Update: SAP files counterclaim against Waste Management

SAP alleges that it is owed millions in maintenance and services fees

SAP attorneys have filed a counterclaim to the lawsuit Waste Management filed in March over dissatisfaction with an enterprise resource planning implementation, asserting the vendor's innocence and charging in turn that the trash-disposal company violated the deal's contract.

Waste Management's initial complaint states that in 2005, the company was seeking a new revenue management system, and SAP said its Waste and Recycling product was ideal for Waste Management's needs. SAP also allegedly said the software could be fully implemented throughout the company within 18 months.

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In addition, senior SAP executives allegedly participated in "rigged and manipulated" product demonstrations prior to the deal that employed "fake software environments, even though these demonstrations were represented to be the actual software."

After a deal was signed in October 2005, SAP's implementation team soon discovered gaps "between the software's functionality and Waste Management's business requirements," and SAP's German product development team knew these existed before the deal closed, according to Waste Management.

SAP eventually determined that if Waste Management wanted an enterprise-wide deployment, it would have to develop a new application with an updated version of SAP's platform, pushing the project's estimated completion date from December 2007 "to an end-date sometime in 2010 without any assurance of success," according to Waste Management's complaint.

But SAP's amended counterclaim, filed in July in a Harris County, Texas, court , said those claims are invalid because Waste Management "understood and expressly agreed that SAP America not warrant that the applications in the Software are designed to meet all of [Waste Management's] business requirements."

In addition, Waste Management allegedly violated its contractual agreement with SAP in a number of ways, including by "failing to timely and accurately define its business requirements"; not providing "sufficient, knowledgeable, decision-empowered users and managers" to work on the project; and failing to successfully migrate data from the legacy system.

SAP alleges that it is owed millions in maintenance and services fees, and is seeking unspecified compensatory damages as well as the return of its software.

An SAP spokesman said Thursday that the company does not comment on ongoing litigation, but the company is "confident in the actions of the court."

Waste Management said in a statement that SAP's claim and alleged damage "are baseless."

"We find it interesting that SAP not only continues to evade responsibility for its fraudulent conduct, but wants to profit from it by obtaining even more fees from Waste Management," it added. "The costs SAP wants to recover are for consulting services it provided in a futile attempt to fix its own defective software, which Waste Management is not even using."

It is somewhat unusual for implementation disputes to result in active litigation, industry observers said Friday.

"Large-scale implementations are complicated affairs that require alignment among the system integrator, vendor, and client for success, " Forrester Research analyst Ray Wang said via e-mail. "It's a three-legged stool and lawsuits are typically the last resort when any one party faces irreconcilable differences."

Nucleus Research analyst Marc Songini echoed Wang. "Things have become very, very bad here. Usually these implementations either get fixed up or they're settled quietly, or as quietly as possible," Songini said in an e-mail. "It doesn't look good to a prospective customer to see that their relationship with an enterprise applications vendor might end in court."

"It's always incumbent on the software vendor to ensure their customers succeed with the vendor's software," Songini said. "According to the response, however, SAP is blaming Waste Management for the problems. In fact, SAP seems to be indicating that if the customer doesn't have a Mensa-level IQ, they shouldn't deploy SAP."

Copyright © 2008 IDG Communications, Inc.

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