A List of SAP Implementation Failures
Executive Summary
- The control highly censors SAP failures that SAP has over IT media entities.
- We evaluate the coverage of previous SAP implementation failures.
Introduction
This article looks at the top Google results that reported SAP implementation failures. What is curious is that few SAP implementation problems or failures could be found through Google. This pales in comparison to the promotional information provided by SAP on their go-lives. Our other research shows that SAP often publishes an implementation as a success when it isn’t. We differentiated this list from SAP implementations that led to lawsuits. Therefore we created a second article that covers SAP lawsuits at A List of SAP Lawsuits. You will see our analysis of these SAP implementation failures.
Notice of Lack of Financial Bias: We have no financial ties to SAP or any other entity mentioned in this article.
SAP Lawsuit #1: City of San Diego
We cover the City of San Deigo SAP implementation failure in detail in the article The Art of Blaming the Client When an SAP Project Goes South; we found not only mass problems in the implementation but a cover-up of the firm that The City of San Diego hired to “investigate” the implementation.
One of the few articles on this is by ZDNet (owned by CBS) and Michael Krigsman — who naturally will not blame SAP, as seen in the following quotation.
My take. Given tightly interwoven accountability on both sides, it’s difficult to accurately dissect the strands of responsibility. I suspect both San Diego and Axon bear responsibility for this failure. Regardless of what happened in the past, the new contract puts SAP squarely on the hot seat to get this project back on track.
SAP Lawsuit #2: County of Dorset (UK)
At a time when the authority is facing a financial crisis and has to save almost £50million, concerns remain about the new £16 million IT system that was introduced to save the council time and money.
A staff survey reveals satisfaction rates have improved only slightly a few months down the line.
Chief executive David Jenkins admitted there was ‘much to be done.’ The Dorset Enterprise System (DES), the local name for Enterprise Resource Planning (ERP), was heralded as a major new investment when it came online last year.
Introduced as part of the Fit for the Future restructuring programme, it changes the way the council organises things like payroll, procurement, HR and finance.
But there have been regular problems with the system, with some staff getting so stressed they have been forced to take time off sick.
Some workers claimed a job which previously only took a minute was now taking an hour. (emphasis added)
The system still has to shut down a few days each month to allow data to be processed.
A staff survey conducted in March revealed 65 per cent of employees felt ‘negative or very negative’ about DES and many agreed it was a ‘waste of time’.
A similar survey was conducted in the summer to see if things had got any better, and these results were presented to the audit and scrutiny committee. Surveys were sent to 1,000 DES users but only 53 per cent responded. Of these, almost half said they thought DES had not improved and nine per cent thought it had got worse.
There has been an improvement in the support provided but there is more to do to make finding information easier.
The survey also shows an improvement in the views of those using DES for procurement but 55 per cent still feel negative. A separate survey was compiled for those using DES in schools. A total of 200 were sent out but only 68 were returned. The overall feedback is that 58 per cent feel negative with concerns about training, usability and support.
Vice-chairman of the audit and scrutiny committee David Harris said: “We have suggested the next report to the committee articulates the benefits the system has produced.
“Clearly the system isn’t liked yet but if you look at how it’s been received in other counties that’s a common element to its introduction.”
Secretary of the Dorset branch of Unison Pam Jeffries said: “The feedback I’m getting is that people are no longer reporting faults because they’ve given up due to the length of time it takes for people to get back to them.
“We’ve heard it’s going to get an upgrade and that may be good and well but the other places where it’s operating, I’ve heard they’re still having huge problems.” – Dorset Echo
Notice the different views presented between management and the reaction from users of the system. In nearly all cases, management sugar coats problems on SAP projects.
SAP Lawsuit #3: Levis Strauss
The following covers the problems of the Levis Strauss ERP system.
Problems with a massive global enterprise resource planning (ERP) rollout have helped send Levi Strauss’ second-quarter results through the floor.
