national grid sap case study

Tuesday, April 09, 2019

• Labels: Case Studies , Project Failure

Case Study 3: How a Screwed-Up SAP Implementation Almost Brought Down National Grid

Is your project headed for trouble? Find out! Just answer the 27 questions of my Project Trouble Assessment , which will take you less than 10 minutes, and you will know. If you just want to read more project failure case studies? Then have a look at the overview of all case studies I have written here .

Timeline of Events

As Wipro knew or should have known, it had neither the ability nor intent to assign appropriately experienced and skilled consultants to the Project because... it in fact had virtually no experience implementing an SAP platform for a U.S.-regulated utility. – National Grid USA

NGUSA has been a valued customer of Wipro for over a decade and both organizations have had a mutually beneficial relationship over the years. We believe that this settlement will be commercially beneficial for us and will help us remain focused on growth. – Wipro

What Went Wrong

Closing thoughts.

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Work Management Solution

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Wipro implements several ‘firsts’ for National Grid to deliver a world class, efficient, scalable Mobile platform of the future.

Client Background

National Grid, the customer, is UK’s largest electricity and gas utility. With transmission and distribution operations in the UK and a large presence in the regulated US market , it has an annual turnover in excess of £20 billion.

Industry Landscape

Electricity and gas utilities in the UK are currently dealing with stricter regulatory guidelines in the form of RIIO (Revenue = Incentives + Innovation + Output) introduced by Ofgem. These guidelines are aimed at creating safer, more resilient networks that meet environmental objectives and which, additionally, protect the interests of consumers by achieving operational efficiencies. In order to ensure these objectives are met and products and services are delivered at fair prices to customers, utilities need to improve the performance of their field forces.

The Opportunity

National Grid’s (NG) transmission business was using a bespoke Work Management Solution to schedule and deliver work to its 1,500 field force engineers spread across the UK. The business was at risk of losing the benefits leveraged from the bespoke solution as the cost of support was rising and a majority of the solution components were going out of support. Wipro’s Transmision Front Office (TFO) – Scheduling and Mobile (S&M) team was tasked with replacing the ageing IT solution to ensure business continued post March 2014. The project, with an implementation period of 19 months was business critical for NG. The TFO-S&M team used the opportunity to introduce IT capabilities that meet current business needs but also improved efficiencies and provided a strong platform for future growth.

Solution(Implementation)

Wipro as the lead SI delivered the SAP Mobility platform solution covering the field force of 1,500. Globally, TFO-S&M was the first to implement the SAP mobility platform (SMP3.0) with the NG Corporate App store. This allowed field force users to use consumer grade devices like iPads in an enterprise environment for a more comfortable experience.

Customer Quote

The ‘Scheduling and Mobile’ project has been one of the more complex projects implemented in Transmission at National Grid. The team adopted a business lead “One team” approach where 11 partners worked together with Wipro leading as SI. As the existing systems were coming to end of life an on-time go-live was critical. The project was delivered on time and budget. The go-live was smooth, user feedback has been positive and they find that the system is intuitive and easy to use. The project was nominated for “Team of the year” award at the UK Utilities event and won the UK SAP excellence awards for innovation

- David Salisbury (Head of Data and Business Change, National Grid, UK)

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Wipro hands $75m to National Grid US after botched SAP upgrade

Pair settle out of court over failed project that cost utility firm hundreds of millions.

IT consultancy Wipro has paid National Grid US $75m to settle a lawsuit over a botched SAP implementation that cost the utility firm hundreds of millions to fix.

National Grid US, which supplies electricity and gas in Massachusetts, New York and Rhode Island, wanted to replace legacy back-office systems with a SAP platform. It hired Wipro in the role of systems integrator in 2010, paying some $140m for the work.

But errors in the rollout saw staff and vendors paid incorrectly and prevented the firm from producing crucial financial reports. This led to state investigations, employee settlements , plenty of negative PR and major losses.

For instance, staff were ultimately overpaid by about $8m, while efforts to stabilise the system were costing National Grid US about $30m a month to a total outlay of more than $300m. A 2014 audit estimated the upgrade could end up costing National Grid $1bn.

National Grid US pinned the blame on Wipro, flinging a sueball at the Indian consultancy at the end of last year with an eye to recoup the $140m as well as the extra cash it sunk into fixing the problems.

Oral arguments in the case were due to be heard in the New York Eastern District Court on Wednesday (8 August), but this weekend Wipro revealed the pair had settled the case out of court for $75m.

