Why ERP projects fail – Lidl stops million-dollar SAP project

ERP systems can help companies to transparently manage process flows in all areas of the organization, better manage resources, and increase the long-term viability of the business. Particularly in large organizations with complex structures and workflows, ERP solutions have become indispensable today. However, from time to time the media report on failed major projects with losses in the millions – as in the case of the cooperation between the discounter Lidl and SAP AG, which raises many questions. Reason enough for us to shed light on the topic.

What was the starting position?

Lidl commissioned the software provider SAP in 2011 to develop a new enterprise resource planning system. This was based on the SAP trading solution and used the so-called in-memory database technology HANA, which was first introduced in spring 2010. In addition to SAP and Lidl, the consulting firm KPS Consulting was involved in this decision as a local implementation partner.

The newly created application called eLWIS should no longer depict only individual functions, but integrated process chains from the supplier to the customer. Key figure analyzes and forecasts should be available in real time. In addition, the discounter hoped for more efficient processes and easier handling of master data for the more than 10,000 branches and 140 logistics centers. A central topic was that the current Lidl concept of valuing inventories based on selling prices should not deviate even in the new solution. However, because the SAP Retail solution calculates house prices with purchase prices, the solution at this point had to be adapted with a lot of effort.

Lidl commissioned a system that was designed to meet the company’s needs, use modern technologies, expand functionality, and consistently map processes.

How did the project develop?

Lidl tested the new system in smaller branches in Austria, Northern Ireland and the USA. Apparently, however, the software developed by several hundred IT specialists was not suitable for high-revenue locations. A few weeks ago, the company’s executive board announced that the originally defined strategic goals could not be achieved with reasonable effort. The expensive project, which according to experts has flowed more than unbelievable 500 million euros, was finally stopped after approximately seven years.

Why did the project fail?

Of course, all answers are familiar only to those involved in the project. Nevertheless, it is not an isolated case. For example, the German company Deutsche Post also suffered heavy losses several years ago. Certain problems occur again and again in large projects.

  • The Lidl example shows us that customization is not one of the strengths of the software vendor SAP. Projects are successfully completed when a customer adapts significantly to the (standard) system and its process models – and not vice versa. Changes sometimes require a lot of effort compared to other providers.
  • Also the current operation would have to be adapted to the software, flexible further developments are difficult to implement. At Lidl, the desired adjustments resulted in extremely high consultant and system integration costs.
  • The project start in 2011 shows that the implementation took a very long time. This could not be prevented by the use of additional consultants.
  • The non-existent usability at smaller Lidl locations suggests that performance problems have arisen despite new and state-of-the-art technologies.

What is the conclusion?

Even though SAP AG is one of the most well-known software houses in the enterprise segment worldwide, has a brilliant image and the customer generally cannot “go wrong” when choosing SAP, it still does not offer the right solution for every project / company. The lack of flexibility in the field of adjustments, the excessive use of numerous external consultants and the complex implementation complicate the project’s success, especially for companies that do not want to completely change their previous processes, but rather “only” want to improve.

Now, the conclusion cannot be generalized and the “Lidl case” is certainly an exception among many very successfully completed SAP projects, yet it shows that the global reputation and image of a software not always go along with success for the respective decision makers per se. In the end, projects are still carried out by people with other people, and technology remains (only) a means to an end.

A good preparation, a clear expectation coupled with a defined project scope (“playing field size” of the project, what is “IN” what is “OUT”) as well as a certain sense for what should be feasible in any kind of project planning (whether large medium-sized companies) – especially for long-term projects.

Increasingly we are experiencing this phenomenon and the selection for a system is rather based on principle world reputation and image and not competence based (such as industry knowledge of the implementation partner or comparable reference projects).

Do you have questions about this article or about ERP systems? We are glad to be there for you and look forward to your message.

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