The jeans giant reported a 98 per cent drop in net income to $1m and squarely blamed “substantial costs” associated with its new ERP system among other factors for the shocker.
Levi’s is standardizing on a single global instance of SAP ERP, and told The Reg it was forced to take shipping systems at its three massive US distribution centers off line for a full week in April to fix problems receiving and fulfilling orders.
The company not only lost business during the shut down, but also saw customers who’d placed orders cancel them once the systems were back up.
A Levi’s company spokesman blamed the problem on integration of “legacy systems”. He told The Reg Levi’s is continuing the software rollout but notes it’s currently in a “stabilization phase”.
An SAP company spokeswoman said the company has a “great relationship” with Levi’s. “As part of this close partnership we work closely together to resolve any challenges that arise,” she said.
It’s rare for software to get called out in an SEC filing for materially hurting the business or increasing costs, along with the standard business complexities of currency fluctuations or retail expansion. ERP was fingered with other factors, though, as Levi’s explained its poor performance this week. – The Register
The Register is one of the few IT media entities that do not report implementation problems with a slant toward exonerating the vendor and the consulting firm. See this comment in this article.
Who’d have thought it?
1) An IT disaster in the private sector? Everybody knows it’s only the public sector that’s incompetent…2) Another disastrous “bet your business on a single package” rollout, sometimes it’s SAP, sometimes it’s Oracle Apps, either way, there’ll be more kept quiet than reach the public… – Comment #1
Yes, that is precisely our thoughts.
And this comment.
When we tried SAP Business one, they integrator was desperate for us to stop using the old system which we refused to do and ran them all in parallel. Two years latter when they just couldn’t get anything to work, words were mentioned about our lack of payment and a law suit was mentioned. The result was a fraud counter suit was mentioned and they took their buggy software and went home.
SAP is still showing a video of how they helped us improve our productivity by using their software and we occasionally get contacted by people saying they bought SBO because of the video. So far they have all received full refunds. – Comment #2
SAP Lawsuit #4: The City of Portland
An SAP implementation conducted by the city government of Portland, Ore., went badly awry due to planning and project leadership problems, resulting in skyrocketing costs and a protracted time line, according to a report released Tuesday by the city’s auditor.
The project to replace Portland’s software with SAP started with a planning phase in 2004 and was originally budgeted at US$14 million, the report states. But while the project has now achieved its primary goal, the implementation ended up costing more than $47 million and took longer than 30 months, instead of an expected 14 months.
“The issues that have appeared pre-dated SAP’s involvement in this project,” said SAP spokesman Andy Kendzie. “To my knowledge, the project is under control and moving forward. They are a very valued customer.”
For example, city officials had based the original budget on an independent estimate that did not factor in costs such as new hardware needed to run the system. In addition, city officials later added more functionality to the project plan.
Meanwhile, the project’s contractor, Ariston Consulting and Technologies, “was not always able to identify standardized ways of incorporating these additional items,” resulting in higher costs, according to the report.
Ariston also failed to finish project documents on time and had staffing difficulties, it adds.
Portland ultimately terminated its contract with Ariston in 2008 and signed a new deal with SAP’s Public Services arm to finish the project, the report adds.
Curiously, the initial timelines, which were undoubtedly presented to The City of Portland by both SAP and the SAP consulting firm — the idea that The City of Portland would come up with its timelines would bring up the question of where they would get this information. At Brightwork, we have a project planning estimator for ECC, Project Planning Package – SAP ERP/ECC/R/3. However, it is unlikely that they would find it — and if they did find it — SAP and the consulting company would say that our estimate is far too long.
As we cover in a later implementation, this is written by Chris Kanaracus, who provides inaccurate information about SAP. A large percentage of the article on SAP lawsuits and problems comes from a few authors, all of whom work for media entities with an undeclared financial connection to SAP.
