Technology companies are notorious for believing the solutions they propose to a potential user’s pain points are the best possible answer. When it comes to ERP software systems, however, too often many developers, vendors and integrators ignore or overlook the reality that the technology they sell is actually a business solution, not simply a technology tool.

In the process of reviewing pitches and proposals from sellers, C-suite executives – including chief technology officers – need to remember that SAP, Oracle, Microsoft and all the rest are in the technology business – this is what they focus on selling. For an ERP software system to have a measurable, positive impact on an organization, whether it is installed in the private or public sector, it is important to remember that no matter how the sophisticated the software, it will still be used by people.

It is a company’s responsibility to ensure it has a plan to accommodate all of the change management aspects of an ERP software project so people are not only trained in how to use the new system, but also to understand how this system will change their jobs. This is important so that both the system and your people succeed.

However, this does not absolve the vendor and integrator from helping with the human aspect of their product.

ERP Means Change Management

As complex as an ERP software system may be, if the vendor and integrator understand the user’s business it is possible for everything to go smoothly (from a technical point of view) on the day the system goes live.

However, this is only half of the problem. The other half is understanding that the data being collected and distributed will be going to people. Since ERP means a major shift in an organization’s management, it also means a major shift in how employees work.

In many respects, the user experience with ERP is at least as important or perhaps more so than all of the coding that sits behind a terminal in someone’s office. This does not just mean easy-to-understand screens; it also means easy-to-understand work processes.

ERP change management can’t simply be handed off to Human Resources. It requires an effort that involves the vendor and integrator, as much as it does HR.

As a result, it is necessary for the contract with both the vendor and integrator of the ERP software system to specify what each entity’s role in the change management process will be. The contract provisions need to be specific, including detailing the seller’s experience in handling change management in similar organizations and sectors. If direct experience is weak in this area, it may signal a warning of other problems with the solution they are proposing you buy.

Serious Implications

Regardless of whether an organization is updating a legacy system or implementing an ERP software system for the first time, it needs to recognize it is acquiring a management solution that happens to use technology.

User experience and understanding of the human factors associated with digital transformation are as important to achieving success as is integrating the system with the organization’s existing processes and infrastructure.

As attorneys whose legal careers have focused on negotiating and drafting contracts for ERP software systems, we have advised clients on ensuring that change management is part of the process and should be incorporated into the agreement with a vendor and integrator. Executives and senior managers cannot lull themselves into thinking that the purchase decision is the end-goal of the process. Nor can they allow employees to undermine the use and effectiveness of the ERP software system because they do not grasp the changes it brings to their job or the organization.

If you have questions about the role of change management in a successful ERP software integration, feel free to call us. We would be happy to share our experience and offer suggestions.

It seems as if nearly every week, a major business or technology publication carries an article about migrating processes to the cloud. In many circumstances, this makes sense for a range of good reasons. However, for users of ERP software systems, migrating a very complicated and sophisticated management tool with countless “moving parts” to the cloud can easily become a nightmare.

This is becoming a serious issue, as some of the large software vendors and integrators are making a push to get users to move their ERP from a company’s private servers to the cloud.

For instance, SAP will require all S4/HANA users to do so by 2025. SAP says the migration will take users only three years, but many independent ERP consultants insist it will take much longer for large users, with many far-flung operating divisions, to make the transition without causing massive disruptions to their businesses.

Why the Rush?

A growing number of ERP software systems users face pressure by vendors and the large integrators to migrate to the cloud, even if doing so is not in the user’s best interests.

Users should not be in a rush, especially if they have built an extensive infrastructure that is secure, serviceable and well-suited to run ERP software. It strikes us that the real motivation is not what is best for the user, but what is best for the software vendor and integrator. Migrating to the cloud can be a complex proposition, which means big fees for service suppliers.

To complicate the issue when making a sales pitch, companies such as SAP, Oracle, Microsoft, Accenture and other large vendors talk about “best practices,” “next generation” and “good for your company” in an effort to convince executives that if they do not sign up, they’re somehow being negligent.

