The right implementation and integration team is critical to ERP implementation success. From project managers and department leaders to third-party consulting teams and systems integrators, every stakeholder matters.
This is a lesson that Marin County, California learned the hard way. In 2005, the county began plans to implement SAP ERP software, aiming to automate and simplify its finance and HR processes. The county chose Deloitte as the systems integrator, and the project seemed destined for success.
How did this partnership turn into a $30 million disaster? Today, we’re looking at the Marin County ERP failure case study to find out what went wrong.
Spoiler Alert: It’s the same kind of shenanigans that our ERP expert witness team unearths every day.
The Marin County ERP Failure Case Study: A High-Level Overview
When Marin County initially purchased an SAP ERP system, the goal was to achieve operational efficiencies. Yet, from the very beginning, the system failed to produce the results they wanted to see. In fact, county officials had a difficult time even creating basic financial reports.
As of April 2009, a grand jury probe concluded that the project had cost local taxpayers a staggering $28.6 million. By 2010, Marin County’s Board of Supervisors voted to stop the ongoing project and seek a replacement solution as soon as a viable one became apparent.
By that time, the county hadn’t issued financial statements for the past two fiscal years. Officials were also unable to reconcile cash balances or administer payables, receivables, inventories, or fixed assets. Even their pension administration function stalled.
Marin County placed the blame on Deloitte, claiming that the systems integrator was ultimately responsible for the system’s inefficiencies. They claimed Deloitte was incapable of providing the expert advice, leadership, or guidance necessary to support the project’s success.
Among their many disputes was the claim that the Deloitte staff members assigned to the project lacked even basic SAP understanding, which put the county at a disadvantage from the beginning. Naturally, Deloitte denied all of these claims.
Though Marin County sued the integrator for $35 million in 2010, it only netted $3.9 million, taken out of Deloitte’s consulting fees.
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4 Lessons Learned From This SAP Failure
What can you learn from the Marin County project failure as you begin your own ERP implementation? Let’s look at some of the key takeaways.
1. Project Managers Shouldn’t Hold Vendor Bias
When Marin County sued Deloitte, one of its allegations was that Deloitte had a conflict of interest by influencing the county’s own project manager to conceal many of the project’s misgivings. This included accepting incomplete work, as well as hiding project risks from Marin County senior officials, and pushing ahead against better judgment so the project’s two software releases could go live.
This brings us to our first key point. Your project manager must not have financial ties to your ERP vendor. This is the person who will influence the most important parts of your implementation, and you should be able to trust their judgment. They cannot provide advice that’s in your best interest if they hold a clear bias toward a particular vendor.
If you’re hiring a third party, steer clear of any that aren’t tried-and-true independent ERP consultants.
2. Scrutinize the Resources Assigned to Your Project
When assembling your project team, don’t automatically hire people based on the name of their company. As Marin County officials learned, the experience and knowledge of each individual matter more than the label on their name tag.
Before starting a project, make sure you clearly understand who will be working on it. Interview all prospective consultants and ask specifically about their experience with ERP implementations in your industry.
You’re also within your rights to conduct reference checks on any consultants you hire. Request a list of similar projects they’ve worked on and follow up with those past clients.
3. Follow a Proven ERP Implementation Methodology
A well-defined ERP implementation methodology gives a sense of order to your project. This is a proven set of steps that you can perform to make sure your project meets performance standards and goes live on time and within budget.
As you review available methodologies, ask these questions:
- Is this a sound, reviewed, and published methodology?
- How has this methodology performed in the past?
- How many ERP projects has this methodology been successful on?
- Have any companies used this methodology and failed?
- How will we measure incremental success with this methodology?
- How will we measure project success with this methodology?
Once you have chosen the right methodology for your project, make sure everyone on your team understands the steps and milestones. This includes any third-party partners, consultants, or systems integrators.
4. Be Wary of Consultants’ Promises
It’s common for ERP vendors and consultants to oversell their services and make lofty promises in an attempt to win business. This is especially true while you’re still in the initial selection phase.
In the Marin County case, officials claimed that Deloitte brought its A-game when making the sales pitch, sending its best representatives to the meeting even though they wouldn’t be the ones managing the project.
When situations like this happen, the consultant will eventually switch out those prolific leaders with less expensive (and less experienced) staff members.
To keep this from happening, verify that the consultants you choose will be the ones working on your project for the full duration. In the statement of work, there should be a clear clause that allows you to veto any staffing changes that occur once you’ve made your official team selections.
Protect Your ERP Project From Setbacks and Failures
In retrospect, the major warning signs and red flags in the Marin County ERP failure case study are clear as day.
The key lesson here is to hire the right personnel from the beginning. Once you have the right people in place, be sure to follow a proven methodology to ensure you have a well-defined plan.
Looking for unbiased, experienced consultants for your next project? Request a free consultation below to learn more about the ERP consulting services we can provide.