The project to upgrade National Grid US's legacy systems – many of which were running on Oracle – began in 2008.

Deloitte was initially employed as lead implementation partner, project manager and systems integrator, but in June 2010, it was replaced by Ernst and Young in the first two roles, and by Wipro as systems integrator.

However, according to National Grid US's complaint (PDF), defects were discovered in the supply chain, payroll, accounting and reporting systems immediately after they went live.

"The new SAP system miscalculated time, pay rates and reimbursements, so that employees were paid too little, too much or nothing at all," the complaint said.

"Meanwhile, with respect to supply chain functions, system defects devastated National Grid's procurement, inventory and vendor payment processes.

"Two months after go-live, National Grid's backlog of unpaid supplier invoices exceeded 15,000, and its inventory record-keeping was in shambles."

Such problems meant delays in producing financial statements – the financial close that took four days using the legacy systems took 43 days with the SAP system – and National Grid US had to seek various extensions.

National Grid said it spent "hundreds of millions of dollars" on additional resources from other vendors, had to hire hundreds more employees, and that it took more than two years for the SAP system to be fully stabilised.

"In many instances, functional and technical specifications had to be completely re-written and entire SAP modules had to be re-built or abandoned," it said.

The suit said that the Indian IT consultancy had over-egged its abilities when bidding for the work, and that National Grid US had relied upon these both when hiring and then extending Wipro's role.

"Wipro's representations were knowingly or recklessly false when made," the firm said at the time.

"As Wipro knew or should have known, it had neither the ability nor intent to assign appropriately experienced and skilled consultants to the Project because... it in fact had virtually no experience implementing an SAP platform for a US-regulated utility."

However, an audit report (PDF) published in 2014 pointed out that some of the blame fell on National Grid US, which it said was "unprepared" for the project.

In addition to picking a firm with little experience of US utilities, the report said, National Grid had "very limited" discussions with other US utilities about implementing and using SAP.

At the time, Wipro said that the claim misstated the facts, and in a filing with the Bombay Stock Exchange this weekend said that the settlement did not mean it had admitted fault.

"The settlement has been effected for an amount of US$75 million and is without admission of liability or wrongdoing of any kind by the parties," Wipro said.

"National Grid has been a valued customer of Wipro for over a decade and both organizations have had a mutually beneficial relationship over the years. We believe that this settlement will be commercially beneficial for us and will help us remain focused on growth."

The settlement will appear in the Wipro's financials for the quarter ending 30 September 2018. ®

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Wipro Responds to National Grid’s SAP Implementation Billion Dollar Lawsuit

• June 5, 2018

John Belden

• Reading Time: 6 minutes

On November 5 th , 2012, swamped in the aftermath of Hurricane Sandy, the National Grid management team made the decision to go-live with a major SAP implementation. The cost of the damage done by the failed implementation easily surpassed the costs that had been incurred to implement.  An external audit determined that the failed implementation was due to an array of problems from the definition of scope and budget to inadequate testing and business preparation.  In December of 2017, National Grid filed suit against Wipro requesting their money back as well as the cost of all damages.  On June 1 st , 2018, Wipro filed a motion to have three of the five causes for action dropped.   Does National Grid have a legitimate case?  What chances do they have of prevailing in court?  

UpperEdge takes a closer look at this case and provides our opinion on National Grid’s odds on prevailing.

The Decision to Go-Live and the Implications

National Grid, one of the largest investor-owned power distribution companies, faced a difficult choice in October of 2012.  The SAP project that was three years in running and marred by delays and budget overruns was scheduled to go live on November 5 th .  Failure to go-live meant a delay of another five months, likely another $50M in additional spending, and a trip back to the rate commission to request adjustments to pay for the overruns.

At the same time, Hurricane Sandy was pounding up the east coast.  By mid-October, forecasts for damage in National Grid’s service area were extensive.  For a utility company, power restoration takes precedence over everything else after a hurricane. National Grid had to know they had a bumpy ride coming when they made the decision to go-live.  What they clearly didn’t understand was how bumpy the ride would be.

