After a contentious battle that started brewing in March of 2008, SAP and Waste Management have reached a settlement agreement. While they have not disclosed the details, it appears that the whole issue was becoming so expensive to litigate that they found moving on more cost effective.
According to a CIO article published on April 9, 2009, SAP had 25–30 contract attorneys working on the litigation, which cost them millions. SAP also claimed that their legal discovery process had cost over a million dollars [FN1].
This saga has even more interesting twists and turns. While I am not claiming that SAP is completely innocent, we can certainly learn some lessons. For example, one writer points out that Waste Management’s leadership was terminated for “aggressive” accounting practices, and then replaced. Shortly afterward, the SAP ERP implementation was started. We can reasonably assume that the new management was not familiar enough with the company or its employees to find the right people to make the right decisions.
Waste Management was a company in crisis. SEC Administrative Proceeding No. 3-10513 had found the following: “As early as 1988, members of Andersen’s audit engagement tram recognized that Waste Management employed ‘aggressive’ accounting practices to enhance its earnings.” In the brouhaha that followed, Waste Management’s board fired the company’s management.
Waste Management’s executive suite attained their current positions in 2004. As such, it seems that the company had a lot on its plate at once: overcoming an crisis, appointing new leadership, and launching a major erp project…
If SAP’s software is indeed a “complete failure,” Waste Management’s executives might well have been asleep at the wheel; no one should pay $100 million and wait two years to find out they’ve bought a defective product. [FN2]
Throughout the litigation over the failed sap implementation, both parties made claims and pointed fingers. The claims, and the counterclaims, and the back and forth, and the armies of lawyers, and the thousands of pages of court filings, and the millions both sides spent, seemed endless. Both sides needed to come to a resolution.
Waste Management claimed in its lawsuit that they “wanted an ERP package that could meet its business requirements without large amounts of custom development…” They also claimed “SAP used a ‘fake’ product demonstration” and “SAP’s technical team had ‘recommended that SAP deliver to Waste Management a later version of the software than the version SAP in fact delivered.’” They also claimed SAP knew the software was “unstable and lacking key functionality…” [FN3]
SAP claimed in its legal counterclaims that “Waste Management didn’t ‘timely and accurately define its business requirements’ nor provide ‘sufficient, knowledgeable, decision-empowered users and managers’ to work on the project.” [FN3]
SAP Implementation Failure Lesson Learned
First of all, as I have often noted, senior management support is critical for success. However, their support is not enough. As the Waste Management lawsuit pointed out, risk management (risk identification and risk mitigation) is a critical component of an SAP project.
Too often, we hear about the success factors of an SAP or large erp project. However, these success factors may also present risk if they are lacking. In this case, we can reasonably assume that Waste Management did not provide key, timely information or key decision-makers, as SAP had claimed. However, Waste Management made other claims in later pleadings that the SAP salesforce had a strong hand in creating the problem because the salesperson was concerned about getting their million-dollar commission.
So, while I do not put a lot of store in serious application gaps or problems, I do give some credence to their claims about the nastier side of business. SAP’s appeared to accept sales scams and fail to adequately assess and then mitigate the implementation risks. The idea that the company did not provide good resources, or that those resources would not make decisions, is likely valid, but those are known risks that should have been raised to the steering committee. In the end, this lawsuit should have never happened.
[FN1] SAP: We’ve Spent Millions So Far on Waste Management Suit. cio.com from IDG Press. http://www.cio.com/article/488866/SAP_We_ve_Spent_Millions_So_Far_on_Waste_Management_Suit (retrieved 5/11/2010).
[FN2] SAP sued by Waste Management, March 27, 2008. http://itknowledgeexchange.techtarget.com/sap-watch/sap-sued-by-waste-management/ (retrieved 5/11/2010)
[FN3] [FN3] SAP, Waste Management settle lawsuit. Business Week. May 3, 2010. http://www.businessweek.com/idg/2010-05-03/sap-waste-management-settle-lawsuit.html (retrieved 5/11/2010)
