Finishing massive SAP project in current form may not be 'feasible,' study says

California recently fired SAP from its role as contractor on the MyCALPAYS project, which is supposed to unify the state's payroll systems

It may not be "feasible" to complete a gigantic SAP software project meant to unify California's many public employee payroll systems, according to a report issued this week by the state's Legislative Analyst's office.

California officials recently fired SAP from the struggling US$373 million project. While the project had been based on SAP software from the start, the vendor came on as systems integrator in 2010, after the state fired BearingPoint, its original contractor.

While the first of five project phases went live last year, it "revealed a significant volume of troubling errors," according to state Controller John Chiang's office. Employees covered under phase one reportedly suffered from incorrect pay calculations and other issues.

California has already spent more than $260 million on the project and officials are undergoing an assessment of what to do next, including whether it will be possible to use any part of SAP's work.

Dubbed MyCalPAYS, the system was first proposed in 2004 and would serve nearly 300,000 state employees, according to the Legislative Analyst's office report.

"The Legislature now faces very difficult decisions concerning this project," the report states. One path may be to decide spending more money on the project is foolish and instead funds should be directed elsewhere, it adds. "The Legislature, on the other hand, must weigh this concern against the importance of updating the state's aged payroll systems, a critical component of the state's personnel and financial management."

However, in general, California's legacy payroll systems "seem a credible (and, in practice, the only) alternative for the state to use over the next few years," the report states. "Given the availability of these still-functioning legacy systems, we suggest that the Legislature prioritize thoroughness over timeliness as it evaluates the shortcomings of [MyCalPAYS] and considers new alternatives."

It could take a year or more for the state to have an independent contractor thoroughly vet SAP's work and decide on a best course of action, the report adds.

However, continuing the MyCalPAYS project as currently envisioned may not be possible, according to the report: "Due to recent events, it is unclear to our office that integrating the state's payroll systems, in their current structure, is feasible."

Lawmakers should ultimately weigh both that scenario as well as a number of alternatives, it adds.

These include sticking with and maintaining the legacy systems; updating legacy systems in a decentralized manner; and hiring a contractor "to restart configuration with a new underlying software solution," the report states.

An SAP spokesman declined to comment Thursday on the report's findings and pointed to SAP's previous statement on being fired from the project.

"SAP is extremely disappointed in the SCO's actions," the company said at the time. "SAP stands behind our software and actions." Its software is "functioning in thousands of government agencies around the world," and SAP believes it has satisfied all of its contractual obligations, the statement added.

California is in a position where it will "have to play the ball where it lies," said analyst Michael Krigsman, CEO of consulting firm Asuret. "You've got to assess where you actually are today [with a project]. Everything you've done before is a sunk cost. Just because you've spent the money and the time doesn't mean you've got anything to show for it."

However, there's some hope. For example, if California has already decided on satisfactory new business processes as part of the project, those can "probably" be reused if they aren't dependent on something specific in the software, Krigsman said. This is not insignificant since developing new processes is "an expensive component" of IT projects, he added.

Meanwhile, California has a broader problem on its hands, as MyCalPAYS is not the only major IT project by the state to stumble in recent times. Last year, the state created a task force that is supposed to figure out how California can "ensure that the right vendors can be hired at the best price and to hold those vendors accountable for their performance," according to its mission statement.

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

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