AFM241 Study Guide - Final Guide: Strange Ways, Sap Erp, Manugistics
30 May 2018
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o On average total implementation costs are in the range of 2-3% of revenues
and consulting fees can be 3 to 10 times the cost of the software
• An ES system implementation will impact a very large number of employees and
departments
• Expected benefits include:
o Reduction in working capital and access to more accurate information faster
about suppliers, customer and employees
o Firms that can leverage this information to support their business strategy are
bound to reap significant benefits from their investment
• As the headlines of “Half of ERP projects achieve less than half of projected benefits” and
these expected benefits are far from certain
o In some cares the results can be catastrophic
o The 1996 bungled ERP implementation of FoxMeyer contributed to the firm’s
bankruptcy
• We will take a close look at issues related to ES implementation, famous ES failures and
some key success factors for ES implementation
o Look at potential benefits associated with ERP system adoption and market
valuation of ES adoption related announcements
• The last few years thanks to cloud computing ES have become more affordable and
available to small companies
6.2 ES Implementation
6.2.1 Famous ES Implementation Failures
• The business and technology press is littered with stories of executives and firms that
have experienced a dramatic failure during their ERP implementation
1. Overstock.com’s Four-Year ERP Nightmare
• Overstock.com, the upstart unafraid to battled e-commerce Goliath Amazon, has become
semi-famous becomes of its brash and highy quotable leader, CEO Patrick Byrne who
once explained a $14.2 million third quarter loss to investors this way: “My bad”
• Online retailer has also drawn notice for its gimmicky advertising campaigns “The Big O”
and “It’s all about the O”
• Latest publicity for overstock.com has been all about “Uh-oh”
• Ovestock.com executives announced they were restating earnings for a five-and-a-half-
year period, dating back to 2003
• All told, the accounting mistakes during the period had lead to a $12.9 million reduction in
revenue and $10.3 million increase in cumulative net loss
• An overly aggressive CEO and problematic Oracle ERP rollout that started back in 2005
• “When we upgraded our system, we didn’t hook up some of the accounting wiring
however, we thought we had manual fixes in place. We’ve since found that these manual
fixes missed a few of the unhooked wires”
• Looking at the company’s history it appears that the ERP implementation has been
nothing but trouble
o Strife started in 2005 with Byrne’s “my bad” mea culpa over $14.2 million loss
was further exacerbated by a customer service meltdown related to the hurried
Oracle ERP rollout
o “I bit off more technology projects than my colleagues could chew”
o Byrne told investors at the time “the last bite, an ERP implementation, was one
bite too many and we choked on it”
• Overstock’s transition from a homegrown ERP package to the new Oracle system, which
was rushed to completion before the 2005 holiday shopping season, let it unable to tell
customers the status of their orders or to provide any shipping information
• Result: overstock’s customer tracking systems were down for nearly a week