In the weeks that followed the go-live, while the National Grid crews were working tirelessly to restore power, the SAP project team was just beginning to understand the full extent of the damage being caused because of the implementation.  As time wore on, the problems compounded, and the cleanup effort intensified as additional resources were brought on to clean up the mess.  Here are some specifics reported by National Grid:

• Payroll was a disaster – Over-payments of more than $6M were made to employees and not recovered. There was $12M paid in settlements to employees related to short pays and deductions.  Delays in the generation of W2’s and other tax reporting occurred.
• Vendor payments — Just two months after go-live, National Grid had 15,000 vendor invoices that they were unable to process for payment, inventory was in shambles, and vendors were being issued payments with the understanding that reconciliation would take place later.
• Financial reporting — Prior to go-live it took National Grid four days to close its financial books.  Following go-live the close took 45 days. So bad was the financial reporting, National Grid lost its ability to access short-term borrowing financial vehicles based upon its inability to provide satisfactory financial reports.

The Lead Up to the Decision

The journey to the decision point for National Grid was not unlike other companies that have followed the same path.  In 2007, National Grid had closed on a major acquisition making it one of the largest privately held power distribution companies in the US.  This acquisition left the company with two sets of financial and operating systems.  Capturing the synergies of combining these systems and adopting new sets of business processes were key components for the justification for the project. The project was also viewed as a method to allow National Grid to address significant audit deficiencies in its financial business processes.

In mid-2009, National Grid hired Deloitte as its systems integrator and set a project budget of $290M that was submitted and approved by the Utilities Rate Commission.  Shortly after the start of the project, National Grid looked to develop a relationship with a firm to lower cost delivery of the development effort required for the program.  As a result of an RFP process, WIPRO was brought on to the project.  Shortly thereafter EY replaced Deloitte in providing project oversight and Wipro’s role was reported to have been broadened to system integration responsibilities.

The program operated with a target go-live date of December 2011.  This date was later moved to July 2012 and followed by October 2012 and then a November 2012 target date.  The final sanctioned estimate of the project was set at $383M, nearly 30% beyond the original target budget that was approved by the board.

Audit Findings

In July of 2014, the NorthStar Consulting Group presented their findings of a Comprehensive Management and Operations Audit of the U.S. National Grid Companies sponsored by the New York Public Service Commission.  The 265-page report covered a broad range of the company’s operations and governance.  Throughout the report, the impact of the failed go-live was noted as well as the governance processes that led the company to determine that going live on November 5 th was the best decision.

As part of the findings, NorthPoint documented National Grid’s management observations as to the root cause of the failed implementation.  These included:

• Overly ambitious design
• Significantly underestimated scale of transformation needed
• Limited availability of internal personnel due to ambitious business agenda
• Multi-partner model did not deliver business benefits
• Lack of ownership of certain business processes
• Testing less effective than expected due to limited range of scenarios tested and limited data availability
• Inadequate quality of data from legacy systems
• Too much focus on timeline and not enough focus on quality
• Training methods proved ineffective

The Lawsuit

National Grid continued to engage Wipro in making the necessary fixes to the installed SAP system tolling their agreement (extending the statute of limitations for filing suit).  On November 30 th , 2017, National Grid filed a lawsuit against Wipro in the U.S. District Court Eastern District of New York.  The lawsuit notes that National Grid was unable to file suit against EY due to the language of their contract. The suit alleges that Wipro:

• Fraudulently induced National Grid into signing the original agreements.  National Grid claims that Wipro misrepresented its SAP implementation capabilities, talent, and knowledge of the U.S. utilities business operations and common practices.
• Failure to prepare design documents and specifications to industry standards,
• Failure to prepare programming and configuration to industry standards,
• Failure to adequately test, detect, and inform of problems,
• Failure to advise that the system was not ready to go live.
• Breached express and implied warranties by not providing consultants that were consistent with a top 25% SAP implementation firm.
• Negligently misrepresented for the same reasons identified in the first cause for action.
• Violated New York’s General Business Law for deceptive practices.

National Grid is seeking damages in the form of relief of all contractual obligations, restitutions of all amounts paid to Wipro, damages associated with a poor go-live, punitive damages, and all attorney’s fees and costs associated with the lawsuit.  UpperEdge calculates Wipro’s financial exposure north of $1B.

Wipro’s Response

On June 1 st , 2018, Wipro filed a motion to dismiss on three of the five causes for claims that fraudulently misrepresented its capabilities and negligent misrepresentation.  In its response to the National Grid RFP, Wipro claims that it identified that it had a well-established SAP practice, installed SAP globally for utilities, and had a long running relationship with U.S. utilities.  There was no explicit statement indicating that Wipro had not completed implementations of SAP for U.S.-based utilities nor were specific references provided in this regard.

