MANAGING RISKS
IN ENTERPRISE SYSTEMS
IMPLEMENTATIONS
Judy E. Scott and Iris Vessey

T

wo companies were
R/3 at a new warehouse. FoxMeyer at risk. One survived expected to save $40–$50 million dollars while the other failed annually from the project, as well as to
What
after installing an grow rapidly and gain market share [5]. determines enterprise system FoxMeyer’s plans did not work out.
(ES), SAP R/3. At the
After its major customer, Phar-Mor, if a system time of its R/3 imple- implementation went bankrupt in May 1993, mentation, beginFoxMeyer signed a major new cuswill be ning in 1995, Dow Corning Incorporated successful? tomer, University Healthsystem Conwas a $2.5 billion producer of silicone sortium (UHC). However, the contract products. The company was facing comrequired major changes to the project. petitive pressures as well as lawsuits worth
Costs soared to over $100 million; and
$2 billion due to well-publicized problems with sili- in August 1996 FoxMeyer filed for Chapter 11 bankcone breast implants. Existing systems were frag- ruptcy protection, after taking a charge of $34 milmented and focused on specific departments, making lion the previous month for inventory and order it difficult to present a common face to the cus- mix-ups. Following liquidation of its major assets in tomer.The company decided that its survival November 1997, FoxMeyer’s trustee sued Andersen depended on reengineering its business processes to Consulting, SAP, and Deloitte for $500 million each become a truly global company, an objective it in July and August 1998. The case against Deloitte believed could be met only with appropriate informa- was dismissed in May 1999. tion systems. It created Business Processes and InforThere are many reports of software project failures. mation Technology (BPIT) to support reengineering In addition to