Two unfortunate situations have captured center stage at the end of summer 2004.
Posted Aug 26, 2004
Perhaps not since CRM failure was blamed for short supplies of Halloween candy five years ago have major enterprise software project missteps garnered so much attention. In the month of August two unfortunate situations have captured center stage.
The ongoing integration of Hewlett-Packard and Compaq became significantly costlier when HP incurred more than $200 million in losses stemming from what it describes as a badly executed integration and upgrade of the HP and Compaq SAP supply chain management systems. In an August 16 research note entitled "Lessons Learned at HP," Bill Swanton, AMR Research analyst, estimated that the budget for this project was $30 million, but that the services disruption lasted longer and affected the company more deeply than anticipated, leading to significant losses as HP scrambled to fulfill customer orders at higher cost.
HP CEO Carly Fiorina was quick to lay blame for the shortfall solely on her own firm, and senior management departures have been tied to the integration problem. "They did experience disruption they weren't prepared for, but they've moved on in their business," says Bill Wohl, vice president of product public relations at SAP.
Indeed, SAP has repeatedly emphasized that HP committed to expand its reliance on SAP the very same day the news broke, and has not retreated from that position. "The good news is that HP is admitting that it's their problem," says Sheryl Kingstone, CRM program manager at The Yankee Group.
Considerably less friendly is the lawsuit filed by British Sky Broadcasting (BSkyB) against EDS, citing "deceit, negligent misrepresentation, and breach of contract" over a four-year-old customer contact-center project. Initially managed by EDS, both sides claim that they were the party responsible for ending the original contract in 2002. BSkyB continued the project with its own management, and claims it sought a settlement with EDS over its dissatisfaction. EDS, on the other hand, says it has a raft of unpaid invoices outstanding to BSkyB. EDS spokesperson Liz Bonet characterized the lawsuit as "outrageous and overly aggressive." Neither side has disclosed the amount of the claim in the lawsuit, although EDS says the original contact was valued at $109 million.
Analysts are quick to point out that the situation between BSkyB and EDS is a dated issue, simply reaching public awareness today, not necessarily an impeachment of modern CRM projects. "In 1999 to 2000 we were really learning [how to implement CRM], and [the industry] overpromised and underdelivered, and that's what the problem with EDS was all about," Kingstone says. "It's so old, [no one] can infer any problems EDS is having today, it's too much of a leap to take."
Beth Eisenfeld, research vice president at Gartner, says that such situations can usually be avoided through better due diligence by client firms. "What I wind up seeing is that eighty percent of evaluation [time] is spent on the software product, while only twenty percent is spent on the services around the installation of the product--external and internal, too," she says. "Three to five times the software cost is going to go into the integration, including your own folks, so why are you spending eighty percent of your time on twenty percent of the cost?"
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