BIG MIS FAILURES

PRESENTED TO: A.H.TOOR

PRESENTED BY: FAISAL JAVAID

REG #: 2113102

NATIONAL COLLEGE OF BUSINESS ADMINISTRATION & ECONOMICS

BIG MIS FAILURES Page 1 of 4

MIS

Short for management information system or management information services, and

pronounced as separate letters, MIS refers broadly to a computer-based system that provides

managers with the tools for organizing, evaluating and efficiently running their departments. In

order to provide past, present and prediction information, an MIS can include software that helps

in decision making, data resources such as databases, the hardware resources of a

system, decision support systems, people management and project management applications, and

any computerized processes that enable the department to run efficiently.

Within companies and large organizations, the department responsible for computer

systems is sometimes called the MIS department. Other names for MIS include IS (Information

Services) and IT (Information Technology).

REASONS OF MIS FAILURES

Information technology (IT) project management is a crucial issue for organizations

today. The failure rate of IT projects is astounding. A 1995 study in the USA found that 31 per

cent of software projects will be canceled before completion, and more than half the projects will

cost an average of 189 per cent of their original estimates.

In April 1997, a survey questionnaire focusing on IT project management issues was sent

to Canada's leading 1,450 public and private sector organizations. KPMG's 1997 Survey of

Unsuccessful Information Technology Projects revealed that the three most common reasons for

project failure are:

1. POOR PROJECT PLANNING: Specifically, inadequate risk management and a weak project plan.

Risk management becomes more important as the organization gets bigger, so larger

organizations need to pay more attention to this area.

2. A WEAK BUSINESS CASE: The need for the system should be justified in ways that relate

directly to the organization's business needs.

3. LACK OF TOP MANAGEMENT INVOLVEMENT AND SUPPORT: This often dooms the project to failure

before it starts. Securing buy-in from the top, often by a strong business case backed up

with a realistic project plan, is an essential step.

Some of the other main findings were:

Projects fail more often because of schedule overruns than budget overruns.

Many projects fail because they use new or unproven technology.

Poor estimates or weak definitions of requirements at the project planning stage also

contribute to project failure.

Projects can run into trouble due to the vendors' inability to meet commitments.

Of the failed projects, 60 per cent were planned to take less than one year to complete.

NATIONAL COLLEGE OF BUSINESS ADMINISTRATION & ECONOMICS

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BIG MIS FAILURES

With the rapid change in the economic world due to new and innovative advances,

organizations switched to computerized system (MIS) from manual system. But such conversion

was not profitable for all organization. Some faced minim while others had to suffer huge losses

by implementing MIs in their organizations. Various factors were involved in their demise. Here

are few MIS failures involving big giants.

ORGANIZATION: Budget Rent A Car Corp., Hilton Hotels, Marriott International Inc. PROJECT: “Confirm” reservation system for hotel and system for hotel and rental car bookings. WHAT HAPPENED: After four years and $125 million in development, the project crumbled

in 1992 when it became clear that Confirm would miss its deadline by as much as two

years. AMR sued its three partners for breach of contract, citing mismanagement and

fickle goals. Marriott countersued, accusing AMR of botching the project and covering it

up. Both suits were later settled for undisclosed terms. Confirm died and AMR took a

$109 million write-off.

ORGANIZATION: Snap-On Inc. PROJECT: Conversion to a new order-entry system from The Baan Co. WHAT HAPPENED: Despite three years of design and implementation, a new order-entry

system installed in December 1997 costs the tools company $50 million in lost sales for

the first half of 1998. Orders are delayed, inventory is miscounted. Snap-On’s operating

costs soar 40%, mainly to cover costs of extra freight and temporary workers.

Franchisees, frustrated because they can’t operate the new software, turn to Snap-On

competitors. Company profits for the period sink 22% compared to 1997.

ORGANIZATION: Fox Meyer Corp. PROJECT: SAP ERP system

WHAT HAPPENED: A bungled enterprise resource planning (ERP) installation in 1996

helped drive FoxMeyer into bankruptcy, the drug distributor claims in lawsuits against

SAP AG, SAP America Inc. and Andersen Consulting. FoxMeyer seeks a combined $1

billion in damages, but defendants deny doing anything wrong.