Wipro also defends much of the language in the RFP response as common puffery implying that National Grid had a basic responsibility to check references.  UpperEdge has obtained copies of National Grid’s RFP and Wipro’s response, and believes that Wipro has a reasonably good chance of having their motions to dismiss granted.  Oral arguments on these motions are to be held on June 10 th .

What We Would Like to Know

As the litigation progresses, there are a number of questions that we hope to find the answers to:

• Where was EY?    EY was providing project management oversight .  They clearly have an understanding of what it takes to put in a major SAP implementation.  How did they not see or anticipate the major problems that occurred and warned the National Grid management team?  Or did they?
• Where was SAP?  In their suit, National Grid claims that Wipro developed an overly complex system that relied on the development of new capabilities vs. using the software as designed.  National Grid identified SAP as providing some level of oversight. Why didn’t they point out these significant deviations from standard? Or did they?
• Where were National Grid’s project owners?   Client project teams have responsibility for signing off on requirements, designs, and project strategies.  What standards were used for signing off?  Did National Grid provide Wipro with the appropriate access to expert personnel to properly identify requirements?  Did Wipro believe that they had accurately captured all requirements based on National Grid’s sign-off?
• Where were the auditors?  Programs of this magnitude are often reviewed by both internal and external auditing.  Were risk assessments performed?  Were the appropriate mitigations put in place?

Our Assessment

UpperEdge’s current assessment is that National Grid does not have a strong case.  There are many checkpoints the project needed to pass to move forward, each requiring National Grid to sign-off on the quality of the delivered product.  There were many opportunities for National Grid to identify poor quality talent on the part of Wipro and demand replacements.  The final decision to go-live always rests with the client and unless Wipro was looking to deceive National Grid regarding the results of its testing, it will be difficult for National Grid to prove Wipro was negligent to the point of being solely responsible for all damages.

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Lessons Learned from the National Grid ERP Failure

by Bill Baumann | Mar 3, 2021

As one of the largest investor-owned power distribution companies in the country, National Grid USA (NGUSA) knows the importance of timely delivery. So, when its much-anticipated SAP ERP project was stalling out after three years of development, team leaders made the decision to push ahead with the go-live date as planned. 

The result? A catastrophic domino effect that impacted nearly every facet of the business, from financial reporting to payroll. 

Understanding the details behind this failure can be enlightening to companies gearing up for their own ERP implementation . Today, we’re exploring the details behind the National Grid ERP failure , along with how your company can avoid making the same mistakes. 

Contemplating litigation?

The national grid erp failure: what happened.

In 2009, NGUSA (part of the UK-based National Grid Ltd.), embarked on an SAP ERP project to streamline its internal operations and improve customer service capabilities. 

The new system was scheduled to go live on November 5, 2012. As that date approached, however, it was evident that the company wasn’t quite prepared to launch the software.

Missing the critical deadline would be costly in terms of both time and money. Not only would it push production back an additional five months, but it would cost upward of $50 million in extra spending. 

In addition, the overrun would also require new approval from the Utilities Rate Commission, a move that would add time and money to the already-over-budget initiative.

All of these factors persuaded the company to try to go-live on the original date. Another reason they wanted to stick to this date was  Hurricane Sandy , which hit in October 2012 and caused National Grid customers on the East Coast to suffer massive damage and extensive power outages. 

Needless to say, the NGUSA project team stuck with the original go-live date with the chief goal of restoring power to impacted communities. The assumption was that any kinks in the ERP system would iron themselves out.

It Wasn’t That Easy

Some of the first issues that became apparent were found within the new payroll system. In addition to the miscalculation of time, the new SAP system also made errors on pay rates and employee reimbursements. As a result, workers were paid incorrectly, if at all.

Then, there were others that were paid too much. In fact, NGUSA spent $8 million on overpayments that were never recovered. At the same time, the company also owed $12 million for short pays or inaccurate deductions. 

Meanwhile, roughly 15,000 vendor invoices sat waiting, unprocessed. Inventory management and supply chain operations were likewise unorganized. 

Arguably the worst impact of all was the way the SAP implementation affected NGUSA’s financial reporting capabilities. Prior to implementing the SAP system , the company could close its books in less than a week.

After November 5, that timeline shot to 43 days. This cost NGUSA many short-term borrowing opportunities, along with valuable time. 

