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Botched PeopleSoft roll out costs Australian firm dearly

1st Jul 2004
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A botched PeopleSoft roll-out - now AUS $28 million over budget - has cost an Australian building firm dearly, with the closure of 13 stores and the loss of 30 IT jobs.

Building materials group Crane Group is to close 13 of its Tradelink stores and cut 30 IT jobs as part of a AUS $52 million restructure partly blamed on ongoing problems with the implementation of a new PeopleSoft system.

Crane began the rollout of the PeopleSoft EnterpriseOne system in 2000, but had serious problems, suspending deployment in a major part of its business for three months a last October and only recommencing in January. Crane has implemented the manufacturing and distribution modules of EnterpriseOne, a key product of the JD Edwards business that PeopleSoft acquired last year for $US1.9 billion.

There are now 207 out of the 230 trade outlets live on the system, with the roll-out expected to be complete by next month. Crane Group has now decided to write down the carrying value of the IT system by a total of $28.8 million for the current financial year.

"The total one-off cost of the restructuring program will be $3.7 million before tax, with an annualised improvement in earnings before interest and tax of approximately $3 million expected from July 1, 2005" the group said.

The company is now said to be "examining its position with regard to a claim against PeopleSoft" in the wake of the rollout. Financial director Mark Fitzgerald said "We are in discussions with [PeopleSoft] with regard to their delivery over the past few years".

The rollout of the manufacturing module is complete, with the deployment of the more troublesome distribution module to wrap up in July with 23 sites in Victoria. Overall, 2100 staff will use the system everyday.

The Crane Group's managing director, Greg Sedgwick, also said the company's information technology department had been rationalised under one chief information officer, while significant savings would be derived from downsizing the department by 30 people following completion of the enterprise resource planning deployment.

The Crane Group said operating costs of the information technology system, including depreciation and amortisation, were expected to rise by AUS $15 million for the year ended 30 June 2005.

The then managing director of JD Edwards Australia and New Zealand, Ian Hodge, had previously touted the Crane Group win in November 2002 as an example of how the company was capturing market share by taking from the higher-end at the expense of Oracle and SAP.

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