As we outlined in a blog post earlier this year, ERP implementations fail for five key reasons. Unfortunately, some of these failures lead to heads rolling, millions of dollars of budget overruns, and in some extreme cases, lawsuits against software vendors. In fact, the number of inquiries we have received to act as expert witnesses in ERP lawsuits has increased dramatically in the last twelve months.
When working with clients, we often hear the perception that most ERP failures or lawsuits must pertain to SAP implementations . After all, Hershey’s, Waste Management, and a host of other high-visibility failures involved SAP’s ERP software. However, our research shows that there is no pattern to ERP failures and lawsuits, other that they happen more often than they should and no one ERP vendor appears more or less likely to experience failure than the others.
For example, two new lawsuits were announced in the last 30 days: one against Oracle and another against JDA’s i2 unit.
In fact, we looked at the most recent lawsuits to see if there was a pattern among vendors and software solutions. As you will see in the table below, there is no apparent pattern to the vendors named in recent legal matters. If anything, when expressed as a percentage of total client base, SAP and Oracle probably have a lower lawsuit rate than other vendors on the list. However, because large and high-visibility companies are more likely to embark on Oracle or SAP implementations, those organizations are more likely to receive attention when something goes awry.
Lawsuits Againt ERP Vendors
|ERP Vendor||Year||ERP Customer||Reason for ERP Lawsuit||Article Link|
|Epicor Software Corporation||2009||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.|
|Infor Global Solutions||2009||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.|
|Lawson Software||2009||Public Health Foundation Enterprises||Failed ERP implementation||Read the Article.|
|Lawson Software||2009||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.|
|Infor Global Solutions||2008||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.|
|Infor Global Solutions||2006||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.|
|Infor Global Solutions||2006||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.|
|PeopleSoft and Kaludis Consulting Group||2004||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.|
|Baan USA Inc.||2003||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.|
|EDS||2003||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.|
|Oracle Corporation and KPMG Consulting||2001||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.|
|SAP (R/3) and Andersen Consulting (now Accenture)||2001||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.|
|SAP||2001||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.|
|PeopleSoft and Deloitte & Touche||2000||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.|
|Oracle Corporation||2000||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.|
|J.D. Edwards and IBM||2000||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.|
So what are some of the best ways to avoid becoming wrapped up in an ERP lawsuit? There are five key factors that can help you stay out of trouble during your ERP selection and implementation process, regardless of which software you are considering:
- Ensure functional and technical fit of the software you select
- Have realistic expectations about how long the implementation process will take and how much it will cost
- Ensure adequate executive buy-in and support
- Where possible, avoid customizing software rather than leveraging standard functionality
- Ensure sufficient internal and external ERP software implementation expertise on your project team
Read more about these five implementation factors by reading the full blog, Welcome to the Jungle: Lessons Learned from ERP Implementation Failures. In addition, share your opinion about which of the five failure points is the most crucial by taking our poll below.
An Appetite for Destruction: The ERP Implementation Lawsuits Continue…,