SAP Lawsuit #5: Lumber Liquidators
Lumber Liquidators is attributing a weak third quarter to a complex SAP implementation, saying the project imposed a significant drain on worker productivity. But the problems appear to be largely related to employees having trouble acclimating to the new system, versus malfunctions in the software itself.
But Lumber Liquidators expects the SAP system to have significant benefits for the company over time, CEO Jeffrey Griffiths said during a conference call Thursday. It will help the company grow internationally, as well as take advantage of a broad ecosystem of complementary applications, he added.
“Lumber Liquidators is a valued SAP customer and we remain strong and positive partners,” SAP spokesman Andy Kendzie said in a statement. “SAP is actively engaged with the company in completing their implementation and we believe this is solidly on track. When complete, we are confident Lumber Liquidators will reap significant benefits from the system and it will continue to be a critical element in the company’s growth strategy.” – PCWorld
The software did not do what SAP said it would do. However, SAP is not blamed in this article. The article’s author, Chris Kanaracus, covers SAP for IDG publications and can be relied upon to provide pro-SAP and inaccurate information.
Observe this quote.
Overall, ERP projects can go badly for multiple reasons, such as “changing internal requirements by the company that slow down system integrator implementation, lack of resources for training and system design, and complexity in the software,” said Altimeter Group analyst Ray Wang.
This is typical of analysts who cover SAP to generalize the implementation issues such that the blame is never assigned to SAP.
SAP Lawsuit #6: Alberta Union of Provincial Employees
Some public servants in Alberta have been underpaid for weeks after the introduction of a new payroll management system. The provincial government confirmed to CBC News that the large-scale transition to the 1GX program in December has led to pay errors for a “small percentage” of Government of Alberta staff. The government did not initially specify how many, but following the publication of this story, Service Alberta provided information saying approximately 531 employees had reported pay issues. Some members have reported that they are missing up to 40 per cent of their wages, while others are missing premium pay for working evening or weekend shifts. “We definitely do not want it to look like what happened with the Phoenix system,” Susan Slade, a vice president at the union, said. That debacle involved tens of thousands of federal public servants getting overpaid, underpaid or not paid at all because of a new, issue-plagued pay system. – CBC
Payroll problems are a common issue with problematic SAP projects. This article did not have commentary from anyone who attempted to minimize or otherwise deflect or rationalize the problems on the project.
SAP Lawsuit #7: Revlon
This is not a lawsuit against SAP by Revlon, but rather a lawsuit by Revlon shareholders against Revlon for lying about the SAP implementation state. We cover this case in detail in the article What Was the Real Story with the Revlon S/4HANA Failure?
Revlon attributed to the changeover a reduction of $20M in net earnings in one quarter alone, accompanied by $10M in unplanned expenses including non-recurring labor to improve customer support. At the time (2018), Revlon had implemented SAP in 22 countries on the Revlon heritage side of the company. Apparently, the Arden switch-out of JD Edwards had not even begun at that stage.
A year later, in March 2019, CFO Victoria Dolan said Revlon had spent $32M in 2018 on operating activities in comparison to 2017, taking the costs of the migration to $54M; understandably, profits and stock prices dipped. Revlon reported increased losses. The fiscal year 2018 (ended on December 31) closed with $294.2 million dollars in the red, compared to $183.2 million-dollar losses registered in 2017.
Ironically the results were due to a drop in sales of all its business categories, except Elizabeth Arden, partly caused by the breaks in service levels directly attributed to the SAP implementation. Revlon also qualified the losses by saying that the rise in losses was also related to the re-acquisition of some rights connected to the brand Elizabeth Arden.
In March 2019, the United States Securities and Exchange Commission (SEC) made public Revlon’s first-quarter 10-K filing, thus illustrating to the wider world the dire SAP ERP issues in the Oxford plant and their wide-reaching effects on the business. Around the time of the SEC’s release, the company’s chief financial officer made clear to the public that the SAP ERP issues had been resolved and that the Oxford plant was up and running as normal.
After the March 2019 financial statement stock prices improved.
