Feeds

Mattress maker can no longer spring for SAP roll-out

Made bed, doesn't want to sleep on it

Beginner's guide to SSL certificates

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. ®

Remote control for virtualized desktops

More from The Register

next story
Nexus 7 fandroids tell of salty taste after sucking on Google's Lollipop
Web giant looking into why version 5.0 of Android is crippling older slabs
Be real, Apple: In-app goodie grab games AREN'T FREE – EU
Cupertino stands down after Euro legal threats
Download alert: Nearly ALL top 100 Android, iOS paid apps hacked
Attack of the Clones? Yeah, but much, much scarier – report
SLURP! Flick your TONGUE around our LOLLIPOP – Google
Android 5 is coming – IF you're lucky enough to have the right gadget
Microsoft: Your Linux Docker containers are now OURS to command
New tool lets admins wrangle Linux apps from Windows
Bada-Bing! Mozilla flips Firefox to YAHOO! for search
Microsoft system will be the default for browser in US until 2020
prev story

Whitepapers

Why cloud backup?
Combining the latest advancements in disk-based backup with secure, integrated, cloud technologies offer organizations fast and assured recovery of their critical enterprise data.
A strategic approach to identity relationship management
ForgeRock commissioned Forrester to evaluate companies’ IAM practices and requirements when it comes to customer-facing scenarios versus employee-facing ones.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?
Managing SSL certificates with ease
The lack of operational efficiencies and compliance pitfalls associated with poor SSL certificate management, and how the right SSL certificate management tool can help.
Top 5 reasons to deploy VMware with Tegile
Data demand and the rise of virtualization is challenging IT teams to deliver storage performance, scalability and capacity that can keep up, while maximizing efficiency.