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The Question You Need To Ask Yourself Before Filing A Lawsuit Against Your ERP Software Vendor: – New Technology



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Oversold and misrepresented software, missed deadlines,
inexperienced consultants, and budget overruns are all common
occurrences in a digital transformation. The reality is that as a
customer, the odds of a successful ERP implementation, or digital
transformation, are stacked against you.

When clients come to us in the midst of an ERP or digital
transformation train wreck, they are overwhelmed and frustrated.
Many times they are convinced they have a case, and want to sue
their ERP vendor. Our response is almost always the same:
“have you done everything you can – within reason
– to make sure that the project can’t be saved?” We
counsel our clients to spend what it takes and to devote the time
that is necessary to “right side” the project so that
they can get a functional product.

Litigation should be the last option, and only considered after
you have exhausted all other efforts. But sometimes that’s just
not possible. If the vendor is incompetent, the software project is
excessively over-budget, the software is inoperable, or the
functionality was misrepresented, then no amount of time or money
may be able to save the project. If that’s the case, litigation
may be a viable option.

If you choose to litigate, understand that the contracts for
software and associated services will heavily favor the vendor. The
limitations of liability, warranties, and remedies will all benefit
the vendor to the customer’s detriment. As a customer, you may
have little recourse to recover damages, and much of the
responsibility for the failed implementation will be placed on you.
Vendors – especially top-tier vendors, will vigorously defend
lawsuits. They hire large law firms with teams of lawyers to defend
them. They employ tactics designed to increase the cost and the
duration of litigation. Some vendors bend over backwards to protect
their salespeople and their commissions.

There’s more:

If you financed your deal, the financing arrangement adds
another level of complexity to the lawsuit. If there are multiple
vendors, things get even more complicated. If you have withheld
payment because of poor performance, it is likely you will face a
countersuit

So, is filing a lawsuit against your ERP vendor the best course
of action? It can be. But it needs to make sense. Litigating
because the software didn’t work the way you expected, or
because the project cost more than estimated rarely forms the basis
for successful litigation. The failure needs to be objective and
identifiable. If there was a misrepresentation, it needs be
substantive. If the vendor fraudulently induced you to enter into a
contract, the circumstances of the fraud must be pleaded with
specificity. And, the failure and/or the misrepresentation needs to
have caused damage in excess of the fees it will take to bring the
lawsuit. Spending $500,000 in legal fees to recover $100,000 in
legal fees rarely makes sense. If you are litigating against a
sophisticated vendor, expect that vendor to aggressively defend the
lawsuit. You need to be prepared to spend at least the amount you
spent on the software and the implementation.

We make our living recovering damages from customers who have
been victimized by failed ERP implementations and digital
transformations. The process is expensive, difficult and uncertain,
but sometimes it is the only option that you have.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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