Few enterprise software purchases meet expectations.
Some industry observers say that fewer than ten percent of major software purchases fully meet expectations, while more than ninety percent experience partial to outright failure. The examples on this page are but the tip of the iceberg. Most people don't like talking about their failures which is why the only ones you hear about are those that ended up in court, involved the government or impacted the stock price of public companies.
The seeds of failure are usually sown at the start of the project with inadequate requirements, but the fruit of these shortcuts only becomes apparent when implementation dates slip, costs go through the roof and business is seriously disrupted when going live. To make matters worse, the new software doesn't come close to meeting expectations.
This page is a compilation of failure examples across the industry. Go directly to the section corresponding to the size of your purchase:
- Software failures under $1 million
- Software failures between $1 million and $10 million
- Software failures between $10 million and $100 million
- Software failures over $100 million
Software failures under $1 million
NetSuite slapped with fraud lawsuit over 'aggressive' salesman's claims
NetSuite is facing a lawsuit from a skin care product retailer that alleges an overzealous salesman led them to buy software that utterly failed to meet their needs. Gulf Coast Medical Group LLC, a Florida company that does business under the name of SkinMedix, had outgrown its website and shopping cart platform and began looking for a replacement that could manage both sales and back-office functions. Its existing system was managing an inventory of 3,000 products but SkinMedix needed something that could eventually handle a 20,000-item inventory.
It quickly became apparent that NetSuite's system was incapable of delivering as promised. NetSuite also failed to meet the deployment deadline, according to SkinMedix. As a result of the salesman's claims, SkinMedix has spent more than $250,000 on a "manifestly unusable" website, the complaint states.
NetSuite socked with lawsuit by textile manufacturer
NetSuite has been hit with another customer lawsuit, this time from textile products manufacturer Kentwool, which alleges the cloud ERP vendor pulled the wool over its eyes in order to take its money. Kentwool signed a one-year contract with NetSuite, under which the vendor would “customize, configure and implement its ERP [enterprise-resource-planning] software for Kentwool’s specific needs and uses” .
Kentwool relied on Netsuite's pledges when it decided to sign the contract, but all the while NetSuite knew its software didn’t have the functionality required to live up to the deal, the complaint adds. NetSuite told Kentwool it could fix the problems, but allegedly failed to do so. Kentwool ended up paying US$318,000 to NetSuite, “well in excess” of the original estimate of $246,000.
Infor demands $131k for 3rd party access fees from Micromatic, a customer of 20 years
Micromatic, a manufacturer of rotary actuators and automation systems located in Berne, Indiana had been using Infor’s ERP software for almost 20 years. After an audit, Infor suddenly claimed that Micromatic owed them $131k in additional license fees for access to its software by two third-party support providers although these vendors only maintained Micromatic's computer systems, and did not use Infor’s software.
In a Federal lawsuit, Micromatic asked the court for a declaratory judgment exonerating them from Infor's claims. The suit claimed that Infor’s actions appeared to be part of a pattern designed to extract extra revenue from customers.
Infor then filed a lawsuit against Micromatic claiming wrongful third party use. Also, the Infor suit argued that their software had been copied illegally and that Micromatic had allowed a contractor access to Infor’s support system although this was not authorized. Infor gave their 20-year customer 15 days to resolve the problem, failing which they would terminate Micromatic’s license and demand the return of the software.
Texas mental health center files breach of contract lawsuit against software provider
A mental health center in Texas is suing a software provider for breach of contract. The lawsuit was filed by the Heart of Texas Region Mental Health Mental Retardation Center (MHMR), against CoCentrix Inc., a Florida-based company. The lawsuit seeks a refund of $250,000 that the agency claims it paid the software provider, as well as triple damages available under the Texas Deceptive Trade Practices Act.
According to the lawsuit, MHMR contracted with UNI/CARE Systems Inc. to provide software for a records system. CoCentrix later assumed all obligations under the contract, which specified that support documentation, training, installation and consulting would be provided. According to the lawsuit, CoCentrix missed more than 10 deadlines for the software to be completed. MHMR states that it terminated the contract and demanded a refund of the money it had paid to the defendant, but CoCentrix did not refund the money.
Million dollar glitch: County pulls plug on court software system
After investing two years and almost $1 million to update Rutherford County's antiquated court-management computer system, a new Circuit Court clerk pulled the plug. Now the county, clerk's office and software company are all standing around with fingers pointed, wanting to find out what went wrong and whether a lawsuit might be around the corner.
