https://francinemckenna.com/wp-content/francine-mckenna.png 0 0 Francine https://francinemckenna.com/wp-content/francine-mckenna.png Francine2008-02-05 07:00:002008-02-05 07:00:00LAUSD – Still Cleaning Up Deloitte’s SAP Debacle
An LA Times editorial this past weekend brings us up to date on the disaster that was the Deloitte implementation, or attempt at implementation, of SAP for the Los Angeles Unified School District. I’ve written about this project here and here. I have also given Deloitte some props for having the only somewhat legitimate consulting firm of the Big 4, but it’s by default rather than design or superior customer service. All of the other firms sold their consulting firms after the independence scares post-Enron.
So much for that. They’re all back at it again.
They do pretty much stick to “advisory services” that stay close to their core audit, controls and financial due diligence “strengths”, and I use that term generously. None, other than Deloitte, as far as I know, are doing large scale ERP implementations in the US that include responsibility for the technical side, or what is known as “system integration”.
(I have heard PwC has a plan to be back in the systems integration business in the US in two years. They were never really out of it in places like Mexico and Brazil…) Deloitte did it before, never gave it up in the US and still does it, although in more than a few cases, not very well.
A reasonable question might be, “Why do the Big 4 firms want to do these types of projects for government, of all things?”
Well, as I’ve written before, because that’s where the money is. While I was at PwC, I saw how small time their “Advisory Services” operation really was. On occasion there is a long, heavily staffed type of project such as Sarbanes-Oxley support that totals up to more than seven figures, (their fledgling consulting arm’s bread and butter the last few years,) and a few other regulatory related projects where clients pay big bucks for the firms to help them out of a jam, (think a big bank recently bought). But, in general, the projects are small. Like in the hundreds of thousands of dollars range. It’s hard to make billions a hundred thousand dollars at a time, especially under the umbrella of an audit firm, with all that litigation as well as overhead.
I was telling someone recently that when I led the Industrial, Automotive and Transportation Practice for BearingPoint in Latin America, we were doing SAP and other ERP implementations for industry that were in the US$10-20 million dollar range. And that was Latin America, at the turn of the millennium…No one I met at PwC in 2005-2006, 6-7 years later, the “consultants” that were left after the sale of their consulting arm to IBM, had ever sold, let alone managed, a US$10 million systems project.
Governments are notoriously cheap, difficult, slow paying, incorrigible, bureaucratic, wishy-washy and litigious. All are good reasons why Deloitte probably had a tough time doing a good job for LAUSD. But they’re no excuse. After all, the Big 4 are consultants. They are professionals!
The government contracts for systems implementations are big, big, big. And since the Big 4 firms are really only interested in building top line revenue and leaving the margins and profit to fall where they may, they eat these opportunities up.
Remember…Partnerships pay their partners on a cash basis, and are loathe to make investments in common goods. So they take the cash when it comes in and distribute it right away. They hate to save for a rainy day. Which is why it would be so interesting to see their reserves for litigation. But I digress…
…Irish Health Service spent eight years and 12 times more money than budgeted before calling a halt to its attempt to install SAP software customized by Deloitte Consulting. That was in 2005, just as the Los Angeles Unified School District was moving ahead on SAP, also customized by Deloitte.
The contract was just the first of the district’s mistakes.One year ago this month, the new software began generating thousands of wildly inaccurate paychecks — 32,000 in June alone — especially to teachers. Some received a fraction of what they were owed; others were grossly overpaid. Teachers camped out for entire days at district headquarters while a special office tried to solve their problems. Money and many thousands of hours of instructional time were lost. At least that part is over.
Almost all teachers are receiving the right amounts now, although it still takes an army of district employees to backstop the software.The payroll debacle was a textbook case of the inefficiencies that perennially plague the L.A. school district — a paucity of talented managers, a lack of responsiveness and a stultifying bureaucracy. Turnover among the top ranks meant the district lacked the expertise to oversee the $95-million contract. Lower-level tech people were undertrained, and many were underqualified but could not be replaced because of union contracts. The district’s pay system is impossibly byzantine, with each of nine unions having its own pay structure. Employees might be paid by the hour, the week, the task or even in six-minute increments.
And in the beginning, bureaucrats in the central office were remarkably indifferent to teachers who faced financial calamity, transferring them, disconnecting them, failing to return their calls. Given the rocky history of the SAP/Deloitte combo in Ireland and elsewhere, it’s unconscionable that Deloitte consultants and L.A. Unified managers turned on the SAP switch overnight without a full-scale test run, even after the school board had expressed doubts…Then, in a perfect microcosm of district ineptitude, it considered paying Deloitte an extra $9 million to fix the mayhem it had created. Then it spent yet more money to hire a public relations team to burnish its image.
Today, L.A. Unified is stuck with a hugely expensive software system that still needs tweaking. The district will have to streamline its pay system while demanding maximum compensation from Deloitte….Prodding Deloitte toward cooperation is Assemblyman Kevin de Leon (D-Los Angeles), whose AB 730 would prevent a company from getting a state contract for five years if it’s found in court to have failed on a large public technology contract. The bill needs modifications — it’s too narrowly drawn, and lawsuits commonly take years to resolve, giving a company plenty of time to do more damage — but its intent is right and it should go forward.
The lessons of this past year are only tangentially about SAP software; it can and does work for some companies. The lasting blame for this debacle lies with Deloitte for bad programming and worse advice, but also with L.A. Unified for the series of foul-ups that followed. If our school district cannot even pay its teachers, how can we trust that it is doing right by our children?