Marin County abandons $30 million ERP failure

Marin County abandons $30 million ERP failure

Summary: Appearing to ignore strong arguments to the contrary, Marin County defended its decision to completely abandon a $30 million investment in SAP software and related services from Deloitte Consulting.

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Appearing to ignore strong arguments to the contrary, Marin County defended its decision to completely abandon a $30 million investment in SAP software and related services from Deloitte Consulting.

Speaking to the Marin Independent Journal, the county's deputy counsel said:

[T]he decision to scuttle SAP and start over came after the county conducted "a lengthy, independent and well-researched inquiry" including analysis indicating another program would save money.

"Deloitte failed to fulfill its contractual obligations when it improperly configured and implemented SAP, which has caused numerous problems requiring additional costs," she said. "The county's investigation concluded that much of SAP's functionality is still missing and that significant additional costs would be necessary to bring SAP up to its full functionality."

These remarks deny allegations that the county's analysis contains serious flaws, as explained in my previous post on this topic.

Related: Understanding Marin County's $30 million ERP failure

In that post, Mark O'Connor, CEO and co-founder of Monadnock Research, and a highly experienced independent analyst, reviewed the county's software replacement plan:

The Marin Information Systems and Technology group appears to have concluded that fixing the Deloitte-installed SAP application will cost nearly 25 percent more over a ten-year period than buying, modifying, implementing, and migrating data over to a new system in a protracted multi-phase project, during which time they would continue to operate the SAP environment concurrently, until going live on the respective new system modules. That conclusion seems implausible to me.

Apparently, the county also continues to deny its substantial role in creating the situation, as I wrote in the same post:

In my opinion, Marin’s decision to replace SAP seems intended primarily to strengthen its lawsuit position and push all accountability away from itself. Marin’s position is extreme and not credible.

Marin’s apparent lack of organizational and governance maturity, and its inability to absorb business transformation changes associated with this implementation, seem to be a basic driver underlying this failure.

Despite the county's seeming attempt to shift blame, we must not lose sight of Deloitte's apparent responsibilities:

Deloitte’s posturing and unwillingness to accept even partial responsibility for the failure appears inconsistent with the facts.

STRATEGIC ANALYSIS

Rather than substantively address legitimate concerns with its plan, Marin launched a personal attack on O'Connor's credibility, saying his "motives were at issue because his past clients have included Deloitte and SAP." In response, O'Connor said neither SAP nor Deloitte is a current client of his firm.

Marin's tactics appear political and suggest the factual basis underlying its decision to replace SAP is weak, leaving the county to defend itself with innuendo rather than fact.

In my view, Marin's decision is misguided, resting on flawed investigation and incomplete analysis. The county appears intent on wasting $30 million rather than acknowledge its own shortcomings and inexperience with enterprise software.

The big question for Marin taxpayers: Is government posturing really worth $30 million of your money?

Thanks to Francine McKenna for assistance in preparing this report. Image from iStockphoto.

Topics: Software, Enterprise Software

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  • RE: Marin County abandons $30 million ERP failure

    I don't know the merits of this situation and I have no opinion about it. However, any financial analyst will tell you that the $30 million already spent is absolutely irrelevant to the decision-making process. It is a sunk cost. That money is gone. What is relevant is how much it will cost going forward to achieve the desired functionality. If, for example, it will cost $20 million to stay with SAP, but the same results can be achieved for $15 million with another solution then, all things being equal, abandoning SAP is the right decision.

    The article should be concerned about Marin's future plans, not its past.
    bkshort@...
    • RE: Marin County abandons $30 million ERP failure

      @bkshort@... <br><br>Thanks for your comment, but we need to consider a few points:<br><br>1. My posts argue that Marin should re-examine their analysis to determine whether that $30m is in fact totally lost. My posts suggest reasons that Marin incorrectly claims the $30m is a sunk cost. Please read this post, and the previous one, carefully and you will see the details to which I refer.<br><br>2. It is not sufficient to be concerned only with the future. Accountability and responsibility are important, or else the next project will end up failing as well.<br><br>3. In fact, my posts are primarily about determining the best way to proceed. Marin wants to abandon everything, but I question the evidence and analysis on which they made that decision.
      mkrigsman@...
      • RE: Marin County abandons $30 million ERP failure

        @mkrigsman@... The $30 million is indeed a sunk cost because it can't be undone. Perhaps they can salvage something from that investment if they continue with the SAP implementation, and it might be enough to tip the balance to SAP, but that recovery would be an offset against future costs.
        bkshort@...
    • The Grounds for the Decision Is at Issue

      @bkshort@... As others have mentioned, lawsuits influence decision processes regarding how to move forward, but they also heavily influences the choices as to which pieces of "evidence" a side wants to bring forward to support it's case.<br><br>Things that are not clear:<br><br>* Was the analysis by Phoenix Business Consulting performed before the decision to sue Deloitte Touche?<br><br>* What lessons did Marin Countys IST (info sys & tech) department and Finance Dept. learn? That is, what mistakes and assumptions did they make prior to going into the SAP implementation that they now know and would not repeat? Why did they think SAP was the correct choice in the first place? How have those factors changed so that SAP is no longer the correct choice? <br><br>* How thorough is Phoenix Biz's report into the underlying issues in terms of being able to understand what went wrong and to guide the decision as to how to proceed? $50,000, is sufficient to discover pain points and identify potential sources of problems. It's not enough to do a thorough assessment of software choice in addition, especially with respect to software fit.<br><br>* From the video of the hearing (original poist), IST is assuming that (1) having disparate, smaller systems is the way to go because it's faster, less expensive, and easier to meet the needs of the immediate stakeholders; and (2) integrating different systems will be faster and cheaper than implementing one central system. While position-1 <i>may</i> be true, position-2 often is often more complex and occasionally not possible and creates many heartaches and cost overruns.<br><br>Yes, $30 MM is a sunk cost, and another system <i>may</i> be the right decision. But from the reference links, its not clear that Marin Countys IST has enough information to be making the decision.
      elizab
  • RE: Marin County abandons $30 million ERP failure