Much of the time, this is nonsense uttered because customers want to hear it. What is good for a supplier is not necessarily what is best for a user.

Beyond the sales pitch, the reality is that many of the new generation of ERP software systems have their own functional issues and problems. Migrating an immature system to an immature cloud risks compounding the potential for difficulty.

Pitfalls in Migrating ERP to the Cloud

There are a number of traps waiting for the unwary or the rushed. In negotiating and drafting contracts where a user of an ERP software system wants to migrate to the cloud, or is facing pressure to do so, we are seeing a number of places where clients are at risk of falling victim to sales pitches. Before you go too far down the road, keep these five points in mind.

1 – There’s more sizzle than steak. Do not get caught up in the hype about cloud migration. It is not an appropriate solution for every ERP user and despite what a sales team or account manager will tell you, few of the current generation of ERP software systems are ready to go in the cloud. As we do with an ERP contract, we always try to include all of the cloud-related sales material in the contract in case promises are not fulfilled.

2 – Don’t underestimate the costs. There are both hard and soft costs in migrating an ERP software system to the cloud. The hard costs are obvious, although we are seeing clients underestimate the downstream expense. The soft costs are more difficult because they involve a change management strategy that could take a year or more to rollout, depending on the size of the organization and the complexity of its ERP system.

3 – Specify security responsibilities in the contract. Since the user will not be operating or controlling the cloud infrastructure, the contract must specify in great detail the obligations and responsibilities of each party to maintain the security of the data being stored. It is one thing if a user’s employee forgets a tablet with access to your ERP system on a bus; it is another thing entirely if there is a breach of cloud files due to lax protections or security by the software vendor. The provider must ensure the safety of the data, protect it from being corrupted, hacked or otherwise accessed without authorization, and have experts on hand to react immediately if something goes wrong.

4 – Ensure there is an out. If the architecture of the provider’s cloud is not a clean fit with the ERP software system being migrated, it is vital to be able to step away from the contract when the problem appears and cannot be resolved to your satisfaction. Another deal breaker should be contract language that protects against cost overruns and completion delays – all too common with ERP.

5 – Before signing, ensure the system being migrated is cloud-ready. Despite what a vendor may say, few of the new generation ERP systems are cloud ready. Legacy systems may create issues for a user when they are migrated to the cloud. The cloud contract should include an assurance from the vendor that the ERP software system being migrated will, once completed, perform as it does now.

The bottom line? Be as careful with your cloud contract as you were with the contract for your ERP software system.

Implications of ERP Cloud Migration

The cloud offers many advantages, but it is not a magic potion – it is not right for every ERP user, despite what a vendor or integrator will say. Business decisions around cloud migration are as important to the future of your organization as was the impact of first acquiring ERP. The key to success is to remember that a cloud migration is a technology solution. Answer management questions first, before deciding to float in a cloud.

If you get calls from your vendor or integrator about migrating to the cloud and are unsure how to proceed, feel free to contact us. We will be happy to answer the questions you may have, as well as refer you to recognized independent consultants who can provide you with technical expertise when dealing with vendors.

The U.S. Supreme Court has granted certiorari for Romag Fasteners Inc. v. Fossil Inc., No. 18-1233, and trademark practitioners are hopeful that the ruling will finally adjudicate the long-standing issue of whether a plaintiff must prove willfulness in order to obtain an award of a trademark infringer’s profits for violating 15 U.S.C. § 1125(a) of the Lanham Act.

In Romag Fasteners Inc., Plaintiff Romag succeeded on its trademark infringement claim against Defendant Fossil for the infringing use of the ROMAG mark. Although Romag and Fossil had previously entered into an agreement to use Romag’s fasteners—which bore the ROMAG mark—on Fossil’s products, Romag discovered that Fossil had been using counterfeit fasteners bearing the mark on Fossil’s handbags. The jury verdict in the ensuing trial awarded Romag nearly $6.8 million based on Fossil’s profits. However, the district court struck the jury’s award, since Romag had not shown Fossil committed willful infringement and that “a finding of willfulness remains a requirement for an award of defendants’ profits in this Circuit.” Romag Fasteners, Inc. v. Fossil, Inc., 29 F. Supp. 3d 85, 109 (D. Conn. 2014).

