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Chapter 7 • Operations and Postimplementation 205

CASE 7-2
Real-World Case
Hewlett-Packard SAP Implementation

Hewlett-Packard was founded in 1939 by Bill Hewlett and Dave Packard, both students at
Stanford University. They built an audio oscillator—an electronic test instrument used by
sound engineers. One of their first sales was to Walt Disney Studios, who used the device to
develop and test a new sound system for the movie Fantasia. From 1939 to the present, HP
has grown and changed as technology has grown and changed, often inventing new and
useful technology products for businesses and consumers. They are now a worldwide
information technology company headquartered in Palo Alto, California, with $85 billion
in revenues. The company is currently organized into three divisions or groups:
•Personal systems—business and consumer PCs, mobile computing devices, and
workstations
•Imaging and printing—inkjet, LaserJet and commercial printing, printing supplies,
digital photography, and entertainment
•Technology solutions—business products including storage and servers, managed
services, and software. 5
For several years, Hewlett-Packard had been working to centralize its ERP systems.
They had migrated five product groups into two SAP systems and had been very successful.
A couple of years earlier HP had purchased Compaq and, as a result, needed to incorporate
the two operations into a single model. In May 2004, however, Hewlett-Packard was imple-
menting the SAP ERP system in its largest North American division. Prior to that the ERP
implementations in previous divisions were successful, and there was no reason to think
that this next one would be problematic. The company had a number of successful imple-
mentations under its belt and believed that even though this was a much larger division,
there was a good, experienced team that could address most any implementation issues.
The Go-live plan allowed for about three weeks of problems and issues related to interfac-
ing between the legacy order-entry system and the new ERP, SAP. The project manager had
identified one of the biggest risks and had a plan in place to address the issue.
When the system went live, however, there were some technical glitches between the
legacy and the SAP system. Although the problems on the technical side were not a big issue
and were mostly resolved in four or five weeks, about 20 percent of orders were stopped
dead in the water until the problems were fixed. This created a backlog of orders, and the
manual workarounds were not sufficient to keep the flow of orders to meet customer
demand. Customers called HP to complain, but, even worse, they called their competitors
to deliver the products not supplied by HP. HP had estimated the financial impact at about
$160 million, $120 million in order backlogs and $40 million in lost revenue.
The implementation was considered a disaster. It was in fact the result of some very
minor technical problems that created a snowball effect on the business. The implementation
team did many things right. They tested the system and the interface between the legacy and
SAP. The team also trained the end users two weeks prior to Go-live and made them pass a

5 Extracted from HP Web site:www.hp.com (accessed July 15, 2006)