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8 Expensive IT Blunders

Our hall of shame of tech failures includes McDonald's $170 million ERP fiasco, an electric-company software bug that wiped out power to much of the northeastern U.S. and Canada, and more. Get the sordid details and find out how you can avoid a disaster of your own.

IT is complex, famously and infamously so. Thousands of variables factor into the success or failure of a high-profile project. Will your career be defined by the data warehouse, delivered on time and under budget, that uncovered a thousand business opportunities? Or the ERP fiasco that forced the CFO to put one of those ugly footnotes about an unanticipated supply chain shortfall into the quarterly SEC filing?

Here we recount eight tech blunders--costly mistakes for the people involved and lessons for the rest of us. They range from application upgrades gone awry to wholesale strategy shifts that landed in the muck. There's the publicly traded company that prematurely unplugged its accounting system, the federal agency whose failed upgrade opened the door to fraudsters, the utility company that plunged much of North America into darkness because of a failed server reboot, and more. What follows are business technology fiascoes, some lesser-known, that continue to serve as shining examples of what not to do.

Nothing funny about a $170 million write-off

Nothing funny about a $170 million write-off
Rule #1: Don't Bite Off Too Much

McDonald's Restaurants undertook a project so grand in scale and scope that, well, it couldn't be done. In 2001, the fast-food chain conceived a project to create an intranet connecting headquarters with far-flung restaurants that would provide operational information in real time. Under the plan, dubbed Innovate, a manager in the company's Oak Brook, Ill., headquarters would know instantly if sales were slowing at a franchise in Orlando, Fla., or if the grill temperature at a London restaurant wasn't hot enough. McDonald's always has been tight lipped about Innovate--the company didn't return calls seeking comment for this story--but there's no doubt about its far-reaching scope. According to a white paper by Mpower, the consulting firm McDonald's hired for early planning and technology procurement, the idea was to create "a global ERP application that will eventually touch every one of McDonald's stores." In other words, about 30,000 restaurants in more than 120 countries. Piece of McCake, right?

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According to Securities and Exchange Commission documents filed by McDonald's, the company realized the project was over the top only after it spent $170 million on consultants and initial implementation planning. McDonald's ultimately signaled Innovate's demise in a paragraph buried within a 2003 SEC filing, which noted the write-off and "management's decision to terminate a long-term technology project."


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The filing revealed what most experienced IT project managers could have told McDonald's from the start: An attempt to create a worldwide network delivering real-time information to thousands of stores, some in countries that lacked network infrastructure, was destined to fail. "Although the terminated technology project was projected to deliver long-term benefits, it was no longer viewed as the best use of capital in the current environment, as the antici-pated systemwide cost over several years was expected to be in excess of $1 billion," the filing says.

Among all companies, the billion-dollar IT extravaganza has gone the way of the McDLT sandwich: It's more than anyone wants to bite off.

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