Avon Products Inc. is putting an end to a 125-million-dollar software overhaul the company has been working on for four years now. Complicated utilization of the system forced many of the companys salespeople to quit their jobs after a test of the software in Canada, causing the company to pull the plug on the project.
The new order management in Canada was put into action in the second quarter of 2013. At the beginning everything about the system was going according to plan, but it soon turned out to be too burdensome and disruptive to the daily routine of many representatives of the company. The resignation of meaningful numbers of people forced Avon to quit the project and halt the implementation of the system in other countries.
The company however decided to keep using the new software system in Canada. It also sticks to the idea of upgrading its ageing technology infrastructure, but it has now abandoned the plans of expanding the system to other markets, such as Brazil, the U.S., Mexico, the U.K. and Russia in the next four years. Avon expects to write down between 100 million dollars to 125 million dollars of the cost of the software in question, because it wont be implemented into action in other countries but Canada.
The step Avon took for improving its management system is not surprising. During the last few years, many companies and governments started hiring contractors, such as SAP and International Business Machines Corp. in order to get software, which will help them make their productivity better. However, the new software proved that it may happen to have exactly the opposite effect.
Andy Kendzie, a spokesman of SAP refuted the rumours of disruption between the two companies and explained that the software was working as designed, regardless of the fact there are some problems associated with the implementation of the project. These words were confirmed by the Chief Executive of Avon – Sherilyn McCoy, who did not deny the issues with the software pilot in Canada, but said the system was working as planned.
“The degree of impact or change in the daily processes to the representative was significant,” Ms. McCoy also said. “This resulted in a steep drop in the active representative count.”
On the New York Stock Exchange, Avon Products Inc.s shares settled 4.43% lower on Wednesday at $17.03, trimming the one-year return rate to 18.59% on the upside.
The 12 analysts offering 12-month price forecasts for Avon Products Inc. surveyed by CNN Money gave a median target of $20.50, with a high estimate of $25.50 and a low at $16.00. The median estimate represents a +20.38% increase from the last closing price of $17.03.