HP implemented an ERP system from SAP in 2004 to integrate its server business unit. However, the implementation faced major technical issues and execution problems. Approximately 20% of orders became lost in the new system. This led to financial losses of $160 million for HP as well as loss of sales and customer goodwill. HP learned it needs better planning, testing, training and contingency strategies for future ERP implementations.

1. .

2. Presentation Outline
Presentation Outline:
• Acronyms
• Introduction
• Company Background
• HP
• SAP
• HP & SAP Partnership
• ERP Background
• Challenges
• HP’s Implementation of ERP
• Background
• The problem
• The impact to HP
• Recommendations and Lessons Learned
• HP lessons learned
• General ERP recommendations
• Conclusion .

3. Introduction
Acronyms used:
• ERP: Enterprise Resource Planning. Software used
to integrate management information across an
organization
• ESSN – Enterprise Services Storage and
Networking. The HP business unit that is the focus
of this presentation
• HP: Hewlett-Packard.
• IT: Information Technology
• SAP: Systems, Applications, Products in data
processing
.

4. HP Company Background
HP Company Background
• Incorporated in 1947
• Provides hardware and software solutions for small, medium and
large sized businesses in both the public and private sectors
• Ranked as one of the top IT companies in the world
• HP has worked with every facet of a company from assembly line to
corporate level management
.

5. HP Company Background
HP’s Seven Business Segments
• Personal Systems Groups (PSG)
• Services
• Images and Printing Group (IPG)
• Enterprise Services Storage Networking (ESSN)
• HP Software
• HP Financial Services (HPFS)
• Corporate Investments
.

6. SAP Company Background
Company Background
Systems, Applications, Products in data processing (SAP).
• Introduced in 1980s as SAP R/2
• Initially known as a security audit system
• Began as a business application that could be used with multiple
currencies and languages
• In 1992, SAP was re-launched as SAP R/3 – a client/server
application which boasted a graphical user interface
• SAP became one of the three primary ERP systems
• Today SAP offers its ERP in three business models
• On Premise
• On Demand
• On Device
.

7. The HP-SAP Connection
Awards
• HP received the “Run SAP Partner of the Year” Pinnacle
award for 2012
• HP also holds awards for SAP partner recognition with
regional partners which include:
» Technical Partner of the Year
» HANA Impact Award
» Innovation Partner of the Year
» SAP Services Partner of the Year
.

8. HP– SAP Partnership
Allied since 1994
HP is SAPs largest global
Partner
HP had $110 million
implementation in their ESSN
Division
In 2004, HP’s ERP Implementation failed
The two companies remain partners despite
failures
Now more than 40,000 SAP implementations
running on HP Systems
.

9. Function of ERP Software
ERP Background
• Integrates disperse organization’s departments and
functions into one system
• May integrate functions such as finance, HR, IT,
manufacturing, inventory, and supply chain into
one system.
• Integrates and standardizes disperse IT systems.
• Allows for planning across functions.
• Provides integrated reporting across functions.
• Integrates back office software such as order
fulfillment software with front office software such
as CRM.
• All departments see the same information in a
unified format.
.

10. Typical Challenges with ERP software
ERP Challenges
• Changes to company’s operations is extensive and requires a lot of
training and time to be adopted.
• Implementation typically take longer and cost more than expected.
• Gartner study of 63 companies in 2002 showed that the average
cost was $15 million. The highest was $300 million.
• Hidden costs include training, integration and testing, customization,
data conversion, data analysis, consultants, post-ERP problems.
• Typically require a lot of customizations to meet organization’s needs.
• Why do many ERP implementations fail?
• Work habits must also change in order to gain benefit from ERP.
• Since cost and time are generally much greater than estimated,
many organizations run out of resources before the project is
completed.
• Many failed implementations of ERP were implemented before the
product was mature.
.

11. HP’s Attempt at ERP
Background of HP’s ERP Implementation
• In June 2004, HP had already had four major successful
implementations of ERP using SAP
• HP had just acquired Compaq before 2004 SAP
implementation
• HP developed SAP as a supply chain order-processing
system for their server business unit
• Due to problems with the implementation, 20% of the
orders became lost in the system.
.

12. The First Problem
Technical difficulties & execution problems
• Poor Planning
• Budgetary Considerations
• Project Scope not adequately defined
• Requirements not fully understood
• Difference of opinion among stakeholders
• Took too long to complete
.

13. The Second Problem
Technical difficulties & execution problems
• Problems with data integrity
• A lack of support from HP’s consultants
• Technical glitches not handled well
• Technical difficulties caused by Compaq acquisition
• Inability to keep pace with orders already in the supply
chain
.

