Problems during the installation of an enterprise resource planning system at an Australia-based company have led to an estimated cost overrun of $21m (£11.3m) - and a claim against the software supplier, PeopleSoft.
The ERP implementation problems and cost overruns emerged last week during a webcast for investors by Crane Group, a metal and plastic pipeline manufacturer and plumbing and electrical supplies distributor.
The costs were incurred during the past several years amid a multimillion-dollar implementation of JD Edwards applications. PeopleSoft bought out JD Edwards last year, and the software is now known as PeopleSoft EnterpriseOne.
The company's IT budget for the project is expected to rise to $33m in the 2004-05 fiscal year, up from $22m in the previous fiscal year, according to Greg Sedgwick, Crane's general manager.
Currently, all 42 of Crane's manufacturing and warehouse sites are live with PeopleSoft EnterpriseOne, along with 207 of the company's 230 trade outlets. The rest are due to go live this month. The applications support planning, forecasting, procurement, sales, financials and other operations in the company.
Without providing specifics, Sedgwick acknowledged that the nearly completed system had run "significantly over time and over budget". The software is expected to allow Crane Group to improve its business processes and offer customers new electronic data interchange, forecasting and e-business capabilities.
According to the company, Crane has taken a number of steps to rectify the problems. They include consolidating the company's IT management structure from four CIO positions to one and a plan to downsize the IT department by 30 people after the ERP rollout is finished. That is expected to lead to significant savings the company said.
Hardest hit by the ERP rollout was the company's Tradelink plumbing distribution business, according to Sedgwick. Financial problems facing Tradelink were exacerbated by the ERP rollout problems, and as a result Crane will close 13 of its nonperforming stores and lay off 200 people.
PeopleSoft declined to discuss the software rollout at Crane Group except to say that it is largely complete.
"We continue to have a close working relationship with Crane in the ongoing rollout of their IT system," said PeopleSoft spokesman Steve Swasey. "The Crane Group implementation is now substantially complete."
Marc L Songini writes for Computerworld