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ANOTHER LOOK The Development of Enterprise Resource Planning Systems

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Buyer Beware: Check that Contract
The history of the ERP software industry is fraught with failed implementations. One of the
latest lawsuits is by Montclair State University in New Jersey, which is suing Oracle for a
failed implementation. Originally, the school contracted with Oracle (PeopleSoft) to buy an
ERP package for $4.3 million, with an additional $15.75 million for the implementation.
The following year, after some delays, Oracle sought an additional $8 million to complete the
project. Montclair University refused the additional fee, and Oracle left the project. Now
Montclair is estimating that it will take it a further $20 million to complete the
implementation.
Experts agree that lawsuits such as these are not productive; no one really wins. It is
essential that customers pay close inspection to the legal contract drawn up between
themselves and the software vendor. ERP software is extremely complex, and it is often
difficult to ask the right questions when negotiating the contracts. Most importantly, the
customer should understand its own business processes and be able to relay them to the
software vendor. The customer must also accept that their business processes will need
to change to fit the software. To top it off, the pricing of many ERP packages is very
complex, with a variety of different licensing models to choose from. The bottom line is:
Understand the contract you are signing.
Question:

1. Research the topic of ERP contracts on the Internet. How could ERP vendors
make it easier for customers to understand their licensing models? What
could customers do to ensure a contract contains all possible eventualities?

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