When ERP is botched, CFOs must act

IDG News Service - Companies long have grappled with glitches in their ERP system implementations -- a situation that the recent botched-rollout record suggests won't get better any time soon. While ERP projects go awry for many reasons, each incident reveals its own set of troublesome repercussions, financial and otherwise.

IT, of course, is the first to get the call for repairs. But the CFO is rarely far behind.

"All roads lead to finance," said Mark Gandy, a partner at b2bcfo.com, a firm that offers finance-chief services to businesses.A "The CIO typically has been involved with the technology issues ... but CFOs have a broad understanding of the entire business." (Gandy also works with Focus.com, a business professional social network whose members offer advice on a range of IT and business topics.)

Where once SAP was at the root of most ERP complaints -- and Gandy recalled how in the 1990s the common complaint reflected "failed SAP implementations" -- customers are plagued now by unrealistic claims from a host of ERP sellers, said Forrester Research analyst China Martens. And muddled messages from companies looking to upgrade add to the confusion caused by the stories of troubled rollouts.

"It's like the company and the vendor have been speaking two different languages, and then things go wildly off track," she said. "Sometimes ERP vendors oversold it and are promising things it can't do. Other times the company hasn't been very clear on what it's trying to do."

And at that point, CFOs who are involved in the ERP selection and deployment process can help mitigate the issues that may jeopardize operations and revenue generation. Further, they can bring a vital, enterprise-wide perspective to the process, since they understand how each department in a company operates and contributes to the bottom line.

Three examples among the many failed, and costly, deployments of 2011 help demonstrateA the current ERP situation.

Montclair State University in New Jersey sued Oracleafter the vendor allegedly fumbled the installation of software to replace the school's legacy systems. Montclair State may need to spend around $20 million to finish the job, according to its lawsuit.

CareSource Management Group is seeking $1.5 million in damages from Lawson Software, according to a lawsuit the health care plan administrator filed. CareSource claimed that Lawson's software was not the system the vendor promised and never advanced past the testing stage.

Ingram Micro, a technology distributor, attributed consecutive quarterly income losses to issues setting up an SAP system in Australia. The company's first quarter profits fell to $56.3 million from $70.3 million in 2010's first quarter. Second quarter income tallied $59.7 million, compared to $67.7 million in the second quarter of 2010.