November 3, 1999 4:20 PM PST

Business software firms sued over implementation

Although glitch-plagued software implementations are nothing new, the growing number of brand-name firms reporting big troubles with their multimillion-dollar projects is starting to look like a Who's Who of the Fortune 500.

The list, for starters, includes Hershey Foods, Whirlpool, Allied Waste Industries, and 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 when huge software projects go wrong it's often the buyer's fault, particularly when companies fail to understand the scope of the project or lend the time and money necessary to move from an old computer system to a new one.

Forrester Research analyst Bobby Cameron said firms that have recently spoken publicly about their software woes are only a fraction of large businesses over the past several years with troubled implementations, particularly users of German software giant SAP's tightly integrated software, he said.

"It's not a recent phenomenon," Cameron said, though he added: "People's willingness to talk about it builds momentum."

But when software projects go bad, he said, companies are more likely to be "scurrying like hell to cover it up," because they fear they are the only ones having troubles.

Why do software projects go bad?
By some accounts, up to 30 percent of all SAP implementations fail to meet the buyer's expectations. Many fail because the companies fail to "kow tow to the ERP vendors" and understand that these software projects involve hard work, commitment, and a driving project manager who understands that a successful ERP project starts on a small scale with a firm intent to meet project and budget deadlines, Cameron said.

For many companies, analysts say, investing in an ERP system becomes a corporate religion driven by the head of the corporation or chief technology officer. SAP, for example, which has installed its software in about 20,000 locations worldwide and at about 5,000 U.S.-based companies, can take years to install throughout a complex corporation with many business units. The technology is tightly integrated and requires a commitment from all divisions and often a change in the way a company does business to make it work.

Many companies are not willing to make those changes, Cameron said. And other times, managers within manufacturing units aren't willing to sign on to a project if they're not convinced it's going to make them more productive.

"Some companies that went to chisel this in didn't have any idea of what was needed to force the fit," Cameron said. "They did a half-assed job. They skimmed and they ended up with a lot of problems."

But some companies say their woes have nothing to do with poor planning, but with incompetent companies that fouled up their projects.

Bringing out the lawsuits
W.L. Gore, for one, is suing Pleasanton, California-based PeopleSoft and Deloitte & Touche, the consulting firm that installed its $2.5 million personnel and payroll software system in 1996 and 1997. The suit, filed in Delaware, alleges PeopleSoft sent in unqualified consultants to do the job, forcing Gore to rely on PeopleSoft's customer service hotline to set up the program after major problems occurred when the system went live.

"PeopleSoft was just a complete disaster," said Jay Eisenhofer, the lawyer who is representing Gore. "They said [Deloitte] could implement the software. That wasn't the case."

Though not addressing the Gore suit, Eric Stathers, vice president of customer service at PeopleSoft, said when a project doesn't work, the responsibility often lies with the user.

"The work environment is very complicated now," he said. "In many cases you have understaffed organizations. They don't have a clear idea of what they want. They haven't budgeted up front. A lot of these problems are budgeting and planning."

Stathers said he believes more companies are publicly criticizing ERP vendors because they are coming to the end of their two or three-year projects and finding that they are over budget, fighting internally over the project, worried about losing their jobs, or concerned about not moving over from a legacy computer system to a new one by the critical Year 2000 deadline.

A Deloitte & Touche spokesperson said the company had not seen the complaint from Gore and "assumed there were no issues [with the system]." The company said any issues would be "acted on as a high priority once we have the details."

Sometimes it's just the consultants who get slapped with a lawsuit.

Last year, the bankruptcy trustee for FoxMeyer, a former $5 billion drug distribution company, filed a $500 million lawsuit against Andersen Consulting, alleging the company's botched implementation of SAP's R/3 software helped send FoxMeyer into bankruptcy in 1996. At the time, Andersen called the claims "outlandish and totally at odds with facts."

Though not suing any vendor, both Hershey's and Whirlpool have reported troubles linked to their big software implementations. Hershey's partly blamed the software for fouling up its Halloween candy shipments, while Whirlpool tackled appliance shipping delays after it went live with an SAP implementation recently.

Jeff Zimmerman, SAP's senior vice president of customer support services, said problems at both companies have been fixed. He said SAP "gave Whirlpool the red light" two times before the company went live with 4,000 users on SAP's core R/3 system, telling the company that the supply chain system wasn't ready to go.

"They moved forward," he said. "We wanted them to go back and do some performance testing. They were on a time line."

Whirlpool did not comment on the matter.

Hershey's problems involved not only SAP, but software from Siebel Systems and Manugistics.

Zimmerman said the company wanted to do a 48-month global SAP rollout within 30 months. The project was on schedule when troubles occurred with a non-SAP system, he said. He said the three companies worked together to fix the problems.

"We missed the Halloween season," Zimmerman said, adding that Hershey's knew the switchover to the new systems would impact their business.

A Hershey's spokesman said the challenges Hershey's is having with its distribution and production systems are "not being blamed on any computer or software company."

Overall, the number of software problems that results in lawsuits is minimal, said Yankee Group analyst Harry Tse.

"It's definitely not a high percentage," he said. "Most of the implementation problems stem from not setting expectations up front."

Meta Group analyst Steve Bonadio said lawsuits and related problems come with the territory with any massive, complex software application installation.

"We're seeing it occur in pretty high profile cases," he said. "But these things tend to drag on and you never really hear the results. There's really nothing specific that goes wrong. It usually has to do with the implementation process and the initial deployment of the applications."

Paul Melchiorre, vice president of North American operations at Ariba and former senior vice president of global accounts at SAP, said problems will continue to occur within companies where ERP software is being sold as a system that can handle everything from production scheduling to e-commerce transactions to sales force automation.

"For finance and ledger, it's good stuff," he said. "It was oversold as one system to do everything forever and the flexibility just isn't there in the systems."

 

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