Actually, I have seen some open relationships that have worked. One couple I've met in Chicago has been married for some 30 years, and been in an open relationship for more than half of that. But, they're still very loving for each other, and most certainly not in a failing relationship. The key is that love is not lust, you don't need sex to be in love or to be in love to have sex. You could be physically unable to have sex, yet still hold a love stronger than imaginable.
It's entirely possible for people to truly love someone (or even multiple people, in the case of polygamists) while still having sexual encounters with others. In fact, in some cases it might even help a relationship between two people, helping them to better see or enjoy what they love about their lover. It all just depends on their mentality and their own sets of morals and definitions. To someone who isn't okay with it, having sex with someone other than your lover might be unhealthy, unstable, or just plain taboo, but perhaps to someone else, sex with someone who's only a friend be just the same as playing a simple game of Monopoly with them. I'm exaggerating a bit of course, but the point is that it's different for each of us, so whether it's right or wrong, whether it's "okay" or not, is pretty much up to only the people directly involved and no one else. We shouldn't force our thoughts onto them.
However, I believe there are instances where it's not okay regardless of the individuals stance on it. Mostly, if one or more of the people involved is being hurt by it or can't handle the complexities that come with everything. An open relationship can be a heavy strain for most people because of the fears and self-doubts caused by their lover enjoying the company of others like that, not to mention the immense level of trust required for it. It is hell to go through with that, feeling like you're not good enough for them or being afraid that they may leave you someday if one of their other sex partners is better than you in more than just sexual ways, not to mention also having to deal with what people think of you and other social issues.
Unless both people they are perfectly confident in themselves and their lover, it's going to have a heavy toll on someone and just not going to work out right. Most of us are only human and can't handle that. So, regardless of whether or not such a person agrees to have an open relationship, it's just not right to hold one and put them through that.
tl;dr - It's not a sign of a failed relationship, but it simply isn't for most people.