Waste Management sues SAP over ERP implementation

The trash-disposal giant Waste Management is suing SAP, saying top SAP executives participated in a fraudulent sales scheme that resulted in a failed ERP (enterprise resource planning) implementation.

Waste Management said it is seeking recovery of more than $100 million in project expenses as well as "the savings and benefits that the SAP software was promised to deliver to Waste Management."

An SAP spokesman said Thursday that "as a matter of policy SAP does not comment on ongoing litigation."

In 2005, Waste Management was looking for a new revenue management system, according to a company statement. "SAP proposed its Waste and Recycling product and claimed it was a tested, working solution that had been developed with the needs of Waste Management in mind," the Waste Management statement reads in part.

SAP promised that the software could be fully implemented throughout all of Waste Management within 18 months, according to the statement.

"From the beginning, SAP assured Waste Management that its software was an 'out-of-the-box' solution that would meet Waste Management's needs without any customization or enhancements," the statement reads. "Unfortunately, Waste Management ultimately learned that these representations were not true."

Waste Management said product demonstrations by SAP prior to the deal employed "'fake software environments, even though these demonstrations were represented to be the actual software."

Waste Management's original complaint, filed in Harris County, Texas district court, said senior SAP executives, including SAP Americas' president and CEO, Bill McDermott, participated in the "rigged and manipulated" demos.

The company filed suit against SAP Americas and SAP AG on March 20 after "months of discussions with SAP and a recent consensual, three-day mediation that SAP ended after day two," according to the statement.

The action followed a lengthy initial courtship and falling out between the companies, detailed at length in Waste Management's court filing.

SAP officials held meetings with the company throughout the summer and fall of 2005, according to the complaint. Shai Agassi, a former executive board member, was among the SAP executives present at one meeting on June 17, 2005, in Walldorf, Germany, according to the complaint.

"At that meeting, SAP AG executives and engineers represented that the software was a mature solution and conducted a demonstration consisting of what they represented was the actual SAP Waste and Recycling software," the complaint states. The company later discovered that the software was a "mock-up version of that software intended to deceive Waste Management," according to the complaint. SAP has admitted to this in "internal documents," the complaint states.

SAP also demonstrated the "fake software" at subsequent sales presentations, according to the complaint.

Waste Management ultimately signed a sales pact with SAP on Oct. 3, 2005, according to the court filing.

"Almost immediately following execution of the agreements, the SAP implementation team discovered significant 'gaps' between the software's functionality and Waste Management's business requirements," it states.