» VIEW ALL POSTS Mar 27 2008   10:11AM GMT

SAP sued by Waste Management



Posted by: JackDanahy
Tags:
lawsuit
SAP

Waste Management, which spent $100 million on SAP software and characterized the project as a “complete failure” in a lawsuit filed March 20, is out for blood. The company seeks damages, including punitive damages, from SAP, whose Waste and Recycling Software software was excoriated by Waste Management in the text of the lawsuit. In part, the lawsuit alleges that, “Unknown to Waste Management, this ‘United States’ version of the Waste and Recycling Software was undeveloped, untested and defective.”

Waste Management came to SAP via the “Safe Passage” program that was supposed to entice PeopleSoft users to SAP during Oracle’s drawn-out bid for PeopleSoft. At the time, Waste Management was a company in crisis. SEC Administrative Proceeding No. 3-10513 had found the following: “As early as 1988, members of Andersen’s audit engagement tram recognized that Waste Management employed ‘aggressive’ accounting practices to enhance its earnings.” In the brouhaha that followed, Waste Management’s board fired the company’s management.

Waste Management’s executive suite attained their current positions in 2004. As such, it seems that the company had a lot on its plate at once: overcoming an crisis, appointing new leadership, and launching a major ERP project.

This is not to say that Waste Management’s lawsuit is mistaken. No one can know for sure until after the wheels of justice turn. However, as it is, something seems lost in the telling. How could a company spend $100 million on software that is “undeveloped, untested and defective”? More pertinently, how could these facts about the software be “unknown” to management? ERP implementations can take years, and are accompanied by rigorous testing and planning. If SAP’s software is indeed a “complete failure,” Waste Management’s executives might well have been asleep at the wheel; no one should pay $100 million and wait two years to find out they’ve bought a defective product. If SAP’s software turns out not to have been to blame, Waste Management will still have done damage to SAP’s share price and reputation — for how long, no one can tell.

Demir Barlas, Site Editor

8  Comments on this Post

 
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  • JackDanahy
    Ask Central Michigan University about the honesty of SAP systems.
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  • JackDanahy
    A private company, unlike the paid off directors found in a government body, can hold SAP accountable. I wish them luck.
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  • JackDanahy
    Time perhaps to sell both WM & SAP short? Friend of mine worked on this project...cited numerous examples of WM management being totally clueless...then yelling and screaming to try and get the new SAP system to do the same unworkable and broken business process their old system(s) did. The waste business in general is filled with crooks being infested with mafioso types for years and years in big cities like NY and Chicago. Witness what's going on right now in Naples Italy. Why SAP thought they could change the culture of a company like WM, which implemenation of an ERP requires, shows that SAP, being a global company is also clueless about culture. Let's face it: trash hauling companies aren't gonna be filled with brainiacs...and mobster's which riddle the ranks of the rough and tumble world of the dumpster haulers ain't really in the business of creating value for their shareholders: they are in it to skim money into their own pockets by washing illicit cash through a seemigly ligit business. Soooo, combine the need to behave honestly to take on the painful changes ERP requires with a bunch of crooks, and ya get: failure. Surprise!
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  • JackDanahy
    This is a classic example of a Sales Rep over promising and Consultants under delivering.
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  • JackDanahy
    There are certainly many potential reasons for why a large SAP project fails - and the general exhaustion among senior management that the author mentiones may be the root cause for them. The key to this lawsuit however must be for Waste Management to prove that the core Waste and Recylcing Software was not developed and tested to the level that SAP committed to when the contract was signed. It is concievable that the WM management gradually discovered deficiences in the solution and in the end put the pieces together to a pattern that can only be explained by the SAP sales team having promised a level of quality higher than they should have. This is what the WM legal team needs to prove in the wheels of justice.
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  • George
    Did anyone mention implementation partner - Accenture ?
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  • JackDanahy
    Points 5 & 6 are very good. To me, this sounds like a classic example of a company, i.e. WM, not doing their homework before investing so much money in a SW implementation. SAP would never promise the implementation would be complete in 18 months. This is even more so if there was a systems integrator involved. That would never be binding in court unless a contract promised it. SAP would never do that. To me, it sounds like WM has very little to stand on here. Most of the things they are pointing to are verbal in orientation, i.e. things you would hear at a sales demo. SAP contracts cover these types of issues, e.g. system enhancements. Now, with that being said if the system was not live in any other client before that is a different story. Clearly there are additional functions needed in the waste industry and those specifically could get called out. The rest of R/3 cannot, as it is used by 20k+ companies around the world. Again, I think WM will have a tough time with this and it sounds like they did not have their homework done. Did they even speak with other customers that implemented SAP to get an idea of what it is like? And for that matter, it does not matter if it is SAP, Oracle or some other package. And where is Accenture in all this?!
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  • JackDanahy
    I can tell you that SAP software apart from R/3 which has matured over the years is not of very high quality. There are no code reviews done in many teams and rigorous quality assurance is not present. The company is neither CMM nor ISO certified nor do they have strong internal processes. If you ask you get the refrain mean time to market is more important than software quality. This of course does not exonerate Waste management's top Brass who made a $100 million mistake and allowed themselves to be fooled into thinking a prototype made for a demo show is a final working product. But then how many top brass do you know who own up to a $100 million goof up? If you ask the consultants who make tons of money hourly they will tell you they make a good living precisely because SAP software is underdeveloped, untested and in many cases undocumented. Long live the SAP ecosystem.
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