ContingencyPlanningAtHP - CONTINGENCY PLANNING When Bad...

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CONTINGENCY PLANNING When Bad Things Happen to Good Projects HP's project managers knew what could go wrong with their ERP rollout. They just didn't plan for so much of it to happen at once. BY CHRISTOPHER KOCH IT GOES AGAINST human nature to always expect the worst. But with IT projects, pessimism—otherwise known as contingency planning—is the only way to keep small technology problems from becoming full-blown business disasters. Too bad no one can bring themselves to do enough of it. Christina Hanger had little reason to be pessimistic in May 2004, when she was moving one of Hewlett-Packard's biggest North American divisions onto a centralized ERP system from SAP. As the leader of an IT consolidation project rooted in HP's acquisition of Compaq two years earlier, Hanger, HP's senior vice president of Americas operations and IT, had an unbroken record of success migrating five product groups within the two former companies onto one of two SAP systems. Hanger had every reason to believe that the sixth would go well too. Even so, she knew to be prepared for problems. At approximately $7.5 billion in annual revenue, the division involved with this latest project, Industry Standard Servers (ISS), is much larger than any of the others that Hanger had migrated to SAP to that point. So Hanger took the contingency plan that her team had developed for the other five migrations and adjusted it to accommodate the ISS division's larger sales volume. She planned for three weeks of IT snafus, mostly focused on what might happen as a result of tweaking a legacy order-entry system to work with the new SAP system. The contingency plan addressed business impacts too. HP banked three weeks' worth of extra servers and took over an empty portion of an HP factory in Omaha to stand by for any overflow of orders that needed special configurations (for example, an unusual component or software combination) and could not be stockpiled ahead of time.
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But the plan wasn't pessimistic enough. Starting when the system went live at the beginning of June and continuing throughout the rest of the month, as many as 20 percent of customer orders for servers stopped dead in their tracks between the legacy order-entry system and the SAP system. As IT problems go, this wasn't too big: Some data modeling issues between the legacy system and the SAP system prevented the SAP system from processing some orders for customized products. These programming errors were fixed within four or five weeks. But Hanger and her business colleagues from the ISS division who were on the project steering committee never envisioned the degree to which these programming glitches would affect the business. Orders began to backlog quickly and HP did not have enough manual workarounds to keep servers flowing fast enough to meet customer demand. Angry customers picked up the phone and called HP—or worse, arch-competitors Dell and IBM. In a commodity market such as servers, customer loyalty is built upon a company's ability to configure
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This note was uploaded on 08/07/2011 for the course ERP 2000 taught by Professor Giachetti during the Spring '11 term at FIU.

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ContingencyPlanningAtHP - CONTINGENCY PLANNING When Bad...

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