ERP train wrecks, failures, and lawsuits

Summary:Here's a detailed list of ERP train wrecks, failures, and lawsuits.

Erik Kimberling, CEO of Panorama Consulting, assembled a depressing list of ERP train wrecks, failures, and lawsuits. Although the compendium is hardly complete, it offers a glimpse into the variety of IT failures associated with ERP projects.

Please recognize these failures arise independently of any particular vendor, geography, industry, and so on. They are systemic across the enterprise software industry and its ecosystem of partners and customers, which I call the IT Devil's Triangle.

A recent article in the Financial Times discusses "normal accidents," a concept created by sociologist, Charles Perrow, after the Three Mile Island nuclear disaster. Perrow believes that accidents are inevitable in certain complex environments. It is worthwhile considering whether ERP is one of these environments.

High-risk situations, such as ERP, should create a strong action imperative for senior management, particularly the CIO and CFO of organizations implementing this software. At the same time, cannot let the software vendors and system integrators off the hook; they're the primary repositories of implementation experience.

Advice to enterprise buyers: Ultimately, you are responsible for the outcome of any initiative that your organization undertakes. Achieving ERP success requires serious senior management commitment and appropriate allocation of resources -- not just time and money, but also bringing the right people to the table.

In addition -- and this is important -- when you buy enterprise software and hire consultants, hold their feet to the fire to ensure your own success. For example, write contracts that tie vendor payment to successful business outcomes in addition to hourly work performed over time. If the external vendors don't have a financial stake in the success of your project, then isn't something wrong?

Here is Erik Kimberling's list of failed ERP projects and lawsuits, taken directly from his blog.

