MillerCoors sues HCL Tech for $100 million over failure to implement ERP project

In a further blow for Indian IT that is already sailing in choppy waters, MillerCoors recently filed suit against India's HCL Tech for breach of contract. "HCL was unable to adequately staff the project and maintain the project schedule," the filing said. Consequently, the beer maker is asking for compensatory damages "in excess of $100 million".

HCL was first hired in 2013 to execute a standard enterprise resource planning implementation using a SAP solution at MillerCoors, which was attempting to adopt more innovative business practices. The new system apparently would allow the integration and sharing of data that modern supply chain software solutions allow, and for linking accounting and sales to storage, distribution, and human resources.

The company had outbid Infosys to snap up the project, which was then worth about $53 million, after which an additional $9.6 million was added to the contract price to adjust for time frames.

Somehow, it didn't go according to plan. "HCL was unable to adequately staff the project and maintain the project schedule," said the lawsuit. So much so that in June last year, MillerCoors dispatched a notice of termination to HCL and is apparently on the lookout for someone new for the project.

For its part, HCL Tech says that there's no bad blood between itself and MillerCoors -- on the contrary, the IT company says that it has good relationships with them. HCL also said in regulatory filings that it has other projects running simultaneously at the alcohol giant. "We are in discussions with MillerCoors to resolve this matter amicably," it added.

IT TAKES TWO TO MAKE A THING GO RIGHT

While this may look like a pretty bad public setback for HCL, the truth is that enterprise resource planning (ERP) implementations increasingly are complex affairs with not insignificant failure rates.

Computerworld said that ERP specialist Panorama Consulting took a peek at ERP implementation outcomes in 2015 and "discovered that 21 percent of companies surveyed considered theirs a failure, 58 percent a success, and the balance was either neutral or they didn't know."

It's not so difficult to imagine why this is the case. These "technology transformation" exercises could bomb for any number of reasons -- a lack of appropriate skills on the tech side, pushback on management's side of new processes, the challenge of a myriad of different units sprawled all over a geographic region, you name it -- but the solutions provider is likely to most often take the first hit for its failure.

"Large transformation deals require complex changes to business processes, organization structure and roles, and integration of multiple technologies. A strong business-led approach to such programmes combined with readiness to change and cross stakeholder alignment is needed to make transformation programmes successful. It is also imperative that the right skill level and mix are deployed from both the client organization and service provider side to ensure success," said Malay Shah, senior director, High Tech sector for consulting firm Alvarez & Marsal India, in Business Standard newspaper.

IMPACT

In the near term, HCL feels that the whole affair won't impact its March quarter much and that Chicago-based MillerCoors is still its client. Industry observers seem to concur. "I don't think the case filing will have material effect on HCL Tech's business. There are always some failures and you have to weigh one client saying something bad versus having several reference clients," an analyst with a Mumbai brokerage told the Economic Times.

Of course, if HCL loses the suit, outcomes could change very quickly. It is already a precarious time for Indian IT with the old, commoditized business lines such as infrastructure maintenance and application development rapidly transforming into a combined ask involving new frontiers such as artificial intelligence and big data. Contract renewals are increasingly beginning to depend on this hybrid, so HCL Tech will be hoping for a swift resolution to the matter.