Who is to blame for the failed ERP project that sparked the SAP lawsuit?
It’s a safe bet that executives at Waste Management, the company that sued SAP for $ 100 million for a failed ERP implementation, hadn’t read the MIT Sloan Management Review article written by Cynthia Rettig describing ERP systems as ” massive programs, with millions of lines of code, thousands of installation options and countless interrelated pieces. “
In an article I wrote about in August, Rettig notes that a typical ERP implementation “presents so many complex and difficult technical and business problems that only getting to the finish line with your shirt on is considered a victory.”
If they had, would they have bought into SAP’s alleged proposition that the system it sold to Waste Management was “a ‘out of the box’ solution that would meet Waste Management’s needs without any customization or enhancements”, one that could be completely implemented across the enterprise within 18 months? Very doubtful.
According to a statement quoted in an ITWorld.com article, Waste Management claims that SAP misled it by creating “rogue software environments” for product demonstrations. The project went awry almost immediately after a sales agreement was signed in October 2005. Although SAP promised that a pilot version of the system would be up and running on December 15, 2006, “it is not even close to completion today.”
Increasingly acrimonious relationships between the two companies included a SAP “Solution Review” that found the software did not meet Waste Management’s needs and a failed consensual mediation effort. 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 expected to implement the software company-wide. According to his statement, which is cited on ITWorld.com:
“The SAP 2007 proposal is precisely the kind of risky, costly and time-consuming project that Waste Management rejected from other companies two years earlier. In fact, SAP’s proposed development project would dramatically lengthen the implementation schedule from the original end date of December 2007 to an end date sometime in 2010 with no guarantee of success. ”
However, as with most failed relationships, it appears that the “injured” 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 solve all his problems, which included a widespread layoff of his management team and the appointment of new executives after a financial scandal.
Waste Management “had a lot on its plate at one time,” writes blogger Demir Barlas. Certainly, taking on an ERP implementation while in the middle of such a major transition seems reckless. A little cursory research should have given Waste Management clues about ERP’s reputation for complexity.
Barlas also questions, and rightly so, Waste Management’s supplier evaluation process and ongoing management of the relationship with SAP. Barlas writes:
“More relevant, how could these facts about software be ‘unknown’ to management? ERP implementations can take years and are accompanied by rigorous testing and planning. If SAP software is truly a ‘total failure’, Waste Management executives may well have been asleep at the wheel; no one should pay $ 100 million and wait two years to find out they have purchased a defective product. “
The biggest problem here is that traditional ERP systems for many organizations seem to be more troublesome than they are worth. This is why well-known IT cynic Nicholas Carr suggested, in a post I referenced and linked to on August – that Workday and other ERP systems delivered through a software-as-a-service model may be the “end of ERP as we know it.”
Waste Management is far from the only organization that has suffered major problems with ERP. IT Business Edge blogger Susan Hall wrote about the Los Angeles School District’s history of ERP issues in October. Nine months after implementing a $ 95 million ERP system from SAP, thousands of employees were receiving incorrect paychecks, some receiving too much and some not enough, and the errors created potential tax problems for the district.