Massachusetts grills Deloitte over large IT failures

Massachusetts grills Deloitte over large IT failures

Summary: Hearings over Deloitte's role in major IT disasters offer a fascinating glimpse inside the big money world of politics and technology.


This week, the Commonwealth of Massachusetts held a hearing, most likely the first of several, examining failed IT projects run by Deloitte Consulting. The hearing focused on Deloitte projects for the state's Department of Unemployment Assistance and Department of Revenue. I attended as an observer.

Massachusetts grills Deloitte over large IT failures
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The complex nature of large IT projects makes untangling truth from fiction a challenging, often futile, exercise. Nonetheless, the significant economic waste and human suffering that arises from failed IT makes the analysis worthwhile and important. 

Background. The Department of Unemployment Assistance project started in 2007 with BearingPoint as the primary contractor. That company went bankrupt and was taken over by Deloitte, which assumed an obligation to complete the project. Today, the $46 million initiative is two years late, $6 million over-budget, and the subject of complaints from users. The project replaced 11 different systems that were not integrated and could not exchange data.

Massachusetts cancelled its Deloitte project with the Department of Revenue earlier this year, despite having spent $114 million.

Currently, Massachusetts has an ongoing project with Deloitte related to the Registry of Motor Vehicles.

The hearing included testimony from:

  • Joanne Goldstein, Secretary for the Executive Office of Labor and Workforce Development
  • Michelle Amante, Director of Department of Unemployment Assistance
  • Amy Pitter, Commissioner of the Department of Revenue
  • Navjeet Bal, former Commissioner of the Revenue Department
  • John Letchford, Massachusetts state CIO
  • Mark Price, the Deloitte executive who oversees the firm's business with Massachusetts

Analysis. We must view the Massachusetts situation in light of Deloitte's history of troubled projects, such as the state of California, Marin County, Los Angeles school districtstate of Florida, Levi Strauss, and others. The multiple Massachusetts failures are not isolated examples.

In fairness to Deloitte, one could argue that their large volume of business naturally leads to a certain number of difficult projects; however, other system integrators do not seem to pop up on my IT failures radar with Deloitte's regularity. In addition, that argument assumes that a certain number of failures are okay, which I believe is wrong.

The hearing centered on three key points:

  1. Ascertaining details of the projects and background
  2. Determining the extent to which the projects actually failed
  3. Trying to understand lessons learned

During questioning, both Secretary Goldstein and Deloitte's Mark Price indicated the unemployment assistance project was a success. Goldstein said, "I am happy with the launch" while Mark Price claimed [registration required], "We fully believe that the system is a success.’’ Although Price acknowledged there were some "issues and challenges," he said the "systems are working well" in Massachusetts and other states.

When asked about lessons learned to improve the project, Price appeared to offer little of substance, bringing to mind the term "dissemble." The Boston Globe elaborates:

State Senator Cynthia Stone Creem, the Newton Democrat who is chairwoman of the committee, expressed disbelief at Deloitte’s view of the system. She said she would schedule another hearing to question Deloitte officials further.

“As I sit here today, I haven’t heard anything you think Deloitte might have done differently,’’ Creem told executives of the firm called to testify. “I’m just at a loss.”

State senator Creem did an admirable job in relentlessly questioning the witnesses, despite her lack of experience with large-scale IT projects. Still, numerous questions and issues remain open, including:

  • What precisely caused these projects to go late, over-budget, and deliver inadequate results?
  • What was the role of the state versus Deloitte in creating the troubled outcomes?
  • How precisely did the state's obligations and responsibilities overlap with Deloitte's? In other words, who was responsible for what, and where were the dependencies on both sides toward the other?
  • How does Deloitte define success or failure — at what point do issues on a project rise to the level of being called a problem?
  • How can a canceled Department of Revenue project that wasted over $40 million be considered a success?
  • Why do Deloitte and the Department of Labor call their project a success despite numerous reported problems associated with the go-live?
  • Where does the state need to improve its project management, procurement, and contract negotiation capabilities for IT-related matters?
  • To what extent did Deloitte have an obligation to guide the state to prevent delays, cost overruns, and ensure the rollout went smoothly?
  • Deloitte's testimony focused on process rather than outcomes. For example, Price stressed he was "proud" of the collaborative and "comprehensive" testing effort on the unemployment project. Yet, he failed to address why testing did not uncover the issues that eventually caused the go-live problems. What was Deloitte's responsibility in helping the state define metrics, measurable outcomes, and other parameters necessary to determine success?
  • Prior to submitting a final bid for the unemployment contract, Deloitte reduced its price by 19 percent, without cutting back project scope. Does this indicate the original price was artificially high? Did Deloitte anticipate it would make up the price difference on downstream changes of scope? What are reasonable profit margins on such a large project?
  • What was Deloitte's responsibility in helping the Department of Revenue balance significant business process change or customize the software extensively?
  • Why did Deloitte sell the Department of Revenue packaged software without first defining the extent of customization that would be required? It appears the need for extensive customization drove the department's decision to abandon its project prior to completion, despite the high cost of doing so.

Final thoughts. It is striking to note that most personnel testifying were not present when the projects were begun, due to the long time frames. Therefore, the business case and underlying rationale were handed down, almost like folklore, from one administrator to the next, and metrics were ill-defined or non-existent. The lack of clear metrics governing expected outcomes helped Deloitte argue that these projects were a success.

