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Blaming ERP

Once again, problematic ERP installations are making headlines. It's time to ask, How much of the problem is really the software?

Second, Hershey attempted to do too much at once. Installing SAP’s R/3 software is complicated enough. Throw in a customer-relations management program from Siebel Systems and a logistics package from Manugistics, and the project becomes dangerously complex.

But not impossible. In another ambitious SAP installation, Amoco Corp. (now BP Amoco) successfully implemented R/3 in all 17 of its business groups. It kept legacy systems in several departments, such as production planning and human resources, that had to be integrated into the SAP platform.

Steve Grossmann, Amoco’s SAP manager at the time, says the project was accomplished in five separate implementations. “These were big bangs,” says Grossmann, whose department has since been outsourced to PricewaterhouseCoopers. “People walked out Friday, and when they came back Monday, their whole world was upside down.”

Hershey can relate. But the differences between the two installations are significant. Amoco did not implement other software at the same time as R/3, avoiding the gnarly issues of integrating multiple new applications. And it took its time between the five major rollouts of the R/3 system, which began in March 1996 and finished last summer. Grossmann says Amoco had its problems, but nothing like the major business disruptions Hershey is experiencing. Hershey, unfortunately, did not have the luxury of time. With Y2K looming, it may have felt pressure to get all three software packages up and running before the end of the year. It is now left with a mess that will continue to hurt the company heading into next year. “There were three cooks in that kitchen,” says Stephen Cole, research director of Forrester Research, in Cambridge, Massachusetts. “That’s why there is so much finger-pointing going on.”

The Internal Fix

Beyond the apparent mistakes at Hershey, there are plenty of other ways for ERP implementations to go awry. Advice from successful implementers suggests ways to avoid at least the biggest potholes.

Number one. Make sure an ERP system is right for your company, suggests ADC chief financial officer Robert Switz. That may sound obvious, but no off-the-shelf software package is a panacea for a corporation’s computing needs. And neither vendors nor the consultants that install the systems have much incentive to discourage prospective buyers. SAP was designed for manufacturing companies with predictable, similar ways of doing business. It is not particularly adept at handling front-end, customer-related operations. Allied Waste, a provider of waste management services, decided to scrap a $150 million ERP system it inherited through its acquisition of Browning-Ferris last August, because it felt its business practices couldn’t be squeezed into the SAP mold.

Some businesses, such as telecommunications-service providers, have such sophisticated billing operations that no standardized ERP package could replace customized software produced in-house. Other companies, including Hershey, have chosen to graft different customer-relationship management (CRM) applications onto their back-office R/3 platform. That increases the number of interfaces and touch points where problems can arise. Before embarking on an ERP project, senior managers should assess whether they can — and want — to standardize business processes around one common template.

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