The majority of businesses that transform from outdated legacy systems to modern, centralised Enterprise Resource Planning (ERP) systems have successful outcomes. ERP systems pack enormous benefits for organisations and if you’re not taking advantage of them, you’re at a distinct competitive disadvantage.
However, some businesses may face bottlenecks, delays and even failures with their ERP projects.
Vodafone is one such organisation that had a failed ERP implementation, which cost the company £59 million.
This mini-case study looks at the Vodafone ERP failure in detail to understand what went wrong and the key lessons that can be learnt from it.
The company
Headquartered in Newbury, Berkshire, England, Vodafone is a leading telecommunications company in Europe and Africa. The company develops a range of leading products and services to connect more than 300 million mobile customers and 27 million fixed broadband customers across 21 markets and 48 partner markets.
Vodafone operates the largest 5G network in Europe, present in 12 countries and growing. In Africa, the organisation runs a mobile payment platform that enables more than 41.5m people to access mobile payments and financial services.
The telecom giant has operations in 20+ countries and 100,000+ employees worldwide.
What happened?
In 2012, Vodafone started a major IT transformation project to consolidate its customer relationship management (CRM) systems onto a Siebel platform. The CRM and billing consolidation project was part of a wider initiative to harmonise and standardise Vodafone’s systems and processes across the group.
However, the project was beset with problems from the start. One of the key issues was that not all the customer accounts migrated properly.
In October 2016, the British telco was ordered by UK telecoms regulator, Ofcom, to pay a £4.6 million fine within 20 working days for “serious and sustained” breaches of consumer protection rules in the UK.
The fine was made up of two parts: £3.7 million for taking pay-as-you-go money from customers and not delivering a service in return, and £925,000 for failures in how the firm handled consumer complaints.
The regulator discovered that:
- Following the collapse of the CRM project, 10,452 users were left out in the cold when Vodafone failed to credit their accounts after they paid to ‘top-up’ their mobile phone credit. In total, those customers lost £150,000 over the course of 17 months.
- Ofcom found that Vodafone had breached its billing rules because the top-ups that consumers had bought were not reflected in their credit balances.
- Vodafone failed to act quickly enough to detect or correct these issues, only getting its act together after Ofcom intervened.
- Vodafone neglected to inform their customers, in writing, of their right to contact a third-party resolution scheme after eight weeks if they were unhappy with the original outcome.
- Vodafone’s customer care agents were not given sufficient clear guidelines on what constituted a complaint, and its procedures weren’t adequate to guarantee that all complaints were swiftly escalated or addressed in a fair, timely manner.
Vodafone owned up to the breaches and paid back all customers who were affected by the errors. But it was unable to identify 30 of them and instead donated £100,000 to charity.
The circumstances resulted in a £54 million revenue plunge from April to June 2015, and Vodafone stated that “continued operational challenges” with the mobile customers’ payment system that was implemented in 2015 had resulted in a 3.2% sales fall to £1.55 billion due to customer defection.
We’re talking about a £59 million loss without factoring in the project’s expenditures when you add the £4.6 million penalty on top of that.
Lessons from Vodafone’s ERP failure
So, what can be learnt from this fiasco? Here are some key lessons:
- Have a comprehensive data backup and disaster recovery plan in place. This is even more critical for organisations that rely heavily on technology to run their business.
- Pay attention to stakeholders’ feedback and complaints. It could be customers, employees or suppliers. In Vodafone’s case, the telecoms regulator was alerted to the issues by customers who had made their grievances known.
- Perform regular system testing and user acceptance testing (UAT) to ensure that the system can meet the organisation’s needs. This is especially important for mission-critical systems such as enterprise resource planning (ERP) systems.
- Invest in change management to help with the cultural shift that comes with implementing a new system. After all, an ERP system is not just about the technology – it’s about changing the way people work.
- Ensure your ERP and accounting systems upgrades are compliant with the latest regulations and standards. This will save you a lot of headaches down the road.
Don’t make the same mistakes!
If you are thinking of implementing an ERP system to help streamline your business processes, be sure to learn from the mistakes of the past and do your due diligence. This will help ensure a smooth, successful ERP implementation that delivers results for your organisation.
With careful planning, testing, and training, you can avoid an ERP implementation disaster and reap the many benefits of a centralised and integrated ERP platform.
Talk to us today to learn more about how we can help you with your ERP implementation needs.
