Lawmakers, SAP pointing fingers over failed payroll project

A new state senate report stirs up controversy over who is responsible for problems with the stalled, $373 million project

The failure of a massive payroll project involving SAP software has California lawmakers, state officials and the vendor pointing fingers of blame at each other.

California fired SAP from the project in February and suspended work on it, saying that despite the expenditure of more than $200 million, the system was error-prone and far behind schedule. Officials have been weighing what to do next.

Controversy is now mounting anew over who is responsible for the project's woes.

The system "suffered from a failure to resolve core issues raised early and often, chronic leadership turnover and lapses in due diligence," states a report released this week by the state Senate Office of Oversight and Outcomes.

State Controller John Chiang's office, which sponsored the project, "was not always candid about the difficulties" being faced and "delivered upbeat reports to the Legislature and others that often only hinted at the turmoil churning within the project," the report adds.

The Senate Budget and Fiscal Review Subcommittee 4 was expected to discuss the report during a hearing on Thursday.

Chiang's office and SAP "blame each other for the project's collapse, with the dispute expected to be settled in court," with as much as $190 million at stake between the $135 million the state wants to recover, and another $55 million SAP believes it is entitled to, the report adds.

Dubbed MyCalPays, the system was supposed to modernize the state's payroll for 240,000 workers across 160 departments. An initial pilot was rolled out last year in Chiang's office, covering 1,300 workers, but rampant errors persisted until Chiang halted the project in February.

The Senate report cited "frequent turnover at the top" of the Controller's office as a possible contributor to the project's issues.

Three different controllers have been in charge of it during the past 10 years, although Chiang accounts for seven of those, it states. "In addition, the Controller's team had at least five different project directors and four different project managers, with half of those leadership changes in the last 18 months alone."

A Chiang spokesman fired back at the report, saying it "demonstrates a misunderstanding or oversimplification for some of the key issues involved in MyCalPays."

For one, Chiang's office "was forthcoming and had great communication with the legislature" about the project, said spokesman Jacob Roper, via email. "We held nine formal legislative briefings in 2011 and 2012, alone. The report only mentions some PowerPoints used in those briefings, which don't reflect all the information offered to legislative staff."

"We have also issued our own, internal, preliminary report on the project's history: what went wrong, what worked, and what lessons can be learned," Roper added.

The Senate report also includes "troubling misstatements," such as a suggestion that there was confusion regarding responsibilities on the project, Roper said. "But the responsibility it references -- data conversion -- is not only clearly defined in the contract as SAP's responsibility, but also in the statement of work for the company."

SAP is unmoved by the report's conclusions, according to spokesman Andy Kendzie.

"We stand behind our software and our actions on this project," he said. "As we said before, we believe we have satisfied all contractual obligations. SAP and the state were jointly responsible for implementation of the system. We believe we upheld our side and share of the responsibilities. We dedicated our best resources to this engagement and had every confidence we could have completed it."

It may be impossible to reach a final determination of everything that went wrong with the project, according to one observer.

"Clearly a tapestry of fault is woven through the project to such an extent that even the auditors could not untangle the threads," said analyst Michael Krigsman, CEO of consulting firm Asuret.

While with any IT project there is a shared responsibility between customers and vendors, "the question is to what extent is the vendor responsible to make sure they're selling the right thing," he added.

The question now is what next steps state officials take regarding MyCalPays as well as other large IT projects.

Earlier this year, Chiang and California Gov. Jerry Brown convened a task force charged with making recommendations on how the state could improve its IT procurement and implementation processes. A report with its findings was released Thursday.

"Abstract, high-level recommendations are fine in theory but projects succeed or fail based on the details of execution," particularly training, Krigsman said. "It's very easy to talk about this stuff but going from the 50,000-foot view to the 10-foot view is a very big leap."

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris' email address is

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