In general, the relationship between system integrators and clients is fraught with difficulty, because the integrator may be the key financial beneficiary when a project runs over-budget. This dynamic creates a potential conflict of interest between the integrator's desire to serve customer needs and the possibility of gaining greater revenue from the late project. The IT Devil's Triangle concept describes this conflict.

Having studied and analyzed IT failures for years, I find it disingenuous for Deloitte to claim success on projects where the go-live is flawed, the project is canceled, or the deliverables are years' late. At the same time, it appears the state made a variety of uninformed choices and bad decisions, from software selection to poorly managing the Deloitte relationship.

Major IT failures virtually always result from a combination of missteps on both the customer and system integrator sides. Therefore, Massachusetts lawmakers should remember that pointing the finger at one side usually implicates the other. These projects are complex undertakings made even more difficult by politics, long duration, and even, perhaps, opportunism.

Senator Creem and her staff are doing the right thing by studying these IT failures. Let's hope they have the fortitude and political will to continue.

Topics: CXO, Project Management

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  • Large IT failures.....

    Demand refunds of 110%!
  • Let's not pick on only Deloitte, Computer Science Corp on wasted $1 BILLION

    Can't but help of thinking of the "Consolidation of Purchasing Systems" for the department of defense that was featured on "The fleecing of America". To quote Senator John McCain, "We spent a Billion dollars of taxpayer money and have NOTHING to show for it". CSC (the major contractor) has a history of messed up outsourcing deals.

    When the CIO of a major international insurance company who signed major outsourcing contracts with CSC 'retires' only to show up as Vice President of South American Operations for CSC 6 months after 'retiring', it's pretty obvious what is going on.

    These large outsourcing deals are driven by politics, insider 'favors' to get the contracts, and rarely work. All one has to do is look at the mess that is. It doesn't work, it hundreds of millions over budget, with security holes are being revealed. Is anyone really surprised that many of these deals are nothing but a mess?
  • IBMs standard response

    Its the customers fault.
  • Interesting

    Be interesting to see what the "finger pointing" alludes to.
    I am very familiar with the LAUSD and Orange County debacle.
    Assumptions, unasked questions, poor scope analysis, and an entrenched management system ... or Union.
    Suspect this will be similar.
  • Conflicts of Interests

    After a major failure, a select committee convenes to investigate. If the finger pointing starts to point back at them, how hard are they going to investigate? If the finger pointing starts to point to their buddies that got them elected, how hard are they going to investigate? All too often, these "investigations" are a lot of sound and fury signifying nothing.

    If you are a government manager and the project goes belly up because your requirements are a target moving faster than a stuck, greased pig, you aught to lose your job. If your company milks what is clearly a DoA project for what its worth and takes advantage of the customer's incompetence, rather than coach them or walk away, you aught to go on a "shun-list" and never get another government project. If you are an elected official and funnel big money projects to your big money donors, you aught to be impeached. Cleaning up this sort of thing isn't rocket science.

    As bad as IT projects can go in the working world, government IT takes incompetence and graft to a whole new level. Why? Business, ultimately, has to answer to its investors and its balance sheet. When the government is responsible for, complicit in, or--at least--actively ignorant of these sort of shenanigans, and the watchmen are left to watch themselves, it is a recipe for disaster.
  • Deloit "success", easy

    They got paid $46 MILLION!

    That is a pretty good addition to the corporate bottom line, $7+ Million per year ...

    I bet several Sr. Executives got big year end "performance" bonuses for that. Who cares if it works or not, this is Big Business America where all that counts is the bottom line at the end of each QUARTER ... someone else can worry about "losses" and "failures" in the future, "I" won't be there after cashing in ... (look how well Big Banking made out with bad loans and "free" bailouts).
  • Implementations Have Jeopardized Commercial Sector Too

    Large enterprise system project failures occur in the for-profit business sector too, some which cause such significant business disruption they entail disclosure in SEC filings, and in some case cause the demise of the company. For example:

    Levi Strauss claimed the company's net income dropped 98% relative to the same quarter in 2007, due to problems with an SAP implementation preventing Levi Strauss from fulfilling orders for a week during the quarter. A problem big enough to warrant mention in the company 10-Q.

    Sleep Comfort took a charge of $5MM against its 2006 10-K filing for a failed SAP implementation.]

    Shane & Company, who claimed the cost overruns on its SAP implementation, which didn’t produce accurate inventory data, caused the company to go out of business.

    My Pillow incurred cost overruns, from a failed implementation. Two months after the target go-live date, "more than 100 components "were not functional." The company claims it had "purchased ‘substantial’ amounts of short-form advertising time" based on the contracted go-live date, but the ads ‘were not successful due to the failure to deliver the system as planned." This forced the company to lay off employees.

    So while the magnitude of $ on these public implementation projects is astounding, these failures represent a significant portion of each of these businesses.
  • re: large IT projects

    For years I've referred to large IT projects -- especially defense IT projects -- as vendor annuity programs. Great for the vendor, not for the customer. Consequently, vendors are highly unlikely to be frank about unreasonable expectations and requirements, or obvious political issues within their clients' organizations. Why jeopardize the gravy train, right?

    The failure of projects large and small can always be traced back to organizational/political/personnel issues within the customer and the vendor orgs.