Maksim Kabakou - stock.adobe.com
For one company, an ERP project failure is now a court battle
ERP projects often run into delays and cost overruns, but some actually fail. That's what happened to one Florida-based manufacturing firm.
Southeast Power Group Inc. had hopes that a new ERP system would improve business operations. The opposite happened. The SAP ERP project ended in failure. It took more than four years to install, failed on launch and disrupted the business.
Southeast, a Miami-based firm that makes and distributes diesel and gas-powered generators and other equipment, filed a lawsuit against SAP America Inc. and Vision33 Inc., its services contractor. It is seeking more than $2 million in damages over an SAP Business One ERP project.
The lawsuit was filed in 2018 and is in federal court. The reasons for the ERP project failure are unclear. The courts have yet to air the claims, but its consequences were exhaustive for Southeast, according to its lawsuit.
The project began in 2014. Southeast believed the project would take no more than a year. Instead, the go-live date was set for Jan. 2, 2018. On that day, the firm's existing software system would migrate to Business One, SAP's ERP system for small and midsize businesses.
ERP project launch a total failure
The launch "was a total failure," said Southeast in its lawsuit. It corrupted or lost data. Prices for parts and production items were inaccurate. The system couldn't generate accurate customer invoices or reliable financial statements. Among the problems were long delays in customer deliveries and lost future sales.
The lawsuit lists the problems the ERP project created for the business, not the causes. But it does note that "during the course of the installation, the Vision33 technical team assigned to install Business One changed to a new installation team three times."
As a general rule, ERP customers should ensure that systems integrators "can't replace anyone without your authority," said Jim Johnson, chairman at The Standish Group, a consulting and research firm in Boston. It's not unusual for IT contractors to bring their best workers in at the start of an ERP project and then replace them with less experienced staff, but Johnson doesn't know what happened at Southeast.
The Standish Group reports on software projects. It has data on nearly 1,800 ERP projects from the last 10 years. The data indicated that 16% of ERP implementations were successful and 53% challenged, meaning they faced budget and delivery date problems. Nearly a third of the ERP projects were failures that can be, in some cases, crippling for a business, Johnson said. Lawsuits are far from rare.
ERP insurance may be prudent
"Anyone who does an ERP project should get project insurance," Johnson said. Insurance costs about 5% to 6% of the project, he said.
Jim JohnsonChairman, The Standish Group
The complaint against SAP and Vision33 was filed in a Florida state court in 2018. SAP then successfully moved the case to federal court in Florida. That court didn't believe it had jurisdiction. It dismissed the case without prejudice, and Southeast is appealing the decision in a federal appellate court in Atlanta. The appeal is pending.
Meanwhile, Southeast recently filed a lawsuit against SAP America in Pennsylvania state court, where it is headquartered. That case has also been moved to federal court.
Asked about the new lawsuit, Susan Miller, an SAP spokeswoman, said in an email that "the claims made by Southeast Power Group in this lawsuit are similar to those it raised in a prior lawsuit in Florida that was dismissed in August of 2019. SAP believes that the claims asserted against it by Southeast Power Group are -- once again -- without merit and intends to vigorously defend the matter. Given this is pending litigation, SAP will have no further comment."
Peter Feaman, a Boynton Beach, Fla., attorney representing Southeast, took strong exception with SAP's statement. He said it "falsely implies" that there has been a ruling on the merits of the case.
"It was dismissed on jurisdictional grounds only, and that ruling is on appeal," Feaman said.
A Vision33 spokesperson said the firm would not be commenting because "this case is in active litigation."