AMR on HP's SAP ERP EPS WTF?

That is, AMR Research on HP's problems with their upgrade of their SAP Enterprise Resource Planning (ERP) software, causing them to miss their earning targets. [PDF Link]. Some highlights:

A Project Mishap Can Cost Far More Than the Project
"HP lost $160M in revenue and $70M in margin...5% of the division’s revenue. It was also many times the project budget. Using AMR Research’s estimation metrics for these projects, the project cost for this near-$4B division was around $30M."

The Business Failure Was In Contingency Planning
While the project didn't come off without a hitch, it was a big effort: it was a system consolidation and upgrade, requiring two business units to unify their business processes; the project was also part of the larger ongoing HP/Compaq integration. "The deleterious results were due to a lack of contingency planning. HP believes the divisional management should have had plans in place to detect and work around the problems and delays possible in any large systems project. As a result of this and other execution problems, three top division executives are gone."

HP Management Holds Business Leadership Accountable

• "Three top division executives are gone."
• "There were no terminations in HP Consulting, which provides IT implementation and operations services to the division."
• "HP does not blame SAP for the problem. In fact, HP did not even mention the vendor until a financial analyst referred to the 'SAP migration' in a question on the conference call."

The Upshot
Ultimately, one of the few places a business manager can control for IT risk to their organization is in contingency planning. Contingency planning can be difficult and many feel it is time ill-spent ("If those IT guys would just get the project done right, we wouldn't t need to waste our time making a contingency plan.") The fact is that there are a lot of things we do in business that are focused on risk mitigation, and contingency planning for IT risk needs to be one of them.

If you have comments about this topic, suggestions for future topics, or questions related to the governance of the IT function or the business-centric use of technology, feel free to e-mail me at eyetoIT@gmail.com.

Some Quick Reading Recommendations on the Subject

	E-Business and ERP: Transforming the Enterprise (by Grant Norris, et alia) While I'm not a huge fan of the title, this is a short book written by PWC folks that really does a good job of walking through some of the high-level aspects of ERP systems and the implementation process. Covers issues from valuing your ERP investment to architecture to political and cultural challenges in implementation. The book is too short and too informative not to be worth a read.
	Maximizing Your ERP System: A Practical Guide for Managers (by Scott Hamilton) Oriented at manufacturing organizations, the book covers many of the key business processes enabled or affected by an ERP implementation such as lean manufacturing, demand planning and made-to-order (MTO) product. Good for a business manager or a technologist unfamiliar with ERP.
	Stop IT Project Failures (by Dan Remenyi) Regrettably Out of Print today, but this is a good, if slightly dated, book on IT project risk, accounting for it, reducing it and managing it. Tables and checklists make this good for a quick primer or a more thorough read. Check Amazon for used copies (they don't have any as I write this) and pick it up if you see it used.
For some quick high-level thoughts, BearingPoint has a good white paper "Implementing ERP Systems In The Public Sector: Nine Sure Ways to Fail - Or Succeed." [PDF Link] Although it is directed at the public sector, most of the ideas apply directly in the private sector as well.