Pet food maker Sunshine Mills takes Ross Systems to court after spending $235k on failed ERP
Pet food maker Sunshine Mills wanted new ERP software to replace a legacy system. They purchased Ross ERP for $235,000 and spent a further $2 million on recommended hardware and other items. Sunshine Mills expected big savings but instead had to hire additional people and deal with problems like system lockups and an inability to print invoices. Promised functionality like a real-time dashboard was not operational.
Problems were so bad that Sunshine filed a lawsuit against Ross Systems. One of the prosecuting attorneys claimed that Ross had tricked Sunshine Mills by demonstrating software that supposedly worked out of the box, but failed miserably once it went live. Sunshine Mills won their case against Ross Systems and received a substantial award.
Buckley Powder sues Infor over ERP implementation failure
Buckley Powder, a Colorado company supplying explosives and other products to the mining and construction industries, purchased ERP from Infor and was promised a working system within 6 months. After spending more than $185k and still having no working system 18 months later, Buckley sued Infor.
Systems integrators are often accused of supplying junior consultants to work on projects resulting in missed deadlines and excessive costs. However, customers are usually also at fault with inadequate requirements and not making the right people available. According to analyst Michael Krigsman, the lawsuit was vague suggesting either an ignorance of details or an attempt by Buckley to blame Infor for all their problems.
Software failures between $1 million and $10 million
Beverage distributor Major Brands is suing Epicor, claiming 2 year effort delivered "useless" software
Beverage distributor Major Brands is suing Epicor, alleging the ERP software vendor failed to deliver a satisfactory system after years of effort and significant cost overruns, and then offered a solution that would force the company to install a new version that hadn't yet been completed, pushing back the original "go-live" date by four years.
Major Brands paid Epicor an initial fee of about US$500,000 for software license and support and roughly $670,000 for implementation services. The software was installed on Major Brands' hardware but "problems with operations, implementation and training" began almost at once, the complaint states. Epicor's application was "running so slowly that it was not going to be suitable for use," it adds.
JB Hunt hits trucking software provider with $3.1 million lawsuit
Mega-carrier JB Hunt has sued transportation management system provider MercuryGate for $3.1 million — the amount JB Hunt says it’s owed as a refund for software it says failed to meet the functionality agreed upon by the two parties.
The carrier says it bought the Mojo Route Optimization Software and Carrier Management System Software from MercuryGate, planning to use them “in booking loads for delivery, identifying and tracking carriers and logistics management.” According to court documents, JB Hunt says the software “is virtually useless,” save for 1 percent of its brokerage business.
Software Procurement Problems at the Delaware State Procurement Office
GSS, the Delaware State Procurement Office, contracted SciQuest Inc. for an “out of the box” website where various state agencies could advertise open contracts, private vendors could submit bids, and the public could keep tabs on the proceedings. However, after two years only part of the site is working and GSS and SciQuest are embroiled in a legal battle over the long-delayed project.
A typical SciQuest client submits 4 or 5 enhancement requests, SciQuest said, but to date GSS had submitted 97 such requests and the project scope was out of control. The company claims to have provided the software that GSS needs, while even throwing in an additional $61k worth of software licenses for free. Delaware taxpayers could be on the hook for a nearly $2.3 million state procurement website that may never function as originally envisioned.
JDA Software Hit With Judgment in Dillard's Dispute
Dillard's sued JDA Software Group Inc. alleging i2 software failed to meet obligations regarding two software-license agreements for which the department-store operator had paid $8 million. JDA was ordered to pay $246 million in damages. The award by a state jury in Dallas included $238 million in punitive damages, which isn't meant to be compensatory but is instead meant to deter the defendant and others from engaging in similar conduct.
Warehouse management software bankrupts Porteous Fasteners
Porteous Fasteners imported and distributed construction and industrial fasteners in the U.S. and Canada. Founded in 1966 in the Los Angeles area, they grew to about 250 employees working at the head office & warehouse, 6 regional distribution centers and 9 branches. One branch was located in Vancouver, B.C.
Porteous had used a local software development company to write their own ERP system, and that had been operating for a number of years. They were importing about 100 containers per week and wanted to improve the management of goods arriving at warehouses, moving between warehouses, and being shipped to customers. This led to them selecting and implementing a new warehouse management system. Unfortunately, about a year after the new system went live, the company was bankrupt. The Porteous name and assets were acquired by competitor Brighton-Best International for pennies on the dollar.
