When I.T. Goes Bad: The Sobeys SAP Fiasco

I.T systems are generally discussed in terms of the benefits they provide. Most would agree that technology is required to sustain competitive advantage or even simply to remain competitive. However, every once in a while, the implementation of technology goes terribly wrong, leaving devastating consequences. Case in point: Sobeys’ implementation of its SAP-powered Enterprise Resource Planning (ERP) system.

For the most part, SAP software is used successfully around the world in numerous organizations. However, in December of 2000, the system caused its database to crash, leaving it unable to process the transactions moving through the stores' systems. The problem created a five-week backlog just before the holiday shopping period.

In January, 2001, Sobeys announced that it was ditching the software due to "systemic problems" and "insufficient core functionality”, as it could not handle its ordering and data processing needs for its stores in Ontario and Atlantic Canada.

The SAP software was a complete disaster for the organization. Sobeys had no choice but to write off all the assets related to the SAP information technology initiative so that additional losses could be avoided. The $89 million project ended up costing the company $50 million. In addition, the interruption of business cut its quarterly operating profit by 16 cents a share.

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