14. The Third Problem
Communications issues
• Between departments
• Lack of communication with upper
management
• Misunderstandings about how product would
work with the current system
• Lack of communication between workers
experiencing problems
.

15. The Fourth Problem
Lack of Contingency Planning
• HP had not planned for significant
technical challenges
• No manual work-around in place to meet
customer demand
• Not prepared to roll back to previous
system
.

16. The Impact of the Failure to HP
The Impact to HP
Financial
• Financial Impact estimated to be at around $160 million
• Significant Order Backlogs
• Loss of Sales/Revenue loss of approximately 5%
Other
• Upper Management questioned decision making
• Sales Execs Fired
• High customer turnover rate
• Bad Publicity
• Loss of Consumer Confidence
.

17. Lessons Learned
HP’s Lessons Learned
• Ensure better project management.
• Better planning of time and resources.
• Better understanding of environment and
requirements.
• Better scope definition.
• Allow more time for testing before implementation.
• Provide better training before implementation.
• Have a contingency plan in place – for example, a rollback strategy or
alternate work-around
• Improve communication with customers.
• Avoid major implementations shortly after major acquisitions (such as
the Compaq acquisition).
.

18. Recommendations
General ERP Recommendations
Ensure support
• Support from upper management is critical to the success of
implementing a large complex system such as ERP.
• Upper management should be committed to providing adequate
resources in the form of time, money, staff, and consultation services.
Contingency Planning
• A backup plan should be in place in the event that there are issues with
the implementation.
• Organizations should consider using the former systems concurrently
with the ERP if it makes sense, or keeping it running for some time in the
event they need to switch back.
.

19. Recommendations
General ERP Recommendations
Better planning
• Organizations should choose their product carefully and understand the
challenges that each product carries.
• Ensure that the ERP chosen meets all of the organizations requirements.
• Organizations should understand that implementation often takes longer
and costs more than estimated.
• Building extra time into the schedule and extra money into the budget will
help offset surprise issues.
• Organizations should consider starting with a pilot or rolling out the ERP
implementation in phases.
.

20. Recommendations
General ERP Recommendations
Build new work processes and ensure adequate training
• Implementing ERP will significantly change work processes.
New work processes must be in place before the ERP is
introduced.
• Staff must be trained on new work processes before they are
implemented.
• Training in the new ERP is critical.
• All staff impacted should be trained.
• Training should continue after the release of the ERP.
.

21. Conclusion
Conclusion
HP’s experiences have served as a
lesson:
HP needs to be concerned about future
ERP rollouts and, as a certified Global SAP
partner involved in businesses in more
than 50 countries, HP is clearly committed
to ensuring the satisfaction and support
required so that SAP services can be a
reliable option for its customers for years
to come.
.

22. References
References
Hewlett-Packard Co. Reuters. Retrieved from
http://in.reuters.com/finance/stocks/companyProfile?symbol=HPQ.N.
CIO staff writer. (2007, April 2). When bad things happen to good projects. CIO. Retrieved October 27,
2012 from http://www.cio.com/article/101505/When_Bad_Things_Happen_to_Good_Projects
SAP AG (SAP). Rueters. Retrieved from
http://www.reuters.com/finance/stocks/companyProfile?symbol=SAP
Songini, M (2004, August 16). HP puts part of the blame on SAP migration. Computerworld. Retrieved
October 27, 2012 from
http://www.computerworld.com/s/article/95276/HP_Puts_Part_of_the_Blame_on_SAP_Migration?
taxonomyId=121.
Thibodeau, P. (2004, September 27). HP's CIO points to internal issues in ERP project snafus.
Computerworld. Retrieved October 27, 2012 from
http://www.computerworld.com/s/article/96158/HP_s_CIO_Points_to_Internal_Issues_in_ERP_Pr
oject_Snafus
Wailgum, T. (2008, April 17). ERP Definition and Solutions. CIO. Retrieved October 07, 2012 from
http://www.cio.com/article/40323/ERP_Definition_and_Solutions
Wood, B. (2012, December 27). SAP ERP Project Failures Lessons Learned and Mini Case Studies 3.
r3now. Retrieved November 03, 2012 from http://www.r3now.com/sap-erp-project-failures-
lessons-learned-and-mini-case-studies-3-2/.
HP Logo Obtained from http://www.turbogadgets.com/2011/08/31/no-more-pcs-for-hp%E2%80%A6-
is-this-the-future/
SAP Logo Obtained from http://www.yourlogoresources.com/sap-logo/
.