Yet, in May of 2019, Revlon faced a stream of painful class action lawsuits from firms Bragar, Eagel, & Squire; Rosen Law Firm; Wolf, Haldenstein, Adler, Freeman, & Herz; and Zhang Investor Law. Ouch.
In the class action suit, specific reference was made to the Oxford center in North Carolina where the business was supposedly unable to fulfil product imports of about $64M worth of revenue.
While the circumstances surrounding the newest ERP lawsuit are unique, as are the plaintiffs, the events that led to the failure of Revlon’s SAP system are all too familiar.
It may be tempting to blame the SAP software or whoever the system integrator was, but Revlon and others should recognize that they ultimately have to own the results of these sorts of transformations.
For starters, it does not seem as if Revlon understood either the size of the projects nor any of the risks inherent in rolling out a new ERP software system. It doesn’t appear as if the cosmetics giant developed any strategies to offset the possible risks.
What is curious is that while the statement above is that “it may be tempting to blame the SAP software” or the system integrator, they should not be blamed.
Something curious about this is that SAP has a long history of lying to its customers — the same history the SAP consulting firms have. Secondly, we have documented the many problems with S/4HANA, the implemented system. SAP aggressively exaggerated the number of S/4HANA systems that were live at this time, as we cover in the article How SAP Controls Perceptions with Customer Numbers, as well as the application’s maturity, as we cover in the article Why Did SAP Fake S/4HANA Maturity So Aggressively?
It is curious that in each case, the author of coverage of the problems with SAP does not point out problems with SAP or the information provided to customers about the software by SAP consulting firms. Why is it not done if it is so “tempting” to point to SAP?
SAP Lawsuit #8: Waste Management
Did SAP deceive and defraud Waste Management (WM) during ERP selection and implementation? That’s the question at stake in a $500 million lawsuit against SAP relating to a Waste Management ERP failure.
According to documents filed in court by WM, SAP pitched WM on a well-tested, sector-specific, ready-to-install ERP package. WM learned after the implementation had started that no such software existed.(emphasis added) Rather, the ERP system in question was still in development and had “never been tested in a productive environment.”
The jury should have its hands full trying to untangle this mess. Assuming that all of the allegations are proven, SAP should end up on the losing side. WM, however, will probably share part of the blame.
WM’s fraud allegations go much deeper than simple misrepresentation. Before contracts were signed, SAP purportedly demonstrated the fully functioning software to WM. WM claims it relied on SAP’s demonstrations when it chose the SAP software. WM says that SAP demonstrated a “mock-up” version and that the demonstrations “were rigged and manipulated to depict false functionality.”
SAP denies the allegations. However, if WM wins on its fraud and misrepresentation claims, this case could drive a stake through the heart of the world’s leading ERP vendor. No customer will want to build its business operations on a foundation of lies and deception. In addition, SAP will likely face criminal investigations.
Members of SAP’s C-Suite were directly involved in landing the WM account. Some of those executives are no longer with the company. There’s plenty of speculation about whether their departures are related to the WM fiasco.
ERP selection guide template ; ERP selection checklist; ERP selection Scorecard
Just on the PR battle, SAP is getting pretty banged up. WM is also taking its share of hits. A close reading of its own court filings shows that it’s partially responsible for its own losses.
Here are two of the most glaring examples taken from WM’s court pleadings:
#1: “Waste Management relied on [SAP’s] Business Case estimates in agreeing to license the SAP software.”
As part of its sales pitch, SAP prepared a “business case.” SAP stated that its software would enable WM to achieve between $106 million and $220 million of annual benefits.
WM showed questionable judgment in relying on SAP’s projections.(emphasis added) Clearly, SAP was partial. It was trying to make a big sale. In my analysis, WM was imprudent and arguably negligent when it decided to rely on an obviously conflicted business case projection.
WM should have done its due diligence. If it needed help, it should have turned to an impartial third-party advisor. An independent analysis might have shown that the SAP software wasn’t the best choice.
