Dirty vendor tricks

From magical demos to deceptive pricing and fictional charges, here are the six most devious tricks vendors use to get their hands in your pocket

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In March 2008, Waste Management -- the largest garbage collection company in the United States -- sued SAP for $100 million after an ERP implementation went completely into the dumpster. In the suit, Waste Management claimed SAP faked the demo it used to convince its top executives to go with the SAP solution.

Five months later SAP countersued, claiming that Waste Management still owed it millions in maintenance and service fees. Last May the allegedly rigged demo mysteriously vanished, with each side blaming the other for its disappearance. Waste Management says it took a $30 million hit on its first-quarter earnings this year thanks to the ERP failure.

"I don't want to necessarily pick on SAP," says Petouhoff. "The entire software industry needs to clean itself up. When companies are spending millions on your products, promising to deliver something you can't deliver is fiscally irresponsible. If companies would just be straight and say something like, 'Our software isn't doing that yet, but we're working toward that,' at least customers would know what they were buying."

Or as they say in the waste management business: Garbage in, garbage out.

Dirty vendor trick No. 2: Underbid, then overcharge

Hand in glove with the fake demo is the deliberate underbid. Enterprise vendors come in and offer an extremely tempting price to a customer, with every intention of making up the difference in added charges after the contract has been signed.

Petouhoff says she witnessed this firsthand when working for a major systems integrator early in her career. As someone who had to implement the solution, Petouhoff would regularly go on sales calls with the software vendor.

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"Whatever the customer wanted, the salesperson said, 'We can do that,'" she says. "One time a vendor bid on building an entire call center for a large entertainment company in Southern California. The salesman said they could do it for $250,000, when he knew the actual cost was $2.5 million. I said to him, '$250,000 won't pay for the computers, desks, and headsets, let alone the software.' My partner said, 'Shut your mouth.'"

Petouhoff says she was told to make up the difference in change orders and blame the customer for changing the scope of the project as it went along.

"It's like selling someone a car, and they come back and say, 'This car you sold me has no wheels,' and you say, 'Oh, you wanted wheels? That will cost extra,'" she adds. "It was an embarrassment for the people inside that organization who had to go back up the chain and sell the changes to their bosses."

And when vendors are counting on implementation to boost their profits -- and the fees don't materialize -- they can get downright nasty, as Connie Elliott can attest. As owner of Data Net, a small maker of bar-code and RFID data collection systems, Elliott wanted to buy a CRM system to integrate with her firm's accounting system. So a few years ago she spent about $5,500 for a CRM system from a small company that shall remain nameless.

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