Avanade sued over alleged ERP project failure

IDG News Service - A half-million lines of custom code wasn't enough to produce a viable Dynamics AX ERP (enterprise resource planning) system for point-of-sale and RFID products distributor ScanSource, according to a lawsuit it has filed against Avanade, the joint venture between Microsoft and Accenture.

ScanSource reached a deal with Avanade in 2009 for an implementation of the Dynamics AX system, according to the suit, which was filed Wednesday in U.S. District Court for the Northern District of Georgia. The project was supposed to cost US$17 million and take 11 months, but ultimately the cost estimate grew to about $66 million and it has failed to go live after three years, the suit alleges.

AX is one of four ERP products sold under the Dynamics brand, and is aimed at larger companies. The ScanSource project "is believed to be one of the largest global enterprise level Microsoft Dynamics AX implementations to date," ScanSource said in a statement. ScanSource reported $3 billion in net sales during its fiscal 2012 and has 26 office locations around the world.

Some allegations in ScanSource's suit have a familiar ring to ones lodged in other recent legal actions by customers against ERP vendors and systems integrators.

For example, Avanade allegedly told ScanSource that it would assign experienced and skilled staff to the project but instead sent in a continually changing cast of consultants without the ability to do the job or even familiarity with AX. It also said it would be able to customize AX 2009 to meet ScanSource's business requirements, according to the suit.

However, "Avanade also knew, or should have known, that the level of software customization required to perform the implementation to meet [ScanSource's] functional needs far exceeded the effort it was capable of delivering at the cost, and within the timeframe, it proposed."

Avanade's team came up with a "defective and deficient system design that resulted in a staggering amount of modifications made to the core software code." Ultimately, Avanade programmers wrote more than 500,000 lines of custom code, according to the suit.

When searching for an ERP system, ScanSource had initially taken proposals from Oracle, SAP and Dynamics, the suit states. Avanade officials went to ScanSource's headquarters to study its systems and gather information from users. Subsequently, Avanade gave ScanSource a "day in the life" presentation that showed how AX would be a good fit.

However, "As Avanade knew but did not disclose to ScanSource, this pre-contract product demonstration, which consisted of mocked-up simulations of the Microsoft AX software, did not reflect the software's actual capabilities or functionality," the suit states.

Avanade also allegedly conducted a "classic bait-and-switch" on ScanSource, by "drastically increasing" its estimated fees after being on the job for a few months.