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July 19, 1998

FOXMEYER PLUS TWO SUE ANDERSEN FOR SAP SNAFUS

By CBR Staff Writer

In a move predicted to have a knock-on effect throughout the consulting industry, the bankruptcy trustee for FoxMeyer Corp has sued Andersen Consulting for $500m, alleging that the consulting firm’s botched SAP installation contributed to the drug distributors’ downfall. The suit, filed on June 29 by FoxMeyer’s Chapter 7 bankruptcy trustee Bart Brown in Houston, accuses Andersen of fraud, breach of contract and negligence, among other charges. The suit further alleges that the consulting giant’s faulty and overpriced SAP installation actually played a key part in FoxMeyer’s eventual bankruptcy and liquidation. FoxMeyer has now been sold to another large drugs distribution company. Speaking to ComputerWire, Brown said FoxMeyer ended up paying Andersen about $30m to install the software, which was double the original estimate. And even then they had only managed to install it in less than 25% of the company’s 26 distribution sites, he said, so FoxMeyer ended up paying double the agreed amount for a quarter of the work. Brown also claims that Andersen is being taken to court over two other botched SAP installations in Connecticut and Chicago, although Andersen refused to confirm or deny his claims. One of the main criticisms is that Andersen took much longer to install the software than it initially stated. Brown also said the firm was forced to rope in a lot more staff which served to hoist up the costs. He also alleges that Anderson used FoxMeyer as a training ground for consultants who were very inexperienced. Yet he said one of the main reasons FoxMeyer had chosen Andersen was because the company had boasted about being expert in SAP, claims which Brown says can be used against Andersen in court. In an official statement, Andersen said: This action is outlandish and totally at odds with the facts. The suggestion that Andersen Consulting’s work for FoxMeyer led to its failure is preposterous and we will vigorously defend against that claim. It added: FoxMeyer’s difficulties were the product of its own business decisions and a highly-competitive industry…..we delivered an effective system, just as we have for thousands of other clients. No court date has yet been set, and Anderson is still to file an answer to Brown’s June 29 lawsuit. Brown said he doesn’t expect the case to go to trial until late spring next year at the earliest. Analysts are agreed that this is an important case to watch, given the large backlog of ERP implementations, most of which they say are over budget, behind schedule and handled by third parties. They argue that the results could be a disaster for consulting companies but beneficial for the software vendors, who typically get blamed when installations go wrong.

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