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.