The Federal Circuit affirmed the District Court’s holding on appeal, determining that willfulness was a prerequisite for an award of profits in the Second Circuit. Romag Fasteners, Inc. v. Fossil, Inc., 817 F.3d 782 (Fed. Cir. 2016). The Federal Circuit held that since Romag could not prove that Fossil had “willfully” infringed, an award of Fossil’s profits was unwarranted. However, the Court also acknowledged the split in Circuit authority, noting that “the willfulness requirement was not uniformly adopted” and that “the Fifth Circuit held that whether the defendant had the intent to confuse or deceive is simply a relevant factor to the court’s determination of whether an award of profits is appropriate.” Id. at 787 (internal citations omitted).

Along with the Second Circuit, the First[1], Eighth, Ninth, Tenth, and D.C. Circuits all require that “willful” infringement must occur before an award of the infringer’s profits is available for the plaintiff. By contrast, the Third, Fourth, Fifth, Sixth, Seventh and Eleventh Circuits do not require a showing of willfulness for the plaintiff to recover an award of the infringer’s profits.

Recovery under the Lanham Act seeks to combine and balance theories of compensation (i.e. assessing profits) and deterrence (i.e. assessing damage). See 15 U.S.C. § 1117. However, trademark monetary awards are challenging to establish due to the difficulty in assessing the actual damage to a brand. Through disgorgement of the infringer’s profits and by awarding the infringer’s profits that the infringer would not have earned but for the wrongful acts, trademark awards may be reasonably calculated.

The Supreme Court’s ruling, if it were to resolve the circuit split, will change the state of the law for several circuits by standardizing whether willfulness is a prerequisite for an award of damages based on the defendant’s profits. The ruling may also have far-reaching effects on other actions under the Lanham Act, since 15 U.S.C. § 1117 of the Lanham Act impacts recovery for other tangential areas of law such as claims for false advertising.

[1] The First Circuit only requires a showing of willfulness where the parties do not directly compete.  See Fishman Transducers, Inc. v. Paul, 684 F.3d 187, 196 (1st Cir. 2012).

Massive and costly failures of corporate ERP software system installations and integrations are becoming legendary. Nearly every week comes news of another train wreck. But as the public sector adopts ERP to serve a variety of purposes ever-more frequently, digital transformations are carrying a growing number of risks for government entities.

In July 2019, we wrote about Maryland’s lawsuit against IBM. While the matter involved a website that the state needed built so state residents could enroll for benefits under the Affordable Care Act, we noted that it stemmed from an IBM subsidiary overpromising and under-delivering on its capabilities.

A government department or agency faces the same risks in selecting, implementing and integrating an ERP software system as does a business, While the procurement process differs, the underlying issues – and need for caution – are the same that every business must confront.

Not Just Another RFP

Public procurement relies heavily on responses to a RFP. Yet the sales teams from SAP, Oracle, Microsoft and other industry players approach the first level of approval as they would any other potential user. While answering the detailed questions in the RFP, because if they aren’t, the proposal is discarded, inevitably marketing material is included.

When a problem arises in the public sector, it becomes a matter for scrutiny by reporters and politicians.

As a result, government units need to modify their typical procurement process. An ERP software system is totally unlike anything the government buys, with the possible exception of military hardware and systems used by intelligence agencies. Senior career officials and possibly even political appointees need to be involved from the outset rather than coming in when a final decision is about to be made.

There are two reasons for this.

First, the buying decision involves two steps: Selecting the vendor and then an integrator, followed by negotiating a contract with each one.

Second, there are numerous related issues that must be addressed at the outset, such as customizing the software to the specific requirements of the agency, who will be on the project team for both the suppliers and the government, and the process by which quality will be assured and the contract specifications met.

