Friday, October 18, 2019

Case Study: How Hertz Paid Accenture $32m for a Website That Never Went Live

Case Study: How Hertz paid Accenture $32M for a website that never went live
Car rental giant Hertz is suing consultant mammoth Accenture over a website redesign that ended in something that never saw daylight.

The U.S. corporation Hertz operates the car rental brands Hertz, Dollar, and Thrifty, and has approximately 10,200 corporate and franchise locations throughout the world.

With the rapid growth of rideshare apps like Uber and Lift, increased competition, and falling used car prices, Hertz has struggled with profitability over the last five years, and the stock price has fallen 85 percent since then. The company has replaced its CEO twice over the same period, most recently at the start of 2017.

Hertz hired Accenture in August 2016 to completely revamp its online presence. The new site was due to go live in December 2017, but this had to be delayed to January 2018. A second delay put the new go-live date to April 2018, which was then also missed.

As Hertz endured the delays, it realized that there was a nasty situation at hand: the product and design apparently didn't do half of what was specified, and even that was still not finished. "By that point, Hertz no longer had any confidence that Accenture was capable of completing the project, and Hertz terminated Accenture," the car rental company complained in a lawsuit against Accenture in New York in April this year.

Hertz is suing for the $32 million it paid Accenture in fees, and it wants more millions to cover the cost of fixing the mess. "Accenture never delivered a functional website or mobile app," Hertz claims.

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Timeline of Events

2015

Hertz hires Tyler Best as the new chief information officer (CIO) and creates a plan to transform the Hertz IT environment, which has become very complex over the years. According to a presentation at a MuleSoft conference in 2018 they had at the time around 1,800 IT systems, 6 database vendors, and 30 rental processing systems. In order to add a new product, Hertz needs to make 18 system changes.

The company launches a major end-to-end technology upgrade program that includes outsourcing operations of its legacy systems to IBM, and designing and building a cloud-based infrastructure for Hertz’s five core platforms: digital, CRM fleet management and fleet accounting, reservations, and rentals. The overall cost of the program is expected to be in excess of $400M.

First half of 2016

Hertz wants to redefine the customer experience of its market-leading brand of the same name by creating a new, modern website and mobile applications.

The envisioned solution is intended to be readily extendable to other Hertz brands, like Dollar and Thrifty.

Hertz engages Accenture to assist in validating its strategy and planning for the project. The engagement is governed by a consulting services agreement between Hertz and Accenture that has been in place since 2004.

The program appears to have adopted an “agile” methodology with the use of product owners and the application of sprints to deliver iterations of the solution.

At the same time Hertz is implementing a large MuleSoft middleware and Oracle enterprise resource planning (ERP) project to upgrade the firm’s transaction processing capabilities.

Second half of 2016

Hertz requests proposals from several of the leading technology services providers to implement the new solution.

They eventually select Accenture, relying on Accenture’s claimed world-class expertise in website and mobile application development.

Hertz completes outsourcing many of its U.S. IT jobs to IBM in efforts to cut back on office costs.

Accenture and Hertz engage in phase 1 of the project, producing a “solution blueprint” that describes the functionality, business processes, technology, and security aspects of the envisioned solution. Fees paid to Accenture for this phase total $7M.

First half of 2017

Hertz announces a new CEO and board member, Kathryn Marinello.

Accenture and Hertz enter into discussions about phase 2 of the project to design, build, test, validate, and deploy the website, mobile applications, and other deliverables.

During an investor presentation in May, Hertz commits to delivering the “modernized e-commerce platform” by the end of 2017.

Accenture removes the product manager and a project architect from the project.

Second half of 2017

Accenture and Hertz sign a formal agreement for phase 2 with fees totaling $26M for this portion of the project. The contract states that Accenture will provide “project management” services, including Accenture’s obligation to “plan, control, and lead the execution of Accenture’s scope of services.” The agreement includes language regarding “a focused objective of launching the [website and mobile applications] platforms and experience in December 2017.”

Soon after signing the agreement Accenture reports that it will not be able to meet the December 2017 go-live date and requests a one-month extension to January 2018. Not long afterward, the go-live date is further postponed until April 2018.

At the end of the year Hertz and Accenture sign a change request. According to Accenture, this change order altered the party’s responsibilities under the phase 2 scope of work (SOW) and includes language in which both parties release any claims “arising out of or related to the need to provide Services beyond” the project's estimated December 2017 launch date, and agree that they will not bring any suit related to delays in the project.

2018

Hertz pays Accenture for the work contracted under the SOW and the first change request. A second change request is signed for Accenture to provide additional services for Hertz for an agreed-upon amount of fees.

In April Hertz’s CIO Tyler Best steps down and receives a severance package that is consistent with firing without cause. The CEO, Kathryn Marinello, takes over on an interim basis.