ORGANIZATION: W.W. Grainger Inc. PROJECT: SAP ERP system

WHAT HAPPENED: Grainger spent at least $9 million on SAP software and services in 1998,

but the ERP system over counted warehouse inventory and had routine crashes. During

the worst six months, Grainger lost $19 million in sales and $23 million in profits.

Grainger patiently worked with SAP on fixes.

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ORGANIZATION: Greyhound Lines Inc. PROJECT: “Trips” reservation and bus-dispatch system

WHAT HAPPENED: Greyhound spent at least $6 million in the early 1990s building Trips.

But Trips failed miserably when installed in 1993, crashing when Greyhound offered sale

prices on bus fares. To avoid using the system, agents wrote tickets by hand while

customers waited in line and missed busses. Ridership plunged 12% in one month. Just

weeks after rolling Trips out, Greyhound disabled it in some regions while trying to trace

problems. The debacle spurred a $61.4 million loss for the first half of 1994. The CEO

and CFO resigned. Trips operate today but Greyhound never regained its status as a

transport powerhouse.

ORGANIZATIONS: Hershey Foods Corp. PROJECT: IBM-led installation and integration of SAP, Manugistics Group Inc. and Siebel Systems Inc. software

WHAT HAPPENED: To meet Halloween and Christmas candy rush, Hershey compressed the

rollout of a new $112 million ERP system by several months. But inaccurate inventory

data and other problems caused shipment delays and incomplete orders. Hershey sales

fell 12% in the quarter after the system went live — down $150.5 million compared with

the year before. Software and business-process fixes stretched into early next year.

ORGANIZATIONS: Norflok Southern Corp. PROJECT: Systems integration with merger target Consolidated Rail Corp. WHAT HAPPENED: Norfolk Southern lost more than $113 million in business during its

1998/1999 railroad merger with Conrail. Custom logistics software wasn’t tested

properly and a dispatcher mistakenly fed bogus test data into the system. Norfolk

Southern suffered more than a year of train backups, untrackable freight and crew-

scheduling mishaps. Norfolk Southern spent an extra $80 million on worker overtime pay

and fix-up costs until the system was stabilized.

ORGANIZATIONS: Oxford Health Plan Inc. PROJECT: New billing and claims-processing system based on Unix International and Oracle Corp. databases

WHAT HAPPENED: 1996 migration to a new set of applications for health maintenance

organizations operations resulted in hordes of doctors and patients angry about payment

delays and errors. The system also underestimated medical costs and overestimated

income. As a result, high-flying Oxford posted its first-ever quarterly loss in November

1997: $78 million. All told, Oxford overestimated revenues by $173.5 million in 1997

and $218.2 million in 1998. New York State fines the company $3 million for violating

insurance laws. Oxford replaced large parts of the home-grown system with off-the-shelf

modules.

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ORGANIZATIONS: Tri Valley Growers

PROJECT: Oracle Corp. ERP and application integration

WHAT HAPPENED: A giant agricultural co-operative, Tri Valley bought at least $6 million

worth of ERP software and services from Oracle in 1996. None of the software worked as

promised; some of it couldn’t even be installed on Tri Valley’s DEC Alpha hardware, the

co-op claimed in a $20 million lawsuit filed. Tri Valley stopped using the Oracle

software and stopped paying the vendor. Oracle countersued for breach of contract. Tri

Valley filed for bankruptcy protection. Oracle denies all claims.

ORGANIZATIONS: Universal Oil Products LLC

PROJECT: Software for estimating project costs and figuring engineering specifications, to be built and installed by Andersen Consulting

WHAT HAPPENED: After a 1991 ERP deal with Andersen resulted in unusable systems for

UOP, the industrial engineering firm cried “fraud, negligence and neglect” in a $100

million lawsuit in 1995. Andersen later sued UOP for libel, accusing it of leaking

incriminating e-mail by its consultants in an “attempt to publicly harass and humiliate

Andersen.” UOP hired another consultancy to implement the system.

CONCLUSION

MIS are effective tools in business. But it must be kept in mind that it is a system which

is made and used by humans. Due to human errors in either its preparation or implementation the

system collapses or provides wrong data which tends to put blame on the system. With proper

and patience managing of the system it can be immensely beneficial for the organization.

REFERENCES

http://www.standishgroup.com

http://www.computerworld.com/computerworld/records/images/pdf/44NfailChart.pdf