As attorneys whose entire careers have been focused on negotiating and drafting contracts for ERP software systems, we have seen the downstream impact of what happens when a public entity doesn’t deal with these up-front. In the event of a lawsuit because of defects, delays or cost overruns, when we litigate a dispute often we find the user did not address potential internal or supplier issues that were created long before the contract was signed.

Avoiding Public Sector ERP Problems

Beyond modifying the typical procurement process, there are some specific steps the public sector should borrow from private companies. They might need to be adapted somewhat to fit the specific situation bureaucrats face but, in general, we would provide the same advice to a government entity as we would to a private sector client.

The lessons for the public sector are applicable from the all-too-often bad experiences private companies have endured:

1 – The sales material you’re given will overstate the promises and underestimate the risks – The vendors aren’t necessarily lying to you but they are financially motivated to put the best face on what they claim to be able to provide. The goal of every vendor is to make it to the final selection process so you’re likely to be told what the suppliers think the agency or department wants to hear about the capability of the software, their experience in your specific area, the expertise of the team that will work on your project and how they’ll be able to meet all of the requirements of the RFP.

2 – Use an experienced ERP consultant – It’s unusual for a public entity to use a third-party advisor at this stage of any proposal review. But it’s money well-spent because a neutral consultant will know, for example, if vague language in marketing material or the proposal is there to fudge their lack of direct, hands-on experience doing what you are trying to accomplish.

3 – Ask tough, probing questions – As important, an experienced ERP consultant will know what questions to ask and whether the answers make sense. Given it is unlikely that a potential user in the public sector has ever dealt with this complex of a situation, it’s wise to have somebody who’s been there before working with you.

4 – Don’t Sign the Contracts You’ll be Handed – These contracts are written to benefit the service suppliers, not the user. If you are unfamiliar with an ERP software system contract or that of the integrators, seek outside help. The impact on your budget will be far less than the impact of a one-sided agreement in the event of a problem down the road.

5 – Make sure the contract details the responsibilities of the software vendor and integrator – The template contract is going to fudge who is responsible for what and when. As the user, it’s your job and duty to your stakeholders to ensure both sides of the agreement understand what they will do and specify remedies in the event there is a problem down the road with the software supplier – as well as the integrator who will make the system work.

6 – Watch for the responsibilities a vendor will try assigning to the user – Nearly every ERP contract we’ve seen places an obligation on the user to assign a sufficient number of its staff to the project. It’s a standard clause. But in the public sector, this can create an undue burden because of budget restraints and union work rules, among other things, that are very different than in private business. Ensure that the contract does not place unreasonable demands on the resources of an agency or department.

7 – Check the liability limitations – Generally, the standard contract limits the liability of a vendor for direct damages to fees paid. Effectively, this limits you to simply being reimbursed for any fees you paid for work or software products that were not as warranted. Yet in the public sector, an ERP failure can have far-reaching consequences with actual damages in the tens or hundreds of millions of dollars – just ask Maryland. Negotiating a limitation of liability provision that provides for meaningful recovery is critical.

If your state, county or municipal government department or agency sees a need for an ERP software system or any other digital transformation, feel free to reach out to us as you begin the selection process. We’ll be happy to share our experience and offer suggestions relevant to your situation. We can also refer you to highly-qualified, independent consultants who’ve worked with public and private ERP users.

Good chief executive officers pay close attention to every aspect of the business they are charged with running, from yesterday’s sales and production numbers, to the look and feel of next winter’s advertising campaign. As well they should: After all, the board, shareholders, employees and even the public hold the CEO accountable for the success or failure of the entire enterprise.

Yet the number of malicious and accidental data leaks and privacy abuse scandals seems to be expanding exponentially. Just in the past few days, organizations ranging from the neurology department of Massachusetts General Hospital in Boston to the Mastercard operation in Germany and Capital One in the U.S. experienced breaches.

