LeasePlan incurs tech blow from failed SAP implementation

29 October 2019 4 min. read

A year after Lidl’s SAP failure rocked the food retail landscape, another large ERP flop has now hit the automotive scene. While it comes nowhere near the €500 million the German discounter sunk into its SAP upgrade, the €100 million flushed down the drain by leasing company LeasePlan is one of the larger European SAP crashes of the past years.

With a fleet of 1.8 million lease cars in about 30 countries, LeasePlan is a leading player in the global leasing industry. The company, founded in 1963 in the Netherlands, leases vehicles to companies and sells second-hand cars – lease cars than have come out of their leasing period – to both businesses and consumers.

It was back in 2006 when LeasePlan first start using SAP. In the intervening years a number of additional SAP projects have been completed, but the company still largely runs on legacy software. When LeasePlan was acquired in 2016 by a consortium of investors led by private equity group TDR Capital, the company accelerated its SAP-ambition.LeasePlan incurs tech blow from failed SAP implementationThe company kicked-off a large programme aimed at designing and building a Core Leasing System (CLS), based on SAP’s enterprise resource planning technology. Using SAP, LeasePlan aimed at becoming a “fully digital Car-as-a Service company, delivering best-in-class services to customers through digital platforms across all areas of the business.” SAP’s second promise was to streamline and smooth internal operations across all of LeasePlan’s country organisations, making the group more efficient and lowering total costs of ownership. 

From green to red

When LeasePlan was planning for its initial public offering last year, all signs were according to the firm’s management team on green. In its roadshows to promote its to-be launched shares, the company repeatedly stated that it had high expectations of the benefits its SAP system would bring. This was for investors a chief reason to factor in a considerable IT-driven efficiency in their valuation of the lease company.

Not all investors however fell for the charm offensive. It was then when the first questions popped up on the need for and the progress of the ERP system. Because LeasePlan found investors were unwilling to pay what its shareholders had set as a target, in October the public listing was called off. 

Twelve months down the line and the worst possible scenario for LeasePlan has unfolded – last month, the company pulled the plug on its major SAP project. A total investment of €98 million has been deemed unrecoverable and has therefore been impaired from the firm’s books, confirmed CEO Tex Gunning in a recent meeting with shareholders. 

“The system is not fit for purpose in the emerging digital world. The monolithic nature of [the SAP system] hinders its ability to make incremental product and service improvements at a time of accelerated technological change. As a consequence, the system is being restructured,” he said. 

“The monolithic nature of [the SAP system] hinders its ability to make incremental product and service improvements at a time of accelerated technological change.”

Modular and agile

Meanwhile, LeasePlan has started working on an alternative IT solution, which it has called a ‘Next Generation Digital Architecture’ (NGDA). Instead of placing its faith in one supplier, the car leasing company is opting for a combination of best-of-breed third-party solutions combined with a deeper in-house involvement. The company will now leverage leading off-the-shelf solutions for various modules (e.g. contract management, insurance claims, predictive maintenance) and combine them with existing LeasePlan best practices to form its new infrastructure.

This approach is according to Gunning better suited to the “digital revolution” taking place in the global lease industry. It will allow for a more scalable and flexible IT infrastructure, smoothen product deployments and updates, and enhance integration with third-party systems to speed up innovation.

“LeasePlan will be able to effectively leverage the data from its 1.9 million vehicles to build ‘smart’ fleet products and services, and seamlessly manage every aspect of its customers’ journey at digital cost levels,” commented Gunning. The complete transition will take between three to five years – unknown is what costs LeasePlan will incur for having to stick longer with its legacy systems.

Meanwhile, it is not all bad news from LeasePlan’s IT department. Its MyLeasePlan app is being well-received by drivers globally. And this summer, LeasePlan Bank – the company’s financial services institution – successfully migrated to a new core banking and CRM system, becoming one of the first banks in Western Europe to run on a 100% public cloud solution.