Enterprise Software

Are the rewards of ERP systems worth the risk?

The country's biggest trash hauler, Waste Management, has announced that it is suing SAP for $100 million as a result of the failed implementation of SAP's ERP package. The suit claims that, "Unknown to Waste Management, this 'United States' version of the Waste and Recycling Software was undeveloped, untested, and defective."

The country's biggest trash hauler, Waste Management, has announced that it is suing SAP for $100 million as a result of the failed implementation of SAP's ERP package. The suit claims that, "Unknown to Waste Management, this 'United States' version of the Waste and Recycling Software was undeveloped, untested, and defective." The damages sought by Waste Management include its expenses in implementing the package plus punitive damages.

Waste Management sues SAP over 'complete failure' (News.com)

Though there are many reasons why an ERP implementation can fail, one of the biggest reasons is existing business processes and people unwilling to change them, according to a consultant who analyzes ERP failures. Here is a piece of his analysis:

ERP packages, even those that are industry specific, are designed for a large audience of companies looking to achieve success by following a template of best business practices. However, software often fails to achieve its promise due to the reluctance to change by people who have a vested interest in existing processes.

It can be tempting to simply scrap a failed implementation rather than throwing good money after bad, but as with any major IT implementation, companies should look at their options for fixing the problems rather than simply writing off the time and money as wasted. Before embarking on a new ERP implementation, a detailed business case is the best way to analyze the situation, pick an appropriate package, and then get it implemented on time and on budget.

The real reasons why ERP systems fail (Reliable Plant)

Fixing a Failed ERP Implementation (IT Toolbox)

ERP Risk and ROI Explained (Industry Week) The college where I work has had its share of problems with ERP packages, and unfortunately, we are in an industry that absolutely requires a package to take care of and report on student information. We are about to start on the third ERP implementation in less than eight years, having gone through everything from proprietary systems to PeopleSoft. Our current vendor has decided that they will not develop their software anymore and will stop supporting it in 2011, causing us to scramble in order to get something in place, as we expect our implementation to take two years or more. With all of the risks inherent in ERP implementations, what have you done to mitigate them, and have you seen the rewards that the ERP vendors tout?

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14 comments
Eric Kimberling
Eric Kimberling

Even if SAP were a good fit for Waste Management (which it sounds like wasn't the case), a lot more would have been required to make the implementation successful. Processes have to be clearly defined, documented, and tested (repeated times), scope and cost needs to be tightly managed, organizational roles and responsibilities need to be defined, etc. In short, the business process and organizational change management aspects of the implementation need to be better addressed. The first step, however, is to make sure your company finds the software that is the best fit during its ERP software selection process. Eric Kimberling Panorama Consulting Group

Al Plastow
Al Plastow

When it comes to software asset management or technology asset management, the pre-purchase work you perform as a responsible business technology consumer is absolutely vital to the ongoing relationship???or the lack there-of. Judging even by the minimal information supplied in the related articles, Waste Management apparently swallowed the vendor hype, hook, line, and sinker. Who's at fault? Could there be an entire industry out there that tends to sacrifice long term customer value in favor of short term profits? (Picture the Goose and the Golden Egg Story.) We all have much to learn from this event. Unfortunately there isn't room here for me to convey even a small percentage of the lessons. Remember when Goodyear ran into post implementation problems? Expected cost? $100 million. Interesting...

ENG21
ENG21

I think it was extremely unrealistic of Waste Management to expect SAP to install and work "out-of-the-box"? without customization. In my opinion, Waste Management is trying to look like the victim here, when in reality, it's obvious they're the reason the implementation failed.

Andy J. Moon
Andy J. Moon

A failed ERP implementation is never a desirable outcome. Budgets for such implementations are generally in the millions of dollars and the impacts can be felt in every corner of the business. Still, if the right planning is done ahead of time, if the business is willing to change its processes, and the appropriate level of training is given to the employees, such packages can easily justify their cost. Unfortunately, it seems that only the big failures make the news. Do you think that the costs of ERP are worth the massive investment of time and money?

NotSoChiGuy
NotSoChiGuy

...that this is some sort of effort to get the corporate bottom line looking healthier during these lean economic times; after the determination was made that the product (even if properly configured) wouldn't reap the $$$ benefits pitched to Sr. leadership. (I may be overly jaded in that view, I admit) The only organization that benefits from an out-of-the-box implementation of any ERP system (I've seen SAP, PeopleSoft and LAWSON all implemented to various levels of success) is the consulting firm that will be inevitably hired to get the lug working. As others have mentioned, due diligence and buy in from ALL levels are key drivers for success. Don't ask a firm whether they've implemented System X for a firm like yours; CHECK AND DOUBLE-CHECK to make sure they have.

oscarlr
oscarlr

I work for a company with similar operations to Waste Management (also we buy them some fiber), we also heared about their failed attemp to implement SAP, we just finish a large implementation of SAP in this business with a lot of customizations, but this is the only way the SAP could work in the recycling business. The actual situation in WM is the result of a bad project planning and users who refused the change.