The reasons behind the various incidents are being exposed though corporate announcements, government filings and investigative reporting. So, it is becoming apparent to us as data security and privacy attorneys that under all of the technical or operational reasons lies one essential fact: Too few CEOs and boards of directors are taking ownership of both their company’s policies and procedures and how the business responds when the unthinkable happens.

Some Things CEOs Cannot Delegate

“That’s why we have an IT department,” seems to be the attitude of many in the corner office. “It’s their job to deal with data security.”

In the days when protecting information mostly meant keeping viruses from infecting the servers, this sort of hands-off delegation was acceptable. It was the job of IT. But as Facebook and Equifax have discovered, not only are incidents front-page news but the company’s brand can suffer even more than the size of the fines and class action lawsuits.

As a result, it is increasingly important for both CEOs and members of the board to take ownership of how their company protects its data. It is distressing that a survey published earlier in 2019 in Corporate Board Member magazine found that less than half of public company directors thought their meetings spent enough time on security and privacy matters.

There are five broad questions each CEO and director needs to be asking in this area.

1 – What data do we hold? This is a basic who, what, where and why question. If the head of the company doesn’t know what information it has or who is responsible for protecting the data on a daily basis, then you won’t be able to respond quickly when there is an incident. Having a good grasp on the information environment inside a business is not only good in the event of a breach or incident, it also enables the CEO to direct a response to the legal and regulatory requirements that come into play.

2 – What threats exist to the data we hold? Identifying and addressing any vulnerable security spots provides the basis for knowing the likelihood of one occurring as well as the potential damage that may result from a breach or incident that may threaten a critical system. Obtain information on what steps are in place to assess and deal with these risks. The details on implementing the resulting policy can be given to IT but the person in charge needs to set the priorities.

3 – Who uses our data? In a broad sense, the chief executive must know which vendors and others outside the company have access to the data, why they need it and how they use it. We recommend to our clients that they have a written agreement with every outside party that details their responsibility if a breach or other incident occurs. The agreement should require the third party to indemnify the company if they were responsible for whatever caused a breach. The CEO also needs to be assured by IT that vendors are maintaining their own security controls.

4 – How do we control data access? The military and intelligence agencies have used a “need to know” approach to security for a century. Only employees who need to have access to data necessary for them to do their jobs should be given access to it. It is the CEO’s job to ensure that threats are minimized. As a matter of policy, access needs to be limited even if it is up to IT and department heads to implement the policy.

5 – How are we protecting our information? The chief executive doesn’t need to know the details but he or she does need to ask what steps the company takes to secure its data, especially if the information is being sent to any outside third parties or even carried outside the company by employees on their devices. There is one basic question to ask: Is all of our data encrypted? If the answer is no, then make sure there is a valid reason. Just as important, often encryption is viewed as a safe harbor under the breach notification laws in some jurisdictions.

Controlling Expanding Risks

The number of ways in which data and privacy can be compromised seem endless. For instance, in August 2019, Palo Alto, California’s Unit 42 security function reported that it found very few businesses are doing very much to protect security in the cloud.

At the same time, all of the Big Tech firms say they are joining the Confidential Computing Consortium to help with security issues as businesses move into the cloud and edge computing.

Every CEO has countless issues, problems and opportunities filling their desk every day. But with business being conducted electronically, the risks are real and a chief executive owes it to their employees and shareholders to mitigate the risks as much as possible.

This means asking questions and getting solid answers.

If you are a CEO or general counsel and want to have a conversation about ways to control data security and privacy risks in your organization, please call. We’ve worked in this area for a long time and can help you develop an appropriate strategy and take the necessary steps such as setting internal policies and drafting agreements with third party entities that have access to your information.

The general counsel at any sized company knows how to draft everything from employment contracts and leases to complicated sales agreements. But few are familiar with what Enterprise Resource Planning (ERP) software systems actually do, let alone the traps lurking in these types of contracts.

This isn’t surprising given that the lifespan of most ERP systems can be 15 years or longer. So, chances are a general counsel may only see one or two such contracts in their entire career.

