Oracle Sued by University for Alleged ERP Failure

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Montclair State University is suing Oracle over an allegedly botched ERP (enterprise resource planning) software project, saying a series of missteps and delays could ultimately cost the school some US$20 million more than originally planned, according to a complaint filed last week in U.S. District Court for the District of New Jersey.

The school entered into contracts with Oracle in 2009 for a PeopleSoft suite that was supposed to replace a 25-year-old set of legacy applications, the complaint states.

Those pacts included about $4.3 million for software and support. The school and Oracle also agreed on a $15.75 million fixed-fee contract for implementation services, according to the complaint.

Under the latter agreement's terms, Oracle would undertake the project in a series of "pillars," each with a specific completion date. In turn, the school would pay out the fixed fee in a number of "milestone" payments, "each of which was tied to Oracle's satisfactory completion of a particular project deliverable," the complaint states.

Dubbed the Bell Tower Initiative, the project was supposed to be done over a 25-month period, according to Montclair.

But Oracle "failed to deliver key implementation services, caused critical deadlines to be missed, refused to make available computer resources that it had promised, failed to deliver properly tested software, and overall, failed to manage properly the project," the complaint alleges.

In the end, Montclair suspended the project, fired Oracle and began looking for a replacement systems integrator, it adds.

Due to the problems, the school's costs will increase by greater than $10 million, according to the complaint, which goes on to describe Oracle's alleged failings in detail.

For one, the school's contract stated that Oracle would use an application called iProjects to manage documents related to the implementation, but was unable to implement it "after numerous failed attempts," according to the complaint.

Oracle asked the school if it could instead use a program called Blackboard, for which Montclair already had a license. The school agreed, but Blackboard "proved ineffective," according to the complaint.

Oracle was also supposed to produce and maintain an "integrated project management plan," but failed to do so, according to Montclair. This "led to confusion amongst Oracle and University staff," the complaint states.

In addition, Oracle failed to keep a separate log for tracking issues and risks associated with the project, instead including them in weekly status reports, according to Montclair. This allegedly led to serious issues getting "lost with simple project problems that required minor fixes."

Oracle also "unilaterally removed or downgraded" risks identified by university officials, the complaint states.

Meanwhile, staffers Oracle placed on the project were unprepared to pull off the implementation successfully, according to the complaint.

While Oracle required the school to use a number of proprietary methodologies, many workers assigned to the job were actually subcontractors who "had no knowledge of the [methodology], didn't understand it, and weren't trained to use it."

Moreover, Oracle "continually rotated staff in and out of the BTI project," causing confusion and wasted effort "as new Oracle staff wanted to do things their way."

Oracle "ignored" many complaints lodged by Montclair officials about the staffing changes, according to the complaint.

School and Oracle officials had a series of meetings between July and September 2010, during which the university repeatedly asked Oracle for a project plan with realistic completion timelines, it states.

On Sept. 27 of last year, Oracle asked the school for about $8 million more than the original $15.75 million fixed fee to complete the job, according to the complaint. In addition, Oracle blamed the school for the project's woes while accepting no responsibility for any problems, it adds.

Oracle then threatened to pull its staffers off the project on Oct. 28 if a new agreement wasn't reached, according to the complaint.

Montclair subsequently sent Oracle a letter on Oct. 11, saying the vendor was in breach of contract and demanding the problems be fixed with 30 days, it adds.

A number of Oracle personnel came to the school on Nov. 1 "to continue previously scheduled data mapping and work on HCM (i.e., business as usual), all of which was inappropriate given the project failures and breaches previously identified," the complaint states.

After conferring with an Oracle attorney, the workers handed their access keys to Montclair's CIO, "said 'here you go' and 'we're out of here," left campus and never returned, the complaint states.

The contract was terminated on Nov. 11, but tensions between the school and Oracle did not subside, according to the complaint.

Oracle allegedly refused to turn over a number of "deliverables" related to the project, which could have made it easier for another systems integrator to complete the job, unless the school agreed to pay for them.

Montclair ultimately paid Oracle about $370,000 for several deliverables, which turned out to be substandard and not reusable, the complaint states.

The school has paid Oracle more than $6 million in connection with the project, and much of that work will not be usable either, according to the complaint.

"Based on the initial bid responses from the replacement vendors, the direct, out-of-pocket cost to complete the BTI project will ... exceed Oracle's bid by at least $10,000,00 and as much as $20,000,000," it states.

Oracle also intends to sue the school for another $5.3 million, it adds.

Montclair is seeking a judgment against Oracle for breach of contract, gross professional negligence and other claims, along with compensatory damages.

ERP projects have been compared to a three-legged chair or stool, with the software vendor, implementation partner and customer all needing to play key roles in a project's success.

For example, vendors should provide software that either fits or can be adapted easily to the customers' needs, while systems integrators should ensure that realistic project timelines are set and met.

In turn, customers must provide adequate leadership as well as budget enough time and money for "change management" activities -- the training and other tasks needed to move users over to a new system.

The Montclair situation is far from the only time an ERP project ended up in court, with SAP, Ross Systems and other vendors also facing litigation in recent times.

It was not immediately clear how Oracle will characterize Montclair's role in the project. As of Monday, the company had not filed a response to the suit. A spokeswoman did not immediately respond to a request for comment.

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris's e-mail address is

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