Will more companies halt SAP projects?
Posted by: CourtneyBjorlin
SAP
Most companies that have already started IT projects will finish them even in this economy, analysts and customers have told me in the last month. It seemed like, for the most part, that was holding true.
But the paradigm seems to lose a little luster with Select Comfort’s announcement this week that it’s halting its SAP implementation as part of cost-cutting measures. It appears from SEC filings that the implementation was costing millions of dollars. The bed retailer is also laying off around 120 people — about 22% of its workforce.
No doubt there’s more than one reason why this implementation was halted. But there’s one clue that’s far more interesting than it perhaps being over-budget or behind schedule.
It seems like it was a huge project, and one which the company expected would be completed in early 2008. The company was implementing SAP ERP, CRM, SCM, PLM, SRM, HCM, SEM, BI and enterprise portal to replace its current disparate software systems and facilitate a growth strategy, according to an earlier SEC filing.
“Our current management information systems may not be adequate to support our growth strategy,” one SEC filing said. “We believe this SAP-based IT architecture, along with best-practices-based processes and greater utilization of off-the-shelf, packaged solutions, will provide greater flexibility and functionality for our growing and evolving business model and be less expensive to maintain over the long-term.”
The recession, however, changed everything. Select Comfort now plans to close dozens of stores, according to a press release from the company. Therefore, the software implementation it wanted to help pursue those business plans may need to change as well.
“There are several alternate SAP implementation approaches and given the smaller than anticipated current size of the Company, the approach to SAP software originally adopted may be outsized for the Company’s needs,” a letter from an investment adviser to the company’s board of directors filed with the SEC and quoted in this ComputerWorld story said.
It seems likely that other companies, which started implementations a year or more ago but haven’t yet finished them, may too be facing similar challenges.
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