HP struggles with second SAP project

Computerworld - After suffering a major black eye last summer from a poorly executed migration to SAP AG's ERP software in its server division, Hewlett-Packard Co. is working to turn around another problematic SAP installation whose schedule has been stretched by two years.

The latest difficulties—blamed primarily on a lack of adequate internal processes—are being encountered at HP's Global Supply Operations unit, which provides spare parts and repair services across the company and has annual revenue of $2 billion. HP officials acknowledged that an aggressive schedule early on didn't allow for adequate mapping of business processes or the implementation of change management capabilities.

"The obvious object lesson is that the complexity of these projects requires even tech-savvy companies like HP to stop, slow down and make sure they are getting all the little details right," said Joshua Greenbaum, an analyst at Enterprise Applications Consulting in Berkeley, Calif. He added that "redemption is possible if you catch the mistakes before you're too far down the road."

HP launched the $110 million ERP consolidation project and rollout, dubbed iGSO, in 2002 after its acquisition of Compaq Computer Corp. The project was due to be completed this year. Instead, it will continue into 2007, according to Peter Ginouves, director of finance at the GSO unit and a leader of the project.

"Having three years to do something of this magnitude is extremely aggressive," said Ginouves. "Three years just zips by doing something of this scale." Despite the delay, Ginouves said he still expects the project cost to remain within the $110 million budget.

The GSO's project is separate from the one at HP's Enterprise Storage and Servers unit that hurt the company's third-quarter earnings last year and led to the firing of several executives .

The goal of the GSO initiative is to consolidate 250 systems—some of them 20 years old and custom-written for HP, Compaq, Digital and Tandem systems—around a core ERP backbone based on SAP Enterprise 4.7. The existing systems also include varying instances of SAP, as well as an "alphabet soup of just about everything," Ginouves said.

To establish immediate credibility, the 350-member implementation team scrambled to do a rapid deployment in 2002, installing applications such as SAP's materials management module but linking them to HP's legacy systems. In its haste, the team neglected to focus enough on business process management and failed to craft full end-to-end workflows, Ginouves said.

By March 2004, it was clear that the project would take five years instead of three and that it "would at best break even" instead of getting the expected 35% return on investment, Ginouves said. Under HP's revised plan, it expects to gain high double-digit returns on the remaining investment of $40 million to $45 million.