California county dumps SAP

ERP system reportedly not up to snuff

Editor's note: This story was modified on Aug. 30, 2010, to incoporate new information. 

Officials of Marin County, California are replacing their troublesome SAP enterprise resource planning system rather than trying to fix it. The county starting working on the system four years ago, but today only 50 percent is in place and working, according to a county report.

"In order to make it happen with SAP, we would need to re-architect it, redesign it, and that would be quite expensive," said David Hill, director of the county's information services and technology department, during a meeting of the Marin County Board of Supervisors, which was webcast.

Most county department heads "agree there's a compelling reason to move off SAP or improve it, but not to stay where we were," he said, quoted in Network World.

Marin County filed a lawsuit for fraud in May against the software’s integrator, Deloitte Consulting. Deloitte “knew that it did not have the ability or intention to provide the skilled resources necessary to deliver a successful SAP implementation for the county,” according to the lawsuit.

“All the while, Deloitte continued to invoice the county, collecting more than $11 million in fees….The result of Deloitte’s misconduct was a defectively designed, deficiently installed and poorly functioning SAP system that was incapable of performing the County’s financial, HR and payroll functions. After serving as Deloitte’s SAP installation guinea pig for nearly two years, the County was saddled with a costly computer system far worse than the legacy system it was intended to replace.”

Deloitte has filed motions against Marin County's "completely unfounded allegations," as well as a complaint seeking unpaid fees, a spokesman said, according to the Network World article. The system "was working properly and could perform all the tasks consistently with the standards set forth in the written contract," according to a Deloitte court filing. "Moreover, the County did not apprise Deloitte Consulting of any problems with its services, or provide Deloitte Consulting with an opportunity to correct such problems, if any, as required by various provisions of the contract."

In its report, Marin County estimates that, over a ten year period, a new ERP system would cost $26.2 million; fixing and improving the SAP system $49.8 million; and maintaining status quo, with no fixes or upgrades, $34.7 million. No particular software package is currently in mind for the replacement.

SAP "strongly believes in the value and performance of its software in use in Marin County," said spokesman Andy Kendzie in Network World. "Our software works exactly as it should, and any issues in this implementation in no way reflect on SAP. Our software is installed and functioning perfectly in tens of thousands of public sector agencies, including dozens in California.
 
"We regret their decision but will work with them going forward as they deem appropriate," Kendzie said.

Many government entities have had horrendous ERP experiences, including the Health and Human Services Department, said Patrick Marshall in a June GCN story. As a result, agencies are moving away from ERPs to software as a service and multiple vendors for specific functionalities, said Michael Fauscette, group vice president for software business solutions at IDC.

Reader Comments

Fri, Aug 27, 2010

This is nothing new for government or the private sector. They continually buy based upon "industry research reports" or who is the biggest vendor in the room because it is easier and they typically do not have the knowledge necessary in vetting the vendors. What is the old saying "no one gets fired for hiring IBM". They issue RFP's and and make their decisions based upon the check boxes. After years of working with government I too feel that they would be better off going with a subscription based solution vs. paying $11M before the solution even works. That is crazy. At least if they had a software as a service if the vendor did not deliver they could walk away.

Thu, Aug 26, 2010 Doug Hadden

This story does identify two systemic problems associated with ERP implementation in government. Government organizations should be forewarned to manage risk. 1) ERP was orginally developed for "enterprises", not government. Top Tier ERP packages use a customization approach to meet public sector needs. Government organizations should recognize this when decided to acquire ERP or the alternative: software designed specifically for government which we could call "GRP". 2) Generic methodologies for software implementation using experts in the software, rather than experts in the domain tend to be risky. Explaining the government domain to good consulting firms can be time consuming & suffer from consultants not asking the "right" questions resulting in something that appears to meet the terms and conditions of the contract but doesn't meet government customer requirements.

Thu, Aug 26, 2010 Tucson AZ

Unfortunately, too many people just believe what the sales people have to say. The normal respone from the vendor is just what you see here in that tens of thousands of people use it daily.What I do not understand after 30 years working in government why governments do not hire their own people who can develop systems that are made for them not a given sector where only 70% or less of the system does not need to modifed. 11 Million dollars is a lot of money and could buy a lot of good internal talent to give the County what it specifically needs.

Thu, Aug 26, 2010 Michael D. Long Knoxville, TN

Software as a service, cloud computing, or whatever else someone may dream up next week is no panacea. While it is entirely possible that SAP was not the correct ERP suite for Marin County, how can anyone draw a conclusion that cobbling together a set of applications that are not designed to interoperate will lead to better results? The real problem with failed software implementations is the appointment by the customer of personnel who do not have the technical skills and in-depth knowledge of the business operations necessary to provide proper oversight and direction to the consultant brought in to provide guidance. A consulting firm is engaged to bring specific technical expertise in the software to the table, along with relevant knowledge of how similar customers apply the technology. This article does not state whether Marin County engaged Deloitte in the software selection process or after the decision was made to move forward with SAP. It is quite common for organizations to select a product (even mission critical systems) without performing an objective analysis and then be faced with costly changes to the software, internal business processes, or both. When I read of failures like this I'm reminded of the old adage, "When all you have is a hammer, everything looks like a nail." This saying is about lack of experience and innovation, qualities which are all too often in short supply.

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