Avon halts work on global SAP implementation

A pilot program in Canada 'caused significant business disruption'

Avon Products has halted the rollout of a global SAP implementation, with the cosmetics maker saying in a regulatory filing that a pilot program in Canada caused "significant business disruption in that market, and did not show a clear return on investment."

"This decision to halt the further roll-out of SMT was made in light of the potential risk of further disruption," Avon said in its filing Wednesday with the U.S. Securities and Exchange Commission. "The Company's current focus is on stabilizing and growing the business and improving operating capability, which includes updating IT infrastructure in a way that delivers clear return on investment."

SMT, which stands for Service Model Transformation, began in 2009 with the goal of improving Avon's order management processes and the way it interacts with the representatives that sell its products. While Avon plans to continue using the SAP system in Canada, it will take a pretax, noncash charge of US$100 million to $125 million, "reflecting the write-down of capitalized software in the fourth quarter of 2013," according to the filing.

SAP spokesman Andy Kendzie declined comment Thursday. But late Wednesday, Kendzie told the Wall Street Journal that Avon and SAP's relationship remains solid and that the system "is working as designed, despite any issues with the implementation."

This position seems to jibe with past statements from Avon's CEO, Sherilyn McCoy.

"While the SMT pilot technology platform worked well, the degree of impact of change in the daily processes to the representative was significant," McCoy said during the company's earnings call in October. "This resulted in a steep drop in the active representatives account. This includes giving additional support to our existing representatives, those making some adjustments to the system and helping them with the transition."

In hindsight, other remarks McCoy made on the call foreshadowed the project shutdown announced this week.

"When I look at our experience in Canada with SMT ... it's clear to me that our business model has difficulty adjusting to these big-bang field initiatives," she said. "The nature of direct selling where our 6 million representatives are independent entrepreneurs is one of personal relationships and connections. It requires spacing change and thoughtfully and strategically not mandating abrupt changes."

This isn't the first time an SAP project had a significant impact on a company's financial performance. Lumber Liquidators and Ingram Micro have also cited SAP implementation woes for dinged profits.

ERP (enterprise resource planning) software from SAP and rivals such as Oracle and Infor is difficult to implement without a hitch.

For one thing, there's the task of mapping over business processes and data to the new system while keeping the project's scope manageable. A customer's users, who might be accustomed to working a certain way, have to be on board with the switch as well.

Successful projects also depend on competent consultants and technical staffers, along with an initial software selection process that results in the right choice for a company's needs.

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris' email address is Chris_Kanaracus@idg.com

Join the newsletter!

Error: Please check your email address.
Rocket to Success - Your 10 Tips for Smarter ERP System Selection

Tags applicationsAvonenterprise resource planningit strategySAPCIO rolesoftwareIT management

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Chris Kanaracus

IDG News Service
Show Comments

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Ben Ramsden

Sharp PN-40TC1 Huddle Board

Brainstorming, innovation, problem solving, and negotiation have all become much more productive and valuable if people can easily collaborate in real time with minimal friction.

Sarah Ieroianni

Brother QL-820NWB Professional Label Printer

The print quality also does not disappoint, it’s clear, bold, doesn’t smudge and the text is perfectly sized.

Ratchada Dunn

Sharp PN-40TC1 Huddle Board

The Huddle Board’s built in program; Sharp Touch Viewing software allows us to easily manipulate and edit our documents (jpegs and PDFs) all at the same time on the dashboard.

George Khoury

Sharp PN-40TC1 Huddle Board

The biggest perks for me would be that it comes with easy to use and comprehensive programs that make the collaboration process a whole lot more intuitive and organic

David Coyle

Brother PocketJet PJ-773 A4 Portable Thermal Printer

I rate the printer as a 5 out of 5 stars as it has been able to fit seamlessly into my busy and mobile lifestyle.

Kurt Hegetschweiler

Brother PocketJet PJ-773 A4 Portable Thermal Printer

It’s perfect for mobile workers. Just take it out — it’s small enough to sit anywhere — turn it on, load a sheet of paper, and start printing.

Featured Content

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?