Business Solutions with SAP

lost cashAfter a contentious battle that started brewing in March of 2008 SAP and Waste Management have reached a settlement agreement.  While the details are undisclosed, it appears that the whole issue was becoming so expensive to litigate that it was probably more cost effective to move on.

In a CIO article published on April 9, 2009, SAP had 25 – 30 contract attorneys working on the litigation and it had cost them millions.  Over and above that SAP also claimed that their legal discovery process had also cost over a million dollars as well [FN1].   That was just over a year ago. 

There are additional interesting twists and turns in this saga and while I am not claiming SAP is completely innocent there are certainly lessons to be learned.  For example, one writer points out that Waste Management’s leadership was terminated for “agressive” accounting practices, and then replaced, and shortly afterward the SAP ERP implementation was started.  It would certainly be reasonable to assume that that new management was not familiar enough with the company or its employees to find the right people to make the right decisions.

Waste Management was a company in crisis. SEC Administrative Proceeding No. 3-10513 had found the following: “As early as 1988, members of Andersen’s audit engagement tram recognized that Waste Management employed ‘aggressive’ accounting practices to enhance its earnings.” In the brouhaha that followed, Waste Management’s board fired the company’s management.

Waste Management’s executive suite attained their current positions in 2004. As such, it seems that the company had a lot on its plate at once: overcoming an crisis, appointing new leadership, and launching a major ERP project…

If SAP’s software is indeed a “complete failure,” Waste Management’s executives might well have been asleep at the wheel; no one should pay $100 million and wait two years to find out they’ve bought a defective product. [FN2]

The normal course of litigation over the failed SAP implementation had both parties making claims and pointing fingers.  There were the claims, and the counterclaims, and the back and forth, and the armies of lawyers, and the thousands of pages of court filings, and the millions spent by both sides on the litigation.  It was time for this to finally end.

Waste Management claimed in its lawsuit that they “wanted an ERP package that could meet its business requirements without large amounts of custom development…” They also claimed “SAP used a ‘fake’ product demonstration” and “SAP’s technical team had ‘recommended that SAP deliver to Waste Management a later version of the software than the version SAP in fact delivered’.” They also claimed SAP knew the software was “unstable and lacking key functionality…” [FN3]

SAP claimed in its legal counterclaims that “Waste Management didn’t ‘timely and accurately define its business requirements’ nor provide ‘sufficient, knowledgeable, decision-empowered users and managers’ to work on the project.” [FN3]

SAP Implementation Failure Lesson Learned

First, as I have often noted, senior management support is critical for success.  However their support is not enough, what the Waste Management lawsuit points out is that risk management (risk identification and risk mitigation) are critical components of an SAP project.

Too often we hear about the “success factors” of an SAP or large ERP project.  But behind those success factors is the risk if those factors are lacking.  In this case it seems entirely reasonable, and plausible, that Waste Management did not provide key, timely information or key decision-makers as SAP had said.  However, I also find some of Waste Mangement’s other claims they made in later pleadings that the SAP sales force had a strong hand in creating the problem because the sales person was concerned about getting their million dollar commission. 

So, while I do not put a lot of store in serious application gaps or problems, I do give some credence to their claims about the nastier side of business.  The acceptance of sales scams and the failure of SAP to adequately assess and then mitigate the implementation risks.  The idea that the company did not provide good resources, or that those resources would not make decisions is likely valid but those are known risks that should have been raised to the steering committee.  In the end, this lawsuit should have never happened.

[FN1]  SAP: We’ve Spent Millions So Far on Waste Management Suit. from IDG Press. (retrieved 5/11/2010).

[FN2] SAP sued by Waste Management, March 27, 2008. (retrieved 5/11/2010)

[FN3] [FN3]  SAP, Waste Management settle lawsuit.  Business Week. May 3, 2010. (retrieved 5/11/2010)


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