SAP R/3: you got it right or paid the price

Enterprise resource planning installations can provide some real benefits or some embarrassing headlines when things go wrong. We...

Enterprise resource planning installations can provide some real benefits or some embarrassing headlines when things go wrong. We recall some high and low points.

Although successful enterprise resource planning projects can deliver productivity gains and business benefits, when things go wrong it is not just the IT director that faces problems; the impact is felt on balance sheets and share prices.

Computer Weekly looks at some of the high and low points of implementing R/3.

Highs

Disney
This year, the Walt Disney Corporation will complete a £240m global IT consolidation based on SAP.

The company, which has a £13.65bn annual turnover, operates in 40 countries and is made up of more than 700 separate companies, is consolidating more than 400 back-end systems to a SAP platform.

Tom Stauffer, vice-president of the implementation project, said, "We had multiple implementations of SAP, PeopleSoft and Oracle," but he said a single ERP system was necessary to create a series of common business processes across the group and move towards developing a group-wide shared services model for business processes.

The final cost of the project will be £240m, but Disney would have spent that much in the next three to five years on maintaining and upgrading legacy systems, according to Stauffer.

Pilkington
In June 2003, glassmaker Pilkington attributed a large part of its £217m annual profit to its IT strategy and specifically its SAP implementation.

The company was in the middle of a £40m SAP-based project to bring common business processes to 50 separate IT groups across the world and put much of its business online.

Steven Pownall, Pilkington Group's IT director, said the global roll-out resulted in a common set of processes across multiple business units, providing a common basis for comparison and allowed shared service centres for human resources and financial applications.

Thomas Cook
In June 2003, travel firm Thomas Cook revealed it had saved £140m in the 20 months to November 2002 with an IT transformation project based on SAP.

The four-year programme helped the company record an £80m turnaround in net revenue and helped it back to profitability.

Thomas Cook standardised on SAP as the main software tool for the group internationally. The £1.7m implementation involved human resources, financials and business intelligence software for 11,000 employees across its airline, travel agency and tour operator divisions.

Lows

Hershey
The US chocolate manufacturer admitted in 1999 that problems with a SAP R/3 implementation meant it fell £70m short on sales targets.

"Although order patterns have remained strong, we have been unable to fulfil them in a timely fashion," said chief executive officer Kenneth Wolfe.

Hershey's problems resulted from difficulties in programming interfaces between the SAP ERP system, its Manugistics supply chains and Siebel CRM.

WHSmith
In 2000, WHSmith began rolling out SAP to integrate IT systems in 50 news delivery depots, but the implementation ran into difficulties within months. The database servers were operating at 70% capacity, with only 15% of WHSmith's operations live on the system.

"Users could not carry out many operations the system was designed for. The principal reason for the deterioration in performance was insufficient processing capacity on the database server," WHSmith said.

The project, which exceeded its £15m budget by £8m, sparked a volley of complaints from newsagents, who claimed they were forced to spend an inordinate amount of time sorting out the system's teething problems.

ICI
In April 2003, Paul Drechsler, chief executive of ICI subsidiary Quest, lost his job after problems with a SAP implementation led to a profits warning and a 40% share price slump.

Quest was to launch ICI into a key market for expansion, but problems with the SAP project, carried out in partnership with Xansa, resulted in the company's first quarter sales forecast for 2003 plummeting by nearly 70% as existing customers, unhappy with unfulfilled orders, jumped ship to buy elsewhere.

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