Who is to blame for the failed ERP project that sparked a SAP lawsuit?
We can bet that the executives at Waste Management, the company that is suing SAP for $100 million over a botched ERP implementation, haven’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 interconnected parts.”
In an article I wrote about in August, Rettig pointed out that a typical ERP implementation “introduces so many complex, difficult technical and business problems that just getting to the finish line with your shirt on (is) considered a victory.”
If they had, would they have accepted SAP’s alleged representation that the system it sold to Waste Management was an “out-of-the-box solution that would meet Waste Management’s needs without any customizations or enhancements”, one that could be fully implemented company-wide within 18 months? Highly doubtful.
According to a statement cited in an ITWorld.com article, Waste Management claims SAP defrauded it by creating “fake software environments” for product demonstrations. The project failed almost immediately after the sale agreement was signed in October 2005. Although SAP promised a pilot version of the system would be up and running by December 15, 2006, “it’s not even close to being finished today.”
The increasingly acrimonious relationship between the two companies included a SAP “Solutions Review” that found the software did not meet Waste Management’s needs and a failed consensus mediation effort. Waste Management claims 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 roll out the software company-wide. According to her statement, which was quoted on ITWorld.com:
“SAP’s 2007 proposal was exactly the kind of risky, expensive and time-consuming project that Waste Management had rejected from other companies two years earlier. In fact, the development project proposed by SAP would dramatically extend the implementation schedule from the original end date of December 2007 to an end date sometime in 2010 with no guarantees of success.”
As with most failed relationships, however, it sounds like the “wronged” party may also have to take some responsibility. According to a SearchSAP.com blog, waste management may have unrealistic expectations that the software could solve all its problems, which included firing the entire management team and appointing new executives after a financial scandal.
Waste management “was a lot of things at once,” writes blogger Demir Barlas. Of course, undertaking an ERP implementation during such a major transition seems unwise. A little cursory research should reveal ERP’s reputation for sophisticated waste management.
Barlas also questions – and rightly so – Waste Management’s supplier evaluation process and the ongoing management of the relationship with SAP. Barlas writes:
“More pertinently, how could these facts about the software be ‘unknown’ to management?” ERP implementation can take years and is accompanied by rigorous testing and planning. If the SAP software really is a “total failure,” Waste Management executives may have been asleep at the wheel; No one should have to pay $100 million and wait two years to find out they bought a defective product.”
The bigger issue here is that traditional ERP systems seem to many organizations to be more trouble than they’re worth. That’s why well-known IT cynic Nicholas Carr suggested – in a post I quoted and linked to 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 experienced major ERP problems. IT Business Edge blogger Susan Hall wrote about the Los Angeles school district’s ERP woes in October. Nine months after implementing a $95 million ERP system from SAP, thousands of employees were being paid incorrectly, with some being paid too much and others not enough, and the errors were creating potential tax problems for the district.
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