#2: “Waste Management believed that developing a new software posed unacceptable risk… and instead decided to look for an ‘off-the-shelf’ solution that was already fully developed and fully tested.” – Pemco Consulting
The things laid out in this description are not something that SAP and SAP consulting firms occasionally do. They are typically how SAP presents their solution to customers – with the SAP consulting firms agreeing to everything stated by SAP. This raises the question of why there are no more lawsuits against SAP.
SAP Lawsuit #9: FoxMeyer
FoxMeyer, once the fourth-largest pharmaceuticals distributor in the United States, sued both SAP and Andersen Consulting (now Accenture), claiming that a botched SAP R/3 implementation in the mid-1990s ruined the company.
Some suggest that a judgment for the plaintiff in the case—brought by the FoxMeyer bankruptcy trustee against Andersen Consulting and now pending in a Texas state court—could galvanize dissatisfied customers and bring on a flood of similar suits against ERP vendors and consultants.
Inexperienced consultants
FoxMeyer’s lawyer, Mark Ressler, contends that Andersen lured FoxMeyer into a services contract by giving the false impression that it had extensive SAP implementation expertise.While inexperienced implementation consultants aren’t uncommon, the practice “became something of a joke,” says ERP implementation consultant Mike Donovan. “The school bus pulls up in front of the building and out jump a bunch of Big Five consultants.”
But highly experienced SAP technologists have always been hard to find.
“It’s not like the old days, when you could ask for and get a COBOL programmer with ten or more years of experience,” said Dan Steinberg, an Ottawa-based consultant. “No one has ten years of experience with SAP.”
The real issue might boil down to how much you pay for the services. Many companies continue to overpay for ERP implementations, said Bruce Blitch, CIO of Tessenderlo Kerley Inc.
But Andersen Consulting did not match that company’s upfront attitude, according to the FoxMeyer lawsuit. Even so, some say, the consultant should not necessarily shoulder the entire blame. “No one buys these systems without evaluating them, conducting demos and pilots, and visiting other users,” said AMR Research analyst Jim Shepherd.
Who is really to blame?
“Every project suffers from overenthusiastic claims and expectations,” Shepherd said, “and most companies don’t achieve all the results they hope to.”Transforming a company’s business processes, Shepherd claims, requires extensive testing and planning on the customer’s part, not just a technology switch.
“Oftentimes, companies look to technology to provide a quick fix to flawed operational models,” Donovan said. “Adopting new and better business processes involves changing how the entire organization thinks about how it does business.”
The FoxMeyer lawsuit alleges that SAP and Andersen Consulting lied to the customer about the volume of transactions that R/3 could handle.(emphasis added)
“The highest total transaction volume it could handle was 10,000 invoice lines a day,” Ressler said. “FoxMeyer’s old Unisys system, the outmoded war-horse the company intended to replace, handled 425,000 invoice lines a day.”
Shepherd, however, is skeptical of that claim, saying that McKesson Corp., the company that eventually acquired FoxMeyer’s assets, uses SAP R/3 to process 1.5 million transactions per day. But Ressler contends FoxMeyer’s pre-3.0 version of the software lacked that capacity.
What’s next?
The insurance industry is already nervous about its potential level of exposure surrounding the lawsuit.While insurers were never hit with the expected flurry of Y2K-related lawsuits, there’s significant litigation related to the buildout of technology infrastructures, said Tim Ehrhart, assistant vice president for worldwide errors and omissions underwriting at The Chubb Group, the largest insurer in the IT sector.
The reasons? The size and scope of contracts for integration and consulting have mushroomed. Contracts that lasted for three to six months and cost $50,000 to $100,000 now take 24 to 36 months and run from $5 million to $10 million, Ehrhart said. As a result, insurance companies are lowering policy limits, charging higher premiums, and demanding heftier deductibles, if they take the business at all. – TechRepublic
Like ZDNet, TechRepublic is owned by CBS. Notice that the media entity is part of a larger media entity in nearly every case and is highly dependent on advertising and paid placement from vendors like SAP and SAP consulting firms. Notice this quote at the end of the article.
