Oversold and misrepresented software, missed deadlines, inexperienced consultants, and budget overruns are all common occurrences in a digital transformation. The reality is that as a customer, the odds of a successful ERP implementation, or digital transformation, are stacked against you.
When clients come to us in the midst of an ERP or digital transformation train wreck, they are overwhelmed and frustrated. Many times they are convinced they have a case, and want to sue their ERP vendor. Our response is almost always the same: "have you done everything you can – within reason – to make sure that the project can't be saved?" We counsel our clients to spend what it takes and to devote the time that is necessary to "right side" the project so that they can get a functional product.
Litigation should be the last option, and only considered after you have exhausted all other efforts. But sometimes that's just not possible. If the vendor is incompetent, the software project is excessively over-budget, the software is inoperable, or the functionality was misrepresented, then no amount of time or money may be able to save the project. If that's the case, litigation may be a viable option.
If you choose to litigate, understand that the contracts for software and associated services will heavily favor the vendor. The limitations of liability, warranties, and remedies will all benefit the vendor to the customer's detriment. As a customer, you may have little recourse to recover damages, and much of the responsibility for the failed implementation will be placed on you. Vendors – especially top-tier vendors, will vigorously defend lawsuits. They hire large law firms with teams of lawyers to defend them. They employ tactics designed to increase the cost and the duration of litigation. Some vendors bend over backwards to protect their salespeople and their commissions.
There's more:
If you financed your deal, the financing arrangement adds another level of complexity to the lawsuit. If there are multiple vendors, things get even more complicated. If you have withheld payment because of poor performance, it is likely you will face a countersuit
So, is filing a lawsuit against your ERP vendor the best course of action? It can be. But it needs to make sense. Litigating because the software didn't work the way you expected, or because the project cost more than estimated rarely forms the basis for successful litigation. The failure needs to be objective and identifiable. If there was a misrepresentation, it needs be substantive. If the vendor fraudulently induced you to enter into a contract, the circumstances of the fraud must be pleaded with specificity. And, the failure and/or the misrepresentation needs to have caused damage in excess of the fees it will take to bring the lawsuit. Spending $500,000 in legal fees to recover $100,000 in legal fees rarely makes sense. If you are litigating against a sophisticated vendor, expect that vendor to aggressively defend the lawsuit. You need to be prepared to spend at least the amount you spent on the software and the implementation.
We make our living recovering damages from customers who have been victimized by failed ERP implementations and digital transformations. The process is expensive, difficult and uncertain, but sometimes it is the only option that you have.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
