Earlier this month Chicago-based MillerCoors LLC filed a lawsuit in the Northern District of Illinois against India’s HCL Technologies and its US affiliate HCL America over a recent SAP ERP implementation. MillerCoors is claiming breach of contract and seeking in excess $100 million in damages. HCL is India’s fourth-largest software services provider.
The complaint alleges that HCL failed to adequately staff the project and failed to follow its own methodology and quality assurance process. MillerCoors also asserts that HCL did this knowingly or with reckless disregard for the impact its actions would have on MillerCoors.
The complaint details a dispute about the completeness of the blueprinting phase and a resulting 5-month delay in the project. The delay posed a problem for MillerCoors becaue it pushed the brewery deployments into MillerCoors’ peak season, a time period that was supposed to be a black out period for any new software releases.
According to MillerCoors, HCL had been on the project over ten months and had a thorough understanding of MillerCoors’ processes and systems. HCL assured MillerCoors that it had full knowledge of the scope of the project and that HCL would complete the project within the revised time frames and costs. HCL represented that it would staff the project appropriately and would be able to meet a new milestone schedule.
HCL was allegedly unable to meet its obligations despite MillerCoors adding additional payment milestones to help facilitate HCL’s cash flow. The complaint asserts that HCL had leadership turnover replacing two Program Directors and, at least, seven Project Manager over the course of the project.
HCL’s project tracking was also allegedly severely lacking, planning for future phases of the project was not completed and the project plan lacked appropriate effort estimates to validate timelines. Extra effort was required because HCL’s designs were not able to support requirements and needed to be reworked. MillerCoors also asserts that HCL violated its own project methodology and Program Management responsibilities.
Surprisingly, the 17-page complaint contains one count – a breach of contract claim. The complaint did not plead causes of action commonly seen in failed ERP implementation cases such as fraudulent inducement or negligent misrepresentation which are typically pled to get around limitations of liability in the software implementation contract. MillerCoors is represented by George Spatz of McGuireWoods LLP.
Almost all ERP software implementation disputes follow a predictable pattern and the MillerCoors/HCL failure is no exception. Our “The Anatomy Of An ERP Implementation Dispute” page tracks this implementation failure pretty closely. Specifically, MillerCoors asserts the following typical customer allegations that we almost always see:
- The ERP vendor assigned inexperienced consultants;
- The software was not implemented to meet the customer’s business needs;
- The ERP vendor failed to follow best practices for software implementation and/or project management without alerting the customer to the associated risk; and
- The ERP vendor failed to follow a project plan.
The MillerCoors debacle is illustrative of a point we repeatedly make: most implementations do not fail because of a fundamental defect in the software, they fail because of a failure in the implementation process. Specifically, in the cases we litigate, ERP implementations usually fail because of: (i) poor project management; (ii) the implementer’s failure to follow best practices; and (iii) inexperienced consultants.
The best way to win a failed ERP implementation lawsuit is to avoid one in the first place. The best way to avoid a failed ERP implementation lawsuit is to draft and negotiate ERP implementation contracts that manage the software implementation process with milestones, deliverable deadlines and incentives and remedies that allow you to hold the implementer’s feet to the fire. While it appears that MillerCoors followed some of these steps, it is notable that they negotiated and then renegotiated implementation contracts in the middle of the project. This is unusual and may have been a contributing factor to the failure of the implementation.