In response to this plethora of problems, NGUSA launched a massive stabilization effort. Around 850 contractors worked to correct the issues, at a cost of about $30 million per month. In all, the corrective actions took two years to complete, costing a total of $585 million.

4 Lessons Learned from This SAP Failure

The cost of NGUSA’s ERP cleanup was 150% of the price of the original SAP system. Let’s take a look at a few of the lessons that companies can glean from this particular failure to avoid making the same costly mistakes. 

1. Project Managers are a Must

In 2009, Deloitte signed on as the system integrator for the NGUSA project. However, that position changed to Wipro in 2010.

In the aftermath of the failure, NGUSA sued Wipro for $140 million and eventually settled  for $75 million . Among other issues, they claimed that Wipro forced them into signing agreements and misrepresented the features of the SAP software. 

Specifically, NGUSA cited that Wipro failed to:

• Create design documents that met industry standards
• Perform appropriate testing and problem-detecting activities
• Inform NGUSA of problems detected
• Inform NGUSA of potential deterrents to the projected go-live date

While these are all important tasks, such finger-pointing reveals the need for strong project management.

Before any designs or strategies go live, a project manager should review and sign off on them. The same goes for test results. There should be expert, in-house personnel on hand that can identify the correct requirements and ensure they’re captured in the documentation.

Assuming that the systems integrator will perform these tasks without guidance can lead to crossed wires and missed deliverables.

2. ERP Testing Should be Comprehensive

In 2014, the New York Public Service Commission sponsored an audit of the NGUSA failure. The findings revealed many shortcomings, including the fact that system testing activities were focused on fine-tuning parts of the system that were actively working.

Though these tests were performed at each phase, they failed to identify areas where the system was not working.

Up until the final tests, there were errors present and noted. Although fixes were put in place, there was not enough time left to test and validate them.

A thorough  ERP system testing  strategy considers the system as a whole, including all working and non-working components. We recommend putting a wide range of scenarios in place and ensuring data availability at each phase. 

3. Complex Designs are Costly and Time-Consuming

This SAP implementation was overly ambitious from the very beginning. At the time, SAP summed up the different components of ERP software with the acronym RICEFW, standing for:

• Conversions
• Enhancements

In the NGUSA project, there were more than 635 RICEFWs! This was incredibly complex, even for a utility company of their size. This level of complexity can make every step, from testing to ERP data migration , difficult and laborious. Such a project requires a substantial number of ERP internal resources and dedicated attention, which NGUSA failed to allocate.

This issue was compounded by the fact that most internal personnel were otherwise occupied, trying to assist with Hurricane Sandy recovery efforts. With such a tightly-packed agenda, rushing such a huge business investment was unwise. 

4. Training Cannot be Overlooked

If managers required information or reports from the new SAP system, they were supposed to request that data directly from the system, relying on SAP’s Decision Support analysts for guidance. However, that process was intricate and involved many moving parts. 

In addition, there was a lack of dedicated training during the NGUSA implementation, especially on how to query data. There was also confusion on how to use the data to create tailored reports for upper management.

A stronger focus on  end-user training  could have ensured that all employees knew how to navigate and make the best use of the new software. 

The Road to ERP Success can be Rocky

The National Grid ERP failure highlights the importance of a strong ERP project plan . This can help you bypass roadblocks and head straight to the finish line.

Our ERP consultants can help you navigate every aspect of your implementation, from ERP selection to go-live and beyond. Contact us below for a free consultation. 

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Lessons from the National Grid v. Wipro SAP Lawsuit

Just after writing about the well-publicized SAP failure at Lidl , news broke about a settlement in the National Grid v. Wipro SAP lawsuit. Long story short, Wipro agreed to pay $75 million to National Grid to settle the case. (Read the original article here ).

Table of Contents

Overview of the National Grid v. Wipro SAP Lawsuit

Since I am a frequent SAP expert witness on the most well-publicized SAP lawsuits, I took a particular interest in this case. Here are some of the key facts regarding the situation:

• National Grid spent close to $1B in total costs on their SAP implementation
• National Grid paid Wipro over $100M in services to support the implementation
• They also had Ernst and Young helping with the implementation
• By the end of the project, the company was spending roughly $30M per month supporting the upgrade to SAP
• After go-live, National Grid’s period-end close process ballooned from 4 days to 43 days
• National Grid’s post go-live accounts payable processes resulted in 15,000 unpaid supplier invoices

What Can We Learn from the National Grid v. Wipro SAP Lawsuit?

