Major IT project disasters continue to be the bane of software providers and software implementors alike. No platform or integrator is immune from the potential of a major disaster. Below are twelve recent disasters that demonstrate the point. Join us December 11th as we dig deeper into these disasters to discover what they have in common, four things to get right early, and what enterprises can do to improve the probability that your project will not end up on this list in the future.
- Bridgestone – In 2012, Bridgestone’s North American tire division went live with SAP order management and IBM’s WebSphere covering all of its North American warehouses in a big bang approach. The implementation significantly disrupted Bridgestone’s supply chain. Bridgestone filed suit against IBM for $600M in damages. The suit was recently settled out of court.
- National Grid – Supported by EY and Wipro, the US subsidiary of National Grid went live with SAP just prior to Hurricane Sandy striking the east coast. National Grid’s payroll, general ledger and procurement systems were thrown into chaos. National Grid’s own internal estimates stated costs exceeded $1B for a program initially budgeted for $290M. National Grid sued Wipro for damages and the suit was recently settled out of court.
- Los Angeles Department of Water and Power (LAWPD) — In September of 2013, 10 months late and nearly $100M over budget, the department went live with their new Oracle-based Customer Information System (CIS) replacing a system that was nearly 40 years old. The project was supported by PWC, and the result, by all accounts, was a disaster. Roughly 11% of the utility’s meters were not functioning properly, so the utility has been unable to bill approximately 180,000 of its customers — in some instances for up to 17 months. LAWPD sued PWC for damages. The suit is still outstanding.
- State of Oregon — Cover Oregon was the State of Oregon’s program to implement the federally mandated healthcare exchange. Oregon made the decision to go wall-to-wall with the use of Oracle software and used Oracle resources to support the implementation. With $300M spent and not a single application taken through the exchange, Oregon and Oracle filed dueling lawsuits.
- H.B. Fuller – Contracting with Accenture, H.B. Fuller utilized SAP as a solution to standardize global business processes following a major acquisition. With the program budget of $60M under pressure, the team went live with its N. American implementation. The problems associated with the implementation were so significant that H.B. Fuller’s stock price dipped by 30% destroying $650M in shareholder value.
- Avon – In 2013, after 4 years of activity, Avon wrote off $125M in project costs after the first implementation of their Service Model Transformation program. Supported by SAP and IBM WebSphere technologies, the first implementation in Canada caused significant disruptions. It was determined that risks to further disruptions to the 6 million representatives globally were unwarranted.
- Select Comfort – Under the pressure from an activist investor, Select Comfort went live in October 2015 with an Oracle ERP system to replace their existing legacy systems — without the support of a systems integrator. Supply chain signals throughout the company were lost and product delivery times extended well beyond promised dates. The company’s stock price dropped 25%, destroying $250M in shareholder value.
- MillerCoors — Following the development of a global blueprint supported by Deloitte, MillerCoors contracted with HCL to support the implementation of SAP Extended Warehouse Management. Following a very disruptive initial go-live, MillerCoors sued HCL for $100M for breach of contract. HCL countersued MillerCoors and accused them of corporate bullying.
- Co-Op Insurance – U.K. Insurance Co-op Group’s CIS General Insurance Limited (CISGIL) contracted with IBM to re-platform the firm’s systems that were running on an aging IBM mainframe. Using agile methods and a relatively new software platform, the project careened off the rails and the finger-pointing started. IBM allegedly used a missed invoice payment to exit the agreement. CIS filed suit claiming damages of more than $100M.
- City of Anchorage Alaska – Anchorage selected SAP as the system to replace the municipality’s ERP capabilities. What was budgeted to be a $50M project has ballooned to over $100M and is still growing. The project has continued through multiple administration and leadership changes and continues to live on.
- Sacramento City Schools – While not nearly the size and scope of our other failures, we include this example to illustrate that failure is not limited to the big ERP companies and the big system integrators. The Sacramento school system selected Workday to replace its ERP and HR systems at a rough cost of $5M for software and implementation services. But the school system could never surpass a 70% pass rate on its payroll testing. Sacramento determined they were not going to put its $250M annual payroll at risk and killed the project. Sacramento has filed suit against Workday to get its money back.
- Lidl – The global grocery store chain announced that it was going to discontinue their implementation of SAP after investing more than $500M. Lidl has stated that it will utilize its current legacy systems as a platform to move forward as the industry transforms and is faced with new industry competitors like Amazon.
To help avoid large IT transformation project risks, leaders that are responsible for business transformation programs need to secure program risk management processes and independent unbiased views of risk as a means of bullet-proofing their implementations.
- Beware of Dante’s (ERP) Inferno
- Don’t Let Your IT-Enabled Transformation Program Go “Into Thin Air”
- Taking Care of Business: Your Business Case Isn’t Shelfware
- Bridgestone vs. IBM: Parties Agree to Reach Agreement
- An ERP DIY is Just Alphabet Soup