Manufacturer sues IBM over SAP project 'disaster'

IDG News Service - IBM has been slapped with a multimillion-dollar lawsuit by chemical products manufacturer Avantor Performance Materials, which alleges that IBM lied about the suitability of an SAP-based software package it sells in order to win Avantor's business.

In 2010, Avantor decided to upgrade its ERP (enterprise resource planning) platform to SAP software, according to the lawsuit, filed Thursday in U.S. District Court for the District of New Jersey.

"Seizing upon Avantor's decision -- and fully aware that, given the competitive pressures of Avantor's industry, and the specialized demands of its customers, Avantor could not tolerate any disruptions in customer service -- IBM represented that IBM's 'Express Life Sciences Solution' ... was uniquely suited to Avantor's business," the lawsuit states. "The Express Solution is a proprietary IBM pre-packaged software solution that runs on an SAP platform."

But Avantor discovered a different truth after signing on with IBM, finding that Express Life was "woefully unsuited" to its business and the implementation brought its operations to "a near standstill," according to the suit.

IBM also violated its contract by staffing the project with "incompetent and reckless consultants" who made "numerous design, configuration and programming errors," it states.

In addition, IBM "intentionally or recklessly failed" to tell Avantor about risks to the project and hurried towards a go-live date, the suit alleges.

"To conceal the System's defects and functional gaps, IBM ignored the results of its own pre-go-live tests, conducted inadequate and truncated testing and instead recommended that Avantor proceed with the go-live as scheduled -- even though Avantor had repeatedly emphasized to IBM that meeting a projected go-live date was far less important than having a fully functional System that would not disrupt Avantor's ability to service its customers," the suit states.

The resulting go-live, which occurred in May, "was a disaster," with the system failing to process orders properly, losing some orders altogether, failing to generate need paperwork for U.S. Customs officials and directing "that dangerous chemicals be stored in inappropriate locations," the suit states.

Avantor has suffered tens of millions of dollars in monetary damages, as well as taken a hit to its reputation among partners and customers, the suit states.

For example, before the go-live, IBM and Avantor met with one of Avantor's biggest customers, which voiced worry that its EDI (electronic data interchange) with Avantor for product ordering wouldn't work after the changeover, and IBM assured the customer it would, according to the suit. "In fact, the EDI interface immediately failed upon go-live."

"IBM, meanwhile, has already pocketed over $13 million in fees from Avantor for a systems implementation project it mismanaged and was unable to perform properly," the lawsuit states. "Incredibly, IBM is now seeking to profit from its misconduct by demanding millions of dollars in additional fees to redesign and rebuild the defective System it implemented."

IBM said it disagreed with the claims and will defend itself against them vigorously. "We believe the allegations in the complaint are exaggerated and misguided and are surprised that Avantor chose to file suit," a spokesman said via email. "IBM met its contractual obligations and delivered a solution that Avantor continues to use in its operations."

Avantor's suit does state that IBM made efforts to right the project's course, albeit ultimately ineffective ones, following a June meeting with Avantor's then-CEO, Rajiv Gupta.

IBM "began to acknowledge the severity of the situation" and replaced many of the original consultants, according to the suit. These workers did extensive redesign and programming.

In July, "IBM told Avantor to cancel every pending order and reset the entire System in light of pervasive warehouse problems," it states. "IBM said this was necessary to discover the root cause of the problem. Ultimately, IBM acknowledged that it had to engage in extensive remedial efforts to redesign and rebuild the System that Avantor hired it to deliver."

"Numerous" IBM workers have told Avantor personnel that IBM failed to manage the project correctly and use SAP "best practices," according to the complaint.

IBM workers even called the project the worst SAP implementation they'd ever seen, it adds.

Avantor is seeking assorted damages in an amount to be determined at trial.

In many respects, the lawsuit reflects other high-profile litigation over SAP projects.

But Avantor broke from tradition by calling attention to its lawsuit via a press release, as companies suing systems integrators and ERP vendors rarely actively seek publicity.

One famous exception came several years ago when Waste Management sued SAP over an allegedly failed project. Waste Management won a sizable settlement from SAP after a public bout of ugly back-and-forth allegations.

It wasn't immediately clear Friday whether Avantor also plans to initiate legal action against SAP, or even has grounds to do so.

An SAP spokesman said Friday he hadn't been aware of Avantor's suit against IBM and declined comment.

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris' email address is Chris_Kanaracus@idg.com