Are businesses unfairly blaming implementation consultants?
Are enterprises all too ready to lay blame for poor business practices at the feet of technology consultants when things go awry? – TechTarget
Why is this statement here? Isn’t it curious how TechTarget attempts to state that enterprises should not be blamed for project failures?
SAP Lawsuit #10: Marin County
We covered the Marin Country v SAP lawsuit in detail in the article Why Deloitte Has Problems Implementing SAP. Marin Country presented stunning claims against SAP. However, when covered by Michael Krigsman for ZDNet, which CBS owns — he stated the following:
Many IT customers complain their system integrators do not follow through on such commitments and use inexperienced labor in attempts to reduce their own costs and increase profits.
Disconnects between service provider promises and actual delivery plays a significant role in many failed projects. For example, EDS recently lost a £200 million ($300 million dollars) court case to UK-based company BSkyB.
Notice that Krigsman does not use the term “fraud” but instead “disconnects.” Michael Krigsman has a long history of explaining away SAP failures such that SAP is never blamed, as we cover in the article The Art of Blaming the Client When an SAP Project Goes South.
SAP Lawsuit #11: InBev
This is a case of an SAP customer being sued by SAP. This was over an indirect access claim.
SAP has quietly settled its US$600 million software licensing dispute with Anheuser-Busch, the U.S. subsidiary of beverage conglomerate AB InBev.
“The parties settled the dispute on 30 June 2017 and the matter is now closed,” AB InBev said in its 2017 Annual Report, published Tuesday.
The company said SAP had accused it of breaching a September 2010 software license agreement by directly and indirectly accessing SAP systems and data without appropriate licenses, and of underpaying license fees due. SAP wanted damages potentially exceeding US$600 million, and had sought reformation of the contract.” – PCWorld
SAP Lawsuit #12: Diageo
SAP sued Diageo for indirect access violations. We covered this case in The Problem with the Judge’s Ruling on the SAP Diageo Case.
The coverage of the case by IT media again gave SAP the benefit of the doubt, with none of them observing what we covered, which was reinforced by a Duke University law professor that SAP’s version of indirect access is obviously in violation of US anti-trust law as we cover in the article SAP Indirect Access as a Tying Arrangement Violation. Yes, we know that the UK is not the US, but we wonder if IT media entities know this. Because after Diageo lost its case to SAP, IT media entities proposed that the judgment would naturally apply to US companies, assuming that the US and the UK have identical legal systems.
What Do the Authors Know — Versus the Financial Bias of Who They Write For
Many of these authors do not appear to know the implemented SAP applications and seem to assume that the application must be mature and not be at fault. There is a further condition where the application may be mature — but it is not appropriate for the customer’s processes. Still, SAP and the consulting firm tell the prospect it is appropriate.
Conclusion
Much like the articles on SAP lawsuits, those covering SAP implementation failures appeared highly censored. Some of the most in-depth coverage was published in media outlets like ComputerWorld, PCWorld, and CIO — which are not, in fact, different or independent entities — but are all owned by IDG — which is in turn owned by a Chinese construction firm — which we cover in the article Can You Trust IDC and Their Now China Based Owners?.
The number of problematic implementations stretches over several decades. However, the problems are few. This is a minimal number for how many SAP customers SAP has had — and the problems that have come from purchasing SAP. We observed a database of problematic implementations recorded by a person who works in competitive intelligence at a significant ERP vendor — and it was a far more extensive list. To find these problematic implementations is an effort.
These IT media entities all take money from SAP. This is why they produce articles that help SAP minimize the reality of SAP implementation problems. They are written by a few authors — all of whom produce unreliable information on SAP when they write other articles about SAP. These authors are protecting SAP and are not reporting honestly.