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Oracle ERP lawsuit underscores installation hardships for big systems
Oracle is being sued over a $4.5 million ERP project that did not go according to plan. That's a common problem with ERP installations, according to a new study.
Oracle is being sued over an ERP installation by a user dissatisfied with the outcome. A Pennsylvania-based mechanical contractor is alleging that the vendor "never provided" a fully functional and operational ERP system.
The ERP lawsuit by Worth & Co., over its $4.5 million project, underscores a major problem with big systems. These are large and risky projects often leading to cost and schedule overruns.
Worth filed its ERP lawsuit last week in a U.S. federal court in the Northern District of California. An Oracle spokeswoman said the firm isn't commenting on it.
Lawsuits over ERP deployment are far from rare. Indeed, IT research firm Computer Economics reported in its Technology Trends 2019 report that ERP systems are "dead last" both in ROI and total cost of ownership. They are near the bottom in customer satisfaction.
According to the survey of 249 enterprises, only 27% reported a positive ROI within two years of implementing an ERP system, 43% reported that they broke even, and 30% reported a negative return on investment.
One-third chance of a negative return
Put another way, an organization has a one-third chance of a negative return on its ERP investment, at least in the first two years of the project, said David Wagner, vice president of research at Computer Economics.
David Wagnervice president of research, Computer Economics
"We believe many organizations do achieve an ROI from ERP, but it takes longer than two years," Wagner said. "ERP is not a quick hit benefit, but a long-term effort," he said.
Worth's effort began in 2014, when it spent about a year investigating ERP systems and was in discussions with several providers before selecting Oracle.
But the installation did not go as expected, and the system experienced delays and suffered from incremental failures that were "never debugged or fixed" by the vendor, the ERP lawsuit alleges.
In 2018, four years later, Worth "made the ultimate decision of discontinuing the use of the Oracle ERP system and began the process of converting to a different ERP system," the lawsuit said.
ERP deployment problems
The Computer Economics ranking for ERP is relative compared to other major project installations. The research firm looked at 15 other business deployments, including mobile device wearables, mobile applications, robotic process automation, enterprise asset management, internet of things, e-commerce, IaaS, as well as CRM and HCM.
The reasons why ERP projects face difficulty run the entire range of issues that appear in the survey, according to respondents. Issues include failure to understand business requirements, process change problems and mistakes in migration planning.
Wagner said deployments of any new business system should be "a people project first." Too many firms consider it solely as a technology project.
"Deploying an ERP requires significant communication between the IT department and users, not just at the requirements stage, but after deployment as well," Wagner said.
Sometimes firms "try to make their new ERP work like their old ERP," Wagner said. That may seem like a quick way to get user buy-in, but "if you don't change anything, you are missing out on the chance to truly transform your enterprise," he said.