HP Rushes to Fix Order System, Reassure Users

Vendor says 'worst is behind us' on shipment snafus caused by rollout of supply chain apps

CHICAGO -- Hewlett-Packard Co. engaged in damage control at HP World last week, telling users it's working in "war room" fashion to fix the order-processing problems that have affected its shipments of servers and storage devices. HP also said its weak third-quarter results aren't a harbinger of any changes in its technology road map.

Joe Nadler, a director in HP's enterprise systems unit, told customers at one conference forum that the company expects its server and storage supply chain "to be just about fully recovered by the end of August."

"There's aggressive plans in place to make sure we catch up on late customer orders, and unfortunately, we did have some significant delays," Nadler said. But he added that the problems have been identified. "We're now completing the fixes," he said.

Among the users on the receiving end of the order-processing problems was Patrick Slattery, a systems manager at IDX Systems Corp. in South Burlington, Vt. Slattery ordered two Intel-based ProLiant servers from HP last month. But IDX, which develops software for health care providers, is still awaiting the delivery of the systems.

"They haven't shown up yet," Slattery said. Normally, the systems would have arrived within five days, according to Slattery. He said that when they didn't, he called HP and was told the servers were back-ordered.

Slattery added that he didn't know what was causing the shipment delay until he heard HP executives discuss the order-processing problems here at the HP World conference, which was sponsored by the independent Interex and Encompass user groups. "I never put it down to the supply chain mess," he said.

Kees denHartigh had a different type of problem with an HP hardware delivery. A systems and network analyst at the University of Alberta in Edmonton, denHartigh placed an order with HP last spring for new equipment that included Opteron-based servers and a storage array. He said that not one but two deliveries showed up at the school in June, leading him to call HP as well.

"They were right upfront about it," denHartigh said. "They were merging the ERP systems between Compaq and HP, and they had some issues with duplication of the whole process. So the order went in at two places." The extra equipment is still boxed, awaiting its return to the vendor, he added.

HP world attendees check out technology offerings on the show floor.

HP world attendees check out technology offerings on the show floor.

Image Credit: Patrick Thibodeau

HP officials have said that the supply chain problems stemmed from a poorly executed migration to a new order-processing system based on SAP AG's ERP applications .

HP's overall revenue rose 9% in its third quarter, which ended July 31. But its enterprise server and storage business fell 5%, prompting CEO Carly Fiorina to fire three executives because of what she called "unacceptable execution" within that unit.

Mark Gonzalez, vice president of enterprise server and storage sales for HP Americas, said the troubles began over the July 4 weekend, when HP went live with the SAP-based system to replace three order-processing applications that it had after its 2002 acquisition of Compaq Computer Corp.

"It's systems talking to systems," Gonzalez said. "It just did not quite work out." He added that customers should no longer experience delays on storage products or Unix servers. Processing of ProLiant server orders is "pretty much back on track, with the exception of a couple of complex, configure-to-order type things," Gonzalez said. "The worst is behind us."

At the conference, HP officials were also adamant that the company won't make any changes in its technology direction because of the poor third-quarter results. But that didn't stop users such as Paul Gerke, systems administrator for Clark County in Vancouver, Wash., from voicing concern about the possibility that HP could alter some of its system development plans.

"Quarterly news can change very quickly," said Gerke, who manages HP-UX systems. Referring to HP's decision to phase out its HP 3000 minicomputer line, he said, "You have to wonder, if we start seeing declining results for Unix, is that the next thing [to go]?"

John Hohenfeld, operations manager at the 55,000-student Cuyahoga Community College in Cleveland, said HP's financial results "made me wonder a little, but I think they are very safe" as a vendor.

Safe for users, perhaps. But when Denys Beauchemin, chairman of Interex's board of directors, opened the floor for questions during a panel session featuring HP executives, he invited attendees to "fire away" with their questions.

That choice of words prompted one HP official on the panel to quickly retort, "Don't fire away," drawing laughter from the audience.

Robert McMillan of the IDG News Service contributed to this story.

Copyright © 2004 IDG Communications, Inc.

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