An "overly ambitious design," poor data quality from legacy systems, ineffective training and lack of accountability were some of the reasons given by New York’s National Grid last week in response to their drawn out system migration from Oracle to SAP based systems. Initially estimated to cost around $384 million, the total cost of this ERP integration is now nearing the $1 billion mark.
Originally scheduled to go live in November 2012, the newly integrated system was plagued with problems that caused many workers at the utility to receive incorrect pay and led to a number of fines and lawsuits for the company. Coinciding with the natural disaster that was Hurricane Sandy, employee overtime went through the roof leading to an abnormally complex payroll situation that exacerbated the problems experienced by National Grid.
In order to resolve the problems associated with the ERP Integration, National Grid were forced to enlist the services of up to 450 additional contractors to work on the payroll issues alone. Even with the extra help that was enlisted, it is reported that National Grid are still unable to access many of the SAP system’s capabilities and are relying on complex excel spreadsheets for management reporting.
Problems with large business system integrations are more common than you might think. In 2011, issues with their SAP ERP Integration led by IBM consultants left Nova Scotia’s nurses receiving erroneous paychecks for 6 months. Janet Hazelton, president of the Nova Scotia Nurses Union said of the integration that, “[they have] thrown a significant amount of manpower towards trying to fix this problem. They're trying. But they purchased something, expected it to work, and it's not working."
Issues with commerce integrations can also have ramifications for the service provider, as seen in 2013 between tire company Bridgestone and IBM, the latter being tasked with building a custom commerce system that was based on SAP software. Bridgestone filed a $600 million lawsuit against IBM on the basis that the newly integrated system performed so badly that it threw Bridgestone’s “entire business operation into chaos.” The custom commerce integration was implemented to process customer orders and fulfillment, however Bridgestone alleged that, “IBM’s defective system lost or deleted scheduled customer orders, would not process orders, duplicated, or partially processed orders and, for those limited orders that were processed, did not complete critical corresponding business applications.”
The above examples are just a sample insight into the complex nature of multi-million dollar business system integrations and how they can go wrong. In fact, according to McKinsey, almost half of them run into significant difficulties. “Half of IT projects with budgets of over $15 million dollars run 45% over budget, are 7% behind schedule and deliver 56% less functionality than predicted. That means that at least half the time — achieving at least $15 million in benefits, requires spending $59 million.”
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