A Troubled Project To Replace Oracle With SAP Software Could Cost A New York Gas Utility Nearly $1 Billion
In November 2012, National Grid replaced its old Oracle system with SAP software that was initially estimated to cost about $383.8 million, according to a recently released audit cited by IDG.
But the system had many flaws from the beginning. Those flaws included making incorrect payments to workers, which resulted in lawsuits from unions, according to a previous IDG News Service Article. Hurricane Sandy, the massive storm that hit the East Coast in late October 2012, only made the problem worse.Citing the audit report made available last week, IDG reported that National Grid had to hire 450 additional contractors to fix the flawed system, with another 400 working on supply chain and financial problems. The upgrade was supposed to be done by September but won't be finished until the end of the year.
Due to all these problems, the project is estimated to cost National Grid a total of $945.1 million. The extra costs will be charged on the company's shareholders, according to the New York Public Service Commission, the utility's regulator.
The audit report largely blames National Grid's decision to hire vendors with little experience handling SAP platforms. It points out Wipro, one of the main vendors, had "virtually no experience" implementing an SAP platform in the US. It also says National Grid should have slowed its schedule to go live since there were questions over its readiness.
This is not the first time we're seeing a huge enterprise software project go wrong. Last year, IBM was involved in a $600 million lawsuit with the tire company Bridgestone over a $75 million computer system project it led. In August, Oregon's Attorney General filed a $200 million lawsuit against Oracle for failure to deliver a healthcare website. In fact, consulting firm McKinsey says almost half of those projects can go awry.
SAP said in an email statement to Business Insider: "We are aware of the challenges experienced at National Grid and we have worked with the customer continuously." National Grid and Wipro were not immediately available for comment. We'll update if they get back to us.