HP to stop, slow down and make sure they are getting all the little details right," said Joshua Greenbaum, an analyst at Enterprise Applications Consulting. He added that "redemption is possible if you catch the mistakes before you're too far down the road."
HP launched the $110 million ERP consolidation project and rollout, dubbed iGSO, in 2002 after its acquisition of Compaq. The project was due to be completed this year. Instead, it will continue into 2007, according to Peter Ginouves, director of finance at the GSO unit and a leader of the project.
"Having three years to do something of this magnitude is extremely aggressive," said Ginouves. "Three years just zips by doing something of this scale." Despite the delay, Ginouves said he still expects the project cost to remain within the $110 million budget.
The GSO's project is separate from the one at HP's Enterprise Storage and Servers unit that hurt the company's third-quarter earnings last year and led to the firing of several executives.
The goal of the GSO initiative is to consolidate 250 systems - some of them 20 years old and custom-written for HP, Compaq, Digital and Tandem systems - around a core ERP backbone based on SAP Enterprise 4.7. The existing systems also include varying instances of SAP, as well as an "alphabet soup of just about everything," Ginouves said.
To establish immediate credibility, the 350-member implementation team scrambled to do a rapid deployment in 2002, installing applications such as SAP's materials management module but linking them to HP's legacy systems. In its haste, the team neglected to focus enough on business process management and failed to craft full end-to-end workflows, Ginouves said.
By March 2004, it was clear that the project would take five years instead of three and that it "would at best break even" instead of getting the expected 35 percent return on investment, Ginouves said. Under HP's revised plan, it expects to gain high double-digit returns on the remaining investment of $40 million to $45 million.
"We were essentially replacing and whittling down 250 systems, but when we were replacing them with new systems, we weren't getting anything back," Ginouves said.
After reaching that conclusion, the GSO decided to take a new approach that would include driving collaboration among business users and IT staffers to get a more thorough mapping of its business processes, he added.
HP is now using the NetProcess tool from Intellicorp to map complete business processes, such as procuring a part and delivering it to a customer. The resulting process models can be summarised and shared with executives or segmented into task-level detail for use by HP's programmers, said Ginouves.
Prior to adopting NetProcess last November, the project team was using PowerPoint, Word and Visio documentation tools, which didn't enable adequate communication among the employees implementing the system, he said.