With enterprise resource planning (ERP) and customer relationship management (CRM) applications at the heart of many a company’s operations, the consequences of a failed software rollout can be serious, including shareholder lawsuits and financial meltdown.
But after a spate of high-profile failures, there are signs that vendors and customers are working hard to ensure the success of their ERP projects. Panorama Consulting Solutions, which regularly surveys businesses on the outcomes of their ERP projects, shows in its 2022 report that 81% of projects met ROI expectations a year or more after go-live.
However, the measure of success has been historically at odds with the number of projects said to be overrunning or underperforming, as Panorama has noted that organizations have lowered their standards of success.
It may be, too, that companies wish to avoid the reputational damage that comes from failure, and instead prefer to redefine success as whatever they get. Sometimes the only sign something has gone wrong is when the parties head to court — and the full details of the dispute rarely come out.
But however success is defined, we’ve assembled here some dramatic ERP flops from over the years and tried to glean wisdom from the wreckage.
1. Mission Produce: This avocado will self-destruct in five days
Mission Produce packs, ripens, and distributes avocados all over the world, and prides itself on its ability to deliver just-ripe avocados year-round. In November 2021 it turned on a new ERP system intended to support international growth with improved operational visibility and financial reporting capabilities.
Then everything went pear-shaped, and suddenly Mission no longer knew for sure how many avocados it had on hand, nor how ripe they were, with many of them ending up unfit for sale. It had to buy in fruit from other suppliers to meet its delivery commitments, taking a hit to margins. And on top of that, there were delays in its automated customer invoicing.
“Despite the countless hours we spent planning and preparing for this conversion, we nevertheless experienced significant challenges with the implementation,” CEO Stephen Barnard told investors with delightful understatement. “While we weren’t naïve to the risk of disruption to the business, the extent and magnitude was greater than we anticipated.”
The company was forced to develop new processes to keep information flowing around the business, and hire a third-party consultant to sort out the ERP system at a cost of $3.8 million over the following nine months.
That’s nothing, though, to the hit Mission took to its earnings. Attributing an exact cost to the ERP failure is difficult, as the company faced additional challenges from a poor avocado harvest in Mexico around the same time. However, it said that the $22.2 million year-on-year drop in gross profit for the quarter following the go-live was primarily due to the ERP problem.
2. Invacare faces long wait and increased cost for health care ERP intervention
Invacare, a manufacturer of medical devices, has put its ailing SAP upgrade into a coma, temporarily stopping the project — but not the bills.
The company’s North American business unit, which accounts for 40% of its revenue, was the first to move to the new system in October 2021. It didn’t go well, initially limiting online ordering and causing delays in accounts receivable, although things were getting back to normal by the end of the quarter.
ERP pains are a recurring illness for Invacare, which also had problems with an earlier upgrade between 2005 and 2009.
The company is busy restructuring in the wake of the pandemic, simplifying its product lines and adapting its supply chain to the new reality. That’s made it hard for the team working on the ERP upgrade to keep up, so early in 2022 Invacare decided to put the project on hold.
“We wanted to pause on investing in the current footprint, which would only be redone based on how the footprint is revised. And we think that’ll take a couple of quarters to resolve,” chairman, president, and CEO Matt Monaghan told investors in August 2022. “Once we have that template created in North America, that will be deployed globally.”
Even though work on the ERP project has stopped, the company still has to keep paying its systems integrator the same monthly fee, he said.
The ongoing delays and costs appear not to have pleased Invacare’s board, which two weeks later nudged Monaghan out saying the company needed “a change in leadership to oversee the successful execution of Invacare’s business transformation.”
If there’s one thing CIOs can take away from Invacare’s experience, it’s to make sure systems integrators’ contracts don’t require them to be paid when there’s nothing for them to do.
3. Protective packaging firm’s profit takes a knock from ERP
Packaging firm Ranpak’s SAP migration was far from a disaster — it took less than a year and was delivered on time and to budget — but nevertheless initially led to disappointing results.
The move to a cloud-based ERP system came several years into a broader digital transformation at Ranpak.
The company rolled out the new ERP in January 2022, coinciding with its new fiscal year. After a period of planned downtime, “We experienced inefficiencies as we got up the learning curve in the new system,” CEO Omar Asali said in a presentation of first-quarter results.
The software roll-out coincided with Russia’s attack on Ukraine, making it harder for the company to respond to supply chain disruption and increasing input costs. That meant a decline in sales across the board, inefficiencies in processing and shipping, and an inability to increase prices in line with costs, leading to a $5 million drop in net profit in the quarter.
