Oracle, Montclair State University Settle Bitter Contract Dispute

Oracle settles prolonged battle over a failed $20 million PeopleSoft deployment out of court.

Doug Henschen, Executive Editor, Enterprise Apps

March 11, 2013

4 Min Read

Oracle announced late Friday that a legal battle that erupted in 2011 with New Jersey's Montclair State University (MSU) over a failed ERP system deployment has been settled out of court.

"Montclair State University and Oracle America, Inc. are pleased to announce that they have amicably resolved their dispute," read a statement sent by Oracle that included both the Oracle and university logos. "Both entities are now looking toward the future of their relationship."

Terms of the settlement were not disclosed. A spokesperson in the University Counsel office reached by telephone said MSU would offer no comment on the deal.

The dispute, which was anything but amicable, began with MSU's original April 2011 suit, filed in the U.S. District Court for the District of New Jersey, in which it accused Oracle of breach of contract, gross negligence, willful misconduct and fraud tied to what was supposed to be a $20 million deployment of PeopleSoft ERP software.

[ Want more on enterprise software legal battles? Read Down To Business: No One Wins An ERP Lawsuit. ]

The deployment got underway in 2009, but after a series of missed deadlines and disputes during the summer of 2010, the project came to a screeching halt in November 2010 when, MSU said, Oracle walked away from the project when the university refused to pay $8 million more than the agreed-upon implementation fee.

In a $5.3 million countersuit filed in May 2011, Oracle denied MSU's charges and asked the court judge to dismiss the claims of gross negligence and legal fraud. Oracle's countersuit charged that university officials "did not adequately understand the technology and the steps necessary to complete the project."

Instead of working out the problems of the contract, Oracle said the university's project leadership, "motivated by their own agenda and fearful of being blamed for delays, escalated manageable differences into major disputes." It branded MSU's suit a "misguided ruse which, unfortunately, is costing taxpayers of N.J. millions of dollars."

MSU upped the ante in December 2011 by amending its suit to add "intentionally false statements" and an effort to "extort millions of dollars" to the list of complaints. Judge Freda Wolfson handed Oracle a partial victory in September by dismissing MSU's claims of fraud and negligence, but Oracle still faced the university's breach of contract claims.

At the heart of the dispute was MSU's desire to keep deployment, administrative and upgrade costs down by avoiding software customization. That's an increasingly common approach, with organizations preferring to use configuration capabilities built into software -- particularly modern cloud-based software -- rather than adding custom code that might have to be tweaked or redeveloped from scratch with each and every software upgrade. But Oracle's PeopleSoft software, which was introduced 25 years ago, was originally developed to be highly customizable with PeopleTools for custom code development.

In its lawsuit, MSU said Oracle falsely stated that "95% of the University's more than 3,200 business requirements were satisfied by its base [PeopleSoft] system." But MSU said it later found that the software "did not contain all of the critical functionality which Oracle had represented it would contain."

MSU, New Jersey's second-largest public university, with more than 18,000 students, contracted with Oracle to replace a 25-year-old administrative system. The new system was intended to give students, faculty and administrators improved self-service access to information through a Web portal.

The project's scope was massive, including Oracle's PeopleSoft Financial Management System, Human Capital Management, Hyperion budgeting and planning software, CRM and Campus Solutions, Oracle Data Warehouse and Analytics, and the Oracle Enterprise Portal. Software fees totaled $4.3 million and the fixed fee for implementation was $15.75 million for a negotiated implementation time of 25 months -- a tall order for such an extensive list of deployments.

MSU stuck by its plan to deploy Oracle's software, but in its suit it said it would incur $10 million to $20 million beyond the original $20 million cost to complete the job with assistance from a third-party systems integrator.

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About the Author(s)

Doug Henschen

Executive Editor, Enterprise Apps

Doug Henschen is Executive Editor of InformationWeek, where he covers the intersection of enterprise applications with information management, business intelligence, big data and analytics. He previously served as editor in chief of Intelligent Enterprise, editor in chief of Transform Magazine, and Executive Editor at DM News. He has covered IT and data-driven marketing for more than 15 years.

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