Ballard's high-risk IT project could save millions - or flop

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Mayor Greg Ballard has decided to overhaul the city’s and county’s 1970s-era financial IT systems—a move that could cement his reputation for improving government efficiency.

But the upgrade also is fraught with risk. His predecessors recognized the need to modernize, but opted not to take the plunge. New systems are expensive to buy and tricky to install and maintain, raising the potential for embarrassing glitches or cost overruns.

IT PlanBallard, a Republican, anticipates a hefty price tag: up to $4 million upfront, plus another $1 million for annual maintenance. But he expects the computer revamp to pay for itself, yielding $11 million in cost savings over the next five years.

That is, if everything goes according to plan. Chances are it won’t.

Ballard’s own request for bids on software installation points out that 60 percent to 90 percent of enterprise-resource planning, or ERP projects, come up short. Some exceed their initial time line. Others get substantially scaled back, or endure soaring, unexpected expenses. A few flop outright and ultimately are canceled.

“Change is always hard,” said Ballard’s city controller, David Reynolds. But he said the city expects a long-term payoff and is taking steps to ensure the project succeeds.

“We’ve tried to make sure we set this up not as an IT project,” he said. “This is a business project, supported by IT. And it really is an opportunity for this [local government] to look at the way it does business.”

Since the 1970s, Indianapolis and Marion County have maintained more than 1,100 separate software systems for back-office functions such as accounting, human-resource administration, purchasing, payroll and grants management. Many of the old systems predate Microsoft Windows’ point-and-click ubiquity. Think aging mainframes and green screens.

Mayor Bart Peterson, a Democrat, recognized the necessity to modernize, and late in his second term initiated a needs-analysis report for buying a new software system. Ballard kept the study going, and the Indianapolis-Marion County Information Services Agency delivered its recommendations in July 2008.

Back-office benefits

The public won’t see it directly, but an ERP system could have an enormous impact on how well local government works. If implemented properly, it will mean less paper pushing and far fewer errors from data entered multiple times by different users.

Meanwhile, it will allow officials to mine the city’s and county’s financials with greater transparency. The public also should gain greater access to the numbers. That means new opportunities to zero in on whether tax money is spent well, or wasted.

Components of the new system will be able to talk to one another, whether they deal with property tax rebate processing, management of jurors in the duty pool, or business license renewal.

That should spawn consolidation opportunities. Ballard will gain the chance to combine separate HR, payroll and other financial functions currently maintained by numerous agencies and departments.

Bottom line: An ERP system should greatly enhance local government’s ability to organize and plan its more than $1.1 billion in annual spending, Reynolds said. It’s a huge step toward true local government consolidation.

“Unigov was, what, 40 years ago? And that’s the furthest thing from what’s going on in [the City-County building],” Reynolds said. “We’re trying to address that and change that.”

Late last year, Ballard issued a pair of requests for proposals, the first asking major software vendors to show what kind of off-the-shelf systems they could provide. The second solicited responses from companies that want to handle installation. The Chicago-based Government Finance Officers Association and the locally based IT consultancy BC Forward helped Ballard craft the requests.

A five-member executive committee oversees the project (see graphic), since it will end up touching nearly every local agency or department. Seven software systems are now under consideration. But the committee has elevated three as the most likely selection: SAP, Oracle’s PeopleSoft and Microsoft Dynamics GP.

The Government Finance Officers Association, which has helped local governments around the country update obsolete IT systems, said Indianapolis’ new system should lead to better city management.

“There’s a number of benefits you can see directly. The one I like to point to the most is just accuracy of data,” said David Melbye, a GFOA consulting solutions manager.

“I think everyone’s got a story of how they called one department of government and got one answer to a question, and called another for a different answer. ERP systems prevent that from happening, because you have one source of data.”

Over budget and late

Ballard’s time line calls for implementing the system over three years, with the core of it installed no later than March 2011 and preferably by the end of this year. Because the systems Indianapolis is considering are mature and well-tested, any problems likely will be the fault of either local officials or the company managing the installation, according to Gartner Group, a Stamford, Conn.-based technology research firm.

Gartner analyst Pat Phelan, who has spearheaded multiple ERP projects, said problems typically arise for one of three reasons.

The first is project management. She said it’s imperative the city hire an experienced vendor who can handle all the many moving parts involved in a big ERP changeover.

Second, Phelan said, is the pressure to meet a timetable established before the project began, and before all obstacles were fully understood. When the deadline to “flip the switch” and go live looms, Phelan said, people start cutting corners, particularly on testing.

Third, she said, there’s the sheer amount of organizational change that will occur. Introducing ERP isn’t just about introducing a software package. It’s also about properly training all the people who will use it, and understanding the domino effect that results.

“You only hear about the total flops when they’re spectacular, and seldom about the successes, because nobody brags about them,” Phelan said.

“But almost every project out there will have some delay, because most people are not good at planning the effort. So to say that every project is going to be over budget and late is probably a pretty reasonable thing to do.”

Three-year timetable

The flops make headlines. Last year, for example, San Diego canned the firm it hired to implement an ERP system after experiencing cost overrurns totaling $11 million, or 27 percent of the project budget, according to the San Diego Union-Tribune.

Philadelphia struggled from 2002 to 2008 to upgrade its 30-year-old computer system for billing customers of the city’s water department. According to the Philadelphia Inquirer, it spent $18 million on an ERP system before turf wars among local officials led it to change direction in 2006. Philadelphia ultimately spent another $6.7 million to implement a different one.

Ballard administration officials say they recognize the difficulty of the challenge they’re taking on. And since the calendar for full implementation is three years long, Reynolds said there should be time to adjust along the way.

But Marion County Treasurer Mike Rodman, a Democrat who’s helping oversee the ERP project, is more cautious in his expectations.

“Basically, what we’re trying to do is get into the 21st century of IT,” he said. “In the long term, is it going to save us money? Yes. How quickly? That remains to be seen.”•


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