Thursday, August 12, 2010

ERP implementation: plan for the worst

Chris Kanaracus, always on the lookout for lawsuits and regulatory filings related to enterprise software, spotted this case study today: a company that was forced to delay reporting of quarterly results due to problems with a newly installed ERP system.
VAN NUYS, CALIFORNIA -- August 11, 2010 -- Superior Industries International, Inc. (NYSE:SUP) today announced that it is postponing the release of its financial results for the second quarter and year-to-date periods ended June 30, 2010, and its earnings conference call originally scheduled for today, Wednesday, August 11, 2010. The postponement is the result of delays in finalizing the quarter financial close due, in part, to the recent implementation of a new Enterprise Resource Planning (ERP) system. Superior is working diligently to finalize its second quarter results and will provide new dates and times for the earnings release and earnings conference call in a forthcoming news release.
Chris provides further details:
The problems were primarily due to closing a quarter for the first time with the ERP system, along with changes to Superior's legal structure in Mexico, it added.

The company recently implemented a product from QAD, CIO Ross Perian said in an e-mail. He did not respond to requests for further details on the project, which went live on March 29, according to another SEC filing.
Fortunately, according to Chris, it appears that only a five day extension will be necessary. And it pales in comparison to some of the catastrophic ERP failures reported over the past decade.

My take
There are several unanswered questions, and several take-aways from this mini-case study.
  • According to Chris's digging, the new system went live on March 29. That's over four months ago, more than one quarter. How did the firm manage to close the previous quarter? Or, was it running the old system in parallel for purposes of financial reporting?

  • The firm had four months since it went live on the new system to test the quarter-end close routines. Did it do so? If so, what were the results? Did it have any forewarning that there were problems? I have personally witnessed QAD implementations that took less than three months. Four months in QAD-land is a long time. What was the project team doing during this time period?

  • Was there a contingency plan? Did anyone ask and answer the question, what will we do if the new system can't close the quarter?

  • QAD's MFG/PRO is a mature product. The financial close routines should simply work. Did the firm modify the vendor's source code or make other non-standard configuration changes to the system?
  • Finally, if I were the top executive, I'd be asking some tough questions about the new system's readiness to close out the fiscal year.
I don't mean to pick on Superior or QAD in particular. The fact that only a five day extension appears to be required is a good sign that the project team was not far off from success. Still, this is a publicly-held company, which doesn't need these sort of SEC filings.

Our latest Technology Trends study at Computer Economics this year shows that, among 19 technology investments, ERP is among the most risky IT initiatives. Yet, we've had 20+ years to learn how to do it right.

Unfortunately, it seems we keep learning the same lessons over and over again.

Related posts
Philly pulls plug on failed Oracle project
What went wrong with HP's SAP migration?
Four problems with ERP
Solving the four problems with ERP

1 comment:

Anonymous said...

You should ask the following:

1. How many new groups of "engineers" did they fly in from India?
2. Were their process owners forced to sign off on the project go-live?
3. How many integration tests did they really do?