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Chapter 2
Toro, a wholesale lawnmower manufacturer, spent $25 million and four years to
implement an ERP system. At first, ROI was difficult for Toro to quantify. Then, the
40 emergence of an expanded customer base of national retailers, such as Sears and Home
Depot, made it easier to quantify benefits. With this larger pool of customers, Toro’s ERP
system allowed it to save $10 million in inventory costs annually—the result of better
production, warehousing, and distribution methods.
A recent survey of small and midsized companies showed that only 48 percent
always do an ROI evaluation, and only 25 percent always repeat the calculation after
implementation. These small and midsized business owners feel they just need an ERP to
support their business, even if the ROI calculation is not performed.

Why Do Some Companies Have More Success with ERP Than Others?
Early ERP implementation reports indicated that only a small percentage of
companies experienced a smooth rollout of their new ERP systems and immediately
began receiving the benefits they anticipated. However, it is important to put such
reports into perspective. All kinds of software implementations can suffer from delays,
cost overruns, and performance problems—not just ERP projects. Such delays have
been a major problem for the IS industry since the early days of business computing.
Nevertheless, it is worth thinking specifically about why ERP installation problems
can occur.
You can find numerous cases of implementation woes in the news. W. L. Gore, the
maker of GoreTex fabric, had problems implementing its PeopleSoft system for personnel,
payroll, and benefits. The manufacturer sued PeopleSoft, Deloitte & Touche LLP, and
Deloitte Consulting for incompetence. W. L. Gore blamed the consultants for not
understanding the system and leaving its Personnel department in a mess. PeopleSoft
consultants were brought in to resolve the problems after implementation, but the fix cost
W. L. Gore additional hundreds of thousands of dollars.
Hershey Foods (now The Hershey Company) had a rough rollout of its ERP system in
1999, due to its use of what experts call the “Big Bang” approach to implementation, in
which huge pieces of the system are implemented all at once. Companies rarely use this
approach because it is so risky. Hershey’s order-processing and shipping departments had
glitches that were being fixed as late as September. Because of that, Hershey lost a large
share of the Halloween candy market that year.
Usually, a bumpy rollout and low ROI are caused by people problems and misguided
expectations, not computer malfunctions:
• Some executives blindly hope that new software will cure fundamental
business problems that are not curable by any software. The root of a
problem may lie in flawed core business processes. Unless the company
changes its business processes, it will just be computerizing an ineffective
way of doing business.
• Some executives and IT managers don’ttakeenoughtimefor aproper
analysis during the planning and implementation phase.
• Some executives and IT managers skimp on employee education and training.
• Some companies do not place the ownership or accountability for the
implementation project on the personnel who will operate the system. This
lack of ownership can lead to a situation in which the implementation
becomes an IT project rather than a company-wide project.

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