robo_dev
robo_dev

Having lived through a failed $350M ERP implementation, I cannot offer any glowing advice. Key learnings: Making your business SAP-compliant: While it's a grand idea to streamline your business processes, ERP introduces 'different' business processes. Sometimes better, sometimes, much worse, but always different. All that change is stressful and costly. Powerpoint as an integration layer: Oh the joys of top-down selling! While the suits wander off to play golf after the pretty 3D powerpoint presentation, IT and the end-users struggle with database schemas-from-hell, and user interfaces that make babies cry. How about finding out three weeks before go-live that they had no interfaces for their Warehouse Management computers?? (handheld/vehicle mount computers). The only positive side of the ERP implementation I witnessed is that it was a windfall for one consulting company...the parking garage would be filled with two floors of rental cars, every day, which belonged to consultants.

CharlieSpencer
CharlieSpencer

If I'm a major enterprise, especially a manufacturer, what's the cost of NOT having an ERP system? What are my alternatives to accomplish the same objectives? I submit those alternatives are few and poorly integrated. It's not worth the money to poorly implement anything. It's worth the money to take the time, hire people with the appropriate knowledge, and do the necessary planning and testing to minimize the chances of ERP installation failing.

The Admiral
The Admiral

Those who pitch ERP better have it ready to deploy with 30 days and then migrate their enterprise over. There is a disconnect between sales morons and engineering types when it comes to these things. Like IBM they pitch a 10 million dollar project and then milk at a million at a time things that are supposed to be in the project - but were left out. It is standard business practice to do unethical things.

kjurgens
kjurgens

By the sounds of things both parties acted irresponsibly, especially Waste Management, believing that an ERP system would work right out of the box without any customization. In any ERP implementation I've been part of there is months of testing. You can never believe something this important will work without testing it. We recently got burned by upgrading to a newer version of our ERP system, only to find some of the basic aspects that worked fine in the old version are buggy in this version. We tested all the new capabilities, but never thought to re-test some of the other aspects. Lesson learned, I guess.

jackintheback
jackintheback

the only failed ERP (Enterprise Resource Planning)implementation is the one sold to an entity that has no use for it. They (Waste Management)are not manufacturing anything, They're a form of a sanitation "effort". Sure you could look at them as a business, but they aren't making Fabrege Eggs! Some people don't work hard enough, while some accuse them of working "improperly". I understand that some find it valuable to implement new technology in the workplace, while the "simpletons" actually doing the work actually despise changes in the daily routine. I still can't fully realise the the importance of "trodding ahead" with new technology while basic fundamentals, when overlooked, reap a flurry of negative accusations. All the while, a simple solution goes overlooked. "Take out the trash" can mean so many things, so don't get distracted.

Scott Priestley
Scott Priestley

As a veteran ERP consultant and project manager I have seen such projects fail miserably and succeed spectacularly. To tip the balance toward success it is so important to do proper planning initially: make sure you have the right product for your business-type, make sure you have competent consulting partners and make sure that you have full support from mid-level management. Many project managers recite the oft-told adage of "securing executive support", and while important, making sure the mid-level managers know what "supporting the project" looks like is imperative. Undeniably there can be competing priorities - typically Lean, Six Sigma, ISO, etc initiatives. In organizations that are already operating with minimal resources these other high profile business objectives can cause conflict of priority. The sometimes impossible job of the mid-level manager is to balance them all effectively. Another great way to insure success is to make sure that the product that has been selected will perform optimally in your environment. Are you a discrete or process manufacturer? Retail or distribution model? Do you have complex inventory management requirements? Some businesses have a mix in their business model and extra care needs to be taken to insure that the ERP system chosen is flexible enough to work the way you need it to. Finally, managing change is at the crux of success in such an endeavor. This can address issues such as process changes, responsibility changes, disruption to the daily routine while implementing the new system and staying focused on the benefits that will be gained in the new system. Change "marketing" must begin early and deliver a consistent message throughout the project. Enterprise application projects by definition are broad-sweeping and touch many aspects of the business. Such disruption can have significant impact, but through disciplined risk planning and mitigation, such projects can offer amazing benefits such as transparency in the cash management model, more accurate costing data, visibility into the supply chain, optimized inventory management models, increased quality and better accuracy in the sales forecasting pipeline.

royhayward
royhayward

"They (Waste Management)are not manufacturing anything, They're a form of a sanitation "effort". Sure you could look at them as a business, but they aren't making Fabrege Eggs!" Just because they don't manufacture anything does not mean there is no viable benifit from an ERP system. They consume lot of things, and the resources that they manage to manage wast management are extensive. Being in the supply chain business, all kinds of companies and businesses have and need ERP systems of various levels to keep track of materials, and resources. If the implementation failed, I should send them an email. Maybe they need my help to make the next attempt work.

StephenInScotland
StephenInScotland

I was involved in a failed ERP system. "make sure you have competent consulting partners". This is vital. Do your homework, check references, dig around. One of the consultants ended up working for the supplier of the failed ERP which he had recommended. Vested interest possibly?

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