    @bkshort

    I agree with regard to normal decision analysis. But when there is a lawsuit at stake, all bets are off in terms of how the decision is made. And when public politics are involved, it follows no logical, private version of a rational decision making process.
    fmckenna
  • RE: Marin County abandons $30 million ERP failure

    Having followed this as an interested observer (and Ca resident) I am trying to see both sides of this issue.

    Only conclusion I can see for Marin to have arrived at their current state: Read th post by @fmckenna.

    As a taxpayer in that county, I would be hauling some of my local county reps in for a severe tongue-lashing.
    rhonin
  • RE: Marin County abandons $30 million ERP failure

    When these big, government projects turn ugly, there will be a ton of finger-pointing and while I don't think SAP is to blame, I do think the SI (Deloitte) in this case should be shot!


    It's easy to say that the county shoulda-, coulda-, woulda- done yet it was the SI who accepted the contract and accepted the responsibility. I am frankly surprised that the new breed of SI contracts does not include a payment only after go-live provision.
    Kerberus13
  • RE: Marin County abandons $30 million ERP failure

    10 years ago my employer spent $39m transitioning to SAP. Various departments willingness to cooperate on a rollout of this size had a great effect on the outcome.
    Without a lot more facts you can't really cast blame based on the content of the article.

    I agree with @bkshort. It's the costs going forward to achieve the desired result that will chart the course.
    Admin71
    • RE: Marin County abandons $30 million ERP failure

      Read the post carefully, and also the last one I wrote on this topic. In my view, the assumptions on which Marin's financial analysis is based are suspect.
      mkrigsman@...
  • It's chump change compared to other SAP failures

    Throwing out the incumbent integrator is part and parcel of the solution, because once everybody is in finger-pointing-tail-covering-I-don't-trust-you mode, nothing can be done. There needs to be a clean break. <br><br>One of the big problems with the "blame the customer" tactic is that if the customer really was to blame, then the integrator would have known it fairly early on (or at least earlier than $30 million dollars worth of consulting). When they know about it and do nothing, then they become just as culpable, because as the experts, it's their job to raise the flag and flash the red lights. Most of the integrators assume that the customer will just have to bend over and take it, making do with what they are left with, so it's easier just to play along.
    terry flores
  • RE: Marin County abandons $30 million ERP failure

    Solutions for government and administration are hard to find. What does not work in such cases is SAP is 80% ready and 20% to adopt. SAP is built for customization and honestly extensions are horrible. When you come to administrations you need in order to get a handable software at least one or 2 metalevels higher defintion of information as a basis than an ERP provides. I think Deloite should have known or simply should not have done this ... and SAP too.

    I see other options to for a failuere ... who knows - maybe the County does not have enough money to pay the outstanding bills - I don't know but honestly everything is possible;).

    SAP rollouts, if they are bigger, they are risky. It is enormous hard to have the specialist, from the specialist, from the specialist on site forming teams and the right people from the client side too.

    Whatever these consulting costs have been ... assuming it had something to do with SAP ... maybe just consultants sitting at the womb of an application or process owner...
    michaelthuma2
  • RE: Marin County abandons $30 million ERP failure

    No one seems to find the notion that $30 Million is rather enormous sum of money for a county government to pay even if the SAP implementation operated fully to expectations.

    Maybe there is something inefficient about the way in which ERP software is developed. And, there doesn't seem to be system integrator incentives for keeping costs and customization low.
    dhadden@...
  • RE: Marin County abandons $30 million ERP failure

    I've done eleven large SAP implementations, two of them got canned, additional two were almost canned. It'll take a long and expensive legal discovery to get a hint regarding the root-causes of the failure. We haven't seen the contract, statement of work, we don't know anything about the business case, timeline, scope, milestones, governance, resources, risks, estimates, escalations, documentation, plans and actuals, payments, etc. We are just touching the surface here - and even when we get the facts, many of the findings will be qualitative in nature and open to spin and interpretation based on different views, methodologies, etc.

    What I do know is that DC and MC were partners here - they went on this journey together and that's exactly how the blame should be distributed. No side here could be excused and they both should (and will) take a hit. I'd bet a buck or two that it'll take 18 months to settle this, the settlement terms will not be disclosed and we will somehow learn that DC returned $15M and that lawyers representing both parties pocketed a fat sum. Just my 2c.
    tekktron
  • Deloitte fails again

    Deloitte repeats itself again, another govt entity in the state of CA. They've failed the large LAUSD implementation before and cost the tay payers millions. How do these pyramid chasing partners sleep at night?!

    http://www.latimes.com/news/opinion/commentary/la-oe-rutten13feb13,1,3511657.column
    avidteknologist
  • RE: Marin County abandons $30 million ERP failure

    if SAP is only there to make money ?

    What is the role of delloite in this whole process ?

    What was the role of Marin mangement in whole scenario ?

    SAP is good one but not in each case - Delloitte is good but not in easch case - I must blame these two parties
    javed.system.analyst@...