Who's to Blame for Failed ERP Project that Prompted SAP Lawsuit?

Ann All

It's a safe bet that executives of Waste Management, the company suing SAP for $100 million over a failed ERP implementation, hadn't read the MIT Sloan Management Review article written by Cynthia Rettig in which she describes ERP systems as "massive programs, with millions of lines of code, thousands of installation options and countless interrelated pieces."

 

In the article, which I blogged about back in August, Rettig point outs that a typical ERP implementation "introduce(s) so many complex, difficult technical and business issues that just making it to the finish line with one's shirt on (is) considered a win."

 

If they had, would they have bought SAP's alleged pitch that the system it sold to Waste Management was "an 'out-of-the-box' solution that would meet Waste Management's needs without any customization or enhancements," one that could be fully implemented throughout the company inside of 18 months? Highly doubtful.

 

According to a statement cited in an ITWorld.com article, Waste Management claims SAP deceived it by creating "fake software environments" for product demonstrations. The project went bad almost immediately after a sales agreement was signed in October of 2005. Though SAP promised a pilot version of the system would be up and running by Dec. 15, 2006, "it is not even close to being completed today."

 

The increasingly acrimonious relations between the two companies included an SAP "Solutions Review" that found the software did not meet Waste Management's needs and a failed effort at consensual mediation. Waste Management contends that it rejected SAP's suggestion that it would have to "start over" with an updated version of the SAP platform if it ever hoped to implement the software throughout the company. According to its statement, which is cited in ITWorld.com:

SAP's 2007 proposal is precisely the kind of risky, expensive and time-consuming project that Waste Management rejected from other companies two years earlier. Indeed, the development project that SAP proposed would drastically lengthen the implementation timetable from the original December 2007 end-date to an end-date sometime in 2010 without any assurance of success.

As with most any failed relationship, however, it sounds as if the "wronged" party may also need to take some responsibility. According to a SearchSAP.com blog, Waste Management may have had unrealistic expectations that the software could fix all of its problems, which included a wholesale firing of its management team and appointment of new executives following a financial scandal.

 

Waste Management "had a lot on its plate at once," writes blogger Demir Barlas. Certainly, taking on an ERP implementation while in the midst of such a major transition seems unwise. A bit of perfunctory research should have clued Waste Management to ERP's reputation for complexity.

 

Barlas also questions -- and rightfully so -- Waste Management's vendor evaluation process and ongoing management of the SAP relationship. Barlas writes:

More pertinently, how could these facts about the software be "unknown" to management? ERP implementations can take years, and are accompanied by rigorous testing and planning. If SAP's software is indeed a "complete failure," Waste Management's executives might well have been asleep at the wheel; no one should pay $100 million and wait two years to find out they've bought a defective product.

The bigger issue here is that traditional ERP systems for many organizations appear to be more trouble than they are worth. That is why well-known IT cynic Nicholas Carr suggested -- in a post that I referenced and linked to in my August blog -- that Workday and other ERP systems delivered via a software-as-a-service model may be the "end of ERP as we know it."

 

Waste Management is far from the only organization to have suffered major ERP pain. IT Business Edge blogger Susan Hall wrote about the Los Angeles School District's tale of ERP woe in October. Nine months after implementing a $95 million ERP system from SAP, thousands of employees were receiving incorrect paychecks, with some receiving too much and others not enough, and the errors creating potential tax problems for the district.



Add Comment      Leave a comment on this blog post
Apr 15, 2008 10:25 AM Ward Christman Ward Christman  says:
Once word gets out that combining a payroll/benefits management system with a SaaS based HCM (Human Capital Management) system can replace 95% of what an ERP can do for a typical company for 20% of the cost, ERPs will go the way of the dinosaur! Reply
Sep 1, 2008 6:36 AM Michael Michael  says:
I think the big software ERP vendor should reflect to the situation. There is feasible alternatives out-there. Its time to stop charging millions for software and consultancy. Affordable business software development is possible. These are professionally managed, relatively low risk but more importantly it deliver!We've been working with large engineering company to develop Sustainability Portal at the fraction of typical ERP cost. By leveraging commercial-based open source technologies and strong framework it has been a successful project for us. Reply

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