
DHL Global Forwarding Failed on Software, and That’s Why It’s Being Sold Cheaply - howrude
https://www.flexport.com/blog/dhl-global-forwarding-sale-software/
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_JamesA_
Slightly OT but the history of DHL co-founder Larry Hillblom[1] makes for some
interesting reading.

[1]:
[https://en.wikipedia.org/wiki/Larry_Hillblom](https://en.wikipedia.org/wiki/Larry_Hillblom)

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nightbrawler
Thanks for sharing that!

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tim333
[http://www.nytimes.com/2012/03/04/business/king-larry-the-
bi...](http://www.nytimes.com/2012/03/04/business/king-larry-the-bizarre-road-
of-a-billionaire-review.html) is also entertaining

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thedogeye
Ryan Petersen here, author of this article. I should clarify one thing: I
don't believe the rumored sales price of $4B. It's just too cheap. If any PE
guys (or Google/Amazon/Alibaba people) out there is reading this and wants to
back me in buying the business and giving it another go, I am game.

~~~
rajacombinator
Pretty mind boggling. How does one spend $1 billion on software and fail? I
guess this is a somewhat misleading accounting statement based around
maintaining the existing software orgs of the merged companies, not building
new software.

It makes me wonder though, with an unlimited budget and willingness to pay a
lot, what could one achieve in one year? If you offered 200k base, 100k
signing, and 1 mil bonus for completion of goals within 1 year, that should
give you access to pretty much all the top tier programmers in the world. Hire
50 of those guys and you're only at 65 mil. Maybe you need a really incredible
guy running it so you offer him a 30 mil bonus. Now you let those guys attack
the problem and it's hard to imagine they couldn't fix things up at DHL within
1 year.

Any known examples of orgs trying this approach?

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pascalmemories
"How does one spend $1 billion on software and fail?"

Just look at most UK Government IT projects. They've got it down to a fine
art, blowing billions and being left with nothing useful.

Several major international government consultancy firms got their break on
supposed small UK Gov IT projects, and were able to keep billing $1,000's/hour
for years (while delivering nothing useful) and became big IT consultancies in
the process. The failure didn't harm them one little bit - it let them claim
the have _experience_ and that got them way more work.

IT project failure in large and complex organizations is practically
guaranteed.

Now, if they did that small-ish team, paid well, it could well work. But your
board is not going to approve some pizza munching, jolt cola drinking geeks as
your wonder IT team. Don't worry what the team is really like, the consultants
asked by the board to review them as part of the process will make sure
they're described as the aforementioned pizza and cola weirdos. And recommend
using the consultants team instead. Been there. Done that.

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darkr
There's no board for UK government IT projects.

The process starts with lobbyists (from the likes of Fujitsu, CSC etc)
offering fancy dinners, a few trips to the opera, family holiday in Barbados,
and crucially a revolving door, behind which is a future lucrative senior
position should they decide to engage the services of said company. Lucrative
senior position will in part involve lobbying former government friends and
colleagues.

And so the cycle continues...

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mseebach
NHS Connecting for Health literally _was_ that board.

Also, never attribute to malice that which is adequately explained by
stupidity -- or, in this case, incompetence. If you're telling yourself that
the difference between billion-pound boondoggles and small, competent and
motivated teams working to agile principles is a bit of low-level corruption
(so lightweight that none of it could be discovered and prosecuted under the
Bribery Act), you're looking in the wrong place (and you'll also struggle to
explain how and why the Government Digital Service was set up, and why they're
succeeding).

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darkr
Yeah, you're right. I am generalising and cynically caricaturing; though a
fair bit of that stuff does go on. The current system of self-regulation is
sorely in need of reform and legislation, but those tasked with legislating
are the ones who benefit from the current system.

I have a lot of respect for the lads and ladies at the GDS. They're doing some
sterling work.

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clumsysmurf
"The company then spent another $1 billion in a failed attempt to build a
unified IT backbone to tie together the acquisitions. Late last year the
company killed the project, known as New Forwarding Environment, deciding to
stick with its legacy systems."

A similar thing happened when DHL acquired Airborne.

[http://www.informationweek.com/dhl-airborne-didnt-take-
the-e...](http://www.informationweek.com/dhl-airborne-didnt-take-the-easy-
road-to-post-merger-it-integration/d/d-id/1044574)

After the smoke cleared, Infosys had the most understanding of the systems
(along with solution support) but domain knowledge and software expertise
slipped away. If I had to describe the atmosphere, it could be summed up by
Nicholas Carr's article "IT doesn't matter"

[https://hbr.org/2003/05/it-doesnt-matter](https://hbr.org/2003/05/it-doesnt-
matter)

Eventually, DHL terminated US domestic shipping

[http://www.bloomberg.com/news/articles/2011-04-14/dhl-
reboot...](http://www.bloomberg.com/news/articles/2011-04-14/dhl-reboots-in-u-
s-after-9-6-billion-bleed-freight-markets)

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kyllo
_The company then spent another $1 billion in a failed attempt to build a
unified IT backbone to tie together the acquisitions. Late last year the
company killed the project, known as New Forwarding Environment, deciding to
stick with its legacy systems. In an object lesson on the risks entailed in
roll-up strategies dependent on massive IT integrations, Deutsche Post now
appears ready to cut its losses and sell the division at a huge discount.

Consider that DHL Global Forwarding generated more than $16.5 billion in
revenue in 2014. At a purchase price of $4 billion, that’s a sales multiple of
just 0.24X. Expeditors, its strongest rival in the U.S. market, currently
trades at 1.3X revenue. If DHL Global Forwarding could be priced at
Expeditors’ revenue multiple, its price would exceed $21 billion._

Worth noting that Expeditors (my former employer) has the complete opposite
strategy compared to DHL, in both business (organic growth with no major
acquisitions) and IT (homegrown systems with no major COTS purchases).

Basically, in the build vs. buy debate, Expeditors has been on the side of
"build" while DHL has been on the side of "buy." This is far from the only
difference between the two companies, but I think it's been a major factor in
their fates.

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treve
Seems like a really blatant ad to me. The author's best guess on why DHL
failed happens to be exactly what the author's key selling point is.

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thedogeye
All journalism is content marketing.

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vt240
I always found DHL Global Forwarding a pleasure to work with, because it was
so personal. People answer your calls. I'm sure that's not great for profits
or high volume customers.

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kakoni
Was Accenture[1] somehow involved in this backbone?

[1]: [https://www.accenture.com/t20150523T030128__w__/us-
en/_acnme...](https://www.accenture.com/t20150523T030128__w__/us-
en/_acnmedia/Accenture/Conversion-
Assets/DotCom/Documents/Global/PDF/Dualpub_4/Accenture-Digital-Future-For-
LSPs.pdf)

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timwaagh
integration architecture for old big systems is so difficult people make a
very good living if they´re any good at this. Software architects in that
field can make up to five times as much as a regular senior developer. I guess
this article shows why.

