Oracle disputes claims over ERP failure

Oracle is asking a judge to throw out some of the claims made in a lawsuit filed against the vendor by Montclair State University over an allegedly failed ERP (enterprise resource planning) software project, according to a filing made this week in US District Court for the District of New Jersey.

MSU sued Oracle in May 2011, blaming the vendor for a series of problems and delays on the PeopleSoft project, which was supposed to replace 25-year-old legacy applications. The parties had signed a $15.75 million contract for software and implementation services in 2009.

The New Jersey school ended up firing Oracle and has said completing the project will cost up to $20 million more than the original budget. Oracle has countersued, seeking money it says MSU owes it and blaming school officials for the project's woes.

In December, the school filed an amended complaint that added new allegations, including that Oracle had conducted a "rigged" demonstration of the software package at issue.

Oracle's motion this week responds to that filing, asking that its allegations of fraudulent inducement, gross negligent misrepresentation, grossly negligent performance of contractual obligations and willful anticipatory repudiation of contract be dismissed.

The school's initial complaint "was premised on the alleged breach of the Consulting Agreement between Oracle and MSU," Oracle wrote in its filing this week. "Now, recognising that there was no breach by Oracle and that the contract contains valid and enforceable limitations of liability, MSU has conjured up claims which completely contradict the allegations it filed initially."

This amounts to a "transparent ploy" that "fails as a matter of law because, try as it may, MSU cannot avoid the fully integrated, extensively negotiated contract which covers the exact terms that form the basis of MSU's new tort claims," Oracle added.

MSU's amended complaint includes claims of wrongdoing by Oracle that are "directly contradicted by a number of contractual provisions," according to the filing.

For example, the school had alleged that Oracle said its base PeopleSoft system for higher education institutions would satisfy 95% of MSU's more than 3,000 business requirements.

But "the Consulting Agreement makes clear, however, that 596 of the 3,071 requirements laid out in Attachment C-1 of the Fixed Price Exhibit were 'Not in Scope,' that 60 of the requirements were designated as 'Undefined,' and 52 of the requirements were to be met by customisation of the base product," Oracle said. "Thus, the Consulting Agreement provides that roughly 23% of MSU's requirements were not to be met by the Oracle base product."

Oracle's motion also denies MSU's allegation that the software vendor misrepresented how much MSU staff and resources would be required to finish the project on Oracle's proposed schedule.

Once again, the parties' consulting agreement contradicts the allegation since its wording "put the onus on MSU, not Oracle, to assure that MSU had the required personnel and resources," the filing states.

If the school can provide documentation for all of its allegations in the 60-plus-page amended complaint, "they're going to be in a real strong position," but it's not yet clear how the case will play out, said one IT consultant and expert witness who has testified in several cases involving Oracle software.

For example, the amended complaint included a long list of original project requirements. "Many of them are stated in general enough terms that it's entirely possible there was a legitimate misunderstanding on the part of Oracle as to what those requirements involved," said the consultant, who requested anonymity because of current involvement in another case regarding Oracle.

To that end, Oracle's motion to dismiss cites an "assumption" in the consulting agreement regarding the project requirements.

If the base PeopleSoft product could do "what" a particular requirement called for, but not "how" MSU wanted it addressed, "it is MSU's responsibility to change MSU's business process to accommodate how the base product's business process addresses the requirement," the motion states.

"It's entirely possible when you look at what was delivered it will be a judgment call, rather than a clear-cut determination, as to whether what Oracle delivered met those requirements or not," the consultant said.

MSU plans to oppose Oracle's motion, according to a spokeswoman, who declined further comment.

Overall, the case presents a cautionary tale for vendors and software customers.

"This is why both sides should document the process," said analyst Ray Wang, CEO of Constellation Research. "When a project goes down, fingers point everywhere."