erp project failure – what can Dubai companies learn?.

November 26th, 2012 by Stephen Jones Leave a reply »

The U.S. Air Force has  scrapped a US$1 billion, ERP (enterprise resource planning) software project concluding that finishing it would cost far too much more money for too little gain.

The Expeditionary Combat Support System (ECSS), , “..has not yielded any significant military capability,” an Air Force spokesman wrote  in an email statement last week. “We estimate it would require an additional $1.1B for about a quarter of the original scope to continue . The Air Force will instead need to use its “existing and modified logistics systems for 2017 audit compliance,” the statement adds.

Meanwhile IBM has been hit with a multimillion-dollar lawsuit by chemical products manufacturer Avantor Performance Materials, which alleges that IBM lied about the suitability of an SAP-based software package it sells in order to win Avantor’s business. “IBM representatives assured us that its Express Life Sciences Solution, a  pre-packaged software solution, was suitable to run Avantor’s core business processes,” says John Steitz, President and CEO of Avantor. “In fact, the solution—and the service and support offered by IBM throughout the implementation—proved to be woefully misaligned with the unique needs of our company and our customers.”

IBM also violated its contract by staffing the project with “incompetent and reckless consultants” who made “numerous design, configuration and programming errors,” it states. To conceal the System’s defects and functional gaps, IBM ignored the results of its own pre-go-live tests, conducted inadequate and truncated testing and instead recommended that Avantor proceed with the go-live as scheduled — even though Avantor had repeatedly emphasized to IBM that meeting a projected go-live date was far less important than having a fully functional System that would not disrupt Avantor’s ability to service its customers,” the suit states.

The resulting go-live, which occurred in May, “was a disaster,” with the system failing to process orders properly, losing some orders altogether, failing to generate need paperwork for U.S. Customs officials and directing “that dangerous chemicals be stored” 

IBM, meanwhile, has already pocketed over $13 million in fees from Avantor for a systems implementation project it mismanaged and was unable to perform properly,” the lawsuit states. “Incredibly, IBM is now seeking to profit from its misconduct by demanding millions of dollars in additional fees to redesign and rebuild the defective System it implemented.”

IBM said it disagreed with the claims and will defend itself against them vigorously. “We believe the allegations in the complaint are exaggerated and misguided and are surprised that Avantor chose to file suit,” a spokesman said via email. “IBM met its contractual obligations and delivered a solution that Avantor continues to use in its operations.”

Avantor’s suit does state that IBM made efforts to right the project’s course, albeit ultimately ineffective ones, following a June meeting with Avantor’s then-CEO, Rajiv Gupta. IBM “began to acknowledge the severity of the situation” and replaced many of the original consultants, according to the suit. These workers did extensive redesign and programming.

In July, “IBM told Avantor to cancel every pending order and reset the entire System in light of pervasive warehouse problems,” it states. “IBM said this was necessary to discover the root cause of the problem. Ultimately, IBM acknowledged that it had to engage in extensive remedial efforts to redesign and rebuild the System that Avantor hired it to deliver.”

Numerous” IBM workers have told Avantor personnel that IBM failed to manage the project correctly and use SAPbest practices,” according to the complaint. IBM workers even called the project the worst SAP implementation they’d ever seen, it adds.

These are not unqiue cases  – in 2011:

