Menu
15 famous ERP disasters, dust-ups and disappointments

15 famous ERP disasters, dust-ups and disappointments

It's no wonder ERP has such a bad reputation. The history surrounding the complex and expensive enterprise software market is packed with tales of vendor mud-slinging, outrageous hype and epic failures

Credit: Dreamstime

You can find out how crucial an enterprise resource planning (ERP) software rollout can be for a company from a single word: billions—as in, lawsuits over failed ERP and customer relationship management (CRM) implementations are now being denominated in the billions of dollars.

Greg Crouse, managing director at Navigant Consulting, has learned all about this from inside the belly of the litigious beast, serving as an expert court witness or consultant after spending 25 years managing large-scale projects.

Twenty-one per cent of companies who responded to a 2015 Panorama Consulting Solutions survey characterised their most recent ERP rollout as a failure. So there are a lot of disasters out there.

But the high stakes in these projects, and the uptick in litigation, have meant that they're simultaneously more and less visible than ever. When lawsuits go public, that's a flag that there's a juicy story out there — but legal necessities often mean that the full details of the dispute never come out.

"You'd have a hard time finding anyone who will talk about it — cases either litigate forever or get settled and sealed," says Crouse.

Nevertheless, we've assembled some dramatic ERP flops from over the years and tried to suss some wisdom out of the wreckage. All comments from Crouse are about his general experience with these kinds of cases; he hasn't actually worked on any of the specific disasters we're discussing here.

1 - MillerCoors: Fighting in public, then making nice

In 2014, MillerCoors was running seven different instances of SAP's ERP software, a legacy of the years of booze industry consolidation that had produced the alcohol behemoth. The merged company hired Indian IT services firm HCL Technologies to roll out a unified SAP implementation that would serve the entire company.

Things did not go smoothly: The first rollout was marked by eight "critical" severity defects, 47 high-severity defects, and thousands of additional problems recorded during an extended period of "go-live hyper-care."

By March 2017 the project had gone so far south that MillerCoors sued HCL for $100 million, claiming HCL had inadequately staffed the project and failed to live up to its promises.

But the IT services company didn't take that lying down: In June of 2017 HCL countersued, claiming MillerCoors was in essence blaming HCL for its own management dysfunction, which HCL said was at the real cause of the failure.

Outside observers noted that the wording of the contracts, as outlined in the lawsuits, seemed to be based on a pre-existing general services contract between the two companies, and left plenty of room for error.

Then, in December 2018, the two companies resolved the dispute "amicably", having apparently used the courts as a venue for a high-stakes, public negotiating session.

2 - Revlon: Screwing up badly enough to enrage investors

Cosmetics giant Revlon was another company that found itself needing to integrate its processes across business units after a merger — in this case, it had acquired Elizabeth Arden in 2016. Both companies had hadpositive experiences with ERP rollouts in the past — Elizabeth Arden with Oracle Fusion Applications, and Revlon with Microsoft Dynamics AX.

But the merged company had made the fateful choice to go with a new provider, SAP HANA, by December 2016.

Was HANA an undercooked product doomed to fail? Maybe. What's clear was that the rollout was disastrous enough to essentially sabotage Revlon's own North Carolina manufacturing facility, resulting in millions of dollars in lost sales.

The company blamed "lack of design and maintenance of effective controls in connection with the ... implementation" for the fiasco in March 2019, and noted that "these ERP-related disruptions have caused the company to incur expedited shipping fees and other unanticipated expenses in connection with actions that the company has implemented to remediate the decline in customer service levels, which could continue until the ERP systems issues are resolved."

The crisis sent Revlon stock into a tailspin that in turn led to the company's own stockholders to sue.

3 - Lidl: Big problem for German supermarket giant

It was supposed to be the marriage of two great German companies: SAP, the ERP/CRM superstar, and Lidl, a nationwide grocery chain with €100 billion in annual revenue. The two companies began working together on a transition away from Lidl's creaky in-house inventory system since 2011.

But by 2018, after spending nearly €500 million, Lidl scrapped the project.

What happened? The scuttlebutt is that the problem centred on a quirk in Lidl's record-keeping: They've always based their inventory systems on the price they pay for goods, whereas most companies base their systems on the retail price they sell the goods for.