Most SAP implementations are difficult, but this one clearly got out of control in a big way. There are some lessons here that we can all apply to our projects, whether that be an SAP S/4HANA implementation or any other ERP implementation or digital transformation:

• Choose the right ERP software. You may be considering SAP vs. Oracle vs. Microsoft Dynamics for your digital transformation. Or perhaps you are considering Infor, NetSuite, Workday, or some other solution. Whatever the case may be, you will want to make sure you choose the right technology for your organization.

• Choose the right SAP system integrator. You may be considering SAP system integrators, such as Deloitte vs. Capgemini vs. Accenture or other firms. There are a lot of them out there, ranging from the conglomerates to the niche players. Either way, be sure to find the one that is the best cultural fit for your organization and its needs.
• Put the right project governance and controls in place . There is no reason this project should have spiraled out of control the way it did. Proper project governance, controls, and risk mitigation would have likely prevented this disaster. Invest in third-party, independent SAP or ERP project quality assurance as an insurance policy.
• Remember that you are in charge of your project – not your system integrator. You may not be the SAP or ERP experts in the same way your system integrator is, and that’s okay. But that doesn’t mean that you aren’t responsible and accountable for your digital transformation. Rely on independent experts such as our team at Third Stage Consulting to keep your system integrator and overall project on track.

The final lesson above is the biggest one: this is your project. It’s not your system integrator’s project. It’s not your software vendor’s project. It’s yours. You are the one who needs to make sure things stay on track and deliver the true transformation you are looking for.

If things aren’t going well, then fix it before it’s too late. Better yet, take the proper steps to ensure these sorts of problems don’t occur in the first place. When compared to the time and cost of cleaning up an ERP failure, it’s a lot cheaper and faster to implement technology right the first time.

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U.S. / Headquarters

CASE STUDIES

National Grid SAP

DESCRIPTION

A Specialist Implementation

Prepare, Deliver

DNASTREAM brought their unique knowledge and insight into the working of the utility sector to address the particular system requirements of National Grid.

With our help the business was able to come together under the same SAP solution.

What We Did

DNASTREAM provided programme management and industry-experienced SAP implementation specialists to help achieve a successful project delivery.

Design, quotation and acceptance of new work including complex individual customer specific requirements

Management of customer queries and ensuring that regulatory standards were met

Management of ad hoc work

Work planning with external input for service provider scheduling

Planned and preventive maintenance work scheduling

Asset portfolio updating

Policy meter exchanges

Procurement, billing and finance

Documents, technical specifications and drawings

DNASTREAM were able to bring their utility knowledge to National Grid to understand the specific issues and complex requirements of the I&C metering business.

This allowed the business to come together under the same solution, whilst still maintaining the particular business requirements of each part of the business. Having been through a SAP implementation before, National Grid were able to appreciate the benefits of having DNASTREAM on board with their experience and expertise to focus on this project and deliver the right solution on time and to budget.

WHAT THE CUSTOMER SAID

"The project encompassed significant SAP and business change elements. DNASTREAM added a strong team of project and programme managers and industry-experienced consultants who brought significant leadership, drive and experience to bear."

"The result was a timely project delivery and excellent adherence to the budget. I would recommend DNASTREAM to other organizations that are looking to ensure their SAP Programmes are successful and cost effective." - Nigel Taylor, Portfolio Lead Metering and Onstream Programmes, National Grid

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Lessons for ERP Implementation Vendor Selection in National Grid USA Service Company, Inc. v Wipro Ltd. — A case study from yet another failed SAP ERP Implementation Project

• John P. Beardwood

© 2020 by Verlag Dr. Otto Schmidt KG, Gustav-Heinemann-Ufer 58, 50968 Köln.

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Supplementary Materials

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Journal and Issue

Articles in the same issue.

Brightwork Research & Analysis

100% Independent Medical and IT Research

How National Grid’s SAP Implementation Damaged Their Company

Table of Contents: Select a Link to be Taken to That Section

Executive Summary

• In the complaint brought by National Grid against Wipro, there were essential details included regarding the SAP implementation’s negative impact on their business.

Text Introduction

When National Grid sued Wipro for failure around a $1 billion set of SAP implementations, National Grid made some curious accusations around Wipro’s consultant quality. These accusations are consistent with the consulting quality we have seen from all Indian SAP consulting firms and many non-Indian SAP consulting firms. This information was lightly reported on, particularly the details around the claims made by National Grid. These claims fall into a partner of exaggerations and lies that SAP consulting firms engage in when attempting to sell implementation projects. You will learn about the specific claims made by National Grid.

