Just as we released some initial data from our 2011 ERP Report showing that ERP implementation costs declined again in 2010, ERP lawsuits continue to proliferate through the industry. For example, Marin County filed a lawsuit against their system integrator in 2010 and Lumber Liquidators blamed a botched SAP implementation for their financial woes late last year.
Over the years, it seems as if SAP and, to a lesser degree, Oracle take a majority of the hits in the media for high profile failures and lawsuits. Waste Management, Hershey’s, the Shane Company, Overstock – all of these examples are well-known companies that blamed their new ERP systems for their difficulties, and the solutions are all provided by Tier I ERP vendors such as SAP and Oracle in these examples. However, as we published in a blog last year, Tier I ERP vendors aren’t the only ones with failures and lawsuits on their hands. For example, just a few weeks ago, a jury awarded pet food maker Sunshine Mills a $61M award against Ross Systems, a division of CDC Software, which was its Tier II ERP vendor.
Several months ago, one of our business analysts put together a list of public information about recent ERP failures and lawsuits, going back several years. As you will see in the table below, there is a fairly even distribution of failures among all types of ERP vendors.[table “36” not found /]
Looking at the above table (recently updated from the version originally published last year before the Marin County failure), one might expect to see SAP and Oracle with much higher incidents of ERP lawsuits and failures since they have the industry’s largest market shares and typically work with the world’s largest high-profile companies. However, the data doesn’t suggest that this is the case. It would be interesting to calculate the number of implementation failures or lawsuits per 1,000 customers or end users of their software. If we did, I suspect that there wouldn’t be a significant difference between the leading ERP software companies.
Unfortunately (or fortunately, depending on how you look at it), Tier II and Tier III ERP implementations are just as likely to fail as Tier I implementations from SAP or Oracle. The reason is that success and failure does not have much to do with the software – it is more affected by how the software is implemented. Even the best ERP software solutions entail a fair amount of business and organizational risk, which is where most companies struggle. Assuming you have selected a software solution that is a good fit for your organization, things like project management, process design, organizational change management, scope management, and other business related factors are much more likely to impact your odds of success than the software itself.
So the lesson is simple: choose the right software and implement it well as a business initiative rather than a pure technology project. You can’t have success with just one of the two and failing in either area almost ensures that your overall project will fail, no matter how good the software may be.