City of Indianapolis sues Interact for dispatch system software implementation failure
The city of Indianapolis is suing Interact Public Safety Systems for over $8 million for emergency management software that was not implemented as promised. Interact was unable to deliver a working system almost three years after the original go-live date. As a result of Interact’s failure to properly meet its obligations, the city was forced to find an alternative vendor to replace their Legacy Computer Assisted Dispatch system. To date the city has paid Interact about $6.6 million for the software.
Woolf Enterprises sues Ross System alleging broken promises, lies with ERP sale
Food grower Woolf Enterprises sued Ross Systems over ERP misrepresentations. Ross claimed their software would meet requirements and implementation would be on time and within budget, but Woolf found costs were grossly understated. Ross had claimed the ERP could provide detailed inventory and would allow controls and yields to be optimized, but Woolf found that was not the case. Ross promised its software would meet farm cost and general ledger needs, but Woolf had to buy another module and pay for customization. Woolf had spent about $1.2 million for software and maintenance, and the suit claimed the ERP was unstable, defective and deficient.
Experts commenting on the case felt that the problem could have been largely caused by mismatched expectations on the part of Woolf. For example, Woolf's requirements were inadequate and consequently new requirements were discovered during the implementation, leading to delays and increased costs.
Software failures between $10 million and $100 million
MillerCoors and ERP implementation vendor sue each other over failed ERP project
In a contract initially worth $53 million, MillerCoors hired HCL America for an SAP project to integrate processes across the organization. The expectation was to save $550 million in costs by consolidating the MillerCoors’ and Molson Coors' supply chains.
The implementation project did not go well, with MillerCoors eventually suing HCL for $100 million claiming that the contractor missed project deadlines, delivered buggy code and used junior consultants with inadequate skills. Then HCL filed a counterclaim disputing the brewer’s allegations that they owned responsibility for the troubled ERP project. MillerCoors is accused of being unable to communicate requirements and of shielding its own leadership from blame for failure by making HCL a scapegoat for project problems. The case is ongoing.
Finish Line's Supply Chain disaster cost CEO his job and $32 million in lost sales
Finish Line CEO Glenn Lyon stated in the Q3, 2016 earnings report that performance was severely impacted by a disruption in the supply chain following the implementation of a new warehouse and order management system. Finish Line had trouble filling on-line orders and replenishing stores that cost it $32 million in lost sales, or about 8% of the company's revenue, and this caused an 11% drop in their stock price. CEO Lyon announced his departure simultaneously with the Q3 earnings release.
Finish Line had underestimated the challenge of the project, and especially the level of change management in moving from the old system to the new. There was not nearly enough training for associates and supervisors on the floor to help when ramping up the new system, and too much trust was placed in the software vendor and the implementation consultants.
Oracle sued by university for alleged ERP failure
Montclair State University is suing Oracle over an allegedly botched ERP software project, saying a series of missteps and delays could ultimately cost the school some $20 million more than originally planned, according to a complaint filed last week in U.S. District Court for the District of New Jersey.
Oracle "failed to deliver key implementation services, caused critical deadlines to be missed, refused to make available computer resources that it had promised, failed to deliver properly tested software, and overall, failed to properly manage the project," the complaint alleges. In the end, Montclair suspended the project, fired Oracle and began looking for a replacement systems integrator, it adds. Due to the problems, the school's costs will increase by greater than $10 million, according to the complaint, which goes on to describe Oracle's alleged failings in detail.
Burned by $30 SAP million deal, Marin supervisors seek new software contract
Mindful of "lessons learned" during the county's $30 million computer collapse, Marin officials will negotiate a new software systems contract with Tyler Technologies, the largest company in the nation focused solely on public sector software and services.
In a brief but carefully orchestrated presentation by a phalanx of top officials, the county administration recommended that top brass "enter into a contract and statement of work negotiations" with Tyler, a company that entered the local government software market in 1998 and has offices in 18 states across the nation, although not in California.
SAP ERP Woes Blamed for Lumber Liquidator's Bad Quarter
Lumber Liquidators is attributing a weak third quarter to a complex SAP implementation, saying the project imposed a significant drain on worker productivity. But the problems appear to be largely related to employees having trouble acclimating to the new system, versus malfunctions in the software itself.
The discount flooring chain "implemented the most significant phase" of its SAP project which included a new point-of-sale system along with warehouse management and inventory modules. While business continued without interruption during the project, and net sales rose US$6.7 million to $147.2 million, lower productivity led to an estimated $12 million and $14 million in unrealized net sales, according to the company. Net income fell nearly 45 percent to $4.3 million.
Avantor Performance Materials sues IBM over SAP project 'disaster'
IBM has been slapped with a multimillion-dollar lawsuit by chemical products manufacturer Avantor Performance Materials, which alleges that IBM lied about the suitability of an SAP-based software package it sells in order to win Avantor's business.
