Nonprofit sues Lawson over alleged ERP failure

Public Health Foundation Enterprises says it spent more than $US1 million on software that 'doesn't work,' clueless consultants

A California nonprofit is suing Lawson Software for more than $US1 million over an allegedly failed ERP (enterprise resource planning) implementation, according to documents filed last month in U.S. District Court for the Central District of California.

Public Health Foundation Enterprises, which provides support and infrastructure services to nonprofits, community groups and governments, began looking for a replacement for its existing financial, human resources and other applications in 2006, mainly because of a lack of integration between the components, according to its complaint.

As part of its search, the Los Angeles organization hired a consulting firm and had various PHFE departments develop an accounting of their functional requirements and business processes. This resulted in a request for proposals that was sent to Lawson, Microsoft, SAP and other vendors, according to the complaint.

PHFE eventually selected Lawson and signed a deal for more than $US1.08 million in August 2007 to take advantage of an offered discount, according to the complaint.

However, "from the inception of the agreement, there were problems with Lawson's ability to provide the integrated program and customer service," the complaint states. "Lawson ... did not have and was not able to dedicate resources to the project, resulting in an immediate delay."

In addition, "Lawson did not have installers available to load the software on PHFE's equipment," which was needed in order to start training staff, the complaint states.

"Incredulously, Lawson's 'customer service' solution was to permit PHFE to train their staff using Lawson's logins and their servers at a cost of approximately $US4,500 a day."

Lawson eventually agreed to waive the fees and training began in October 2007, but PHFE subsequently ran into problems with the consultant Lawson provided, according to the complaint.

"It became immediately clear that [the consultant] did not possess the knowledge necessary to answer PHFE's questions. ... when PHFE's implementation team members would ask questions about basic functions of the system or how PHFE should handle certain situations, [the consultant] was unable to provide a response."

The consultant repeatedly referred back to Lawson for the appropriate answers, further delaying the project, according to the complaint. Similar problems occurred with a number of "Core" consultants from Lawson, the complaint states.

In November 2007, PHFE began training human resources workers on the system, but this effort stumbled, because the consultant Lawson initially assigned did not know how to properly configure the system to meet state guidelines, according to the complaint. PHFE's HR department was subsequently "shuffled around" to three other consultants and Lawson did not provide a permanent consultant to them until January 2008, according to the complaint.

Lawson was also supposed to "provide PHFE with an 'A to Z' demonstration of how the entire system would work together during System Test, which commenced in March 2008," the complaint states. Technical problems arose and the system test was never completed.

"As a result, PHFE has spent more than $US1,000,000 on various programs, rather than one integrated program as promised, that do not work," the complaint adds.

PHFE is now using its previous system to run operations, according to the complaint.

A Lawson spokesman said the company does not comment on pending litigation, but added that it is "committed to working with [its] customers to resolve issues."

One observer said IT buyers can draw an overarching lesson from the dispute.

"It wouldn't be fair to place blame in this situation, without hearing Lawson's side of the story," said Frank Scavo, managing partner of Strativa, an IT and business consulting firm in Irvine, California, via e-mail.

"However, from a quick reading of the complaint, it appears that PHFE went for a quick sale to take advantage of some sort of discount that Lawson was offering and then desired a quick start to the project. I'm guessing this led to resource conflicts with the most experienced Lawson consultants. In my experience, the best consultants for any vendor are booked out weeks or months in advance."

Buyers should make sure to "do due diligence not only on the vendor's software but on the consulting organization that will be delivering services, whether the vendor's own consultants or a third-party. Interview the proposed project manager and key consulting staff," Scavo added.

"Interview them and get a commitment that those individuals will be assigned to the project."

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