Lidl didn't want to change its way of doing things, so the SAP implementation had to be customised, which set off a cascade of implementation problems. Combine this with too much turnover in the executive ranks of Lidl's IT department, and finger-pointing at the consultancy charged with guiding the implementation, and you have a recipe for ERP disaster.

4 - National Grid: A perfect storm

National Grid, a utility company serving gas and electric customers in New York, Rhode Island, and Massachusetts, was facing a difficult situation. Their rollout of a new SAP implementation was three years in the making and already overdue.

If they missed their go-live date, there would be cost overruns to the tune of tens of millions of dollars, and they would have to get government approval to raise rates to pay for them.

If they turned on their new SAP system prematurely, their own operations could be compromised. Oh, and their go-live was date was November 5, 2012 — less than a week after Superstorm Sandy devastated National Grid's service area and left millions without power.

In the midst of the chaos, National Grid made the fateful decision to throw the switch, and the results were even more disastrous than the pessimists feared: Some employees got pay checks that were too big, while others were underpaid; 15,000 vendor invoices couldn't be processed; financial reporting collapsed to the extent that company could no longer get the sort of short-term loans it typically relied on for cashflow.

National Grid's lawsuit against Wipro, its system integrator, was eventually settled out of court for $75 million, but that didn't come close to covering the losses.

5 - Worth & Co.: Interminable rollout leads to a lawsuit at the source

Worth & Co. is a Pennsylvania-based manufacturing company that just wanted a new ERP system, and after hearing several pitches in 2014, decided to hire EDREi Solutions to implement Oracle's E-Business Suite. The first go-live date was November 2015. But then things began to slip.

The deadline was pushed back to February 2016; at that point Oracle demanded that Worth & Co. pony up $260,000 for training courses and support contracts. But 2016 came and went and still no rollout.

In 2017 Worth & Co. jettisoned EDREi for another integrator, Monument Data Solutions. Another year was spent attempting, without success, to customise Oracle's suite for Worth & Co.'s purposes.

Finally, after the project was abandoned, Worth & Co. did something novel in February 2019: They sued not the IT vendor, but Oracle, specifically citing the $4.5 million they paid the software giant for licenses, professional services, and training. The lawsuit is still ongoing.

6 - Vodafone: The long arm of the law

When British telecom provider Vodafone consolidated its CRM systems onto a Siebel platform, they ran into problems: not all the customer accounts migrated properly. The company didn't go out of its way to advertise this, of course, but people started to notice when their accounts weren't properly credited for payments made.

The upshot: a £4.6 million fine from the British telecom regulator. And while this incident was concluded with just the fine paid, Crouse points out that regulatory oversight can, somewhat surprisingly, lead to private litigation down the road.

"If there's problems with large scale implementations, people are going to find out about it — because you have to report it to your regulator if things go bad."

Whereas a company might've been previously tempted to keep quiet about the whole affair, with regulators revealing screw-ups, that company might decide its best bet is to cast blame on someone else through litigation.

7 - Washington community college system: When third parties flop

But that litigation can go both ways. For instance, students at Washington State's community colleges have been paying a portion of their tuition every year to help the schools upgrade to a PeopleSoft ERP system that was supposed to go live in 2012.

Instead, the project is still limping along. One cause of delay was internal: the 34 campuses in the system had widely varying business processes that needed to be standardised, which wasn't clear until well into the rollout.

But now another crisis has emerged: Ciber, the third-party company hired to roll out the PeopleSoft system, went bankrupt in April of this year, only to have its assets scooped up by HTC, a Michigan company — and HTC then cancelled its contract with the school system and sued for $13 million, claiming the failed rollout was due to "internal dysfunction" on the colleges' part.

Crouse says that this sort of mutual animosity is not uncommon: "you get into cases where the client is unhappy with the work the implementation firm has done and so they sue them. You also get into issues of the client’s not happy so they stop paying the bills.

"Then you have the third parties that sometimes get involved from a vendor reseller perspective. You can see either side being the plaintiff or the defendant, based on who got mad first."

The rollout is meanwhile stuck in limbo.

8 - Woolworth's Australia: The death of institutional memory

The Australian outpost of the venerable department store chain, affectionately known as "Woolies," also ran into data-related problems as it transitioned from a system built 30 years ago in-house to SAP.

One of the biggest crises that arose was that profit-and-loss reports tailored for individual stores, which managers were accustomed to receiving every week, couldn't be generated for nearly 18 months.

Read more on the next page...


Tags ERP

Brand Post

Show Comments