Our References for This Article

If you want to see our references for this article and related Brightwork articles, see this link.

Notice of Lack of Financial Bias: We have no financial ties to SAP or any other entity mentioned in this article.

• This is published by a research entity, not some lowbrow entity that is part of the SAP ecosystem. 
• Second, no one paid for this article to be written, and it is not pretending to inform you while being rigged to sell you software or consulting services. Unlike nearly every other article you will find from Google on this topic, it has had no input from any company's marketing or sales department. As you are reading this article, consider how rare this is. The vast majority of information on the Internet on SAP is provided by SAP, which is filled with false claims and sleazy consulting companies and SAP consultants who will tell any lie for personal benefit. Furthermore, SAP pays off all IT analysts -- who have the same concern for accuracy as SAP. Not one of these entities will disclose their pro-SAP financial bias to their readers. 

The Claims by National Grid

This is the first claim that caught our eye in the filling by National Grid.

Claim #1: National Grid Unable to Operate its Payroll, Supply Chain and Procurement, Accounts Payable and Financial Close

Specifically, inherent technical defects in the new SAP system rendered National Grid unable to operate its core functions relating to payroll, supply chain and procurement, accounts payable, and financial close and reporting. Wipro’s failures caused National Grid to suffer hundreds of millions of dollars in damages. The first series of payrolls processed after go-live were plagued by errors. As an initial matter, payroll programs that took a few hours to run on National Grid’s legacy payroll systems took weeks to run on the new SAP system (in part due to the flawed design of National Grid’s SAP in-house cash module).

This would have been a surprise as the project would have likely promised improvements in this area, as SAP has massively exaggerated what SAP ERP can do. However, this quote raises a question about how the system passed the sign-off stage. We cover the tricks consulting firms use to get companies to sign off on systems. The consulting firm covers itself by having the client sign that they agree the system is ready to go live. WiPro will use this document against National Grid in the lawsuit.

Claim #2: The Problems With the Payroll System

The payroll system itself was riddled with defects, as payroll amounts were wrong, causing harm to National Grid and its employees. National Grid was not able to pay its employees on time and in accurate amounts, as employees were underpaid, overpaid or not paid at all. National Grid’s union workforce was overpaid by approximately $8 million, a loss that National Grid ultimately had to absorb.

This is quite a basic functionality and is considered essential for operations. However, it is also a common problem cited in lawsuits against SAP and SAP consulting firms. This same issue happened to The City of San Diego, as we cover in the article The Art of Blaming the Client When A Project Goes South.

Claim #3: National Grid Unable to Operate its Payroll, Supply Chain and Procurement, Accounts Payable and Financial Close

Within weeks after go-live, the SAP system could not properly run National Grid’s business processes for paying vendors. By January 2013, the backlog of unpaid invoices exceeded 15,000, caused in part by data corruption that generated inaccurate vendor invoices. Unable to obtain the supplies it needed to service its customers and run its operations, National Grid had to prematurely pay vendors, in estimated amounts, to ensure that they would continue to supply National Grid with required materials. These pre-payments resulted in reconciliation problems when National Grid had to subsequently determine amounts that were advanced to vendors in excess of what was actually owed. In other instances, National Grid unknowingly paid vendors for the same invoice multiple times, which took extensive research and effort to uncover and correct.

This quote describes a ridiculous situation that asks how much the system was tested before being cut over. This is not only the consulting firm’s responsibility, but questions around National Grid’s efforts in this area and the timeline that may have led corners to be cut naturally arise. The only way that this could have happened is if the National Grid management of the project was weak. Remember, this is WiPro. It is an Indian consulting firm. All of the managers at WiPro would have been corrupt and provided false information to National Grid executives and project team members.

Claim #4: Cash Reconciliation Was a Disaster

As a result, a cash reconciliation team had to be formed to contact banks to determine whether checks were actually cashed or not. This encashment problem forced National Grid to write-off approximately $3 million on approximately 40,000 checks that were cashed or voided in error.

Claim #5: National Grid Runs into Audit Issues

Following go-live, National Grid experienced extreme delays in its financial close and reporting processes, which jeopardized its ability to carry out each of the functions discussed above. For months, neither National Grid nor its auditors could rely on the integrity of the data generated by its new SAP accounting management systems. National Grid was therefore forced to repeatedly delay issuing critical financial and regulatory reports (both state and federal) regarding its financial status, drawing penalties from its regulators and jeopardizing its relations with lenders.