Year ERP Vendor ERP Customer Reason for ERP Failure and/or Lawsuit Further Information
2010 SAP Lumber Liquidators Problems appear to be largely related to employees having trouble acclimating to the new system, versus malfunctions in the software itself. Read the Article.
2010 JDA Software (i2) Dillard's, Inc. Dillard's had alleged i2 failed to meet obligations regarding two software-license agreements for which the department-store operator had paid $8 million. Read the Article.
2010 SAP and Deloitte Consulting Marin County, California The lawsuit alleges that Deloitte committed fraud and “misrepresented its skills and experience.” Read the Article.
2010 Capgemini and SAP Dorset County in the UK Some workers claimed a job which previously only took a minute was now taking an hour. The system still has to shut down a few days each month to allow data to be processed. Read the Article.
2009 Epicor Software Corporation Ferazzoli Imports of New England Epicor's system never worked as intended or promised. Initially paid: US$184,443.61. To date: US$224,656.42 (included the additional software and services meant to make the system operate properly). Read the article.
2009 Infor Global Solutions Vaughan & Bushnell ERP software giant Infor is taking legal action against customers as it seeks to recoup license fees it claims it is owed. An attorney for the tool company, which sued Infor in this case, confirmed that his client paid Infor something. Read the article.
2009 SAP and Axon City of San Diego The city of San Diego, CA terminated its software implementation contract with services provider, Axon, citing “systematically deficient project management practices” and a project that was running $11 million over budget. Read the article.
2009 Lawson Software Public Health Foundation Enterprises Failed ERP implementation Read the Article.
2009 Lawson Software Sisters of Charity of Leavenworth Health System Hospital chain sues Lawson Software over retiring ERP apps, a breach-of-contract. Its agreement with the ERP vendor requires Lawson to provide -- for just a small fee -- replacements for two software modules that will be decommissioned next year. Read the Article.
2008 Infor Global Solutions Carver Pump Company The company sued Infor over a disputed $451,000 invoice Infor sent Carver in August 2008 for allegedly using the Maxim ERP package without a license since 2000. Carver says it received a perpetual license from CA (which acquired Maxim's original developer, NCA) in 1998 as part of a Y2K upgrade, and claims it stopped using Maxim anyway in 2006. The companies settled out of court in November. Read the Article.
2008 SAP Levi Strauss The company was forced to take shipping systems at its three massive US distribution centers off line for a full week only to lose business and customer orders. Read the Article.
2008 SAP Waste Management Waste Management wanted an ERP package that could meet its business requirements without large amounts of custom development. Read the Article.
2008 Oracle Overstock.com "When we upgraded our system, we didn’t hook up some of the accounting wiring; however, we thought we had manual fixes in place. We’ve since found that these manual fixes missed a few of the unhooked wires." Read the Article.
2008 SAP City of Portland Portland’s SAP project, budgeted at $31 million in 2006 for a 2007 go-live date, is now estimated to be nearly $50 million. Portland has fired its systems integrator, Ariston Technologies and Consulting, and is working directly with SAP services to get the system up and running. Read the Article.
2006 Infor Global Solutions Scientific Components Scientific Components sued Infor in U.S. District Court in New York over a dispute concerning temporary license fees needed to access MAPICS running on a secondary iSeries server connected via iTera's high availability software. The companies settled in December 2006. Read the Article.
2006 Infor Global Solutions Western Textile Company The Company sued Infor over allegations by Infor that the company owed it more than $100,000 for exceeding the number of sessions in its license agreement; Western Textile claims its original license with CA was measured by concurrent users, not sessions. They settled in March 2007. Read the Article.
2004 PeopleSoft and Kaludis Consulting Group Cleveland State University A faulty installation of the company's ERP applications. The lawsuit charges PeopleSoft with breach of contract and negligent misrepresentation, among other counts, and claims PeopleSoft's solutions for managing student applications amounted to little more than "vaporware." Read the Article.
2003 Baan USA Inc. Dexter Axle Company Dexter asserted twelve claims: breach of the Software Agreement and the Consulting Aggrement, two claims of breach of express warranties, breach of implied warranties, fraudulent inducement of the Software Agreement and the Consulting Agreement, fraud, negligence, constructive fraud, statutory deception, and unjust enrichment. Read the Article.
2003 EDS British Sky Broadcasting Sky has alleged that EDS dishonestly exaggerated its abilities and resources when bidding for the contract, resulting in late delivery of the project and lost benefits that make up the the £709m in damages it is claiming Read the Article.
2001 Oracle Corporation and KPMG Consulting The University of Cambridge in the United Kingdom Considered possible legal action against Oracle and KPMG Consulting for a faulty computer system that the university estimates it spent $13 million installing, with the aid of the two companies. Read the Article.
2001 SAP (R/3) and Andersen Consulting (now Accenture) FoxMeyer Corp. The company claimed that a botched SAP R/3 implementation in the mid-1990s ruined the company, driven the company to bankruptcy. Six years later the bankruptcy trustee and Accenture settled out of court and the lawsuit was dismissed on August 8, 2002. Read the Article.
2001 SAP Arkansas State The National Federation of the Blind of Arkansas had sued the state in 2001 claiming the AASIS system was not fully accessible to blind persons. The state, in turn, filed a third-party claim against SAP, blaming the vendor for the accessibility problems. SAP agrees to fix Arkansas ERP system. Read the Article.
2000 PeopleSoft and Deloitte & Touche Gore & Associates Alleges PeopleSoft sent in unqualified consultants to do the job, forcing Gore to rely on PeopleSoft's customer service hotline to set up the program after major problems occurred when the system went live. Read the Article.
2000 Oracle Corporation Tri Valley Growers Alleging fraud, negligent misrepresentation, malpractice, and breach of contract. TVG claimed that the database giant failed to fulfill its contract to modernize the company's production and management systems using its ERP applications. Read the Article.
2000 J.D. Edwards and IBM Evans Industries Inc. The suit alleged that OneWorld was "defective and failed to operate and function as promised by the defendants." Failed and refused to fulfill its obligations under its agreements" and with IBM failed to install the OneWorld software "such that it is operational. Read the Article.
1999 SAP, Siebel, and Manugistics Hersey Foods The company was having problems with its new order-taking and distribution computer system. Read the Article.
Thanks to Paul Kedrosky for pointing me to the Financial Times article and discussion of normal accidents. Photo by Michael Krigsman.

Topics: SAP, CXO, Enterprise Software, IT Employment, Software

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Michael Krigsman is recognized internationally as an analyst, strategy advisor, enterprise advocate, and blogger. For CIOs and IT leadership, he addresses issues such as innovation, business transformation, project-related business objectives and strategy, and vendor planning. For enterprise software vendors and venture-funded star... Full Bio

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