ENTERPRISE RESOURCE PLANNING LITIGATION
CD: Could you provide an insight into the recent proliferation of litigation in the enterprise resource planning (ERP) space?
Ressler: ERP litigation has surged over the last five-plus years, for several reasons. First, competition from alternative business software platforms has led some ERP vendors to generate revenue by taking on certain projects they should have avoided. As a result, they’ve been increasingly unable to deliver the promised functionality at all, or deliver it on time and on budget. Second, since the 2008 financial crisis, companies are less inclined to tolerate the business disruption and financial losses caused by failed ERP projects. Third, the embrace of ERP by governmental entities has resulted in a spate of failed implementations and accompanying lawsuits at the state and municipality level. Fourth, companies now realise that through litigation, they can recover from ERP vendors that botch implementations – companies don’t have to accept costly delays, ballooning costs, missing functionality, expensive change orders, and so on.
CD: What are some of the common reasons behind failed ERP software implementations?
Ressler: The first step in an ERP engagement is to investigate what went wrong on a project and why. Some projects fail because vendors overpromise and under-deliver regarding their consultants’ experience or their software’s functionality. Sometimes the software itself is the problem, especially when an ERP provider attempts to penetrate a new industry or develop functionality for challenging business processes. Usually, however, projects fail not because of an intrinsic software problem but because of mistakes in the implementation. Botched implementations result from deficient project management, as consulting firms fail to apply an appropriate implementation methodology. Project management lapses are reflected by, among other things, failure to assign an appropriately skilled and experienced team of consultants, failure to conduct sufficiently robust testing, slippage between project phases – for example, the build phase begins before the design phase is completed – and failure to identify, manage and mitigate project risks.
Jan-Mar 2016 issue
Kasowitz, Benson, Torres & Friedman LLP