In May Accenture is removed from the project.

In June Hertz hires a new vendor to complete the project. Hertz claims to have spent an additional $10M in fees to correct or replace the work produced by Accenture.

On July 31 Hertz announces Opal Perry as the new CIO. She joins the company from Allstate Insurance.

2019

On April 19, Hertz files a lawsuit against Accenture.

A spokesperson for Accenture tells The Register: "We believe the allegations in this lawsuit are without merit, and we intend to defend our position. Because this is an ongoing legal matter, we decline any further comment."

In May Accenture submits a statement that the damages should be limited to only Accenture’s direct damages capped by Accenture fees and further that Hertz’s claims are barred by the mutual release that both parties entered into as part of the first change request that was signed for the phase 2 SOW.

Hertz responds that the releases agreed on expressly exclude breach of warranty.

According to the letter, the work, which consisted of redesigning the car rental provider’s “website, apps, digital marketing and related services,” unfolded in two phases, the first of which “proceeded relatively smoothly.” The letter acknowledges that phase 2 included “some delays and setbacks” that required the parties to adjust the statement of work twice as planned launch dates came and went.

The letter claims that Hertz and Accenture agreed on these changes to the contract and that the client paid for the first extension period. When Accenture asked to be paid for the second period, however, Hertz claimed it was not obligated to pay “due to perceived deficiencies in Accenture’s work on earlier phases of the project.”

It followed by suing the firm to prevent further requests for payment, stating in its own filing that Accenture “never delivered a functional website or mobile app.”

The letter continues, “Accenture intends to assert counterclaims, including for payment of these past-due invoices.”

On June 7, the judge issues scheduling orders that sets the trial date for March of 2020.

On June 20, 2019, Hertz files an amended lawsuit against Accenture and lays out their case on their claim of deceptive and unfair practices. In doing so, Hertz takes aim at Accenture talent and trashes the team that had worked on the Hertz program.

What Went Wrong

Before we can understand what went wrong we have to understand what was planned to be delivered. Hertz describes the five-layer digital platform architecture below in its suit. They suggest that Accenture recommended this architecture.

Front End Layer – The presentation layer in which the screens and the interface were presented to the users using the JavaScript framework Angular.

Content Management – Adobe Experience Manager (AEM) was the tool of choice to update and revise the content that appears on the website.

Microservices Layer – Composed of code that performed various “services,” such as searching for a Hertz location or for a type of vehicle, writing a review, sending an email to a Hertz representative, etc.

Integration Layer – MuleSoft was the tool of choice to allow the front-end systems to request and receive data from the back-end systems.

Back-End Systems – Hertz’s reservation systems, rewards systems, etc.

Now that we know the plan, we can have a look at the results.

No responsive design

One of the most staggering allegations in Hertz's suit is that Accenture didn't incorporate a responsive design, by which web pages automatically resize to accommodate the visitor's screen size, whether they are using a phone, tablet, desktop, or laptop.

This has been a standard website practice for years, and is even included in the contract that was signed. But somehow the team from Accenture decided that only desktop and mobile versions were needed, according to Hertz.

When Hertz execs asked where the tablet version was, Accenture "demanded hundreds of thousands of dollars in additional fees to deliver the promised medium-sized layout."

No common core

The specification documents defined a common core of libraries to be "a fundamental principle of the design" so that the company could share information and structures across all its companies' websites and apps. And Accenture, well, completely ignored that, according to Hertz.

"Accenture deliberately disregarded the extensibility requirement and wrote the code so that it was specific to the Hertz brand in North America and could not be used for the Hertz global brand or for the Dollar and Thrifty brands," the lawsuit alleged.

Vulnerable code

Hertz states the code that was written by Accenture was terrible and a security nightmare waiting to happen.

"Accenture’s developers wrote the code for the customer-facing ecommerce website in a way that created serious security vulnerabilities and performance problems," it says before noting that "the defects in the front end development code were so pervasive that all of Accenture’s work on that component had to be scrapped."

No experience with used technologies

In its revised suit, Hertz states that Accenture represented that they had “the best talent in the world,” “the skills needed to win,” and that they would “put the right team on the ground day one.”

Hertz claims that they were far from experts in these technologies and that Accenture was deceptive in their marketing claims.

Where the previous point regarding vulnerable code shows that the front-end developers were not familiar with and did not really understand Angular, the Accenture developers were also inexperienced with the Adobe Experience Manager (AEM) code.

The lawsuit complains that Accenture decided to use Adobe's AEM analytics but didn't follow its archetype in either the coding or the file structure "which made the application unreliable and difficult to maintain, as well as making future updates challenging and inefficient."

On top of this Accenture apparently told Hertz that to speed up the production of the website's content management system, it wanted to use something called "RAPID" — and told Hertz it would have to buy licenses for it to do so. Hertz bought the licenses; however, it turned out that Accenture didn't actually know how to use the technology and the quick-fix took longer than it would have without it.