  •  the UK government scrapped the £12 billion National program for IT in the NHS.
  • New York’s massive CityTime payroll system project, which has been wracked by cost overruns and a criminal probe into an alleged kickback scheme involving former employees of systems integrator SAIC and a subcontractor, TechnoDyne.
  • In April, massive technology distributor Ingram Micro announced that problems with an SAP project in Australia had made a significant dent in its first-quarter profits. Net income stood at $56.3 million, a drop from $70.3 million in the same quarter the previous year, Ingram Micro said at the time. The shortfall was “primarily attributable to difficulties transitioning to a new enterprise system in Australia,” it said.
  • In May, Montclair State University in New Jersey filed suit against Oracle, claiming the vendor had completely botched a PeopleSoft project that was supposed to replace the school’s aging legacy systems.  Because of Oracle’s alleged misdeeds, it might cost up to $20 million to finish the project, Montclair has claimed. But Oracle quickly fired back, claiming that the problems were the school’s fault.  “When issues arose during the course of the project, it became clear that MSU’s leadership did not adequately understand the technology and the steps necessary to complete the project,” Oracle said in a court filing. “Instead of cooperating with Oracle and resolving issues through discussions and collaboration, MSU’s project leadership, motivated by their own agenda and fearful of being blamed for delays, escalated manageable differences into major disputes.” Montclair recently filed an amended complaint that adds a wealth of detail to its claims, including an allegation that Oracle ran a “rigged” software demo during the sales process and was also guilty of extortion.
  • Outdoor furniture seller ParknPool took Epicor to court in late November over a “big mess” of an ERP project that  Epicor said they could do it in seven weeks. “We gave them seven months, and we got zero,” he said in the interview. “I couldn’t even look at a profit-and-loss statement. We couldn’t process orders. Epicor denied wrongdoing: “Our products, consulting personnel and partner performed well, all of which Epicor believes will be borne out as we defend our position in any proceedings.”
  • In February, the government of Marin County, California, sued Deloitte Consulting and SAP in federal court, claiming they had “engaged in a pattern of racketeering activity” of more than $20 million in connection with a failed ERP project. Marin County  sued Deloitte in a lower court  claiming that the systems integrator had dumped inexperienced workers on the project, which led to the problems. The county decided to rip out the SAP software and replace it with something else, in the belief that doing so would be a lower-cost option to finishing the job.Its suit alleges that SAP and Deloitte are in violation of the federal Racketeer Influenced and Corrupt Organizations act (RICO). Under the statute, the county’s desired $35 million in damages would be tripled.Marin County later said that SAP enticed it into joining a “Ramp-Up” early adopter program for the software suite, a move it claims ended up contributing to the project’s failure since the software was new and risky.SAP and Deloitte both denied any culpability. Deloitte called Marin County’s federal suit a “frivolous” tactic and an attempt to get a more favorable legal forum for its claims, while SAP has questioned why it would want to collude with Deloitte on a project that was doomed to fail,

What are the lessons?

Software is not enough. Proven software reduces risk. Proven consultants who see the project through are more important.  What is good for one company may not be good for yours – clear requirements are essential to get desired results – demos need to be relevant to your need if you ask for a dmeo then you get one – if you don’t provide a clear company brief and expectations, and test data and scenarios, or invest in a detailed scoping exercise, or defining business processes then  you can’t blame the vendor for showing his solution in the best light nor that you chose to buy it on that basis.

If something sounds too good to be true then it probably is – low cost, perfect fit, out of the box, rapid implementations etc may be what you want to hear but do you really believe it ? If you deliberately buy cheap and hope to squeeze the vendor who takes the blame when all goes wrong?

How much project management is  required from both sides. If you do not allocate resoutces for this, nor expect to pay the implementation partner to provide a project manager then how will problems be identified and managed?  The bigger and the more complex a project he more staff it needs and the harder it is to get suitable resources, the longer the project the more chance the goals will change the technology will change the available resources will change. 

QA is part of the process not something that is added afterwards, it is the users job to test and declare statisfatory not the implementation partner.  If the small print says out of the box reports and workflows then have you checked that those are adequate, if it says you have to load you own data or create your own documents do you really know what that involves and have you really understood the workload and skills.  

If you follow  a process of evaluating and selection (partner and product and own team) , preparing, defining building, testing, documenting training piloting, auditing, supporting all packaged with managment and review and reporting then how can it fail at the end? What is the hidden cost of your own team being tied up twice as long as needed to achieve half the result?

Nothing wrong with implementing fast and cheap – but if there is a significant different in partner estimates  do you really understand why  – what is really included and not included – why is yours the one special project that can implement in half the time with no risk?

Why do we stress such matters so much in our implementation, why do we walk away from some sales rather than cut corners,  why do our customers say “go with Synergy and sleep at night.” For all the doom and gloom of high profile project failures the blame is seldom clear cut and there is usually a large dash of wishful thinking on both sides.   The good news is that by focusing on proven solutions, with realistic phased implementation scope, delivered by certified and experienced consultants following proven processes we regularly deliver on time on budget projects.  It also takes two hands to clap and we ensure the customer understands their contribution and where we need to help.


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