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Business Solutions with SAP

ERP Project Failure 1

The following SAP project failures are the first three of nine or ten we will review over the next few weeks.  The SAP project failures we will review were high profile examples with significant lessons to be learned.  In nearly every case where the SAP implementation actually occurred, within 1 to 2 years after the troubled go-live the SAP software itself was reasonably well-received and the business was generally satisfied.

I apologize for the timing of these posts so close to the Christmas and New Years seasons but considering that a number of new SAP or other ERP projects are starting in the first quarter of next year I didn’t want to wait.

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One interesting feature of the SAP project failure research is that none of them I could find can be attributed to the actual SAP software itself.  Although a few customers claimed it was the software when doing more thorough research I have only found structural problems with the project itself and not directly attributed to the software. After all, as of this post, SAP software has been installed or implemented over 100,000 times.  Careful research shows that none of the high profile SAP project failures were related to technical failures of the standard software, SAP architecture, application depth, or the breadth of the application.

Problems with SAP projects from the published literature usually involves:

  • poor project management and control,
  • little or no change management,
  • poor training,
  • significant custom coding, or
  • poor consultants from the SAP system implementation partners or vendors.

This sampling of project failure issues will start from the most recent to some of the older ones.

SAP ERP Project Implementation Failure Overviews

Marin County California – SAP ERP project failure overview (2009)

Financial, HR, and Payroll systems were implemented by Deloitte.  This project led to a lawsuit filed by Marin County (the customer) in 2010 alleging fraud.  For example, from the introduction to the Marin County legal complaint Marin notes:

Deloitte [claimed to have] assembled a team of its ”best resources” who had “deep SAP and [business] knowledge.”  These representations were fraudulent. Indeed, at the time Deloitte made them, it knew that it did not have the ability or intention to provide the skilled resources necessary to deliver a successful SAP implementation… Deloitte also knew that because the County did not have any prior ERP implementation experience in general, or SAP experience in particular, it  would be depending on Deloitte to oversee, guide and manage the project.  Notwithstanding such knowledge, Deloitte made these false representations in order to obtain the contract for the County’s lucrative SAP project.  [R]ather than providing the County with SAP and public sector expertise, Deloitte used the County’s SAP project as a trial-and-error training ground to teach its consultants – many of them neophytes — about SAP… software, all at the County’s expense.

A number of significant problems were caused throughout the project and Marin County is in the process of abandoning its SAP software implementation.

  • Fake Consultants / Trainees / unqualified consulting resources on the project
  • Pay rates, payroll, and wage information were incorrect.
  • Huge amounts of custom coding to replace standard SAP functionality (which Marin County claims would have been sufficient).
  • Inability to easily make adjustments and resolve compensation issues (much of this because of custom ABAP programming).
  • Insufficient training and change management.
  • Lawsuit claims improper relationships and ethical problems with the Deloitte and Marin County employees involved in the project.
  • Has since announced they are abandoning the SAP project after working for a couple of years to resolve the underlying problems.
  • Lawsuit is still ongoing and proceeding slowly in Marin County, CA.

Lessons Learned: Throughout the legal complaint by Marin County against Deloitte Consulting there were allegations of fraud with the consultants they provided.  Taking the Marin County complaint at face value they knowingly provided inexperienced and incompetent consultants for the government project.  Worse still, at least according to the complaint, this was done knowingly and deliberately.

For more information on the required skills, as well as how to screen and interview good SAP consultants please see these posts:

Screening and Interview Methods to Find the Right SAP Consultant
Screening and Interview Methods to Find the Right Consultant – Part 2

Shane Company – SAP ERP project failure overview (2008)

  • Shane Company had 23 stores in 14 states and filed for bankruptcy in January of 2009.
  • Shane initially blamed their company bankruptcy on SAP as a software application suggesting that their bankruptcy was partly due to SAP project cost overruns and SAP project delays.
  • The initial project cost was budgeted or planned for $10 million but ended up costing approximately $36 million and was planned for 1 year but ended up taking approximately 3 years [FN1, pg. 26]
  • After initially blaming SAP, Shane later admitted that their (“low cost”) SAP system implementation vendor, Ciber Novasoft, was more responsible for the SAP project failure than the SAP ERP software.

