10 Famous ERP Disasters, Dustups and Disappointments
It's no wonder ERP has such a bad reputation: The recent history surrounding the complex and expensive enterprise software market is packed with tales of vendor mud-slinging, outrageous hype and epic failures.
Tue, March 24, 2009
CIO — The world of enterprise applications (ERP, CRM, BI and supply chain apps) may seem boring to those caught up in the hysteria over Twitter and iPhone applications, but there's plenty of drama to be found (even more than on an episode of "The Bachelor"): Troubled multimillion-dollar software deals that produce spectacular failures and huge spending nightmares; vendor marketing bravado that breeds cut-throat competition and contempt; and embarrassing and costly lawsuits over botched implementations and intellectual property breaches.
It's no wonder ERP has such a bad reputation among executives. All of this drama is, in fact, creating a nasty and very real ERP backlash. Consider CIO.com's brief and semi-chronological history of 10 ERP scandals as a warning if you're contemplating an upgrade or implementation.
1. Definitely Not a Sweet Experience for Hershey
Could a failed technology implementation (in this case SAP's R/3 ERP software) take down a Fortune 500 company (in this case Hershey Foods)? Well, it certainly didn't help Hershey's operations during the Halloween season in 1999 or make Wall Street investors thrilled.
In the end, Hershey's ghastly problems with its SAP ERP, Siebel CRM and Manugistics supply chain applications prevented it from delivering $100 million worth of Kisses for Halloween that year and caused the stock to dip 8 percent.
So I guess a failed technology project can't actually take down a Fortune 500 company for good, but it can certainly knock it around a bit.
2. Just Do It: Fix Our Supply Chain System!
What did a $400 million upgrade to Nike's supply chain and ERP systems get the world-renowned shoe- and athletic gear-maker? Well, for starters, $100 million in lost sales, a 20 percent stock dip and a collection of class-action lawsuits.
This was all back in 2000, and the horrendous results were due to a bold ERP, supply chain and CRM project that aimed to upgrade the systems into one superstar system. Nike's tale is both of woe and warning.
3. HP's "Perfect Storm" of ERP Problems
The epic tale of HP's centralization of its disparate North American ERP systems onto one SAP system proves that one can never be too pessimistic when it comes to ERP project management. You see, in 2004, HP's project managers knew all of the things that could go wrong with their ERP rollout. But they just didn't plan for so many of them to happen at once.
The project eventually cost HP $160 million in order backlogs and lost revenue—more than five times the project's estimated cost. Said Gilles Bouchard, then-CIO of HP's global operations: "We had a series of small problems, none of which individually would have been too much to handle. But together they created the perfect storm."
4. A New Type of Freshman Hazing
Pity the college freshman at the University of Massachusetts in fall 2004: The last thing they needed was some computer program to haunt their lives and make their new collegiate experience even more uncertain.
But more than 27,000 students at the University of Massachusetts as well as Stanford and Indiana University were forced to do battle with buggy portals and ERP applications that left them at best unable to find their classes and at worst unable to collect their financial aid checks. Said one UMass senior at the time: "The freshmen were going crazy because they didn't know where to go." After a couple of tense days and weeks, however, everyone eventually got their checks and class schedules.
5. Waste Management Trashes Its "Fake" ERP Software
Garbage-disposal giant Waste Management is still embroiled in an acrimonious $100 million legal battle with SAP over an 18-month installation of its ERP software. The initial deal began in 2005, but the legal saga commenced in March 2008, when Waste Management filed suit and claimed SAP executives participated in a fraudulent sales scheme that resulted in the massive failure.
Several months later, SAP fired back, claiming that Waste Management allegedly violated its contractual agreement with SAP in several ways, including by "failing to timely and accurately define its business requirements," and not providing "sufficient, knowledgeable, decision-empowered users and managers" to work on the project.
In the fall 2008, accusations were still flying about documentation, depositions and delays in bringing the case before a judge. And that proposed 18-month implementation now sounds like a dream scenario.