Subscribe / Unsubscribe Enewsletters | Login | Register

Pencil Banner

SAP project halted after shareholder pressure

Chris Kanaracus | Dec. 18, 2008
A mattress maker's decision to halt an ERP project reflects the bleak economic climate.

"Ceasing an implementation midstream is certainly not a pleasant decision, because assuming that at some point, this organization is going to restart the implementation, they're going to have additional costs," Scavo said.

For example, a company might have to retrain workers on processes they're already been taught, and any implementation partners being used may not be available. "But sometimes financial realities are what they are, and companies need to make a decision," he said.

Another industry observer said Wednesday that overall, the economy is undoubtedly having some chilling effect on ERP projects.

"A number of our companies are in the process of conserving cash," Forrester Research analyst Ray Wang said via e-mail Wednesday. "For some, this means the delay on implementing certain modules, reducing costs in maintenance, and also renegotiating implementation contracts."

Customers do have ways to hedge their bets during the planning stages of a project, Wang said. "If you design your contract in phases, you have the opportunity to put in clauses around phase completion and kick-off. This is more a system integrator issue than a software vendor issue.

"We typically tell customers it's best to budget for a project in good and bad times in order to achieve the best ROI," Wang added. "Delays do impact the ROI. However, when cash is king, you have to protect cash flow, and that will win out."

One thing financially strapped software customers don't tend to have is the opportunity to return the product and get their money back, according to Scavo.

"The only time I've seen that is if there's a non-performance issue or breach of contract on the part of the vendor," he said. "The customer would not be entitled to get money back just because they can't afford the system anymore."

Moreover, licensing costs don't even represent the bulk of software costs; implementation and support fees rack up a bigger percentage, Scavo noted. "There's probably more money sitting ahead of [Select Comfort] than there is behind them."

It is not SAP's place to comment on the financial well-being of a particular customer, but Select Comfort's decision appears to be an anomaly, according to SAP spokeswoman Natalie Fine.

"We fully recognize these are truly critical times for our customers ... [but] what we're seeing is this is not a trend. SAP projects are continuing to go forward," she said. "Our experience is that even in this macro environment, companies are standing firm."

Like other vendors, SAP has announced ways it is trying to help customers weather economic difficulties, such as zero-percent financing offers.


Previous Page  1  2 

Sign up for Computerworld eNewsletters.