A plan to replace nine IT systems with one Microsoft platform is a case study in how not to manage a large-scale tech project.
Already a subscriber?When Doug Jones arrived from South Africa in early 2022 to become CEO of grocery, liquor and hardware company Metcash, he discovered the “dream” digital transformation trumpeted by his predecessor was more like a nightmare.and the board, chaired by Rob Murray, earmarked $80 million to $100 million over three years to replace nine different IT systems with a single operating platform supplied by Microsoft.
Within 18 months the implementation costs for the Microsoft project had almost doubled to $190 million. Birtles had first-hand knowledge of what happened, as he was chairman of the Project Horizon steering committee and was on the board when it was approved. He left the steering committee in early 2022 after serving for two years.
Jones could not understand why a group-wide transformation program was sitting inside one of the Metcash pillars instead of it being answerable directly to the CEO.“I changed that reporting line so there was a program director co-ordinating all of the resources and making sure that updates were provided. I made sure the planning was being done with the interaction of the IT organisation inside the business and with our partners, KPMG and Microsoft,” Jones says.
Jones asked his team two fundamental questions: “Do we really want, and is it realistic to expect that we can have, one way of doing things across our business? Do we really think that we can have one ERP architecture across a food wholesaler, liquor wholesaler, hardware wholesaler and retailer?” Project Horizon was a dream project for Microsoft because it was an opportunity to go head-to-head with German software powerhouse SAP.Jones realised that the dream that had been sold to his predecessor in 2021 was neither practical nor good for the business.
Jones said the “strong partnership” with Microsoft, including the design and development of a pricing engine , was proceeding as planned with the build underway. His job was to talk to all those involved in the project and recommend what lessons should be learnt. “And we had only engaged with them at a steering committee kind of level, and we needed to bring the team closer to the business and the business closer to the program.
When it won the Metcash contract in 2021 against competition from SAP, Microsoft 365 did not have an integrated pricing engine. In essence, Metcash was a test dummy for upgrading the global software company’s range of services.After backing the Microsoft pricing engine in June 2022, Jones is now more circumspect.
There were different versions of warehouse management systems, there were different portals the new system needed to fit in into, and there were different trading terms for the same suppliers depending on which state they were located in. This meant the IT environment was much more complex than the initial design and build contemplated.
McKinnon noted that one of the unusual aspects of Project Horizon is that mid-way through the digital transformation it became a business transformation program, because the guiding principles were that the businesses had to accept the D365 software processes out of the box without impacting customers.
It is believed McKinnon’s report noted that Metcash had become very reliant on KPMG because it was leading the project management office as well as leading the design and the build of the new systems. “As the program team, which included both Metcash and KPMG members, did further work, the complexity became clearer as did confidence in the path forward, but this had consequential cost implications.”“Microsoft have been a responsive and responsible partner,” Birtles says.
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Metcash, KPMG, Microsoft: How a $80m tech upgrade blew out by $200mA plan to replace nine IT systems with one Microsoft platform is a case study in how not to manage a large-scale tech project.
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