Avon Pulls Plug On $125 Million SAP Project - InformationWeek

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12/12/2013
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Avon Pulls Plug On $125 Million SAP Project

Avon halts its global rollout of an SAP order management system after a Canadian pilot project prompts reps to quit in frustration.

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Avon has halted the global rollout of an SAP-based order management system after a failed deployment in Canada, The Wall Street Journal reported late Wednesday.

The project, which has been in the works since 2009, was intended to go global, but the cosmetics firm decided to halt further rollout because a pilot deployment in Canada caused "significant business disruption in that market, and did not show a clear return on investment," according to an 8-K filing with the SEC on Wednesday.

Jim Dever, an SAP spokesman, told the WSJ's CIO Journal that the company "only worked on the back end" of the order management system, but that doesn't jibe with what SAP CEO Bill McDermott told us in an October 2011 interview. "Andrea Jung [then CEO and chairman] at Avon wanted to have the Avon lady enabled on the iPad so she could digitize the experience with the consumer," McDermott said. "She wanted [goods] ordered on the iPad so the whole demand-driven supply chain would react instantaneously. This was innovating a 100-year-old company and making it brand new again."

[ Want more on troubled ERP deployments? Read "Oracle, Montclair State University Settle Bitter Contract Dispute." ]

An iPad-based Avon demo app was prominently featured at the SAP Sapphire event in 2011. McDermott presided over the demonstration and highlighted SAP mobile capabilities.

InformationWeek sent followup questions to SAP, but Dever declined further comment about the specific technologies involved in the Avon project.  [Update 12/13: After the publication of this article, SAP told InformationWeek that the concept app demonstrated at Sapphire was not what was deployed by Avon in Canada, and it repeated its assertion that it was involved only in the back-end applications behind Avon's project, not the front-end, sales-rep-facing application.]

Jennifer Vargas, an Avon spokeswoman, declined to talk about the specific technologies, but she cited statements Avon CEO Sheri McCoy made during its third-quarter earnings call (registration required). "While the pilot technology platform [in Canada] worked well, the degree of impact or change in the daily processes to the Representative was significant," McCoy told analysts. "This resulted in a steep drop in the active representative count."

An excerpt from Avon's Dec. 11 8-K SEC filing.
An excerpt from Avon's Dec. 11 8-K SEC filing.

In other words, the technology worked, but it was so hard to use that Avon salespeople -- many of them part timers who network among friends and hold in-home parties -- left the company in droves. That's not consistent with the kind of consumer-grade app experience that has made tablets so popular in sales and retail settings.

The decision to halt the rollout was made in light of "potential risk of further disruption," Avon said in the 8-K document. The company reported it would continue to use the software in Canada to avoid further problems in that market, but it announced a $100 million to $125 million writedown for associated software costs. "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."

Doug Henschen is executive editor of InformationWeek, where he covers the intersection of enterprise applications with information management, business intelligence, big data, and analytics. He previously served as editor-in-chief of Intelligent Enterprise, editor-in-chief of Transform Magazine, and executive editor at DM News.

IT groups need data analytics software that's visual and accessible. Vendors are getting the message. Also in the State Of Analytics issue of InformationWeek: SAP CEO envisions a younger, greener, cloudier company (free registration required).

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Lorna Garey
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Lorna Garey,
User Rank: Author
12/13/2013 | 1:27:31 PM
Re: From the Trenches
Good for Avon for being willing to pull the plug. Many companies wouldn't have made a clean break and cut their losses.
D. Henschen
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D. Henschen,
User Rank: Author
12/13/2013 | 9:48:53 AM
Re: From the Trenches
The points you take issue with were based on Avon's CEO statement to financial analysts in 3Q that "the pilot technology platform worked well." What you're saying suggests the app was flawed from every perspective. As for the mobile access, I'm hearing from sources that it's a mobile web app, not a native iPad app. That would suggest the interface available on tablets isn't much different than what you see on desktop or laptop computers. It would also explain why, as you say, it made no difference how you accessed the app, it's the underlying system that's flawed.
D. Henschen
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D. Henschen,
User Rank: Author
12/12/2013 | 4:43:50 PM
Re: Who did the mobile interface and back-end connections?
We do know that SAP demonstrated an Avon-sales-rep-facing iPad app at Sapphire in 2011, and an Avon executive participated in the demo. But it's not clear that the app used in Canada was mobile or was entirely developed by SAP. Avon's 8-K makes no mention of "mobile" or "iPad," and SAP insists it was only involved in "back end" work. It's pretty obvious Avon was talking about and would want its reps to have a dead-easy iPad app. That's why I ask: Who did the interface and the back-end-connections?
Laurianne
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Laurianne,
User Rank: Author
12/12/2013 | 4:07:05 PM
Re: Who did the mobile interface and back-end connections?
This type of iPad application, for roving sales people, is one of the most common. So many companies to learn from already. It will be interesting to hear more about how this one went wrong, whether it was the back end work, the UI, the training...or some of several factors.
D. Henschen
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D. Henschen,
User Rank: Author
12/12/2013 | 3:37:03 PM
Who did the mobile interface and back-end connections?
This deployment clearly involved a user interface -- that's what the sales reps experienced and why they left. It's also a fact that SAP showed off a demonstration (not yet in production), sales-rep-facing mobile app back in 2011 at Sapphire. I don't recall SAP acknowledging the contributions of any partners in that project (developing, say, the mobile front-end or middleware connections to the back end), so I have my doubts about this "we only worked on the back end" claim.

There's a cautionary tale here about highlighting deployments that have yet to be proven in production.
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