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Courtroom lessons from a failed SAP ERP implementation

A consulting firm's expert witness explains what SAP and a global manufacturer did -- and didn't do -- that led to a major SAP ERP implementation failure.

I was asked to write an article about the lessons learned from a certain failed SAP ERP implementation and its...

causes from both the client's and SAP's perspective. As director of expert witness services for Panorama Consulting Solutions, I have been involved in the firm's highest growth area: expert witness testimony, which is primarily used by law firms that work for software developers, systems integrators and those companies' customers.

An independent ERP consulting firm, Panorama has worked on numerous SAP ERP implementation projects on both the SAP and customer sides. In the case discussed here, we represented SAP in an implementation gone wrong that eventually ended up in court.   

We have been exposed to a number of poorly executed SAP ERP implementations. Due to the size of most SAP implementations, many of those that fail or have performance issues tend to end in litigation more often than with tier-two vendors, such as Epicor or IFS.

For confidentiality reasons, I cannot mention the name of the client or the players involved, but the lessons remain relevant nonetheless.

SAP ERP implementation started well

First, some background on the SAP ERP implementation and ultimately the legal case. Through a request for proposals (RFP) process, SAP was selected as the system of choice for a large manufacturer, and subsequently awarded the project implementation. The geography of the ERP system spanned seven countries and 18 manufacturing facilities. SAP followed its standard ASAP implementation methodology from the start, but soon faced challenges from the client, who had agreed to the documents delineating each party's roles and responsibilities. The shortcomings on the customer's side included:

  1. Limited bandwidth from the core implementation team resulting in missed deliverables
  2. A lack of buy-in from executive leadership
  3. No execution of the recommended organizational change management communications strategy
  4. Excessive turnover, most notably of four project managers in three years.

SAP admirably tried multiple times to fill in the gaps left by the negligence of the customer during the project. Unfortunately, these efforts ultimately backfired on SAP when SAP attempted to take on responsibilities originally allocated to the client but without the time required to complete the tasks satisfactorily. The legal complaint indicates that SAP took on these added activities for a profit motive when in fact they were attempting to move the project to a successful conclusion.

An outside independent verification and validation (IV&V) team was brought in from the start of the project and identified areas of risk in its reports to the executive steering committee. Unfortunately, the recommendations in the IV&V reports fell on deaf ears, and no action was taken by the only group capable of enforcing the needed changes to mitigate the identified risks. It seems the executives charged with oversight of the project were not invested, and their lack of commitment filtered down to all parties involved on the client side.

The good, the bad and the ugly of a failed SAP project

A quick review of what SAP did well -- and not so well – in the failed ERP implementation for a global manufacturer:

Good Processes

  • Created a detailed scope of work and obtained signoff on all deliverables.
  • Stepped up to the plate when asked to supplement or replace customer resources to ensure the success of the project.
  • Brought in highly experienced project managers, subject-matter experts and consultants.
  • Sought effective solutions for escalating high-risk issues. 

Bad Processes

  • During the initial sales process and subsequent augmentation services, SAP sales set unrealistic expectations for the project based on the level of sophistication throughout the customer organization.
  • Allowed the customer to ignore the independent verification and validation consultant's recommendations by allowing the project to progress without addressing major risk areas.
  • While attempting to ensure the success of the project, SAP put itself in a position that enabled the customer to turn these well-intentioned efforts against the vendor in litigation.

SAP should have interrupted the project when it saw the lack of commitment. While SAP acquired appropriate signoffs, it did not escalate delayed validations or signoffs quickly enough to avoid unrecoverable delays on the project's go-live date. Prior to completion of the blueprinting phase, all the project plan contingency time had been consumed. This was another huge red flag that the steering committee should have seen as a major risk to the project.

The lack of understanding regarding the critical nature of on-time signoffs and validations was symptomatic of poor communication regarding the critical importance of following the assigned roles and responsibilities.

Another root cause of this failed SAP ERP implementation was the mismanagement of the project by the customer's project management office. There were four different project managers over the three-year span of the implementation, and as each new project manager came onboard, there was often disagreement on the processes and procedures established by the previous project managers. This created the need for extensive revisions to previously validated plans, resulting in time-consuming and expensive modifications to the system.

One theme we see in almost every expert witness case is a lack of organizational change management. If you want your ERP implementation to fail -- regardless of the software package -- just ignore the users and don't tell them why the project is happening. In addition, do not provide adequate training, and do not test users' level of knowledge before go-live. Finally, instead of creating a skills requirement matrix by user type in each functional area, try to teach all users all of the functionality regardless of whether they will ever need those skills.

ABOUT THE AUTHOR:

William Baumann is director of expert witness, IV&V and project recovery at Panorama Consulting Solutions, a Denver-based firm that specializes in ERP implementation.

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This was last published in April 2016

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