Obviously, with the previous items, there would have been no way to close the books. This means National Grid turned into a full-time firefighting operation as soon as they went live.

Claim #6: National Grid Was Stunned by How BadWipro’s Implementation Was

The financial close delays after go-live were stunning: whereas National Grid typically performed its monthly financial close in 4 working days, the first financial close after go-live took 43 working days. These delays were caused by (among other things): (i) the instability and defects in the SAP system; (ii) inaccurate data conversion and lack of data capacity; (iii) defective application interfaces; and (iv) the cascading effects of the payroll and supply chain issues described above.

Again, the basic things could not be done in the ERP system. But notice for the first time in these quotes we have instability and defects in the National Grid SAP system.

Claim #7: Flawed Mapping and Design Defects

Nor could National Grid take advantage of certain attributes of the SAP solution that are designed to enhance an organization’s financial close and reporting capabilities. The system’s flawed mapping and related design defects prevented National Grid from benefitting from the SAP FERC module, which addresses unique accounting requirements set by FERC for public utilities like National Grid.

SAP ERP had defects? Why did this claim not receive broader coverage? This is a significant issue, and I cannot recall this specific claim ever breaking into the SAP community’s consciousness.

For more than a year after go-live, National Grid was unable to use the SAP FERC module to process the extensive financial reports it must regularly provide to FERC, and the company was forced to seek numerous extensions from its regulators.

This module, FERC, is a financial reporting module for the utility solution. It is widespread for SAP to exaggerate its industry solutions’ capabilities, which appears to be another case. However, no doubt, FERC would have been a central selling point used by SAP and Wipro during the project’s sales stage.

What Could National Grid Have Done Differently?

National Grid took SAP and Wipro’s word that FERC was ready to be used (SAP ERP). However, National Grid could have figured out if FERC was, in fact, ready to be implemented. We review SAP solutions for readiness. We use techniques to determine the general degree to which an application or module, or industry solution is mature and ready to be implemented. We have run into all the SAP consulting companies lie about SAP software’s maturity and capability. So, neither they nor SAP is a reliable source of information for whether any SAP item is ready for implementation.

The quote on FERC continues.

FERC also denied National Grid the ability to engage in short-term borrowing from banks due to the company’s inability to file FERC financial reports. The problems with the SAP FERC module should have been readily evident during testing, but Wipro never tested the module and none of the problems were discovered until after go-live.

This lack of testing is prevalent in SAP consulting firms. SAP has many problems with its applications and various modules. However, there is a strong tendency in SAP consulting firms to “take SAP’s word for it” that something works. This claim is made against Wipro, but actually, SAP shares the responsibility for having such continual problems in so much of its software.

Claim #8: National Grid Had 321 Resources Contracted?

By September 2013, the continuing efforts to stabilize the new SAP system cost approximately $30 million per month, totaling over $300 million. As of August 2013, there were still approximately 321 external resources contracted, and full SAP stabilization was not achieved until approximately September 2014.

If you have to hire 321 external resources to stabilize a project, you have a massive issue.

This is little discussed in the SAP and ERP industry. When a project does fail, what are the costs of remediating the situation? The loss is often the project cost, but when it negatively impacts the business,  the business costs and the remediation must be added.

One must be careful in making accusations in legal cases at face value. There is no requirement in a US legal case that any stated be true. However, these issues are explained in specific detail by National Grid. If there were no lawsuit filed, we would never have heard of these claims as the implementation failure would have been suppressed. SAP consultants usually give a highly misleading representation of the benefits of SAP implementations.

This is what can happen when an SAP project goes south. Project problems and failures occur far more often than are generally discussed because they are suppressed. They are suppressed by the customers, by SAP, and by SAP consultants. The lawsuit was filed against Wipro, and not SAP; however, many of the lies told by WiPro both at National Grid and at all of Wipro’s other accounts, as well as by SAP consulting firms in general — are based upon false information that I have previously contradicted in previous articles. I spent decades working as an SAP consultant, and in each case where I worked for an SAP consulting company as a full-time employee or later as an independent consultant, I was told to lie to the client. This is how the SAP market works. The amazing thing is that we don’t see at least 10x as many lawsuits as we do — and it is amazing that SAP finds a way not to get named as part of the lawsuit.