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.
[...] Some of these problems could have been avoided by considering certain actions. In order to identify the possible solutions for the problems during the implementation of the project, the different aspects that caused the failure have to be identified and categorized. The weaknesses of the company can be divided in two categories: Organisational Problems Project Management Problems After the categorization of the problems, possible solutions can be provided to avoid these aspects. Organisational Problems The corporate culture at HP can be considered as very weak and critical. [...]
[...] The knowledge can be deployed for the evaluation of a guideline for ERP or other project implementations. This guideline will help all HP segments, so that the overall value of this information is very important. This guideline also gives the opportunity to offer new services to the customer. The HP consulting and project management will improve and realisation of successful projects will increase. If the next projects will be implemented successfully HP can easily build up the respectful image again, because customers will realize that HP learned from its mistakes. [...]
[...] 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. In the US, it has at least a market share of 47 percent with an increasing trend (10 percent last year).[9] The co-operation with SAP, therefore, is very important for HP, even though the ERP implementation at the ESS segment was a failure it will probably not effect the business situation of HP's server orders, since SAP dominates the market. [...]
[...] Therefore, every lose of a customer is very expensive for HP. Therefore, the financial impact of the failure of the project might even result in huge loss of revenues and market shares. The decrease in market shares would be the worst case, since other customers might also lose their faith and trust in the company. The relationship between SAP and HP was already mentioned at the possibilities section. It can be observed in two ways. There might be a chance that the relationship will become worse. [...]
[...] A better requirement definition, planning and implementation would have solved a lot of problems. An external expert might have had a better overview and collected the necessary data to make the project a success. The SWOT analysis also shows that there were a lot of opportunities and threats for HP due to the project. Even after the failure of the execution of the ERP project, HP's reputation was not all that affected due to its good realationship with its customers and SAP. [...]
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