Fully aware that, given the competitive pressures of Avantor's industry, and the specialized demands of its customers, Avantor could not tolerate any disruptions in customer service, IBM represented that IBM's 'Express Life Sciences Solution' was uniquely suited to Avantor's business," the lawsuit states. "The Express Solution is a proprietary IBM pre-packaged software solution that runs on an SAP platform." But, after signing, Avantor discovered that Express Life was "woefully unsuited" to its business and the implementation brought its operations to "a near standstill," according to the suit.
Avantor has suffered tens of millions of dollars in monetary damages, as well as taken a hit to its reputation among partners and customers, the suit states. "IBM, meanwhile, has already pocketed over $13 million in fees from Avantor for a systems implementation project it mismanaged and was unable to perform properly," the lawsuit states. "Incredibly, IBM is now seeking to profit from its misconduct by demanding millions of dollars in additional fees to redesign and rebuild the defective System it implemented."
Software failures over $100 million
Rough ERP go-live leads to 25% decrease in stock price
In October 2015 Select Comfort went live with a big bang ERP implementation linking 3 manufacturing plants, 20 distribution hubs, and over 475 company stores. Select Comfort, with just over $1 billion in sales, spent more than $30 million on the project in 2015, with estimated spending nearing $100 million over the last 3 years.
Although the CEO had said things were going well with the ERP implementation, a different picture emerged in the January 2016 quarterly earnings release. Overall, sales were down by $83 million, and earnings were $21 million lower than expected. While the worst of the problems caused by the ERP implementation appear to be over, the company was expecting to take a hit of around $45 million more in the next quarter.
Select Comfort has experienced ERP problems before. In 2008 the company halted an SAP ERP implementation because they were over budget and behind schedule, which resulted in a $25 million write-off.
Avon's Failed SAP Implementation A Perfect Example Of The Enterprise IT Revolution
The Wall Street Journal covered the news that Avon Products Inc. is halting a massive multi-year software project. Avon’s new management order system was rolled out initially in Canada and was to be extended globally thereafter. Avon balked however when the software rollout not only disrupted regular operations, but when implemented was so difficult to use that Avon representatives left the company “in meaningful numbers”. Avon was forced to write down somewhere between $100M and $125M on its balance sheet.
Waste Management sues SAP over ERP implementation
Waste Management sued SAP for fraud over an allegedly failed implementation of its ERP software. The trash-disposal conglomerate had claimed it suffered significant damages, including more than $100 million it spent on the project, which it has dubbed "a complete and utter failure," and more than $350 million for benefits it would have realized if the software had been successful. SAP fired back with charges that Waste Management didn't "timely and accurately define its business requirements" nor provide "sufficient, knowledgeable, decision-empowered users and managers" to work on the project.
Waste Management wanted an ERP package that could meet its business requirements without large amounts of custom development. SAP used a "fake" product demonstration to trick Waste Management officials into believing its software fit the bill, the complaint states. In addition, SAP's technical team had "recommended that SAP deliver to Waste Management a later version of the software than the version SAP in fact delivered," according to the lawsuit.
Bridgestone sues IBM for fraud in $600 Million lawsuit over failed SAP implementation
This is already turning into one nasty, public fight. The Tennessean ran an article about Nashville-based Bridgestone Americas, Inc., which is part of the Japanese firm Bridgestone Tire and Auto-service Corporation, bringing a US$600 million lawsuit against IBM. Bridgestone alleged in its complaint that when the new US$75 million plus SAP-based invoicing, accounting, and product delivery system went live, it found "that there were extremely serious defects in the IBM SAP design solution as implemented which Bridgestone had no reason to expect and for which IBM offered no explanation consistent with the purported concerns IBM had raised.”
As a result, the lawsuit states, “Bridgestone has suffered damages in excess of $200 million and continues to suffer damages from injury to its reputation and customer relations.”
Price tag for troubled SAP project will skyrocket to nearly $1 billion, audit says
An 'overly ambitious design' and poor training are cited as reasons for the mess at a New York gas utility. The cost of finishing a massive SAP software overhaul at National Grid, a New York gas utility, will rise to nearly $1 billion from an original estimate of $383.8 million, a newly released audit report has found.
Immediately upon the go-live, the SAP system was wracked with issues, particularly related to payroll. National Grid ended up bringing in 450 additional contractors to work on the payroll problems, along with 400 more to help out with issues related to supply chain and financial closes, according to the audit by the New York Public Service Commission.