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Ballard bets big on $16 million software project

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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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  • Setting the record straight
    ERP software today is a development environment. All the bidders presented software which can be configured, and there are programming tools to accomplish any feature, interface or method. Client satisfaction or not is due to the ability of the software implementation company to effectively listen to the business users and understanding their business processes and then configuring the software to help them. The problem in govt is that you have people who have been silo'ed into one or two functions in their daily regimens and they do not want to change or learn. That's the fact. People can either love and hate Peoplesoft ... yet... it's the same product, yes? Only a different perspective...so consider the source. So give Indy a chance. It's all about execution of the implementation company. Zanett has about a good a record as most and better than many. They were the low bidder by far and their methods were conservative and positive. So, don't blame the software, blame the govt workers who bitch too much and work too little. Blame the incompetent people pretending to be qualified IT workers in America,and blame the decision makers that can't tell the difference. Even if the total costs come in 30-40% more than the initial bid, this will still be a success and when all of you who are griping now because you don't have a life, please remember... the city should be more efficient in a couple of years to provide better service to you.. and you will should have nothing to complain about as far as Indy goes... so quit bellyaching and read a book..
  • Incompetence or compromise?
    @ Bob Jones

    No argument the company is managed poorly. Hell, half the companies in Indiana are managed poorly, but still manage to eek out a living. I would imagine the LaSalle loan will be either refinanced or rolled up into a new agreement that is a convertible note in with a principal amount of USD7MM+ to Rockport Investments Ltd. This note will can be converted into shares of the common stock. Now that Uncle Bruno (Guazzoni) has been paid off (by selling his note to Rockport), effectively the company is owned by Rockport. So a PE firm is now funding the company in hopes of flipping converted common stocks for a profit in the future. (Can you say Made-2-Manage, purchased by Battery Ventures, and now Consona?) It will have the funding to keep going as a concern, but of course the SEC filings will always mention the dire situation. My point was that it's not the company to be concerned about, but the talent in that company to pull this conversion off. (See IBM and State of Indiana FSSA for how not to do projects with companies that supposedly have "capacity, depth and financial stability".) As for better choices -- I would agree there are better choices, but for a lot more money. The city could have hired Oracle Consulting to do the work for triple the cost. The key issue for success is not a homerun, but a lot of singles, doubles, and triples to win. Change the outdated processed to mesh with the software, and keep modifications to an absolute minimum. (This was the failing for the State PeopleSoft implementation. Most of the problems are due to outdated processes implemented in the software.) And keeping with the baseball analogies, anyone performing the change at the City will need to leverage a bat to whack the head of departmental leaders at the city that are stuck in processes ingrained by the 1970's based system. It's not the company. It's the people and their talent. I don't know what the project plan might be for ZANE talent and subs. Locally, ZANE has some good talent to doe the work. The real question will be if the City leadership provides any vendor with the support to do the job correctly.
  • Bigger Number
    Per the city controller, D, Reynolds, during a meeting of administration and finance on 6/8 the number quoted was 18.8 million over the next five years. About two million has been spent to date and ISA was requesting 7.95 million to fund this project over the next two years.
  • State Using PeopleSoft
    The Captain, I have worked with plenty of software systems. The PeopleSoft system the State uses is the worst by far.
  • State and PeopleSoft
    "The State has PeopleSoft and employees complain about it every day."

    I've worked as an IT contractor with the State for the past three decades. The next piece of software the State doesn't complain about every day will be the first.
    • Incompetence
      Responding to MUDD... Lets see ZANE has a $4,350,000 loan with Lasalle due 6.21.10. Thye indicated in there annual report going concern issues... What scrutiny/due diligence was done by the City of Indianapolis? There were other better choices... Is ZANE going to get a "Bank Letter of Credit". To pull off a homerun across the span of the IT systems we do not need back benchers without the capacity, depth and financial stability to drive the process. What a joke.... Your telling me they are going to subcontract this out? They say they have 204 fulltime employees...
    • PeopleSoft???
      Do I understand the City wants to use PeopleSoft? The State has PeopleSoft and employees complain about it every day. It's software is dreadful.
    • 6 Degrees of Seperation
      Zanett and St. Vincent Health Mira Award
      Techpoint
      State of Indiana - PeopleSoft
      Zanett client - Klipsch Audio Technologies
      Kevin Teder SVP Zanett
      INRANGE Consulting
      Surge of Zanett Healthcare Contracts
    • About Zanett...
      About Zanett...

