The Biggest ERP Implementation Failures

More and more companies wanting to take part in the race to be the leader in their industry are using ERP and CRM systems. Encouraged by the vision of automated digitalization, organizations often make the decision to purchase and install a system. Unfortunately, the history surrounding the complex market of IT solutions for business shows that ERP implementations sometimes have an infamous reputation.

The consequences of mistakes in this area can cast a long shadow on the further profitability of the entire business. Failure to fulfill contracts and missed deadlines are among the most common causes of failed projects. Demanding ERP system implementations are therefore increasingly being entrusted to specialized external companies that are supposed to carry the burden of transforming the most intricate processes.

Research conducted by Panorama Consulting Solutions shows that back in 2015, only 58% of surveyed enterprises described their ERP installation process as a success. However, in 2019, this number soared to as much as 88%.

Does this mean the market has matured and ERP implementations are no longer a challenge? The truth may be slightly less optimistic.

• The high indicator may be the result of lowered standards of success.
• Companies want to avoid the loss of reputation associated with failure, deciding to redefine success as accepting "whatever they get."
• Sometimes the only visible sign of critical errors is the fact that the parties meet in court. Details of the dispute rarely come to light entirely.

Below we present the most well-known case studies of companies whose digitalization plans clashed with harsh reality. Here are the most unsuccessful ERP implementations in recent years.

In 2016, after an initially satisfactory implementation in its Australian subsidiary, Leaseplan commissioned the construction of a new Core Leasing System (CLS). The solution, based on SAP technology, was meant to handle IT transformation in as many as 32 countries. Over time, however, this system implementation began generating numerous problems.

In early 2018, auditors warned about deficiencies in change and user access management, recommending a quick improvement in controls. By March 2019, the situation was getting out of hand, causing Leaseplan to abandon the project. The company lost €92 million on the process itself. Millions more were spent on consulting and restructuring. Consequently, only €14 million from separately developed IT modules were salvaged. According to reports, the system was not fit for the digital world. Its monolithic nature significantly limited the ability to improve services. Ultimately, the company returned to plans for building a fully modular system that enables scalability.

In the alcohol industry, after years of corporate consolidation, MillerCoors was operating on seven different instances of SAP software in 2014. To organize its IT environment, the company hired HCL Technologies to launch a single, unified system.

SAP implementations are often referred to as a "roll-out," meaning launching a system using a ready-made template to speed up work. It was supposed to be a showcase unification of the IT structure. However, the first launch revealed 8 critical flaws, 47 high-severity errors, and thousands of smaller problems during post-implementation support. Unfortunately, in 2017, MillerCoors sued the provider for $100 million. The company claimed that HCL staff did not keep their promises. The provider responded with its own lawsuit, claiming that internal dysfunction in MillerCoors' management was to blame for the failure. Ultimately, the dispute was settled amicably in December 2018.

Following a high-profile merger in 2016, cosmetics giant Revlon joined forces with Elizabeth Arden, Inc. Previously, both brands had positive experiences with ERP implementations (Elizabeth Arden with Oracle, and Revlon with Microsoft Dynamics AX). However, they decided on a new architecture - SAP S/4HANA.

The system roll-out was so disastrous that it led to the sabotage of work at the manufacturing plant in North Carolina. This generated millions in lost sales. According to the company itself, the culprit was "a lack of design and maintenance of effective control over the system." The problem caused higher shipping costs for goods and other unforeseen expenses related to rescuing customer service. Ultimately, this IT blunder led to a drastic drop in Revlon's stock, which also led to a lawsuit from their own shareholders.

The fusion of Lidl's massive processes and SAP was supposed to be a benchmark for the entire industry. The cooperation began in 2011. However, in 2018, after investing nearly €500 million, Lidl completely withdrew from the project.

The main cause of this failure were discrepancies in the business approach. Lidl focused on the price it paid for goods in its records. Meanwhile, the delivered inventory system defaulted to retail prices at which the goods were sold. Lidl refused to change its own procedures, so the software had to undergo continuous customization for atypical requirements. Combined with excessively high employee turnover in Lidl's own IT department, this provided a ready recipe for an ERP disaster.

