Biggest ERP failures of 2010

No year in the IT industry would be complete without a number of high-profile ERP (enterprise resource planning) project failures, ones that burn through mountains of cash, bring company operations to a standstill, generate bad publicity for vendors and toss careers in the trash.


No year in the IT industry would be complete without a number of high-profile ERP (enterprise resource planning) project failures, ones that burn through mountains of cash, bring company operations to a standstill, generate bad publicity for vendors and toss careers in the trash.

There's no one reason why ERP projects run off the rails. In fact, you can equate a typical project to a three-legged stool, with the customer, vendor and systems integrator each serving as a leg.

Customers have to plan well, budget enough money for training and evolve their usual way of working. Vendors must deliver software that functions properly and matches up well with a customer's business processes. And implementation teams have to set the right expectations, meet project milestones and avoid waste.

If one or more of these "legs" doesn't hold up, things can get ugly.

Michael Krigsman, president and CEO of Asuret, a consulting firm focused on helping companies improve the outcome of IT projects, prefers to use the more ominous metaphor of "the Devil's Triangle" to describe the dynamics in play.

And he sees no immediate end to troubled projects. "There is no magic bullet. The magic bullet is to change human nature, to make us wise and all-seeing," he said.

But Krigsman sees "bright lights on the horizon," such as the gradual emergence of cloud-based ERP, which can take the complexity out of upgrades for customers, as well as packaged services offerings, where the job gets a fixed price tag instead of being billed by the hour. In addition, such services are often based on well-established processes that have worked for many other customers, Krigsman said.

"Where the gotcha comes in is when you're working with a fixed-price agreement and you ask them to do something different," Krigsman added. Then the job might revert to a standard, by-the-hour billing arrangement that can ratchet up costs. "That's why the customer has to exercise a greater level of discipline," he said.

All vendors want their customers to be successful, but they can do more to improve project outcomes, according to Krigsman. One way would be to tie part of a salesperson's compensation to project success. This way, a salesperson won't be able to simply disappear after the ink dries, and moreover, they might be less inclined to upsell a customer on marginally beneficial extras that could make the project unwieldy.

Someday, the bright lights Krigsman sees in the distance could be shining broadly over the IT industry. In the meantime, we have the status quo, where one study found that nearly 70 percent of the time, project success is "improbable."

Here's a look at some of the top ERP project boondoggles, flameouts and failures of the year -- and these are just the ones that entered public view.

New York's CityTime 'disaster'

CityTime, an effort by New York City to modernise its payroll system, is more of an ERP "project failure of the decade" and then some, as it dates to 1998. But in recent weeks allegations of massive corruption and waste regarding the project have come to a boil.

It was originally budgeted at around US$60 million, but has since ballooned to a colossal $700 million-plus, the New York Daily News reported recently.

New York Mayor Michael Bloomberg has called the project a "disaster." This week, federal authorities charged a number of workers on the project with being the ringleaders of a fraud scheme that siphoned some $80 million from taxpayers, reports said.

On Thursday, New York Comptroller John Liu suspended Joel Bondy, executive director of the city's office of payroll administration, and stopped all payments to consulting firm Spherion until a thorough review has been conducted.

New York officials simply did not understand just how complex the project would end up being, Bloomberg said in a radio interview Friday. "Once they started, part of it was they just kept adding things that it made sense to do," he said.

But he stressed that the city still needs the system "desperately," and it is saving money for agencies that are using it. The project is on track for completion by June, he added.

BSkyB gets £318 million settlement from Hewlett-Packard/EDS

While the £318 million settlement broadcaster BSkyB received in June from Hewlett-Packard was technically for a CRM (customer relationship management) implementation, not ERP, the award still stands to make a serious impact on the outsourcing business.

A court found that HP's EDS division had lied about how long it would take to finish the project, which was started in 2000 and originally budgeted at £48 million. BSkyB fired EDS in 2002 and completed the job itself, but costs ultimately quintupled.

Some believe the massive verdict will give systems integrators and salespeople pause from here on out when making promises at the contract negotiating table.

Marin County's "rip and replace"

If there is a worst way for an ERP project to end, it's with a "rip-and-replace," and that's what officials in Marin County, California, decided to do in August.

Officials decided that it would be less expensive to simply replace its ailing SAP system with something else, instead of trying to fix widespread problems with it.

Marin County sued system integrator Deloitte Consulting in connection with the system earlier this year, saying Deloitte used the project as "a trial-and-error training ground" for inexperienced employees, and the result was a "costly computer system far worse than the legacy systems it was intended to replace."

Deloitte has denied the county's claims.

Marin County determined that maintaining the system at "status quo" would cost up US$34.7 million over 10 years. Fixing it and "supporting continual improvement" by bringing on more workers would cost $49.8 million. Addressing the problems and keeping the system in place would run up a $34.1 million tab.

In contrast, starting over with something new would cost just $26.2 million over the same 10-year period, according to the county.

An SAP spokesman stressed at the time that the company's software is not to blame in Marin County, and is "installed and functioning perfectly in tens of thousands of public sector agencies, including dozens in California."

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