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Waste Management Hauls SAP to Court

Most companies say that at least some of their large-scale software deployments are outright failures.
Karen M. Kroll, CFO Magazine
June 1, 2008

Let the trash talk begin. In March, Waste Management Inc. filed a lawsuit against SAP, accusing the enterprise-resource-planning-software powerhouse of fraud. The suit claims that SAP deliberately misrepresented a revenue-management application, positioning it as a mature, out-of-the-box solution that could be functional within a year with no customization.

Waste Management also claims that SAP knew the software was undeveloped, untested, and defective, and conducted demonstrations on fake or mocked-up software. After two years of recoding and $100 million in project expenses, the software was still not functional, Waste Management says.

Complaints about major software implementations are nothing new; studies from the past 15 years have found that 50 to 70 percent of companies consider at least some of their large-scale software deployments outright failures. But few seek legal remedies.

In most vendor-client disputes, both sides share some blame, experts say. Software vendors "definitely tell their customers what they want to hear," says Charles Schley, founder of ERP Implementation Consulting Group. On the other hand, it's naïve to assume that an enterprise application won't need some customization. Many buyers simply don't know what questions to ask, says Richard Ligus, president of Rockford Consulting Group, and project managers often lack the experience and political clout to keep implementations on track.

Erik J. Phelps, a partner with Michael Best & Friedrich, says that while most cases settle, the allegations of fraud may inspire SAP to fight to clear its name. SAP had no comment.

Ray Wang, a principal analyst with consulting firm Forrester, says companies should ask whether the functionality they're being pitched is part of a current product or a future release, whether it was built for demonstration purposes, and whether it was created by the vendor or a partner. Contracts should stipulate that the software being delivered contains all expected functions. For additional peace of mind, videotape the demo. That may not dazzle the YouTube crowd but it could provide useful evidence down the road.




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