ERP implementation nightmare provides lesson for business

Private business enterprise systems can be massive, and the financial costs of a misguided software selection and implementation equally massive.

The only good news is that unlike public systems, when something goes wrong, it doesn’t land on the front page of the local paper. Mainly it only negatively impacts the careers of those that lead the project.

That’s why the recent implementation debacle at BC Hydro – one of the largest electric utilities in North America with revenues of $4.8 billion in 2013 — is worthy of note. It spells out the story that so often occurs in cases of poorly managed software enterprise implementations when expectations and costs get out of control.

With nearly two million customers and 5,000 employees, in 2008 BC Hydro approached a software provider about upgrading its financial ERP system.

The provider came back with two options — $7.2 million upgrade, or switch to a better platform for $40-million.

Hydro shelved the project all-together – arguing it would take too much time and money. Two years later though, with an even older system, BC Hydro changed its mind and went ahead. But not only did they go for the platform switch, they broadened the scope to include five other IT systems to create a global ERP system.

The changes BC Hydro now had in mind prompted a new estimate. Here are a few of the details that were uncovered:

• Financial systems upgrade — went from $7.2 million to $16.1 million
• Project management — went from a $15-million upgrade, to switching platforms at a cost of $21-million
• Website upgrade — went from $2-million minor upgrade to a customized $17.5-million website

Ultimately, documents further revealed that what started as a financial systems upgrade of $7.2-million became a comprehensive system-wide plan to spend $400-million over five years. By mid-May 2015, the cost was closer to $492-million and growing.

BC Hydro isn’t the only large organization that has run into the software ERP implementation nightmare. Even non-profits have been hit.

Stories like this speak loudly to the most critical issues companies face when considering their IT strategy.

• Determine precisely what the overall objective is
• Conduct a cost/benefit analysis before entering into customization
• Critically identify and assess any potential bells and whistles
• Conduct due diligence on the provider

It’s hard to know how much if any of these recommendations were followed in this case. Business is always risky, and a project of this magnitude is bound to have its challenges.

It’s equally true that no one can afford to operate on aging software systems. There’s a responsibility to take advantage of current efficiencies.

What you don’t want is a cumbersome transition you can’t afford. Try selling that to your shareholders.