SAP project failure

The following SAP project failures are the first three of what we will review over the next few weeks. The SAP project failures we will review are high-profile examples with significant lessons to be learned. In nearly every case where the SAP implementation actually occurred, within one to two years after the troubled go-live, the SAP software itself was reasonably well-received and the business generally satisfied.

 

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One interesting feature of the SAP project failure research is that none of them I could find can be attributed to the SAP software itself. Although a few customers claimed the software was the issue, when doing more thorough research, I have only found structural problems with the actual project. After all, as of this post, SAP software has been installed or implemented hundreds of thousands of times. Careful research shows that none of the high-profile SAP project failures were related to technical failures of the standard software, SAP architecture, application depth, or application breadth.

Problems with SAP projects from the published literature usually involve the following:

  • poor project management and control,
  • little or no change management,
  • poor training,
  • significant custom coding, or
  • poor consultants from the SAP system implementation partners or vendors.

This sampling of project failure issues will start from the most recent to some of the older ones.

SAP ERP Project Implementation Failure Overviews

Marin County California – SAP ERP project failure overview (2009)

Deloitte implemented Financial, HR, and Payroll systems. This project led to a lawsuit filed by Marin County (the customer) in 2010 alleging fraud. From the introduction to the Marin County legal complaint, Marin notes:

Deloitte [claimed to have] assembled a team of its ”best resources” who had “deep SAP and [business] knowledge.” These representations were fraudulent. Indeed, at the time Deloitte made them, it knew that it did not have the ability or intention to provide the skilled resources necessary to deliver a successful SAP implementation… Deloitte also knew that because the County did not have any prior ERP implementation experience in general, or SAP experience in particular, it would be depending on Deloitte to oversee, guide and manage the project. Notwithstanding such knowledge, Deloitte made these false representations in order to obtain the contract for the County’s lucrative SAP project. [R]ather than providing the County with SAP and public sector expertise, Deloitte used the County’s SAP project as a trial-and-error training ground to teach its consultants – many of them neophytes — about SAP… software, all at the County’s expense.

The project faced a number of significant problems, and Marin County is in the process of abandoning its SAP software implementation. Some factors include/may include the following:

  • Fake Consultants/Trainees/unqualified consulting resources on the project
  • Incorrect pay rates, payroll, and wage information
  • Huge amounts of custom coding to replace standard SAP functionality (which Marin County claims would have been sufficient)
  • Inability to easily make adjustments and resolve compensation issues (mainly due to custom ABAP programming)
  • Insufficient training and change management
  • Possible improper relationships and ethical problems with the Deloitte and Marin County employees involved in the project

Marin County has since announced they are abandoning the SAP project after working for a couple of years to resolve the underlying problems.

Lessons Learned: The legal complaint by Marin County against Deloitte Consulting included allegations of fraud with the consultants they provided. Taking the Marin County complaint at face value, the consulting firm knowingly and deliberately provided inexperienced and incompetent consultants for the government project.

For more information on the required skills, as well as how to screen and interview good SAP consultants please see these posts:

Screening and Interview Methods to Find the Right SAP Consultant
Screening and Interview Methods to Find the Right Consultant – Part 2

Shane Company – SAP ERP project failure overview (2008)

  • Shane Company had 23 stores in 14 states and filed for bankruptcy in January of 2009.
  • Shane initially blamed their company bankruptcy on SAP as a software application, suggesting that their bankruptcy was partly due to SAP project cost overruns and SAP project delays.
  • The initial project cost was budgeted or planned for $10 million, but ended up costing approximately $36 million. Additionally, the project was planned for one year but ended up taking approximately three years [FN1, pg. 26]
  • After initially blaming SAP, Shane later admitted that their (“low-cost”) SAP system implementation vendor, Ciber Novasoft, was more responsible for the SAP project failure than the SAP ERP software.

To summarize Shane’s SAP ERP failure “Enterprise Matters” offers succinct insight:

[L]arge enterprise systems, that have been installed in thousands of companies, don’t cause customers to lose money due to implementation failure (This is true for SAP, Oracle, and everyone else). It takes the customer’s managers, usually aided and abetted by a company like Ciber, to get it really wrong. [FN2]

Lessons Learned from the Shane Company SAP ERP project failure [FN3]:

  • Poor SAP ERP management, both on the project management side and the Shane Company senior management
  • An improper budget and implementation plan
  • Improperly managed scope and cost
  • Poor or undefined processes, along with poor or untested system functionality

For more information on proper scope, management, and project oversight, see the following posts:

Aligning SAP Scope to Meaningful Business Requirements
Effectively Scope Your SAP Project
SAP System Vendor Project Success Criteria & Factors 2

Select Comfort – SAP ERP project failure overview (2008)

Select Comfort is included as an example of an SAP project that was abandoned rather than actually failed. As a brief summary: the entire project was improperly conceived from the beginning because they faced no pressing business need to change systems, a new CIO initiated the project, the scope was massive (ERP, CRM, SCM, APO, etc.), and the project was performed only by internal employees.

I am certain other factors played a role, but the project was destined to fail from the beginning.

Lessons Learned: Enterprise applications should be implemented one at a time (or at least very limited), scope must be carefully managed, and enterprise applications need a proper justification or business case.

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[FN1] Bhagwani, A. (2009). Critical Success Factors In Implementing SAP ERP Software, University of Kansas Graduate School. https://www.iitrun.com/literature/2009-Bhagwani-SAP-Project-Success.pdf

[FN2] Shane’s Blame Game: Management, Not SAP Retail, Sinks Jewelry Company
http://ematters.wordpress.com/2009/01/14/shanes-blame-game/

[FN3] Some of these were derived from: Shane Company: Lessons Learned From an ERP Implementation Failure
http://www.erpko.com/articles/erp-articles/shane-company-lessons-learned-from-an-erp-implementation-failure/

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