Epicor Lawsuit Claims Useless Software Despite One Throat Chokehold and Doubling of Costs

There seems to be a steady stream of news related to ERP vendor Epicor (Full disclosure – I work exclusively as an independent consultant with a competitive ERP product). The latest lawsuit from Major Brands claims that Epicor over-promised and under-delivered on a $1,000,000+ software and services ERP engagement.

According to the lawsuit the initial cost of $500,000 in software licenses and $ 670,000 in services (to be provided by Epicor directly because “there’s only one throat to choke”) not only ran past the initial go-live date of  “mid 2011″ but also doubled in price and according to the suit Epicor eventually admitted the software they’d recommended was ” not suitable for Major Brands’ needs and that it would not perform as previously represented”.

By the time Major Brands filed suit Epicor was indicating that their net version, ICE 3.0, would fix everything – but not until it was available in mid 2012.

 During the testing, the V9 software was so ill-suited for Major Brands’ needs, no invoicing or shipments were able to occur.

Two questions

  1. What type of due diligence happens before a company spends $1 million on a software project? In this case it would seem as if the most that was done was some type of free demo and followup — “the company gave Epicor a detailed accounting of its business processes and transaction volumes, according to the complaint. The company also allowed Epicor personnel to “visually observe all aspects of its order entry process [so] it would understand Major Brands’ needs and requirements and the processed involved.”
  2. Is the software publisher really best suited to deliver implementation services in this mid-market space? Here, according to the suit, Epicor represented that they were the best resource because there would be only “one throat to choke” if things went wrong. Ultimately for Major Brands it may turn out that Epicor was most favorable not because of a throat chokehold but deep pockets when the system doesn’t activate as they claim.

In an environment where software publishers are desperate for new sources of revenue it’s tempting to think that taking on the role of implementer is an easy road to high margin profits. And in some cases where the implementations are cut and dry that may be true. Increasingly the bulk of implementations , such as Major Brands which was replacing a 20 year old system, have some type of quirk that requires more than a free demonstration and conference room meeting to uncover.

Current best practices include a paid conference room pilot – or at least rolling out the software in test phases prior to jumping in with both feet. Companies who have stayed on software for 20 years (though Year 2000 scares, upgrades to Windows) almost always have some type of special needs inherent in their old software which make a migration challenging. Most experienced VARs recognize this. It doesn’t sound like in this case Epicor did.

The message for software publishers – be careful what you wish for (one throat choke) – because you may get it.

9 Replies to “Epicor Lawsuit Claims Useless Software Despite One Throat Chokehold and Doubling of Costs”

  1. In regards to the really old systems, you are spot-on. Regularly we find that prospects who run ancient systems view them as old/archaic/outdated/basic and expect a modern system to do everything the old one can, with more features of course. However, they almost always have some sort of advanced/custom pricing/cost structure in inventory, or produce some sort of report that no modern out-of-the-box system has. We have to regularly tell them, “just because it’s old doesn’t mean it’s not advanced.” Of course, these companies just want to have one 2-hr needs meeting before they make a decision. You probably spend more time picking out which cell phone you want.

    1. The other one I love is “we hate our old system” and “nobody remembers why it functions the way it does” now please make our new system perform exactly like the old one….

  2. These types of stories are typically accompanied by a qualifier, like…it’s not the software that is to blame, but poor communication and gap in expectations between the vendor and the customer. It’s a way to pin some of the blame back on the customer, and no doubt some of it will belong there. But I wonder if we need to back it up a step further and blame the sales person and the sales approach. Epicor’s direct sales style, with its flashy demo, grand promises, and massive discounts seems much more likely to lead to one of these situations.

    1. My theory on many of these deals gone awry is they start with a free demo or RFP. Technically you get what you pay for. Also the switching costs these days are high and I think that is a much bigger contributor than people think.

  3. What a great lesson in not paying out money up-front for services that have not been satisfactorily performed. Companies with implementors from the outside need to put joint deliverables next to all payments so that if things fail then both sides take the hit. They need a true partnership, not one side doing the work and the other side paying the money.

  4. We recently came down to a decision between Epicor and a Microsoft Dynamics NAV solution. One of the major factors in our decision was not getting involved with a 3rd party developer like Epicor. The one throat to choke approach can put you in a situation where you have no choice but to scrap the system and start over or live with what you got. We felt that going with a Microsoft Solution would give us the flexability to dump the external implementation team if they failed to produce what they have promised. Microsoft are not going anywhere and we already have a Microsoft infrostructure. There are always going to be challanges with any type of major technical implimation project. People are often restant to change, policys and procedures need to change. Things will undoubtly come up that are a suprise. However getting your self cornered with a single providor can put you into a situation you do not want to be in if things go sideways.

  5. I was so tickled when I read these articles about Major Brands suing Epicor because I work at a company where we implemented one of their softwares several years ago and I have been sorry we did ever since. They are a very difficult company to deal with and there software doesn’t perform some basic needs that erp softwares do. They are difficult to deal with, not supportive, the software is unstable, looses transactions, and is riddled with bugs. I have to give their sales team credit because they can sell! They got us and it is only a matter of a few years before we change. BUYERS BEWARE

  6. I’ve sat on both sides of the ERP implementation table – I’ve sold, implemented, and been a member of a couple selection teams. I think the bottom line is that it’s critical for the customer to have a complete understanding of what they need and what they’re buying from a software and implementation standpoint. I think that the customer’s management team also has to be realistic in understanding their ability to make an informed decision. I’m not a big fan of bringing too many players into the game, but some customers, i.e. customers who have never purchased a packaged ERP system, need help in running a proper selection process. Uninformed or unqualified buyers run a huge risk of making bad choices – and a savvy sales team can spot an easy mark a mile away. If you’re spending a million dollars it’s up to you to make sure you’re not an easy mark.

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