HP Puts Part of the Blame on SAP Migration
By Marc L. Songini
August 16, 2004 12:00 PM ET
Computerworld - Hewlett-Packard said last week that part of the blame for the revenue shortfall in its enterprise servers and storage group rested on a problematic migration to an SAP AG order-processing and supply chain system.
HP CEO Carly Fiorina said the problems cost the group about $400 million in revenue and $275 million in operating profits.
"We executed poorly on the migration," Fiorina said. While the problems primarily hit HP's industry-standard server business, they also affected the business-critical and storage businesses.
Although the company worked to ensure product availability, HP still lost sales and was forced to fulfill direct orders through channel partners and expedite other orders via air shipments. Those moves cut into the company's gross margins.
HP is a close partner with SAP and offers specialized consulting services around SAP's supply chain and ERP software.
HP has a "strong and productive relationship [with SAP], first as a customer and as a strategic partner," said SAP Americas Inc. spokesman William Wohl. "The relationship continues to expand even today, as teams talk about deepening that customer relationship.
"We can't talk specifically about what's happening inside HP," Wohl added. But he noted that in HP's statements, no blame for the problems has been attributed to SAP's software.
HP is a highly decentralized company whose various divisions make their own decisions around implementing software and order management processes, noted David Dobrin, an analyst at B2B Analysts Inc. in Cambridge, Mass. After its previous implementations, it would seem logical that HP should have known how such rollouts can create problems severe enough to affect sales and prepared itself accordingly.
"Even if HP doesn't have the institutional memory, you would think that SAP would," he added.
This case of a high-tech company "choking on its own dog food" was likely caused by human error during the execution of the project, and not by the software itself, said Joshua Greenbaum, an analyst at Enterprise Applications Consulting in Berkeley, Calif. "I was impressed HP fired management and didn't nail SAP to the wall," he said.
However, it's surprising that "good software could take a company down like this," Greenbaum added. "It doesn't get more embarrassing than that."
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