Feeds

Mattress maker can no longer spring for SAP roll-out

Made bed, doesn't want to sleep on it

Choosing a cloud hosting partner with confidence

With the economy presently being the pits nearly everywhere you look, many folks are warily eying the IT sector for signs of disaster.

Will IT spending take further hits in 2009? An announcement today from the US-based mattress maker Select Comfort could be a sign of tech spending on the chopping board – but it also could just be another case of an enterprise software adoption gone out of control.

Select Comfort has announced a new cost-cutting scheme that includes a complete freeze of its SAP Enterprise Resource Planning (ERP) software roll-out, as well as laying off approximately 120 workers.

The company blames the need for reductions on "further slowing of sales after Thanksgiving and in anticipation of continued macro-economic challenges in 2009." The move is expected to save $15m annually beginning in the first quarter next year, the company said.

But according to letters sent to the Select Comfort's board of directors by a major shareholder, New York-based investment firm Clinton Group, the SAP implementation had been a burden on the company for some time. The filings were first spotted by Computerworld.

A Clinton Group letter filed by the US Securities and Exchange Comission dated March 6, 2008 claims the SAP system installation "is behind schedule and is significantly over running its original cost estimates"

The investment firm estimated Select Comfort had already spent $12m on the SAP implementation and expected to spend another $8m in 2008.

"It is difficult for us to envision, given the size of the Company, that the Company should ever achieve costs savings to justify such a large expense," the firm wrote.

Clinton Group called for Select Comfort to cease all spending on the SAP installation until the IT needs of the company could be reviewed by a independent consultant.

Another letter dated June 23 goes into more detail on why the Clinton Group claims Select Comfort's IT adoption was running afoul.

"Select Comfort's plan to continue on with the SAP implementation, particularly using internal resources rather than qualified external consultants, is a waste of resources and puts the entire company's operations at risk from a poor implementation," the letter stated.

"Implementing an enterprise software system is challenging for any company, even when using qualified experienced outside consultants. Select Comfort's plan to continue with the implementation using internal resources that have at best limited experience implementing a new enterprise software system is indicative of extremely poor judgment by management."

The letter added that Select Comfort never said why it needs even to spend the cash on a enterprise software system.

Select Comfort claims to employ about 2,500 people total in the US, with manufacturing and distribution facilities in South Carolina and Utah. Earlier filings with the SEC indicate the company planned to roll-out a full suite of SAP applications, including Enterprise Resource Planning (ERP), Supply Chain Management (SCM), Customer Relationship Management (CRM) and others. It had originally planned for the project to be complete in the first half of fiscal 2008.

But with sales drying up – the company apparently had no choice but to bow to shareholder pressure.

Economic downturn aside, enterprise software roll-outs often come with a substantial sticker-shock if a company doesn't appreciate the complexity. Escalating costs of an ERP installation was largely blamed by jean giant Levi Strauss for its second quarter net income dropping 98 per cent.

HP has blamed fiscal bombshells on SAP implementation as well. ®

Providing a secure and efficient Helpdesk

More from The Register

next story
Preview redux: Microsoft ships new Windows 10 build with 7,000 changes
Latest bleeding-edge bits borrow Action Center from Windows Phone
Google opens Inbox – email for people too thick to handle email
Print this article out and give it to someone tech-y if you get stuck
Microsoft promises Windows 10 will mean two-factor auth for all
Sneak peek at security features Redmond's baking into new OS
UNIX greybeards threaten Debian fork over systemd plan
'Veteran Unix Admins' fear desktop emphasis is betraying open source
Entity Framework goes 'code first' as Microsoft pulls visual design tool
Visual Studio database diagramming's out the window
Google+ goes TITSUP. But WHO knew? How long? Anyone ... Hello ...
Wobbly Gmail, Contacts, Calendar on the other hand ...
DEATH by PowerPoint: Microsoft warns of 0-day attack hidden in slides
Might put out patch in update, might chuck it out sooner
prev story

Whitepapers

Choosing cloud Backup services
Demystify how you can address your data protection needs in your small- to medium-sized business and select the best online backup service to meet your needs.
Forging a new future with identity relationship management
Learn about ForgeRock's next generation IRM platform and how it is designed to empower CEOS's and enterprises to engage with consumers.
Security for virtualized datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.
Reg Reader Research: SaaS based Email and Office Productivity Tools
Read this Reg reader report which provides advice and guidance for SMBs towards the use of SaaS based email and Office productivity tools.
Storage capacity and performance optimization at Mizuno USA
Mizuno USA turn to Tegile storage technology to solve both their SAN and backup issues.