University hits PeopleSoft with $510M lawsuit

University hits PeopleSoft with $510M lawsuit

FRAMINGHAM (03/26/2004) - Ohio's attorney general has filed a lawsuit against PeopleSoft Inc. seeking US$510 million in damages stemming from an allegedly faulty installation of the company's ERP and student administration applications at Cleveland State University.

The lawsuit, filed Jan. 30 in an Ohio state court, claims that the student administration applications were "vaporware" when the project began in 1997 and that the module for managing financial aid remains unusable even now. Through the attorney general, Cleveland State is charging PeopleSoft with fraud, breach of contract, negligent misrepresentation and four other counts.

The school is also seeking unspecified damages from Kaludis Consulting Group Inc., a Washington-based firm that advised Cleveland State during the technology selection process and then temporarily managed the project.

Via e-mail, a spokesman for Cleveland State declined to comment about the suit, citing a school policy against discussing pending litigation.

PeopleSoft officials didn't respond to repeated requests for comment Thursday.

Cleveland State was the first user to install a full set of PeopleSoft's student administration applications. But after it began using the software in 1998, university officials blamed the technology for problems in processing financial aid, enrolling transfer students and recording grades.

In the lawsuit, Cleveland State says PeopleSoft falsely assured it that the applications would run on the school's IBM mainframe. In addition, the initial version of the software that PeopleSoft shipped to Cleveland State was "woefully deficient," according to the suit.

Subsequent releases also didn't work as promised, the school claims, saying that it had to install "hundreds of fixes" to try to get the software to function properly. Work on the project continued unsuccessfully into 2001, the suit says.

The fallout at Cleveland State allegedly included more than $5 million in lost revenue because of an inability to track and collect receivables, plus unexpected purchases of a second mainframe and a Sun Solaris server with an Oracle database.

James Lang, an attorney at Cleveland-based Calfee, Halter & Griswold LLP, is handling the case on behalf of the school. He said Cleveland State eventually gave up on some of the PeopleSoft applications and decided "to go down another path." He didn't have detailed information about the technology now used for student administration.

The court hasn't set a schedule for hearing the lawsuit, Lang said.

Joshua Greenbaum, an analyst at Enterprise Applications Consulting in Daly City, Calif., said failed ERP installations often result from implementation problems rather than shortcomings in the software itself. "But what's important when you see a lawsuit of this magnitude erupt into the public arena is that the customer relationship process between vendor and customer has broken down completely," Greenbaum said.

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