Wal-Mart, which agreed to buy SAP ERP Financials last year, officially began its rollout yesterday. It’s a massive, multi-phase project that sees Wal-Mart ditching its long history of developing IT systems in-house in favor of working with packaged software vendors (including SAP arch-rival Oracle).
Already, however, there are some red flags around this project, not from a functionality or project expertise perspective — SAP ERP Financials works, and Wal-Mart can afford the finest systems integration — but from a strategic perspective. Consider that Wal-Mart CIO Tom Schoewe has stated that “As you continue to see us grow, enter new countries, [SAP is] something that can accommodate that better than our home-grown solution.”
Growth? Entering new countries? Wal-Mart registered a 3.5% same-store sales decline in April, its worst performance in this metric in nearly three decades, and has been beaten out of South Korea and Germany, where the local retailers easily kept pace with Wal-Mart’s basement pricing strategies and continued to retain local customers, many of whom were no doubt culturally alienated by the faux-friendly in-store Wal-Mart experience. This winter, many of the people who faithfully shop Wal-Mart may have to spend their money on natural gas and gasoline instead, and there’s no indication that the world’s shoppers — outside England — are enthusiastically lining up to shop at Wal-Mart.
Wal-Mart is a vast company, and is a larger economic entity than some countries, but growth isn’t perpetual, and success in foreign markets is fickle. The company would be better served adjusting to these economic realities rather than planning to expand still further. It’s not as if there aren’t other priorities. How about squeezing more margin out of higher-margin goods? How about finally delivering on that RFID promise? How about building a brand friendlier to social issues like the living wage? But no, Wal-Mart anticipates business as usual, and has brought SAP along for the ride.
Certainly, Wal-Mart, like so many other retailers, needs to develop new IT capacities in order to keep up with larger supplier ecosystems, more complex logistics, and pickier customers; but to peg the SAP investment to corporate goals that don’t have much of a chance of succeeding seems like an invitation to project failure of some kind.
Demir Barlas, Site Editor