Einstein once said: “It is appallingly obvious that our technology exceeds our humanity.” And as technology becomes more pervasive and critical to business, so the human capability to manage it diminishes.
Take the directors of Avis Europe. They are facing a £30m bill because the company decided to terminate the development of its new ERP system in October. Avis announced that the project had incurred significant unexpected costs and had problems in its design and implementation.
Sainsbury’s is having even bigger issues with its supply chain. Justin King, chief executive of the retailer, blamed much of its recent poor financial performance on failing IT systems, despite having spent £3bn on IT in recent years.
The company is writing off £550m in 2004, about half of which is attributable to a bungled stock management system that left many of its stores with empty shelves.
“The system was developed to account for stock, but it can’t see the stock on the shelves,” King said.
It seems the system could tell what was being shipped from the warehouses but it couldn’t tell what individual stores were doing with the old stock that was being pulled off the shelves.
King’s solution was to scrap all automated systems, renegotiate Sainsbury’s contract with its IT consultants, and implement tried and tested technology to get the yoghurts back on the shelves.
That technology is pen and paper. In an incredible turnaround, all stock-taking at Sainsbury’s stores will now revert to manual processes. Think how many Biros you could buy with £3bn.
The way companies spend sizeable chunks of shareholder money on IT is reminiscent of the millions of dollars NASA spent in the 1960s when attempting to develop a pen that could write in space. The Russians, on the other hand, issued their cosmonauts with pencils.
Complicated solutions to simple problems cost a lot of money, take a lot of time and effort, and often end in failure.
The rather unfortunate upshot of all this is that jobs are on the line as more IT functions in organisations report through finance.
MFI recently sacked its financial director, Martin Clifford-King, and its supply chain director, when a £30m SAP implementation went off the rails, costing a further £50m to put right.
It seems strange that a finance director should be blamed for the failure of an IT system, which is designed for the operations side of the business. But MFI chief executive John Hancock was clear that finance was culpable.
“They accepted responsibility. I think Martin accepts that his credibility is important on these issues,” Hancock said.
One financial director who had his fingers burned by a failed IT implementation, and who wishes to remain anonymous, claims that directors should heed a new take on an old maxim: There are three roads to ruin: drinking, gambling and IT. The most pleasant is drinking, the quickest is gambling, but the surest is IT.
It is unfortunate that in our quest for the watchwords of ‘leverage’, ‘synergy’ and ‘efficiency’, technology failures must claim human scalps.
Avis had hoped to lift operational profit margins by one percentage point by using technology. Sainsbury’s claimed that reorganising its supply chain would save £25m a year. MFI estimated IT-driven efficiencies of £35m a year. The combined cost of these three project failures is close to £400m.
The potential benefits of technology are easy to articulate in a spreadsheet, but difficult to realise in practice when human beings and the real world get involved.
Perhaps artist Andy Warhol had it right after all when he said: “Machines have less problems. I’d like to be a machine, wouldn’t you?”
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