SAP Sued for Typical Ghetto Behavior

So... when me and my friends talk about the "bar being set so low" in this industry, we're not talking simply about programmers. Stupid, crass ("ghetto", if you will) behavior is endemic at all levels, and even at the biggest players. Case in point, SAP getting sued to the tune of $100 million by Waste Management over a failed enterprise project. (full article via cote)

The trash-disposal giant Waste Management is suing SAP, saying top SAP executives participated in a fraudulent sales scheme that resulted in a failed ERP (enterprise resource planning) implementation.

What makes this case interesting, in my opinion, is that the "fraudulent sales scheme" that SAP is accused of doing is a well-known marketing tactic used by practically every software vendor I've ever known, and is probably familiar to you as well. Read on...

In 2005, Waste Management was looking for a new revenue management system, according to a company statement. "SAP proposed its Waste and Recycling product and claimed it was a tested, working solution that had been developed with the needs of Waste Management in mind,"

Emphasis mine. They claimed it was a tested, working solution! Further, they promised to implement it throughout Waste Management in 18 months. There must be huge logistical challenges and biz-process re-engineering (BPR) factors to account for in such a deal, but 18 months is probably a reasonable time-frame to get a working, tested solution implemented. However, writing plus implementing in 18 months, for such a huge company is of course a whole 'nother story!

"From the beginning, SAP assured Waste Management that its software was an 'out-of-the-box' solution that would meet Waste Management's needs without any customization or enhancements"

Wow! No customization or enhancements! How do you convince skeptical purchasing managers that such a bold claim is true? (Here's where I start chuckling, knowing how common this practice is)

Waste Management said product demonstrations by SAP prior to the deal employed "'fake software environments, even though these demonstrations were represented to be the actual software."

If you're in the business of selling enterprise software, you kind of have to go read the article, because it is a priceless account of how to really fuck up a major deal like this.

Waste Management ultimately signed a sales pact with SAP on Oct. 3, 2005, according to the court filing.

The charade about fully-functional and tested software collapsed immediately.

"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.

I guess deep-down inside, it's this sort of stuff that drove me away from the "enterprisey" side of the industry. For all the talk of pragmatism and being lean, and Agile, this sort of thing is just still too common.

"Waste Management has discovered that these gaps were already known to the product development team in Germany even before the SLA was signed. Instead of admitting what it knew at the time -- that the software lacked basic functionality to run Waste Management's business -- SAP undertook an elaborate fraud to perpetuate the original fraud and to recover additional money from Waste Management."

How do you cover up fraud on this scale? Blame the client of course!

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.

We all play our part in the grand drama of IT, behaving in ways that improve the industry or lead to fiascos like the one described above. The client is not always right, and I'm sure Waste Management played into the fraud to a large degree, with clueless managers and unreasonable expectations. The onus is on us, the technology providers, both at the executive level and below, to stand up and be honest about what can and cannot be accomplished, and risk our jobs if necessary. That's courage, although you have to admit, that given the red-hot demand for IT talent currently in place, it might not actually take that much courage to stick to your guns.

Comments

[AkitaOnRails]

This is hilarious. As a 5 years experienced and former SAP consultant I can say that I saw this kind of negotiation go on as routine.

It is a known deal: the consultancy/software implementor, say they have an 'out of the box' solution or something in these lines. The client plays its role by 'believing' in it. Most of them don't care, because everybody play by the same rules. The project ends up costing way more, but the kind of company SAP and the like target can afford it. And that's the way the enterprise market works.

I've seen it happen all the time. In the consultancy they actually say it with all the words "We don't have it working, but show a controlled mock up and the client will buy it. We can finance the rest of the product with the income of the project". They actually expect to have it working in the client. But the sales guys sell it as a finished product and the delivery guys send junior developers to keep costs down at first. When everything falls down eventually (as it always happen) they call the 7th cavalry and the seniors get in. But then its already too late. The client is pissed off and the consultants are also pissed off to deliver something they know ain't gonna work.

Just another usual day in the consultancy market.

[Erik Peterson]

That is pretty endemic with the Enterprise software community. I don't see it as much to be sad about though. I see it as a tremendous opportunity.

To me, this is kind of similar to the search engine market in about 1998. There were a ton of players, and all of them sucked enormously. Then, one player comes in, bucks all of the traditions, and cleans up. I think a similar thing will happen here, but probably with a multitude of players cleaning up due to the nature of the implementations.

There's an absolutely massive amount of money in this market. A stupid, crazy, huge amount of money that makes almost anything else pale in comparison. If someone can go in there and wrangle all this Enterprisey stuff correctly, they'll make an absurd amount of dough.

For every failure there's an opportunity. One I plan on taking advantage of.

[bob]

Yeah, software companies are sleazy, but why do clients let things get this far? That is, when SAP said they had a working existing solution for their business needs did Waste Management get references and talk to those customers? I'm willing to bet they didn't, which is idiotic on their part.

[tom termini]

As some of the other comments have repeated, I, too, gave up on ERP (including SAP and Oracle). Undertakings that are just plain too big swamp an organization, drag on for years, and have tremendous cost overruns.

I've been involved with a software-as-a-service business providing what might be called a "lightweight" EPR solution. Instead of trying to re-engineer and customize for EVERY business process for a plethora of verticals, our firm has taken the "Get 80% of it right, right now" approach, delivering value by offering per-seat licenses of a hosted solution.

