Business Software Firms Sued Over Implementation - Lawsuits Bring ERP Problems to Light

Event Summary

This grim list includes Hershey Foods, Whirlpool, Allied Waste Industries, and the maker of Gore-Tex, W.L. Gore & Associates. Other stories of troubled enterprise resource planning (ERP) software implementations are also leaking out from additional companies, colleges and universities across the country. Some companies are even turning to lawsuits, alleging the software doesn't work and pointing a finger at the ERP software makers and consultants who install the systems intended to automate their accounting, order entry, and manufacturing processes. However, many analysts say that when huge software projects go wrong, it is often the buyer's fault, particularly when companies fail to understand the scope of the project or spend the time and money necessary to move from an old computer system to a new one.

Market Impact

We believe that this is only the tip of the iceberg. It is an open secret that a large number of ERP implementations do not live up to their expectations. As a matter of fact, a number of consulting practices are not only surviving these bleak days of ERP market downturn, but also making a very lucrative business by utilizing their ERP consultants in projects aimed at resolving major post-implementation "blues". The idea is the same, although each renowned consulting firm will sell their "unique" methodology disguised under the names like "Enterprise Effectiveness", "Second Wave" and "Continuous Improvement".

We believe this bad news will have greater market consequences for both the ERP vendors and consulting firms then one would initially imagine. The news will make it much more difficult for big ERP vendors to make inroads into the much coveted mid-market territory, where the prospective clients are forced to be cost conscious. Moreover, some mid-market ERP players go so far in their sales campaigns as to offer 50% of the software license payment deferral until successful project signoff.

User Recommendations

The old adage is "Such a beginning, such an end". The foundation of any ERP implementation must be a proper exercise of aligning customers' IT technology with their business strategy, and subsequent software selection. These steps are very often neglected despite the amount of expert literature and articles that emphasize their importance. Upon ERP project failure, consulting firms' assertion that clients' expectations differ from those originally agreed upon is often a poor cover-up for larger implementation or product deficiencies.

IT organizations should conduct a detailed ERP software selection process where all critical business requirements are identified and pinpointed. The scripted scenario demonstration phase of an ERP selection process is the perfect opportunity to put potential ERP packages through their paces, and we urge users to exercise this prerogative. Finally, users are strongly advised to require fixed time and cost contract commitments from both vendors and their affiliates.

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