To summarize Shane’s SAP ERP failure “Enterprise Matters” offers succinct insight:

[L]arge enterprise systems, that have been installed in thousands of companies, don’t cause customers to lose money due to implementation failure (This is true for SAP, Oracle, and everyone else). It takes the customer’s managers, usually aided and abetted by a company like Ciber, to get it really wrong. [FN2]

Lessons Learned from the Shane Company SAP ERP project failure [FN3]:

  • Poor SAP ERP management, both on the project management side and the Shane Company senior management.
  • An improper budget and implementation plan.
  • Scope and cost were not properly managed.
  • Poor or undefined processes along with poor or untested system functionality.

For more information on proper scope, management, and project oversight see the following posts:

Aligning SAP Scope to Meaningful Business Requirements
Effectively Scope Your SAP Project
SAP System Vendor Project Success Criteria & Factors 2

Select Comfort – SAP ERP project failure overview (2008)

Select Comfort is included as a recent example of an SAP project that was abandoned rather than actually failed.  As a brief summary: the entire project was improperly conceived from the beginning because there was no pressing business need to change systems; a new CIO initiated the project; the scope was massive (ERP, CRM, SCM, APO, etc.); and the project was performed only by internal employees.

I’m sure there are other factors but it is obvious this project was destined to fail from the beginning.

Lessons Learned: Enterprise applications should be implemented one at a time (or at least very limited), scope must be carefully managed, and there should be a proper justification or business case for enterprise applications.

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[FN1]  Bhagwani, A. (2009). Critical Success Factors In Implementing SAP ERP Software, University of Kansas Graduate School. http://www.r3now.com/literature/2009-Bhagwani-SAP-Project-Success.pdf

[FN2] Shane’s Blame Game: Management, Not SAP Retail, Sinks Jewelry Company
http://ematters.wordpress.com/2009/01/14/shanes-blame-game/

[FN3] Some of these were derived from: Shane Company: Lessons Learned From an ERP Implementation Failure
http://www.erpko.com/articles/erp-articles/shane-company-lessons-learned-from-an-erp-implementation-failure/

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Contact me today through our site contact form ( http://www.r3now.com/contact ), phone, or e-mail.

Bill Wood
+1 (704) 905 – 5175
Bill Wood contact

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7 Responses to “SAP ERP Project Failure Lessons Learned and Mini Case Studies 1”

  1. Check out Airgas… They went live April 1….

    • Bill Wood says:

      Thank you for the suggestion. Is there someone I could contact there to find out what the state of the project is? You can always e-mail me privately at my e-mail address. You could use a throwaway e-mail address as well or just reach out through the Contact form.

      I’m not above talking directly to insiders who might know what is going on. And I certainly would not reveal anyone’s name either.

      Bill

  2. Manjunath Rao says:

    What about Oracle implementation? Have there not been any failures?

    What is anybody doing about rampant fake resume industry that is still flourishing in IT sector.

    • Bill Wood says:

      Oracle has had several failures. However I primarily focus on SAP and do not have much industry knowledge of Oracle’s products or customers. On the resumes I would LOVE to see some Federal level RICO actions because in a very real sense (without joking here) it IS organized crime. When these organizations set out to defraud companies by using fake backgrounds, fake credentials, etc., that is part of the Racketeering and Corrupt Influence act. I would love to see some of them lose their businesses AND their personal property. Many of them may not realize that incorporation does NOT protect from RICO. Under RICO all of a person’s personal property can be taken as well as all of the business property.

  3. Manjunath Rao says:

    I would love to see the same. But who will bell the cat? Whistle blowing do not seem to work. Companies dont care because all they want is somebody to do the job. The recruits dont care because they want the job. Oracle/SAP may not care because they dont want to spoil their own market. The racketeers dont care because they are flourishing. General public may care but what can they do?

  4. […] In the first post of the series it was the Shane Company (2008) (SAP ERP Project Failure Lessons Learned and Mini Case Studies 1). […]

  5. Bill Bloggs says:

    You should look at Trade and Investment NSW Australia – what a mess

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