National Grid, an energy enterprise, carried out a 3-year implementation roll-out. Missing the "go-live" deadline threatened costs measured in tens of millions of dollars and rate hikes for customers, which required government approval.

The launch date was set for November 5, 2012. This was less than a week after Superstorm Sandy devastated the area, leaving millions of citizens without power. The system was activated right in the middle of this chaos. The results?

• Some employees received oversized paychecks, while others received smaller ones.
• About 15,000 vendor invoices got stuck unprocessed.
• Internal financial reporting collapsed, cutting the company off from necessary short-term loans that facilitate maintaining liquidity.

The systems integrator, Wipro, eventually agreed to pay $75 million in damages. However, this in no way covered National Grid's real losses.

Alternative technologies also carry challenges. Worth & Co. is a manufacturing company based in Pennsylvania. In 2014, it hired EDREi Solutions to install the E-Business Suite package from Oracle.

The planned deadline for November 2015 was pushed to February 2016. Oracle demanded the payment of another $260,000 for support and training agreements. However, the software still did not work properly.

In 2017, Worth & Co. dropped EDREi in favor of another integrator, Monument Data Solutions. Another year was spent on ineffective attempts to adapt the software to the company's goals. This ended in an unprecedented move in 2019. Worth & Co. filed a $4.5 million lawsuit against the giant Oracle itself for wasted licenses and training.

When British telecommunications provider Vodafone consolidated its CRM systems on the Siebel platform, some user profiles did not migrate correctly. The problem became apparent when customer accounts failed to credit payments that had been made.

This led to a £4.6 million fine from the UK regulator. The moral of this story is obvious: problems will sooner or later come to light.

The Australian branch of the venerable department store chain, affectionately known as "Woolies," also struggled with problems. The company switched from 30-year-old software to SAP. For the next 18 months, the chain could not generate weekly profit and loss reports from individual stores. Undocumented daily business procedures failed. The departure of qualified employees during the overly long, six-year ERP implementation also had an impact. Because of this, institutional knowledge was lost.

When designing a new environment, companies often transfer confidential data from old systems. In May 2016, Chris Vickery, a risk analyst at UpGuard, discovered a publicly accessible database. It contained 47,000 records (computers, services) belonging to PG&E. It was completely open and unprotected by a password. This data was exposed by a third-party vendor handling a "demo" version of an IT environment management tool.

A massive $400 million modernization scheduled for the year 2000 was supposed to implement a central ERP/CRM system combined with the supply chain at the footwear manufacturer. Instead, it served the company $100 million in losses and a 20 percent drop in inventory.

The i2 software turned out to be too slow and hindered integration with other systems. Besides this, Nike's planners were inadequately trained in its use before the go-live mode.

The consolidation of multiple tools consumed $160 million in lost revenue and backlogs. This was five times more than the initial 2004 business plan assumed. Managers knew about the risks, but as an HP executive described it: "We had a series of small problems, none of which individually would be too big to handle. But together they created the perfect storm."

In 2008, Waste Management, a waste disposal giant, sued SAP over an ERP system installation that took barely 18 months. The company demanded over $1 billion in damages for a fraudulent sales program.

However, the provider filed allegations that Waste Management had allegedly breached its contract with SAP. The company had supposedly failed to specify its requirements for the system implementation. It also did not provide the appropriate decision-makers to handle the project. In March 2010, the matter went to arbitration, though the final result was unsatisfactory. Waste Management received a settlement of just $77 million.

We have discussed the most spectacular implementation failures. Therefore, it is worth considering how not to repeat them in your own example. Experts' conclusions can be boiled down to a few critical points:

• Secure and clean data before migration. By doing so, you will avoid both invoice chaos and possible legal penalties or data leaks.
• Document current processes thoroughly. The system will not guess the internal habits of the business. You need to provide it with the right data and processes "on a silver platter."
• Ensure personnel presence. Someone in the company should feel responsible for this project and take care of the fluidity of changes at the top of the organization.
• Prevent knowledge loss. Take special care of those specialists who know business processes inside out. If they leave during architecture modifications, the project will quickly lose a key foundation.