Elected Officials and City Government and Local Government and Greg Ballard and Software and Tech Companies and Government & Economic Development and Government and Manufacturing & Technology and Technology

Ballard bets big on $16 million software project

June 9, 2010

Indianapolis Mayor Greg Ballard is making a $16 million bet that purchasing enterprise-resource-planning software will yield efficiency gains worth even more to local government.

Concluding a year-long evaluation and public bidding process that initially considered seven possible ERP systems, Ballard has chosen the software package he believes offers the best potential to modernize the city’s and Marion County’s 1970s-era financial IT systems. He also has selected the consultant that will lead its three-year implementation.

IBJ first reported the high-risk project’s details in its Feb. 20 edition.

Ballard, a Republican, picked Oracle’s PeopleSoft over SAP and Microsoft Dynamics GP, the other two software-system finalists. Study of the need for new IT system began under Ballard’s predecessor, Democrat Bart Peterson.

“The selection process was extremely thorough,” said Marion County Treasurer Michael Rodman, a Democrat, who also leads the city-county IT board. “A number of people were involved from just about every impacted area and spent an incredible amount of time going through proposals that each software company gave us. And truly, truly they gave us books.”

New York-based Zanett Inc.—which scored higher than 12 competitors on the basis of price, ERP experience, minority-subcontractor participation and local ties—will lead the instillation project. Zanett maintains one of its eight offices in Carmel. Publicly traded on NASDAQ under the symbol ZANE, last year it reported a $2.3 million loss on $41.4 million in revenue.

Zanett’s local minority-, women- and veteran-owned business partners on the project include ENTAP, Sondhi Solutions, CSCI Consulting and PME.

New ERP software is expensive, and can be tricky to install and maintain, particularly when it replaces systems left over from the green-screen era. Other cities, notably San Diego and Philadelphia, have struggled with ERP-conversion projects after costs and timelines soared far beyond initial expectations.

But ERP has a huge upside. If implemented properly, it results in less paper pushing, far fewer errors and a treasure trove of data-mining opportunities. The upshot is Ballard could identify new areas to zero in on to determine whether tax money is well-spent or wasted, yielding consolidation opportunities.

“New and different is always tough,” said Aaron Hood, the city’s ERP project director. “But we’ve got a solid change-management plan.”

Early estimates had pegged the Indianapolis IT project’s cost at $4 million for implementation, plus another $1 million for annual maintenance. But that was before its scope had been professionally studied by a vendor and become fully understood. Rodman pointed out that, in the bidding process, some vendors pegged the project’s full cost as high as $30 million.

Hood said California-based Oracle is charging $3.6 million for a three-year license of its PeopleSoft software. Zanett and its partners will get $7.5 million for the system’s implementation. The remaining $4.9 million for the project will pay for internal staff, new hardware and hosting. Starting in 2013, Hood puts the cost of ERP’s annual maintenance at about $1.5 million. He said the project is projected to produce a substantial return on investment within five years. Rodman agrees.

“I think it’s a French proverb that says the devil’s in the details,” Rodman said. “But from my vantage point, this really looks like something that is going to help us, certainly over the next two to three to five years.”

PeopleSoft is supposed to eventually replace Indianapolis’ and Marion County’s more than 1,100 separate antiquated mainframe software systems. The current patchwork of aging IT annually handles $1.1 billion worth of local government back-office functions, such as accounting, human resource administration, purchasing, payroll and grants management.

At its May 25 meeting, the nine-member Indianapolis-Marion County Information Technology Board unanimously approved both PeopleSoft and Zanett. Tuesday night, the City-County Council’s Administration and Finance Committee voted 6-0 for a $7.95 million appropriation for the project. The spending measure will be considered by the full council at its June 28 meeting.

But work on the project has already begun, using $2 million set aside in the city-county’s annual IT budget. The remaining funding will be allocated at a future date.

Pat Phelan, an analyst for Stamford, Conn.-based technology research firm Gartner Group, has spearheaded hundreds of ERP projects. She called PeopleSoft a “very reasonable choice,” given Indianapolis’ size, among a short list of three solid software systems.

“Do they need the overkill of SAP? Maybe not,” she said in a telephone interview Wednesday morning. “Are they going to have more functional requirements than the Microsoft product can offer out of the box? Very likely.”

As for Zanett, Phelan said she hadn’t heard of the firm. But she said that could be because it is small enough that Gartner doesn’t track it. The project’s $16 million price tag is also “not an outlandish starting point,” Phelan said.

But a number of factors could drive up cost, if they aren’t anticipated and carefully planned around. For example, legacy-data conversion could end up being tougher than expected. Individual agencies may demand unexpected variations in the system’s configuration for their specific needs. If the project’s timeline gets off track, Phelan said, proper testing is likely to be the first victim, which can create long-term problems.

And then there’s the human factor of business-process reengineering, which will force city and county employees to change the way they handle their jobs in all kinds of ways.

On the other hand, Phelan said, the new PeopleSoft system could begin producing some tangible improvements almost immediately. Hiring and purchasing approvals that currently take days or weeks may be shaved down to hours or minutes. Book-closing duties that now require a month of meticulous work could become instantaneous, with the benefit of transparency, because PeopleSoft can produce pro-forma financial statements at any hour of the day.

“You might not realize until you get up and running that you don’t need 17 approvals to purchase pencils,” Phelan said. “And find a better way to skin that cat.”
 

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