The global headquarters of technology distributor Ingram Micro has blamed declining financial performance over the first quarter of its 2011 financial year specifically on failings associated with a troubled upgrade to a new SAP-based enterprise system in Australia.
The upgrade has been in the works for some time, with the local division of the company standardising on the SAP platform it uses globally, and shifting off the Adonis platform it was using previously. In January this year, the company said it was planning to switch on the upgrade with minimal disruption, but a series of glitches led the company’s local MD Jay Miley to ask partners for patience with the platform in mid-February.
In a statement issued late last week, Ingram Micro’s global operation said its operating and net income over the past quarter did not meet its expectations,” largely due to complications with our ERP system implementation in Australia”.
“We’re diligently addressing these issues to drive improved profitability and performance as soon as possible,” the company said. “We are confident the future benefits of the new system outweigh some of the hurdles we are facing today.”
The company’s net income over the quarter to April 2 this year dropped 19.9 percent to reach $56.3 million, compared with the same quarter in 2010, although net sales had actually risen by 7.8 percent in the period. The cost of sales, as well as operating expenses, rose over the period. Asia-Pacific sales also rose — by some 9 percent. “This year’s lower income is primarily the result of the system-transition issues in Australia, which experienced a $21 million decline in operating income compared with the prior year,” the company said.
A spokesperson for SAP said Ingram Micro was a valued customer, and that the pair remained “strong and positive partners”. “SAP is actively engaged with the company in completing their implementation and we believe this is solidly on track,” they said. “When complete, we are confident Ingram Micro will reap significant benefits from the system and it will continue to be a critical element in the company’s growth strategy.”
It is believed that Accenture is the implementation partner for the project at a global level. A spokesperson for the company locally was not immediately able to comment on the issue.
It’s not the first time the company’s software has proven harder than expected for a major Australian organisation over the past several years. As late as March this year, Queensland’s Health Minister Geoff Wilson said his department’s new SAP-based payroll system had been stabilised, although work still needed to be done. The new platform – built with the assistance of IBM – was firstly introduced in March 2010 to serve about 78 thousand workers and deliver a regular payroll amount of $210 million.
It replaced the previous LATTICE payroll system and was dubbed the “Continuity Project”, but its misfunctioning resulted in a large number of Queensland Health staff receiving little or no pay in some periods. Reviews into the implementation have made no specific mention of culpability from SAP’s side.