Why Deloitte Has Problems Implementing SAP

Is Deloitte a good firm to use for SAP implementations? They are a large SAP implementor, however, some important issues with hiring Deloitte that companies should be aware of are listed below.

What is Covered in this Article? 

• What are some well known Deloitte SAP project failures, and do these well known or litigated cases extend to other Deloitte projects, or are they isolated events?
• How Deloitte’s internal funding system works with respect to infrastructure consultants rely upon.
• What is the culture that Deloitte has created and limits success on SAP projects? 
• What are Deloitte’s actual core competencies? 

Background

Deloitte has a high number of problematic SAP projects. The exact ratio of problem projects to overall projects is difficult to estimate, and even projects where Deloitte is sued by its clients, are declared by Deloitte as not their fault. However, of the few that go to court many others leave the client in a worse state than when Deloitte arrived on site. The following are well known SAP implementation failures, and three of the five have gone to lawsuits. These include the following:

• Levi Strauss
• Southern California Edison
• Caterpillar Logistics
• Los Angeles Unified School District
• Marin County

Serious Problems

The problems at these companies include the following:Levi Strauss having a significant reduction in earnings which they attribute to the Deloitte lead implementation, to Caterpillar Logistics being unable, after 8 years of implementation work by Deloitte to get basic functionality within SPP and EMW working. With Southern California Edison, Deloitte at one point during their project actually moved away from showing project plans to the company to keep SCE from knowing how far behind the project actually is.

Disabling Clients

Finally with the Los Angeles Unified School District, their implementation prevented them for a time from even printing paychecks. This resulted in an $18 million judgement against Deloitte, although the damage done to LAUSD was much greater. A very similar story emerges with the case of Marin County versus Deloitte and SAP. The accusations against Deloitte from multiple clients quite serious. They allege that Deloitte..

“Engaged in a pattern of racketeering activity designed to defraud the County of more than $20 million.”

Deloitte apparently bought off an employee at Marin County to sign off on their deficient work.

Marin County’s suit also names as a defendant Ernest Culver, a former county employee who served as project director. The county alleges that Culver interviewed for jobs at Deloitte and SAP, where he now works in the Public Services division. During that time, Culver “was also approving Deloitte’s deficient work on the project, approving payments, and causing Marin County to enter into new contracts with Deloitte and SAP Public Services.

If Deloitte has done this in one account it has probably done it at several. More details on the nature of Deloitte’s conduct in the Marin County case are available at this link.

So Many Lawsuits

Deloitte has been sued in relation to the WaMu failure, for approving fraudulent financial statements. Similar suits are in the works or have occurred from Symbol Technologies, Parmalat, and Bears Stearns.

Deloitte, a Larger Cultural Problem

In addition to they type of failure that leads to lawsuit, Deloitte has an extremely contentious relationship with a number of its SAP accounts. One of these being Applied Materials, which is considered a nightmare account by many consultants at Deloitte. Many Deloitte consultants complain that the project problems, which are oftentimes caused by Deloitte partners (senior level decision makers) which create bad blood at the client. This then ends up being placed in the consultant’s lap. Furthermore there is very little accountability at Deloitte at the higher levels, so the senior members can drop any problems on the account to the more junior members of the company.

Furthermore Deloitte does not invest in sufficient training or infrastructure. So its SAP sandboxes are supported on a shoestring budget, and some configuration that has been specialized for specific markets appears to simply get lost because there is insufficient maintenance. Deloitte makes very high margins off of their clients, but those monies do not flow to consulting infrastructure. These are all signals that the partner level is pulling too much compensation from the company, and not giving enough for the operations of the business.

Deloitte’s Core Competency

The things Deloitte is best at don’t have anything to do with their consulting. Instead their true core competencies are marketing and sales (i.e. getting clients) and litigation (i.e. defending against lawsuits), therefore the beginning and end of the consulting relationship. Credit must be given where it is due, and at litigation and marketing they are best in class. However, its the middle part, the delivery of value that Deloitte does not do very well. If they were to use their own strategy consultants to develop steps to go forward, it they may recommend outsourcing the consulting business to someone who can actually deliver value, but keeping the marketing and litigation capabilities under the Deloitte umbrella.

Deloitte’s promotional literature and advertising is excellent. However, that is the extent of their excellence. Actually working on or with Deloitte is extremely frustrating because they do not set expectations appropriately nor do they know how to bring together the right skills to bring off successful implementations.

Conclusion

SAP projects are risky endeavors. However, based upon my analysis of over a hundred SAP implementations, whether the lead implementation partner is one of the strongest indicators as to whether the project will fail. Deloitte needs to change its internal culture to begin creating a more honest partner class that has accountability so that clients can trust them again.

References

http://blogs.zdnet.com/projectfailures/?p=917

http://blogs.zdnet.com/projectfailures/?p=1183

http://www.bizjournals.com/seattle/stories/2008/10/13/story9.html

What Do You Think?

I would like to open up the post to comments. Other readers and myself would be very interested in hearing whether you have had positive or negative experiences with Deloitte. If you had Deloitte as your implementation partner, did they do a good job or a poor job? Would you hire them again? 

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