Because the ERP implementation and software licensing contracts are as complicated as the software itself, there are a number of key things for general counsel to keep in mind as they review these contracts. While this is not an all-inclusive, “how to DIY” guide, as an attorney who’s devoted his career to negotiating and drafting contracts for ERP software systems, these are the seven main areas where we have seen companies slip up most-frequently.

1 – Specify the vendor as the expert. No matter how qualified the internal IT department might be, the contract has to spell out that the vendor is making representations based on their knowledge of the product and experience in the user’s industry, and that the user is accepting their word. If there is a failure down the road, this will help document the vendor’s responsibility.

2 – Detail liability and warranty limits. The template contract given to the company will contain one-sided and onerous limitations on liability and warranty disclaimers. The agreement with the vendor and any third-parties it or the company uses must include detailed language on liability and warranty limitations along with specifying what remedies will exist in the event of an ERP implementation “train wreck.”

4 – Define everyone’s responsibility. Your company will have responsibility for certain activities during the software integration as will the software vendor and integrator. These must be carefully negotiated and drafted into the agreement so no one can say later “Didn’t think that was our job.”

5 – Put everything in the contract. We have seen numerous situations where assertions made in marketing material and proposal responses are filled with generalities and vague promises that have little bearing on what the product will actually do. We always try to insist that all of these materials are included as part of the contract so that if there is an issue later on the user has it in writing and the vendor or integrator are bound to what they’ve presented when trying to close the deal.

6 – Watch out for contractual remedies. In template contracts provided by vendors and integrators, usually there are onerous provisions specifying what the user’s company must do to exercise its rights under the contact with respect to warranty remedies and indemnification. Review these provisions carefully and, ensure that they are followed to the letter.

7 – Have a Mechanism for Controlling Scope. Ensure that no one involved in the project on the company side says or does anything that, later, could be construed as narrowing or expanding the project’s scope. Negotiating a detailed change control process can be critical to keeping the project on track and the scope manageable.

Protecting Management

Too often, senior management sees their ERP vendor and integrator as their partner. In many instances, that’s the case, but in a growing number of situations – especially when the vendor and integrator are among the behemoths in the ERP business – the opposite turns out to be true. It’s the job of general counsel to protect management against itself in case you have to enforce the contract down the line.

We’ve spent our career as lawyers focusing on negotiating and drafting ERP software system contracts, as well as litigating disputes when things go horribly wrong. If you’re an in-house attorney whose management is planning to replace a legacy ERP system or is considering one for the first time, we’ll be more than happy to share what we’ve learned over the years. Feel free to call us.

 

Taft Chicago Intellectual Property attorneys Adam Wolek and Rashad Simmons contributed, “A District Court Split on Curing Copyright Timing Defects,” to Law360 on Aug. 15. The article discusses the differing opinions of district courts on whether parties can file copyright suits before the copyright registration is issued. Read the full article here.

Wolek protects the intellectual property of some of the world’s largest companies, including those in the wireless, internet, agriculture and manufacturing industries. He has successfully litigated and negotiated numerous patent, copyright and trademark infringement, trade secret and business disputes for his clients. Wolek also assists clients with intellectual property licensing.

Simmons concentrates his practice on complex civil and commercial litigation, including intellectual property, employment litigation, products liability, personal injury and class action matters.

Taft was a co-sponsor with the Third Stage Consulting Group of the Digital Stratosphere Conference 2019, which was held in Chicago on August 7-9, 2019. The conference was an independent educational and peer-networking event for organizations about to embark on a digital transformation or ERP/CRM/HCM implementation. Attendees learned real-world lessons, shared battle scars and heard best practices that will equip project teams for success. Learn more about the conference by clicking here.

On the opening day, Chicago partner Marcus Harris and Indianapolis partner Jeff Kosc spoke on best practices of negotiating with your ERP software vendor and system integrators.

