Dumpster Diving: Rules on How Not to Acquire Enterprise Software

Dennis Byron

Waste Management's $100 million claim against SAP is a how-to in how not to acquire enterprise software. The case itself recalls the great "Halloween-candy scandal of 1999," when Hershey said SAP did roughly the same things as Waste Management said about SAP in its April 2008 legal filings in the Houston Federal District Court. Of course Hershey didn't sue SAP and seems to be a continuing good reference, based on a quick look at SAP.com.

Still, SAP America should realize the customer is always right and not let anything like this get to court. According to an Internet search, the case has already been "remanded" somewhere and maybe that means settlement is being discussed. (Update to follow if I hear back from the principals.)

But the details as laid out in the Waste Management legal documents are instructive for all IT shops looking at acquiring and deploying enterprise applications software from any supplier. Remember, it's a Capitalism 101 rule that when you are buying anything, you are in an adversarial position. I know the lawyers wrote this and not Waste Management's IT folks, but consider the following things Waste Management said it did as "don'ts" the next time you look at acquiring or deploying enterprise software:

  • Did Waste Management really get this excited because a go live date in the pilot phase slipped two weeks over the 2006 Christmas holidays? I can't believe I'm reading that part of the legal filings correctly, but that's what it says.
  • Did Waste Management really believe there was an "out of the box" enterprise application for "U.S. waste management?" SMBs can often get enterprise applications specific to their business from a Windows solution provider or IBM partner or similar smaller software company that does industry-specific customization of a product, such as Great Plains Dynamics or Lawson ERP. But that's not the case for enterprises Waste Management's size.
  • Did Waste Management really plan to spend millions with SAP, Oracle or some such supplier without talking to Gartner, IDC, AMR or a similar analyst firm that would have told them about the above "out of the box" issue in a New York minute? I am guessing it didn't because, if there were an analyst firm involved, it would have been sued also.
  • Did Waste Management really depend on SAP to put together the return on investment analysis for the software and services it was buying from SAP?
  • Did Waste Management talk to any references? Does Macy's talk to Gimbels?
  • Did Waste Management really spend another 6 months after signing on the dotted line in October 2005 detailing a "Project Schedule, Timeline and Deliverables?" Why were these items not in the original RFP and why sign the contract before they were agreed to?
  • Did Waste Management not get a hint of a problem when, right after the contract signing, "SAP submitted change orders." And why did Waste Management agree to them?
  • Did Waste Management really spend "more than $100 million" in 2006 and part of 2007 on this project before realizing its checkpoints were not being reached?

Actually the $100 million includes lost opportunity costs, not out-of-pocket costs, which Waste Management says in a 10-Q filing are around $50 million. There is one important DO, in the legal filing: Always consider opportunity costs when planning your enterprise software acquisitions.

 

As an aside, you wouldn't think "U.S. waste" is much different from other countries' waste. But the Waste Management legal filing points out that the order-to-cash process for waste management in the U.S. is really different than in Europe because of less regulation.

 

Still, is taking away bottles and newsprint from U.S houses that different than delivering soda or newspapers to the same houses initially?



Add Comment      Leave a comment on this blog post
Jun 9, 2008 7:36 AM Todd Glassey Todd Glassey  says:
The funnier part is that they havent realized with damage SOX406 opens them (WM) to. The fact they spent $50M w/o proper staff and management on board opens the company and those executives to the pain of private litigation. Nice move...TSG// Reply
Jun 9, 2008 11:42 AM Lawrence Lawrence  says:
It is amazing to me that a company has $50,000,000 to spend on a system, but they do not employ IT personnel, with a basic knowledge of IT principles and project management. You get what you pay for I guess. Reply

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