City Budgets Frozen by ERP Problems

November 26, 2010

SAP System Issue Blamed for Delayed San Diego Audit
By Chris Kanaracus, IDG News

Problems with its SAP system are forcing San Diego to delay a city budget audit for six months, in just the latest tale of woe for the troubled ERP (enterprise resource planning) project.

San Diego decided to fire its original consulting firm, Axon, in late 2008 for nonperformance and subsequently signed a deal with SAP’s services arm to finish the job, which is also running well over its original US$36.5 million budget.

The audit delay is necessary due to data issues in the SAP payroll system that are in the process of being corrected, according to a Nov. 2 memo by San Diego’s chief financial officer, Mary Lewis.

“There were many timecard entry errors introduced by our employees (i.e time being charged to one account when it should have been charged to another account) when the new payroll system went live [in January],” Lewis wrote in part.

City officials have been making fixes all year, but in recent months determined that “a different approach was needed and a comprehensive reprogramming effort was developed.”

The fixes will be “permanent and comprehensive,” she added. “This is a one-time action that will resolve the issues in fiscal 2010, the current year and going forward, and will not need to be repeated.”

ERP projects are sometimes compared to a three-legged stool, with the software vendor, customer and systems integrator each playing an important role. A project’s success depends on how well all three players execute their part.

In this case, the delayed audit is not attributable to complexity or performance problems with SAP’s software, SAP spokesman Andy Kendzie said via e-mail. “Nor is it a lack of leadership or executive commitment. SAP and the City of San Diego remain absolutely trusted partners. We are firmly on board with the city and proud of our association with them.”

A spokesman for San Diego mayor Jerry Sanders did not respond to requests for comment.

A seemingly similar situation is ongoing in Portland, Oregon. City officials there are dealing with an overdue and vastly over-budget SAP project, but like San Diego, the original implementation partner and not SAP’s software has come under fire. SAP’s services division has also taken over the project.

Meanwhile, San Diego’s former city attorney, Michael Aguirre, is alleging that the SAP system may not be to blame at all, according to the San Diego Union-Tribune. Instead city officials are possibly using it as an excuse to cover up inappropriate transfers of funds from certain city accounts to pay for operating expenses, Aguirre said.

Overall, ERP projects aren’t living up to many customers’ expectations. An April survey of 1,600 organizations by Panorama Consulting Group found that more than half gained no greater than 30 percent of the expected benefits from their ERP systems. Half of the companies’ projects went over budget and 35 percent took longer than expected.

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris’s e-mail address is

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