If you are a foreign company or foreign attorney used to directly filing U.S. trademark applications from overseas, be prepared for a big change on August 3. The United States Patent and Trademark Office (USPTO) has announced that, effective as of August 3, 2019, all foreign-domiciled trademark applicants, registrants, and parties to Trademark Trial and Appeal Board proceedings must be represented by a U.S-licensed attorney.

To read the full law bulletin authored by Indianapolis partners Zach Gordon and Russell Menyhart, click here.

We often write about the mounting number of failed digital transformations, especially those involving an ERP software system. More often than not, the underlying cause of the failures involve either the vendor or integrator biting off more than they can chew. They misrepresent the capability of their ERP system or their experience at integrating a system into the user’s existing software and hardware.

But seldom is management blameless when there is a failure.

One common mistake we see as ERP contract litigation attorneys is that the executives along mahogany row see the ERP software acquisition as only a technology project. It isn’t. ERP software systems are a technology solution to an overriding management issue. The issue might vary from one company to another. In some, it might focus on how the business is run; in other’s, its manufacturing processes; while still others might want to include employee matters or financial concerns.

By thinking of ERP software systems strictly as a bit of complex, if costly, technology not worthy of much more attention than approving an upgrade in Microsoft Windows, CEOs, COOs and CFOs can easily lose track of the project.

When this is the starting point, a failure of the system installation and integrations might not be far behind.

Compounding the Problem

Making matters worse, many integrators are quite happy to lull executives into this false sense of inattentive security. After all, they bid on and won a contract that can be worth tens of millions of dollars. So, they are likely to be reluctant to shout “Fire!” at the first whiff of smoke.

Many, especially among the large integrators and consultants such as Accenture, even try to shoulder other advisors with specific expertise out of the way even though these third parties might be able to rectify the situation before the project becomes a total disaster.

Then, when the head of technology in the company sees an issue spiraling out of control and alerts top executives, often they get blamed for the unfolding disaster. Using the outdated management notion that “somebody has to take the fall and it won’t be me,” these CEOs and COOs fail to recognize that if they had been paying closer attention from the outset, the problem might have been entirely avoidable.

Often, problems can be traced back to management not really knowing what it is they want an ERP software system to accomplish for the business. This is an offshoot of thinking they are acquiring a technology solution, not a business process.

As New York Yankees hall of fame catcher Yogi Berra used to say, “If you don’t know where you’re goin’ you won’t know if you got there.”

Fox in the Hen House

The second major mistake happens when senior corporate leaders assume that because they have an integrator, that resource will take care of monitoring progress. But since when have foxes been any good at guarding the chicken coop?

By not retaining an independent consultant to monitor the vendor and the integration, users can leave too much to chance. Yes, a consultant can be expensive but so, too, is the digital transformation project. Adding a few hundred thousand dollars to the cost of a multi-million dollar ERP implementation project is a small price to pay when the overall impact on the entire company of an ERP failure is considered.

The next error made when a problem appears is that the software itself is blamed. Admittedly, many vendors over-promise and under-deliver on the capability of their product and its applicability to the user’s business and industry. But a smart CEO is going to take a deep look to find if there is any reality behind the bold assurances.

Again, this is where independent consultants will pay for themselves. They bring experience with businesses in many different sectors, and have a comprehensive understanding of the product offered by each vendor. So, a consultant is in a good position to tell the CEO, “They’re blowing smoke” or “This will work for you.”

We have seen countless situations where the vendor and integrator must shoulder the bulk of the burden of an ERP software system failure. We’ve written about many transformation projects, such as the system sold by IBM to Lufkin Industries LLC, Revlon’s massive problems that cost the company tens of millions or when a system sold to the State of Maryland couldn’t do what was promised.

Many times management shares part of the blame in ERP implementation failures. Just as often, had the C-suite been doing its job the problem may not have existed in the first place.

If you are considering upgrading a legacy ERP software system or installing one for the first time and would like to discuss ways to avoid getting off on the wrong foot, feel free to call us. We’re always happy to answer questions and can refer you to some of the industry’s most highly respected consultants.