HP CIO points to issues in ERP project snafus

Business processes, not software, was the problem

Eight months after he became CIO and executive vice president of global operations at Hewlett-Packard, Gilles Bouchard was put in about as unenviable a position as an IT manager can find himself. In August, cheif executive Carly Fiorina said HP had "executed poorly" on a migration to an order processing and supply chain system based on SAP's applications.

She partly blamed the problems for a $US400 million third quarter revenue shortfall within HP's enterprise servers and storage group. In an interview last month, Bouchard spoke candidly about what it was like to be on the IT hot seat. Excerpts follow:

Given that you're directly responsible for HP's supply chains and IT systems, what was your role in the failed ERP migration? I got this job in December and in the following four or five months, what I didn't want to do was merge business and IT just at the corporate level. I wanted to also merge it in the field, in each region and each country. A lot of the pieces of the supply chain, order management and IT (functions) were in different businesses. Bringing those things together into one operation became official on May 1.

This (ERP migration) problem broke out three weeks later in the Americas region. It was one of many transitions we had done, and are still doing, where we simplify our portfolio of ERP (systems). This was the 35th transition we had done; 34 had gone well, and this one did not go well.

What went wrong? It's a lot of little things that added up. Not one or two of them would have created the problem, but the combination of them created a bigger problem than we expected. We had planned for three weeks of disruption, and there were six weeks.

These problems are in three major categories. One we call "working across silos." The team that was driving this programme had to work with other parts of the company. And working across these seams proved difficult. . . . Secondly, there were a lot of data integrity (problems). Orders fell out between the legacy front-end system and SAP on the back end, which required a lot of manual intervention. . . . The third element was increased demand. This migration had to do with our Intel-based server business. The demand really increased for those products, and it's still very high right now, which is good news. But it put even more pressure on the whole system. We should have had a contingency plan for four, five or six weeks.

HP has made it clear that this was an implementation problem, not an SAP problem. So where exactly does SAP fit into the mix? Clearly there was an SAP component to it, but the issue that created the problem was not the SAP (software) itself. It was the set of business processes that went around it.

Do you agree with Carly Fiorina's conclusion that HP "executed poorly on the migration?" Yes. When orders fall out and there's more manual intervention and there are data integrity issues, I would call those execution issues.

What should you have done differently? In August, we went back and basically polled everybody involved in the programme and all the stakeholders and tried to turn this into a learning experience. We just got the results a few weeks ago. . . . When you consolidate, by definition, there's a lot more interdependencies. When everybody's got their own ERP (system), they can all work within their own silos. Now there's a lot more commonality and a lot more sharing, and a lot of learning in terms of programme management. We've invested a lot in program management.

Fiorina fired three managers because of what happened in the third quarter. How did you escape the guillotine? Why did we miss (our numbers in) Q3? It was not just because of this. We have four businesses at HP: PCs, servers, services and printers. In Q3, three of the businesses met their goals and did well, and one missed. And it missed for three reasons. One was the SAP transition, one was weakness in the storage business, and one was some channel issues in Europe. What Carly did is put accountability at the business management level. She took people out who were in charge of those businesses.

Are the problems fixed? Can customers expect their orders on time? The demand being still strong, we have some product shortages. So you might find a customer with a lead time that's longer than ideal, but that has nothing to do with what happened in Q3.