$50M SAP Rollout Runs Into Trouble in Tacoma

Added costs, snafus mar big-bang project

Cost overruns, glitches and other bumps hit during a $50 million-plus rollout of SAP AG's ERP, CRM and other business applications in the city of Tacoma, Wash., have generated a storm of bad press and end-user complaints, and a call from a city councilor for an audit to determine the causes of the problems.

Some Tacoma administrators said they believe that overall, the year-old implementation of SAP R/3 has been successful. But they acknowledged that complaints about the system's payroll, billing, budgeting and customer service performance have proved to be a thorny problem.

Moreover, the city has had to pay nearly $700,000 to Tacoma-based integrator TUI Consulting Inc. for unforeseen customization work.

"They threw the switch at one time, and a lot of failures happened," said Scott Huntley, communications supervisor for the city. The extensive project gave the city an integrated system to run all general operations, such as police, fire and utilities. End users learning to use the new system initially complained about implementation problems, he said.

Of late, the most pressing issues have been problems with the financial module, which have led to delays in hammering out the city's budget. There have also been performance issues with the SAP CRM software that supports the city's five utilities.

Tacoma's system problems have become so prominent that city councilor Julie Anderson last month filed a resolution calling for an audit.

"The City of Tacoma is experiencing unanticipated costs in operating the system, and there are significant gaps between our expectations for functionality and how the SAP system currently operates," Anderson said in an e-mail. "As an elected official, I am unable to determine if these issues are due to SAP software, management of City of Tacoma employees, or poor consulting services from TUI."

Problem Areas

"Technically, 99% of the system is working fine," said Mark Crisson, CEO of Tacoma Public Utilities. The problems have tended to be mostly the result of implementing new processes and formats that SAP supports, he said.

For instance, some of the bills the CRM application generated were difficult to understand compared with their prior format and led to a flood of service requests, Crisson said. The city had to add staffers to handle the increase in requests and paid $270,000 to TUI to make modifications.

Tacoma now has a much-desired work management system to help support job-order fulfillment. However, utility service representatives have to plow through as many as five screens to access customer data. That forced the city to sign a $405,000 contract with TUI last month to do some extra work, including collapsing the customer data into a single screen.

Some of the early problems have been solved, officials said. For instance, the payroll application issued inaccurate checks, but that was related to manual errors that haven't recurred, said IT personnel.

More significant were the problems with the budget module. The difficulties of switching to the new system, combined with a $30 million city budget shortfall, resulted in a "perfect storm," said David Otto, director of business information systems for Tacoma. Despite this, the city was able to meet its preliminary budget deadline of Oct. 31 and expects to have its final numbers by year's end.

"The city of Tacoma violated one of the key rules of a big ERP implementation," said Joshua Greenbaum, an analyst at Berkeley, Calif.-based Enterprise Applications Consulting. "They tried to do too much, too fast." He added that Tacoma "didn't hold the integrator's feet to the fire on the nondelivery of functions."

SAP has no worries about an audit, said spokesman William Wohl. He noted that R/3 has enabled Tacoma to establish common practices and become more efficient. "The software is helping transform city government in a way not otherwise done with its legacy systems," Wohl said. "At the end of the day, the customer has said the software tools are an asset."

Copyright © 2004 IDG Communications, Inc.

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