University accuses Oracle of extortion, lies, 'rigged' demo in lawsuit

Montclair State has elaborated on its case against Oracle over an ERP project gone wrong

New details have emerged in Montclair State University's lawsuit against Oracle in connection with a troubled ERP (enterprise resource planning) project, in a court filing that includes more information about Oracle's alleged failings and also accuses the vendor of extortion as well as "inducing" the institution to take on the implementation.

Montclair's amended complaint, which was filed Tuesday in U.S. District Court for the District of New Jersey, states that Oracle made an array of "intentionally false statements" regarding the functionality of its base ERP system, the amount of customization that would be required, and the amount of "time, resources, and personnel that the University would have to devote."

"Ultimately, after missing a critical go-live deadline for the University's finance system, Oracle sought to extort millions of dollars from the University by advising the University that it would not complete the implementation of the ... project unless the University agreed to pay millions of dollars more than the fixed fee the University and Oracle had previously agreed to," it adds.

Oracle spokeswoman Deborah Hellinger declined comment.

In a response earlier this year to Montclair's original complaint, Oracle said the university was to blame for the project's woes.

"When issues arose during the course of the project, it became clear that MSU's leadership did not adequately understand the technology and the steps necessary to complete the project," it stated. "Instead of cooperating with Oracle and resolving issues through discussions and collaboration, MSU's project leadership, motivated by their own agenda and fearful of being blamed for delays, escalated manageable differences into major disputes."

But much like its original filing, MSU's revised complaint tells a much different tale.

MSU wanted to replace its legacy systems with a new one requiring minimal customization, according to its revised complaint. The school spent a year developing a detailed requirements list that ended up totaling some 3,200 items.

This list was given to vendors, including Oracle, who responded to the school's original request for project bids several years ago, it adds.

In January 2008, Oracle told the school that its base PeopleSoft system for higher education institutions would satisfy 95 percent of MSU's business requirements, the complaint states. "This representation was false."

Before it won the bid, Oracle also conducted live demonstrations of its software that used test scripts prepared by the university. One demonstration involved "a robust on-line application process for Undergraduate and Graduate Admissions ... that it falsely represented was an existing part of the base system and satisfied the University's requirements," the complaint states.

But in fact, "Oracle's ultimate implementation plan was to sell the University a third-party product called 'Embark' to satisfy those requirements, suggesting the initial 'live' demonstration was rigged," it adds. A "substantial" amount of customization was needed in the end, according to the complaint.

Oracle also misled Montclair State about how long the project would take, saying it could be done quickly through a methodology it had developed, the complaint states. At the same time, Oracle was working out a contract with the Lone Star College System to install a similar set of software, it adds. Oracle repeatedly told MSU that the Lone Star project was comparable to its own plans, according to the complaint.

In fact, "the number of personnel and resources available to the Lone Star College System to complete its implementation ... was four times greater than the personnel and resources available to the University to implement its ERP system," the complaint states.

Ultimately, most of the work Oracle performed, for which the university has paid more than US$6 million, won't be reusable, according to the complaint. Depending on which vendor MSU hires, the cost to finish the project will exceed Oracle's original $15.75 million bid by up to $20 million, Montclair has said.

The revised complaint also includes a partial list of MSU's project requirements and in all runs 60 pages, nearly twice as many as the original filing.

"This is a textbook example of how to file a legal action against a vendor for failure to deliver," said analyst Ray Wang, CEO of Constellation Research, who reviewed the updated complaint on Wednesday.

MSU made some smart moves to protect itself, such as documenting all conversations and interactions with Oracle, and working out an escalation procedure in the event the project ran into problems. It also was wise to use real-life use cases for the demonstrations, Wang added.

"The documentation on this complaint is solid," he said. "Whether it's true or not, we'll let the courts decide."

Another expert pointed out that it remains to be seen whether MSU or Oracle is responsible for the problems.

"The fact that Montclair produced a detailed list of Oracle project issues does support their claim that work was not completed as expected," said Michael Krigsman, CEO of Asuret, a consulting firm that helps organizations conduct IT projects successfully, in an email.

"However, the detailed fact list does not establish cause," he added. "The case hinges on the respective roles, responsibilities, and expectations of the parties in driving successful project results. In and of itself, the mere fact that something went wrong does not help us understand either why the problem occurred or which party was responsible."

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris's e-mail address is Chris_Kanaracus@idg.com

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Tags enterprise resource planningIT managementCIO roleOraclelegalservicessoftwareapplicationsit strategyCivil lawsuitsApplication services

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Chris Kanaracus

IDG News Service
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