While not right for every business, for 80% (see, that 80/20 rule works!) of the SMEs out there, they get access to enterprise software without the overhead or huge time/money suckage of customization.

[Enterprise Wow]

What I want to know - what kind of fucking software customizations does a trash company need?

[slate]

That kind of sales and development practice is routine for all big players. Such as Oracle, IBM, MS, just to mention a few that I personally met.

The main points supporting this practice are:

1. Enterprise ignorance. The deal is: We give you the money, you give us what we want. We think, we give you so much money, that is enough to implement everything under the sun.

2. Software company monopolies. It seems to be a competition between main vendors, but that is not true. A big implementation has to be 'future-safe', and supported with a great number of cross-domain consultants and strategic sales. And that means big companies, with big capital. To have a working product is only a fraction of the whole game, hell it is not important at all:)

3. No industry standards. Neither party of the game is really interested in defining what really - for example - a 'tested solution' is. The enterprise wants to be able to demand anything, the software company wants to lock out others. That means, never expect innovation and clean solutions to come from the enterprise world.

Same say, that 90-95 percent of software market - measured in money - goes to the enterprise. By my experience, that means endless customization and codevelopment of mostly unsuitable 'enterprise' software in a confuse network of everchanging applications and burocracy.

Most of the money goes for consultancy, that means:
* The most important part is getting to know the social network of the enterprise. Who wants what, who is dependent from whom etc. A big implementation is made of little personal deals.
* Sales and presales. Demonstrating a solution by noncompetents for noncompetents. Hell, competent people have to work.:)
* designing the business process, mostly instead of the enterprise.
* Gasping the confuse IT network of mainframe, 30 year old solutions, the CIO-s pet application, big piles of hidden excel sheets. Hundreds of thousands of code line, and decade old historical and many times changed datastructures, mostly without documentation.
* Writing concepts, concepts of concepts, status reports, reports on status reports, memos, project kickoff documents, without the hope, that the enterprise will ever read it and sign it. See point 1.
* Getting the work done. Negotiate a requirement specification, developing system design based on it and implementation. Thats minimal.:)

Sincerelly

[AkitaOnRails]

What most developers (that never got into the Enterprise market) realize is that it is utterly impossible to have any standard or 'tested solution' that works 'out of the box' for vertical markets.

Every business process will be inherently different. You can actually have pre-configured software to handle some scenarios, but NO software whatsoever will ever be capable of delivering an out of the box experience. Any software will have to be reconfigured to either fit in the current business process or help to improve those processes.

There are thousands of factors involved. Internal culture of the company, strategy, policies, local laws, federal laws, foreign country laws, market demand, market pressure. Then you have many other scenarios involving multiple branches, multiple countries, acquisitions, merges, etc.

No sales process will be the same. No manufacturing process will be the same. No accounting, HR, quality management, project management, distribution and logistics, warehouse, investments and asset management. None of these processes will be the same.

Depending on the size of the company, each business process demand huge horse power to work properly, both in man-hours and machine-hours. It is simply out of scale for most of us to implement such a beast.

Today, only SAP and Oracle has the assets, expertise and resources to try to deliver such a beast. Waste Management is a huge business that has huge demands. The article only mentions about Revenue system. This alone is a big endeavor. 18 months is an small amout of time actually, for consultancy and implementation work. This is the kind of project that will never be able to bear an Agile process, it demands a waterfall approach. There is lots of politics involved inside the company, between departments, between branches and everything needs to be sorted out, and this is a very very long, stressing and demanding process.

Millions of dollars are literally thrown out in the trash because the process is very unoptimized. And trying to optimize it is what consultancies have been trying for more than 30 years. SAP being such a consultancy and the SAP stack of technologies and processes being one such solution.

The idea is to try to implement the SAP stack within as many companies as possible and use the projects closure outcomes as input to optimize the software for each particular vertical market, so the next project should be less problematic.

A good idea in paper, but it took decades to reach a point that's still way behind what it could be. Businesses are dynamic things, processes change all the time, and the software has to keep up. Laws changes. Management approaches changes. Every once in a while a new way of doing business sprung to life and the software has to start from scratch.

Honestly, a very difficult market. And you still has to provide for the future. Fortune 500 companies buy SAP because its the only player that has the chance to endure for a few more decades, with a minimally stable roadmap and known propositions.

[Michael Neale]

What - in practice, are people doing about improving this though? I mean, if you could, you would do (as I think obie has done) and basically step away from "enterprise" for good ? (or for a long time). Its kind of crushing, and sad, so much that if you have an opportunity to get away from it, I guess you would take it and not look back (not really solving or contributing to the problem, but I guess it means its someone elses problem).

[Roland Hesz]

What is really sad is, that on the buyers side management knew what the situation is. Everyone knows that the whole sale and agreement is BS, but they still jump in.
They only cry when it really goes out of hand. So we have an industry that has almost no responsibility for anything - software - and buyers who eat it up willingly and allow for such behaviour.

Why are we surprised that these things happen?

[Roland Hesz]

"What I want to know - what kind of fucking software customizations does a trash company need?"

You should check out what goes on in the business of waste management.
I can say: a lot.