ERP Installations Derail -- Y2K Deadlines And Unexpected Costs Plague Several Recent Implementationsgreenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
[Fair use/educational purposes]
Recent high-profile outbreaks of failed or derailed enterprise resource planning implementations are a reminder that installing ERP applications is still not for the faint-hearted.
Getting ready for the year 2000 was a prime driver behind a Baan ERP implementation by Miller Industries Inc., a manufacturer of towing and recovery equipment in Chattanooga, Tenn. The company met its January 1998 deadline for the project, but in August reported a $3.5 million operating loss for the fourth quarter of 1999, ended April 30. It attributes the loss in part to costs and inefficiencies resulting from the new system.
CIO Lance St. Clair says the unexpected costs resulted from hiring additional staff to support a change in the production process imposed by the Baan software, and outsourcing part of its business to focus its operations running on Baan. "It takes a while to get everyone used to doing things a new way," he says.
Other companies aren't so forgiving. Allied Waste Industries Inc., a waste-management company in Scottsdale, Ariz., is throwing out a $130 million SAP installation it inherited with the recent acquisition of Houston's Browning-Ferris Industries Inc. David Hunts, director of MIS at Allied Waste, says the cost of maintaining the software and the constraints it put on his business couldn't be justified. "It looked like it wasn't going to bear fruit," he says. Allied Waste will transfer Browning Ferris to its Infinium ERP system over the next few months.
SAP customer W.W. Grainger Inc. in Lake Forest, Ill., also reported losses caused by bugs in newly its installed ERP package. In October, Grainger, a $4.3 billion distributor of maintenance, repair, and operating supplies and services, reported that net earnings for the third quarter, ended Sept. 30, were down 18%. CEO Richard Keyser says service disruptions caused by the company's transition to the new enterprise system accounted for an $11 million reduction in operating earnings.
Analysts suspect looming Y2K deadlines have been a factor in many troubled ERP projects. Y2K "may cause implementation teams to rush what they would have done more gradually," says Jim Shepherd, VP of research at AMR Research.
That was the case at the University of Utah in Salt Lake City, which had to prepare its systems for Y2K as well as a conversion from a quarter- to a semester-based calendar. The university is still working out problems with its PeopleSoft reporting and payroll systems. "Whenever you do an ERP implementation, especially in a compressed time frame, you're going to have glitches to work out," says Joe Taylor, director of administrative computing services for the university.
Software vendors should set realistic expectations for their products' capabilities and requirements, Taylor says-but that concept is often at odds with sales objectives. The university is still waiting for data warehouse and analysis tools PeopleSoft promised but has not delivered. "Did they tell us the software can do things it doesn't? Yes, they did," Taylor says. "But you have to realize when you're talking to a vendor that they're in a sales mode."
What's more, as they face stiff competition on the E-commerce, supply-chain, and customer-relationship management front, ERP vendors are rushing new products and releases out the door, says Dave Stein, an independent software sales consultant. He's concerned that many new products may not go through proper steps of quality control, beta testing, and consultant training. "The faster this stuff comes out, the worse it will be for those buying it," he says.
But Byron Miller, an analyst at Giga Information Group, says ERP projects involve changing the way a company works-and the company has to be responsible for doing that. "Unless a vendor materially misrepresents itself or its product," he says, "let the buyer beware.
Copyright . 1999 CMP Media Inc.
-- Steve (firstname.lastname@example.org), November 26, 1999
Sorry, but this isn't my area of expertise, so I'm gonna ask a dumb question: Are the acronymns SAP and ERP interchangeable?
Any comments from someone with more knowledge in this area?
-- counting down (email@example.com), November 26, 1999.
SAP is the name of one company who offers products in the ERP space, just as Ford is one company who offers products in the automobile space.
By the way, neither ERP nor SAP are acronyms, since they aren't officially pronounced like the tree juice, or like Wyatt of Tombstone's last name. Instead, they are only abbreviations, pronounced "E" "R" "P" and "S" "A" "P".
-- YourEnglishTeacher (firstname.lastname@example.org), November 26, 1999.
Last year, SAP advertised itself as virtually the savior of the world with respect to Y2K...
-- K. Stevens (kstevens@ It's ALL going away in January.com), November 26, 1999.
SAP was advertising itself as THE Y2K Solution last year and maybe these companies are trying to cram several, year's worth of work into one year or less.
I spent most of 1997 and half of 1998 enduring an SAP installation. My employers figured a six-month process of functional transfer from the old system to SAP. And we had headaches in what was considered an smooth tansition. Smooth enough to drive out lots of experienced employees and cause a one-third loss of business when customers got PO-ed due to lost and delayed orders.
Eighteen months was closer to reality for implementing all of SAP and then fixing the problems. And the transfer time didn't include the gearing-up period to make the first portion of SAP ready for cut- over. So add another year to the head-end time of the project. Then add whatever time was required up front for the purchase and design phase.
SAP may have been touted as the answer last year. But it was already two years too late to do anything with SAP besides take the people's money and ride off into the sunset with the word "SUCKER!" ringing in the customer's ears.
-- Wildweasel (email@example.com), November 26, 1999.
... leaving a whole year - oops, make that a whole 17 Federal working days or 35 total days - for testing.
-- Linda (firstname.lastname@example.org), November 26, 1999.