      A time to remember. Zanett has some deep local roots via M&A activities. The local connection is a company called ONEX back in the 1990's. It was acquired by Inrange Technologies Corp of New Jersey in early 2001. Inrange was acquired by CNT of Minneapolis, MN in 2003. Then Brandywine Computer Group of Mason, OH ( a division of Zanett and big JD Edwards ERP shop) acquired the ERP business of CNT in 2004, while CNT itself was sold to Brocade a couple of years later. The reason? JD Edwards was acquired by PeopleSoft and Brandywine wanted an instant PeopleSoft presence. Brandywine went back the Inrange name and brand. Finally, Zanett renamed all of their divisions to the Zanett name a few years ago. Yes, Zanett is not as financially sound as many would like, but at least their still in existence. (Chrysler or GM anyone?) The goodwill is a legacy of the many M&A activities to stay alive. (See Haverstick's transition to Kratos Defense & Security Solutions and Kratos 10-Qs and Ks.) The purpose of the history lesson to say that a lot of the talent from the 1990's ONEX that was deep in PeopleSoft then, is still with the firm today. If this group can navigate the politics, inbred ideologies of a crumbling local government administration, and an ignorant public that is reticent of any change, they might successfully bring the City's back-office to some level of functionality. Oh yeah, a disclaimer on relationships with any of these firms through their various names. I've just worked with the people in the past. No complaints about their capabilities.
      • Good Choice
        Any ERP consulting firm would staff the project with a mix of in town and out of town people. There is no in town consulting vendor that could tackle a PeopleSoft project of this size with in town only staff. There's just not enough expertise in this market. You all did see that they will be replacing 1,100 older systems right? That's a big project folks. Based on that, the $ amounts seem low to me.
      • The Mayor
        That's not really the message the mayor wants to send, is it? I thought Indiana was attempting to become some kind of tech/biotech mecca....Maybe he's giving an Indiana company a chance to jump in and save the day?
      • Insider Trading?
        The Strange Case Of Zanett Inc.

        There is something seriously peculiar going on today with a micro-cap stock called Zanett Inc. (ZANE).

        http://blogs.barrons.com/techtraderdaily/2010/03/04/the-strange-case-of-zanett-inc/

        Ballard Signs $20 Million Contract With Financially-Struggling IT Company

        http://advanceindiana.blogspot.com/2010/06/ballard-signs-20-million-contract-with.html
      • no happy with this choice
        Anybody with experience in this realm knows that you don't pick a vendor based on price - the costs ARE going to overrun, they always do - you pick a vendor on performance. I'm not happy that we picked a pink-sheet out of town vendor. I would be happier to keep my tax dollars in the city.
      • IS THE CITY AWARE OF ZANNETT'S FINANCIAL CONDITION
        This company according to its records with EDGAR has not made money as a publicly traded company? what due diligence has been done? Also there balance sheet is bloated with Goodwill, there annual report makes statements about potentially being delisted with NASDAQ? Has the city received some other assurances privately? Further the company stock according to the 2009 annual report is closely held.... Why not choose an Indiana Company? Perhaps if they are the cheapest that is why they are not making money? Not always a good thing..... BE CAUTIOUS..... Were not buying aluminum siding here for a Parks Department Building? I do not like it a bit....
      • What is going on with Zanett
        Zanett Inc. Auditor Raises 'Going Concern' Doubt
        03/31/2010
        Zanett Inc. filed its 10-K on Mar 31, 2010 for the period ending Dec 31, 2009. In this report its auditor, Amper, Politziner & Mattia, P.C., gave an unqualified opinion expressing doubt that the company can continue as a going concern.

        http://investing.businessweek.com/research/stocks/ownership/ownership.asp?ticker=ZANE:US

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