February 11th, 2008
ERP implementations and outsourcing: The white board rarely reflects reality
In the things you must read today department check out Michael Krigsman’s analysis of a bankruptcy filing by American LaFrance, a maker of custom firefighting equipment. In the filing, American LaFrance alleges that IBM is responsible for the company’s bankruptcy because of a botched ERP implementation.
Michael outlines all of the moving parts between American LaFrance (ALF) and IBM nicely, but the big lesson is that these big-bang implementations always have problems. Sometimes these problems tar the technology vendor involved, but more often than not management at the buyer gets a hefty dose of blame too. And when management tries to outsource technology without doing any of the grunt work that needs to happen it’s a potential disaster.
Michael writes:
According to filings in the District of Delaware bankruptcy court (PACER case no. 08-10178), problems occurred when ALF was spun out as an independent company from Freightliner, the previous owner. During the transition, ALF outsourced “accounting, inventory, payroll, and manufacturing process services” to Freightliner. As part of the transition, ALF developed a “standalone” ERP system designed to support the firm after the Freightliner separation was completed.
From there all hell broke loose with the implementation managed by IBM.
You can imagine the setting where this disaster got rolling. ALF is spun off, but as an operating unit it had no IT staff to speak of. ALF’s plan was to toss its ERP system over the fence to IBM. ALF executives saw a whiteboard sketch and fell in love with the plan. Outsourcing always looks good when you don’t know what you’re doing. IBM comes in with its pitch and says it can complete the task (it only does thousands of ERP implementations a year). By time folks really figure out what’s going on the project management has turned into a complete mess.
Who’s to blame? Everyone.
Is IBM responsible for ALF’s bankruptcy? I seriously doubt it. ALF’s market tanked as this ERP debacle ensued. It appears ALF’s management–the same folks that probably didn’t map processes and think through its ERP system–is looking for a scapegoat. Tag, IBM you’re it. But the big lesson is that nothing every works out the way you sketched it out on a white board.
Larry Dignan is Editor in Chief of ZDNet and Editorial Director of ZDNet sister site TechRepublic. See his full profile and disclosure of his industry affiliations.
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