The lawsuit notes: "As Accenture's project leaders acknowledged, Accenture 'spent a good deal of time fighting through integration of RAPID' into Hertz’s environment."

No testing and documentation

Accenture also failed to test the software, Hertz claims, and when it did do tests "they were seriously inadequate, to the point of being misleading." It didn't do real-world testing, we're told, and it didn’t do error handling.

Accenture’s developers also misrepresented the extent of their testing of the code by commenting out portions of the code, so the code appeared to be working.

On top of that, despite having specifically requested that the consultants provide a style guide in an interactive and updateable format — rather than a PDF — Accenture kept providing the guide in PDF format only, Hertz complained.

When Hertz confronted the consultants about the PDF problem, guess what the response was? Yep, it wanted "hundreds of thousands of dollars in additional fees" to cover the cost.

A bad ending...

After missing the April deadline the team working on the project was pulled off by Accenture "but their replacements did not have the same level of experience, and a good deal of knowledge was lost in the transition," Hertz states.

Despite having missed the deadline by five months, with no completed solution and slowed down by buggy code and an inexperienced team, Accenture tells Hertz it will cost an additional $10M — on top of the $32M it had already been paid — to finish the project.

How Hertz Could Have Done Things Differently

On July 15th, Accenture delivered their response to the initial Hertz lawsuit. These responses are straight to the point, and they show a number of things that Hertz could have done better.

The following represents a summary of Hertz’s claims (in bold) and Accenture’s responses.

Accenture claimed they had “the best talent” and “the skills needed to win.”

> Hertz’s claims are made on marketing language. “Simply put, no reasonable person, much less a Fortune 500 company planning a multi-million dollar redesign of its digital platforms, could interpret a statement in a marketing presentation that a company had ‘the best talent’ and the ‘the skills you need to win’ as a factual assertion that everyone who ever worked on the project would perform their work flawlessly.”

> Accenture limited its warranty to only what was defined within the contract and expressly excluded all other conditions and representations.

Accenture said they had the best talent in the world and would provide their best team from the start.

> Hertz provided no evidence that Accenture claimed to bring the best Angular JS front-end and AEM back-end coders.

> Accenture had the right under the contract to determine all staffing, including to replace staff at will, with no agreement as to the minimum levels of experience of any particular staff member.

Accenture had the responsibility to deliver the product by December 2017.

> Accenture only had responsibilities to manage the portions of the project for the Accenture scope of services.

> Hertz was responsible for implementing mid-tier and backend integrations, security, and user acceptance testing.

> Hertz was responsible for managing all third parties.

> Hertz was responsible to provide all website content, without which the website could not launch.

Accenture exhibited “extortionist-like” claims, asking for more money to complete work.

> This was not a fixed-price contract and instead, Accenture was paid on a time-and-materials basis. Therefore, there are no circumstances under which an Accenture request for payment would be considered “extortionate.”

Accenture did not properly test the code or comment out sections of the code. 

> Hertz did not provide specific examples of this situation as required by governing law, so Accenture would have the ability to specially respond or defend itself. These claims should be dismissed.

We are entitled to consequential damages as a result of the delay in the program and additional costs to a third party.

> The consulting services agreement signed in 2004 between the companies barred Accenture from being liable “for any consequential, incidental, indirect, special or punitive damage, loss or expense (including but not limited to business interruption, lost business, lost profits, or lost savings)."

Closing Thoughts

This is an incredibly important case for any company that will be engaging systems integrators like Accenture, IBM, Deloitte, EY, and others. This case is an early high-profile case in digital transformation using agile methodologies.

The information available in these suit filings provides insights into how these integrators position themselves in contracts and marketing materials, and how they behave when actively engaged with the buyer.

As with any dispute, there are at least two sides to every story. There are many questions that will need to be answered to understand what really happened, but no matter what the answers are, Hertz did not act as a responsible buyer.

A responsible buyer of third-party systems and systems development will have excellent knowledge, understanding and experience in defining, planning, directing, tracking, controlling and reporting systems development projects. They will know what should be done, when, why and how.

You can delegate authority for doing the project management to the supplier but you cannot delegate responsibility.

In a nutshell: Responsibility for the project — including responsibility for it failing — always rests ultimately with the buyer. 

Other Project Failure Case Studies

> For an overview of all case studies I have written please click here.

> To download all my Project Failure Case Studies in a single eBook just click on the image.

References

> THE HERTZ CORPORATION vs ACCENTURE LLP Civil Action No. 19-3508

> Letter Accenture - Hertz May 17

> Letter Hertz - Accenture May 23

> Presentation Hertz - Mulesoft 2018
Posted on Friday, October 18, 2019 by Henrico Dolfing