Some of the software issues remained unresolved into the second quarter, and by the end of the third quarter the company had run up $6.5 million in implementation costs. But in early November Asali said the new ERP system had started to deliver better and faster measurement of productivity and KPIs.
4. Snack manufacturer bites off more than it can chew with ERP change
J&J Snack Foods’ ERP problems stem not from a modern system but an older one — Oracle’s JD Edwards.
J&J has long used JD Edwards in its frozen beverages division and decided to move the entire company to the same platform. Unusually, the company decided not to switch ERP systems after closing its books for the year, but in the middle of its second fiscal quarter. For J&J, that was in February, usually a quiet period for snack sales.
February 2022 turned out to be busier than usual, although not for the best of reasons.
“The implementation created unforeseen temporary, operational, manufacturing and supply chain challenges that affected the performance of our food service and retail segments during the quarter,” CEO Daniel Fachner told investors in May. By then, though, the problems were largely resolved and the company was “just fine-tuning a few pieces of it,” he said.
Those challenges meant J&J lost out on $20 million in sales and $4.5 million in operating income. It would’ve been a banner quarter if not for the ERP disruption: The company’s frozen beverages segment, already running JD Edwards, saw sales rise 50%.
5. Leaseplan: A monolith unfit for the emerging digital world
After an initially successful SAP deployment at its Australian subsidiary, in 2016 vehicle management company Leaseplan commissioned HCL Technologies to develop a new SAP-based Core Leasing System (CLS) that was to be the heart of the group’s IT transformation across 32 countries.
In early 2018, auditors warned of exceptions with respect to user access and change management in CLS, and recommended improvements to IT controls and governance as more countries were expected to migrate to CLS that year. By March 2019, things were slipping. The auditors noted that rollout of “the first phases” of CLS was now expected that same year, and added recommendations on managing outsourcing risk to their earlier warnings.
Leaseplan abandoned CLS months later, writing off €92 million ($100 million) in project costs, and millions more in related restructuring and consultancy fees. It managed to salvage just €14 million it had spent on separately developed IT modules that it expected would generate economic benefits in the future.
The problem, Leaseplan said in its second-quarter results, was that CLS would “not be fit for purpose in the emerging digital world in which [it] operated.” The monolithic nature of the SAP system “hindered its ability to make incremental product and service improvements at a time of accelerated technological change,” according to Leaseplan.
Instead, the company planned to build a modular system using best-of-breed third-party components alongside its existing predictive maintenance, insurance claim and contract management systems. It expected this to be more scalable and allow incremental product deployments and updates.
6. MillerCoors: Fighting in public, then making nice
In 2014, MillerCoors was running seven different instances of SAP’s ERP software, a legacy of the years of booze industry consolidation that had produced the alcohol behemoth. The merged company hired Indian IT services firm HCL Technologies to roll out a unified SAP implementation to serve the entire company. Things didn’t go smoothly: The first rollout was marked by eight “critical” severity defects, 47 high-severity defects, and thousands of additional problems recorded during an extended period of “go-live hypercare.” By March 2017 the project had gone so far south that MillerCoors sued HCL for $100 million, claiming HCL had inadequately staffed the project and failed to live up to its promises.
But the IT services company didn’t take that lying down. In June 2017, HCL countersued, claiming MillerCoors was in essence blaming HCL for its own management dysfunction, which HCL said was at the real cause of the failure. Outside observers noted that the wording of the contracts, as outlined in the lawsuits, seemed to be based on a pre-existing general services contract between the two companies, and left plenty of room for error. Then, in December 2018, the two companies resolved the dispute “amicably,” having apparently used the courts as a venue for a high-stakes, public negotiating session.
7. Revlon: Screwing up badly enough to enrage investors
Cosmetics giant Revlon was another company that found itself needing to integrate its processes across business units after a merger — in this case, it had acquired Elizabeth Arden, Inc., in 2016. Both companies had positive experiences with ERP rollouts in the past: Elizabeth Arden with Oracle Fusion Applications, and Revlon with Microsoft Dynamics AX. But the merged company made the fateful choice to go with a new provider, SAP HANA, by December 2016.
Was HANA an undercooked product doomed to fail? Maybe. What’s clear was that the rollout was disastrous enough to essentially sabotage Revlon’s own North Carolina manufacturing facility, resulting in millions of dollars in lost sales. The company blamed “lack of design and maintenance of effective controls in connection with the … implementation” for the fiasco in March 2019. It also noted that “these ERP-related disruptions have caused the company to incur expedited shipping fees and other unanticipated expenses in connection with actions that the company has implemented to remediate the decline in customer service levels, which could continue until the ERP systems issues are resolved.” The crisis sent Revlon stock into a tailspin that, in turn, led to the company’s own stockholders to sue.
