If It Isn't in the ERP Contract, Don't Count on It: Protecting Your Company Before an ERP Implementation

Somewhere in a conference room right now, an enterprise software salesperson is saying, “Yes, the system does that.”
But, nobody is writing it down.
Eighteen months later, that sentence could be at the center of a seven-figure ERP implementation dispute. Failed ERP implementations are not always caused by technology alone. Many begin much earlier, during the sales and contracting process, when expectations about functionality, integrations, implementation timelines, data migration, staffing, or customization are discussed but never adequately documented in the ERP contract or Statement of Work (SOW).
By the time the project is delayed, over budget, or unable to deliver promised functionality, the customer may discover that the sales presentation and the written contract tell very different stories.
For companies considering Oracle, NetSuite, SAP, Microsoft Dynamics, Workday, Epicor, Sage, or another enterprise software platform, the lesson is simple: document what you are buying before you sign.
Understand Who Is Across the Table During the ERP Sales ProcessDuring the enterprise software sales cycle, the vendor is trying to close a transaction. The long-term business relationship may develop after implementation begins, but sales personnel are generally incentivized to move the deal toward signature.
That does not mean every representation is misleading. It does mean companies should independently verify important claims and document the representations that influence the purchasing decision.
If your decision to purchase an ERP system depends on a particular capability, integration, implementation timeline, staffing commitment, or business outcome, do not rely solely on a sales presentation or verbal assurance.
Get the commitment in writing and, whenever possible, incorporate it into the governing ERP agreements.
Put Critical ERP Requirements Into the Statement of WorkThe ERP Statement of Work is one of the most important documents in an enterprise software implementation.
Before signing, make sure the SOW and other governing agreements clearly address the requirements that matter to your organization.
Functional RequirementsAvoid vague language such as “supports multi-entity consolidation.”
Identify the actual business processes the ERP system must perform, particularly those demonstrated during the sales process. Where possible, test those processes using your company's own workflows and data.
ERP IntegrationsIdentify each system that must integrate with the new ERP platform.
The agreement should address:

• The systems being integrated
• The direction of data flow
• The frequency of data transfers
• Which party is responsible for building each integration
• Testing requirements
• Responsibility for correcting integration failures

Data MigrationDefine what data will be migrated and what constitutes a successful migration.
The SOW should address:

• Types of records being migrated
• Years of historical data
• Data cleansing responsibilities
• Validation and testing
• Reconciliation requirements
• Acceptance standards

Do not leave “data migration” as a broad deliverable without defining what successful migration actually means.
ERP Acceptance CriteriaAcceptance criteria should be objective and measurable.
The contract should identify the tests or milestones that determine whether the ERP implementation has been successfully delivered and what happens when those criteria are not satisfied.
Companies should also carefully negotiate when implementation payments become due and whether payments are tied to successful completion of defined milestones or acceptance criteria.
Change Orders and Scope ChangesERP implementation disputes frequently involve disagreements about whether required functionality was included in the original scope or constitutes additional work.
The contract should establish:

• How scope changes are identified
• Who can authorize a change
• How change orders are priced
• Whether additional time is permitted
• What happens when the customer and vendor disagree about whether something is actually out of scope

A poorly defined change-order process can turn an initially manageable ERP implementation budget into a dramatically more expensive project.
Key Implementation PersonnelThe people assigned to an ERP implementation matter.
If the vendor or implementation partner sells the project based on the experience of particular consultants, consider identifying key personnel in the SOW and requiring notice or consent before those individuals are replaced.
Location of ERP Implementation PersonnelDetermine whether critical implementation work will be performed by U.S.-based personnel, offshore resources, or a combination of both.
If staffing location, time-zone availability, industry expertise, security requirements, or communication expectations matter to your organization, document those requirements before signing.
If an ERP vendor or implementation partner makes an important promise during the sales process but resists documenting it in the agreement, that resistance itself deserves scrutiny.
Vet the ERP Implementation Partner SeparatelyMany enterprise software projects involve more than one company.
The software publisher may sell the ERP licenses or cloud subscription while a third-party ERP implementation partner or systems integrator performs much of the actual implementation.
Those companies may have separate contracts, separate responsibilities, separate insurance coverage, and separate defenses if the ERP implementation fails.
Before signing, determine:

• Who actually employs the consultants performing the work
• Which company is responsible for implementation defects
• Who bears responsibility for project delays and cost overruns
• Whether the software vendor contractually stands behind the implementation partner
• Whether the partner is merely “certified” or whether the vendor accepts responsibility for its work
• How much experience the implementation partner has in your industry
• How many comparable ERP implementations the vendor and integrator have successfully completed together
• Whether you can speak directly with customers who completed similar implementations

Do not rely exclusively on references selected by the vendor or systems integrator. When possible, independently verify the implementation partner's experience with companies of similar size, complexity, and industry.
Claims of “industry experience” should also be examined carefully. Ask which consultants have that experience, what projects they completed, and whether those same people will actually work on your implementation.
Avoid the Accountability Gap Between ERP Vendors and Systems IntegratorsOne of the most dangerous structures in an ERP implementation is having multiple vendors, multiple agreements, and unclear responsibility for the final result.
When something goes wrong, the software publisher may blame the systems integrator. The integrator may blame the software. Both may blame the customer.
Companies should address that accountability gap before the project begins.
Where commercially possible, a contractual structure with clear prime-contractor responsibility and accountability for subcontractors may reduce the risk of ending up between two vendors, each claiming the other is responsible for the failed ERP implementation.
Preserve the ERP Sales and Implementation Paper TrailThe contract is critical, but companies should preserve the broader record as well.
Keep sales presentations, demonstrations, proposals, emails, meeting notes, implementation plans, requirements documents, and other communications related to the ERP purchase.
After important meetings, confirm material verbal representations in writing. Maintain a requirements log and trace important requirements through the SOW, implementation, testing, and acceptance process.
This documentation may feel burdensome while the project is going well.
If the ERP implementation fails, it can become some of the most important evidence your company has.
Before You Sign an ERP Contract, Know What You Are Actually BuyingThe best time to address an ERP implementation dispute is before there is one.
Companies investing millions of dollars in enterprise software should approach the contracting process with the same discipline they expect during implementation. Define the functionality. Identify integrations. Establish acceptance criteria. Document staffing expectations. Clarify responsibility between the software vendor and implementation partner. Preserve important sales representations.
And most importantly, do not assume that a promise made during an ERP sales presentation will protect your company later.
If the promise matters to the deal, document it before you sign.
Tactical Law Group LLP represents companies in failed ERP implementation disputes, enterprise software disputes, software licensing matters, and claims involving ERP vendors and implementation partners. The firm also advises companies on ERP and enterprise software agreements before implementation begins.
Companies facing an ERP implementation problem—or preparing to enter into a significant ERP agreement—can contact Tactical Law Group to discuss contract strategy, risk, and potential disputes.