The global leasing industry is fast-paced, competitive and reliant upon a finely tuned infrastructure. That’s what makes enterprise resource planning (ERP) solutions critical in this sector. With a collective fleet of nearly 2 million lease cars in 30 countries, LeasePlan is a major player in the leasing space.
In 2006, the Dutch car-as-a-service (CaaS) company implemented SAP to organize and streamline its operations. However, it was still heavily relying on legacy systems, as well.
In the years that followed, it suffered setback after setback, and the SAP project never took off as imagined. In September 2019, the LeasePlan ERP failure finally came to a head, resulting in an overall cost of 100M Euros, or almost $119 million USD.
Today, we’re taking a look at what went wrong, as well as key lessons you can take away to help your organization avoid similar issues.
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The LeasePlan ERP Failure: A Brief Recap
As mentioned, LeasePlan has run some level of SAP software since 2006. However, their ERP project didn’t truly ramp up until 2016, when LeasePlan was acquired by investors from TDR Capital, a leading private equity group. This is when LeasePlan took a more dedicated and invested approach to its SAP implementation.
The main goal? To design, build and maintain a core leasing system (CLS) based on SAP’s ERP technology. The project was a dramatic transformation for the company, centered around completely digitalizing all its operations across all areas of its business.
However, three years later, LeasePlan decided to pull the plug on the project. While there wasn’t one linchpin that officially sealed the deal, there were several issues that worked together to create a perfect storm. These included:
- Trying to consolidate 35 systems onto one platform
- Not learning from past SAP failures at affiliate companies
- Implementing a fast-paced, highly aggressive project plan
- Following a big bang implementation strategy that heightened risks
- Underestimating the importance of organizational change management (OCM)
4 Lessons Learned From the LeasePlan ERP Failure
There are a many important lessons that business leaders can learn from this SAP failure. Let’s take a look at a few of the top ones:
1. Align Technology Investments With Your Business Model
It’s all too easy to get starry-eyed over software without considering if it’s the best match for your unique position. In this case, LeasePlan was attempting to combine its 35 legacy systems onto a single instance of SAP S/4HANA.
S/4HANA is SAP’s ERP solution for large, established enterprises. While LeasePlan certainly fit this bill, the company has a more agile, flexible business model than many of the competitors in its space.
In fact, at the time of the most recent 2016 SAP ramp-up, it was exploring new platforms, including CarNext.com, as well as strengthening its CaaS approach. While this type of experimentation can be great for business, it can make it difficult to fit operations into a single ERP system.
Lesson: While evaluating ERP vendors, it’s imperative to ensure the solution you’re selecting aligns with your long-term business goals.
2. Consider Customization Requirements at the Onset
When announcing the failure, LeasePlan cited SAP’s “monolithic architecture” as one of the reasons it wouldn’t work for their company. They stated that they planned to leverage a best-of-breed solution instead. While it’s good to come to this realization, it would have been best to discover it right from the beginning.
The reality is that standard, out-of-the-box ERP software offers enough functionality for many companies. However, there are some industries that are more niche, and car leasing is one of them. These companies usually require customization or additional solutions to meet their business requirements.
Lesson: Document your highest priority business requirements before ERP selection so you can avoid many of the financial and operational challenges that LeasePlan encountered.
3. Follow a Strategic Project Plan
A successful ERP project can’t be rushed into haphazardly. LeasePlan’s “highly aggressive” project plan was most likely rushed.
The company used a big bang approach, which resulted in critical problems that only came to light upon go-live. If the company had used a phased implementation approach, they would have been able to fix smaller, incremental issues as they occurred.
Lesson: A detailed, realistic project plan can help you take control of every step in your ERP implementation, ensuring nothing gets missed.
4. Take Ownership of Your ERP Project
Rather than relying on their system integrator to take ownership of the project, LeasePlan leaders should have taken a more hands-on approach to overseeing each task on the timeline. LeasePlan’s hands-off approach made it nearly impossible to spot when the project was failing. It was only when the company was 100M Euros in the red that they realized it was time to stop the bleeding.
Lesson: An experienced and engaged internal project team can help you identify if there are any issues with your project at every critical touchpoint.
Learn From LeasePlan and Avoid ERP Failure
Even the best-intended ERP projects can venture off course if companies fail to align their resources and clarify their goals.
In this case study, the effort was tremendous from the beginning, considering the sheer number of systems that required centralization. Yet, where the effort really failed was when the team moved forward aggressively without the same rigor applied to the planning phase.
If there’s one primary lesson to learn from the LeasePlan ERP failure, it’s that you can’t plan enough for the kind of success you want to see.
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