8. Lidl: Big problem for German supermarket giant
It was supposed to be the marriage of two great German companies: SAP, the ERP/CRM superstar, and Lidl, a nationwide grocery chain with €100 billion in annual revenue. The two began working together on a transition away from Lidl’s creaky in-house inventory system since 2011. But by 2018, after spending nearly €500 million, Lidl scrapped the project.
What happened? The scuttlebutt centered on a quirk in Lidl’s record-keeping: They’ve always based their inventory systems on the price they pay for goods, whereas most companies base their systems on the retail price they sell the goods for. Lidl didn’t want to change its way of doing things, so the SAP implementation had to be customized, which set off a cascade of implementation problems. Combine this with too much turnover in the executive ranks of Lidl’s IT department, and finger-pointing at the consultancy charged with guiding the implementation, and you have a recipe for ERP disaster.
9. National Grid: A perfect storm
National Grid, a utility company serving gas and electric customers in New York, Rhode Island, and Massachusetts, was facing a difficult situation. Their rollout of a new SAP implementation was three years in the making and already overdue. If they missed their go-live date, there would be cost overruns to the tune of tens of millions of dollars, and they would have to get government approval to raise rates to pay for them. If they turned on their new SAP system prematurely, their own operations could be compromised. Oh, and their go-live date was November 5, 2012 — less than a week after Superstorm Sandy devastated National Grid’s service area and left millions without power.
In the midst of the chaos, National Grid made the fateful decision to throw the switch, and the results were even more disastrous than the pessimists feared: some employees got paychecks that were too big, while others were underpaid; 15,000 vendor invoices couldn’t be processed; and financial reporting collapsed to the extent that the company could no longer get the sort of short-term loans it typically relied on for cashflow. National Grid’s lawsuit against Wipro, its system integrator, was eventually settled out of court for $75 million, but that didn’t come close to covering the losses.
10. Worth & Co.: Interminable rollout leads to a lawsuit at the source
Worth & Co. is a Pennsylvania-based manufacturing company that just wanted a new ERP system, and after hearing several pitches in 2014, decided to hire EDREi Solutions to implement Oracle’s E-Business Suite. The first go-live date was November 2015. But things began to slip. The deadline was pushed back to February 2016. At that point, Oracle demanded that Worth & Co. pony up $260,000 for training courses and support contracts. But 2016 came and went and still no rollout. In 2017 Worth & Co. jettisoned EDREi for another integrator, Monument Data Solutions. Another year was spent attempting, without success, to customize Oracle’s suite for Worth & Co.’s purposes.
Finally, after the project was abandoned, Worth & Co. did something novel in February 2019: they sued not their IT vendor, but Oracle, specifically citing the $4.5 million they paid the software giant for licenses, professional services, and training. The lawsuit is still ongoing.
11. Target Canada: Garbage in, garbage out
Many companies rolling out ERP systems hit snags when it comes to importing data from legacy systems into their shiny new infrastructure. When Target was launching in Canada in 2013, though, they assumed they would avoid this problem: there would be no data to convert, just new information to input into their SAP system.
But upon launch, the company’s supply chain collapsed, and investigators quickly tracked the fault down to this supposedly fresh data, which was riddled with errors — items were tagged with incorrect dimensions, prices, manufacturers, you name it. Turns out thousands of entries were put into the system by hand by entry-level employees with no experience to help them recognize when they had been given incorrect information from manufacturers, working on crushingly tight deadlines. An investigation found that only about 30% of the data in the system was actually correct.
12. PG&E: When ‘sample’ data isn’t
Some rollouts aim to tackle this sort of problem by testing new systems with production data, generally imported from existing databases. This can ensure that data errors are corrected before rollout — but production data is valuable stuff containing a lot of confidential and proprietary information, and it needs to be guarded with the same care as it would in actual production.
In May 2016, Chris Vickery, risk analyst at UpGuard, discovered a publicly exposed database that appeared to be Pacific Gas and Electric’s asset management system, containing details for over 47,000 PG&E computers, virtual machines, servers, and other devices — completely open to viewing, without username or password required. While PG&E initially denied this was production data, Vickery says that it was, and was exposed as a result of an ERP rollout: a third-party vendor was given live PG&E data in order to fill a “demo” database and test how it would react in real production practice. They then failed to supply any of the protection a real production database would need.
Surviving an ERP rollout
So what have we learned? Well, don’t fall afoul of regulators, make sure your data is secure and clean, and document your processes before you move to a new platform — all good advice for any rollout or any other big IT project, really.
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