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SAP ERP Project Failures Lessons Learned and Mini Case Studies 2

December 20th, 2010 by
SAP ERP Project Failures

SAP ERP Project Failures

The following SAP ERP project failures cover the importance of testing, change management, training, senior management involvement, scope management, and quality of the consultants provided by ERP implementation vendors.

With the exception of the inept, incompetent, or otherwise unqualified “con”sultants provided by some system integrators it is important to note that these failure overviews illustrate many of the points made by Steve Phillips in the post on Software Consulting Firms and Clients Myths and Half Truths .

There Mr. Phillips lays out pretty significant areas where the business must chart and then control their own project destiny.

For a table of the primary areas of responsibility for end customers to ensure project success please see SAP Success Factors for Vender Selection – Responsibility Matrix 2 .  The table developed there is derived from the academic literature and my own experience.  I have added my opinion on how the responsibility for those success factors is divided between the customer and the SAP implementation partner or vendor.

Continuing on the series of SAP ERP project failure overviews, here are three more.

SAP ERP Implementation Failure Overviews – part 2

Levi Strauss & Company – SAP Failure? (2008)

  • After go-live shipping was prevented for one week and there were legacy system integration issues.  Levi was an interesting case study because many industry experts believe the SAP implementation was used as an excuse for broader economic issues affecting Levi.
    • One week of delayed deliveries was insufficient to explain the overall drop in financial performance (approximately 98% decrease in revenue could not be sufficiently tied back to the SAP implementation).
  • Levi Strauss has since worked through and resolved the implementation issues and SAP is running smoothly.

Lessons Learned: Ensure that all legacy system interfaces are carefully tested before going live. Don’t use SAP or enterprise application implementations as an excuse for poor economic or poor overall market conditions.

Waste Management Incorporated – SAP ERP Failure Overview (2008)

  • 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…” [FN1]
  • SAP claimed that its application could meet the company’s needs without modification.
  • 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.” [FN1]

Lessons Learned: First and foremost any organization or company who implements SAP, ERP, or other enterprise software applications must ensure they are in control of their own project. This would generally fall under numerous critical success factors: business process engineering / change management, scope management, senior management support, formal project plan and schedule, consultant experience, implementation strategy, and amount of custom coding.  Delivering a project with standard system functionality, and on time / on budget requires strong leadership from both the customer and the integrator.  For additional insight and a somewhat different perspective please see the post where SAP and Waste Management Finally Settle .

Los Angeles Unified School District – SAP ERP-HR Failure Overview (2007)

  • Fake Consultants / Trainees / unqualified consulting resources on the project
    • “[I]t appears Deloitte (the implementation partner) brought unqualified resources (i.e., personnel) to the project.” [FN2, pg. 28].
    • I personally encountered one of these fakes as a project manager for another company looking for a workflow resource.  Their ABAP and SAP skills were horrible but they got a great reference from LAUSD.
  • Lack of cooperation with the Teacher’s Union and no user buy in.
    • This is a project planning and change management issue; the company and the integrator bear this responsibility.
  • Has since worked through and resolved the implementation issues and SAP is running smoothly.

Lessons Learned: SAP implementation vendors and partners may allow margin desires to override quality to the point of presenting significant project risks.  It is critical to evaluate every consultant any integrator brings onto your project.  There are just too many fakes in the marketplace that do not have proper background checks.

======================

[FN1]  SAP, Waste Management settle lawsuit.  Business Week. May 3, 2010.
http://www.businessweek.com/idg/2010-05-03/sap-waste-management-settle-lawsuit.html (retrieved 5/11/2010)

[FN2]  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




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SAP and Waste Management Finally Settle

May 12th, 2010 by

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.  CIO.com from IDG Press. http://www.cio.com/article/488866/SAP_We_ve_Spent_Millions_So_Far_on_Waste_Management_Suit (retrieved 5/11/2010).

[FN2] SAP sued by Waste Management, March 27, 2008.  http://itknowledgeexchange.techtarget.com/sap-watch/sap-sued-by-waste-management/ (retrieved 5/11/2010)

[FN3] [FN3]  SAP, Waste Management settle lawsuit.  Business Week. May 3, 2010. http://www.businessweek.com/idg/2010-05-03/sap-waste-management-settle-lawsuit.html (retrieved 5/11/2010)




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