Waste Management sues SAP over ERP implementation

Written March 30th, 2008 by
Categories: CEO's Blog
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News Service 3/27/08

Waste Management said it is seeking recovery of more than US$100 million in project expenses, as well as “the savings and benefits that the SAP software was promised to deliver to Waste Management.””

This isn’t the first time, and it most certainly won’t be the last time, that an IT based project falls apart.  How did this happen and what lessons can b2b2dot0 learn from it?

In fact, we will probably never learn the “real” truth, and no doubt a $100M mistake involves a lot of people and will prove to be very complex, but one thing is very simple and clear, the two parties weren’t communicating.

At the end of the day, SAP and Waste Management (WM) had very different expectations for this transaction.

Waste Management’s expectations (at least in hindsight), were very clear.  They wanted to quickly replace their legacy revenue management systems, with an “off the shelf” product, and take on as little customization and risk as possible.  (That sounds familiar to us. :-))

SAP simply wanted to win a new customer and a sizable contract.

According to the lawsuit, after several months of due diligence and many many meetings, WM signed a contract with SAP in October of 2005 that promised that WM’s full-scale roll-out would happen in 18 months (April 2007). 

“Almost immediately following execution of the agreements, the SAP implementation team discovered significant ‘gaps’ between the software’s functionality and Waste Management’s business requirements,” it states.”

So my question is…what exactly was that due diligence process all about?  I think that the key requirements need to be uncovered and demonstrated before contracts are signed!  That helps both parties understand what they’re about to get into. Run a pilot as part of the due diligence process. A reasonably thorough gap analysis should be a key deliverable.

Members of SAP’s implementation team blamed Waste Management for the functional gaps and submitted change orders requiring that Waste Management pay for fixing them, according to the complaint.”

I have no doubt that in fact WM did uncover “new” requirements once the project got started.  That’s inevitable on every project and it’s very easy to blame the customer for changing the scope of the project.  As is evidenced here, that’s a guaranteed one way ticket to divorce court.  Establish a collaborative, open and honest relationship from the onset, define clear and crisp business goals up front (which is very hard and often avoided), and to not let issues fester.

In addition, the complaint alleges, SAP originally promised that a pilot phase in New Mexico would be up and running by Dec. 15, 2006, “but it is not even close to being completed today.””

This project plan appears to have been irrational from the start. The WM website states that:

the company’s network of operations includes 413 collection
operations, 370 transfer stations, 283 active landfill disposal
sites, 17 waste-to-energy plants, 131 recycling plants, 95
beneficial-use landfill gas projects and 6 independent power
production plants.”

If SAP was going to take 14 months to implement the first pilot, that would only leave them only 4 months to roll it out to the remaining 1000+ sites.  That doesn’t make sense to me.
Create realistic, iterative project plans and monitor them all along the way. Avoid the “happy ear” syndrome…hearing what you want to hear and being deaf to what’s really being said.

“Eventually, SAP conducted a “Solutions Review” and by summer 2007 determined the software was not an “enterprise solution” for Waste Management’s needs, according to the complaint.”

It took two years to act upon what was uncovered within weeks of the start of the project.  It takes great courage to confront the issues that we face.  They need to be faced early and often. “Courage and perseverance have a magical talisman, before which difficulties disappear and obstacles vanish into air.”  John Quincy Adams, US diplomat & politician (1767 – 1848)