back to article IBM Australia on the stand over $1bn blowout

In 2007 the Australian State of Queensland decided it needed shared services arrangements to streamline its affairs and reduce costs. One shared service was a new payroll system that would be used, in part, by the State's health department. IBM won a deal to do the job for an initial payment of $AUD6.19m. But by the time the …

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Mad

Cost spiralled from $6m to over $1000m. You couldn't make it up. Makes UK Govt procurement look efficient.

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Devil

Re: Mad

The devil is in the initial project definition, and the change control process thereafter...

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Re: Mad

The devil is in the initial project definition, and the change control process thereafter...

So true. I've seen overruns of this magnitude, proportionally, even on tiny projects - small one-off enhancements for a major customer, for example, where the initial implementation done to the initial specification is delivered in a couple of weeks, but then over the next couple of years there's one change request after another as the customer discovers new features they must have, or it turns out that their system doesn't work quite as they thought, etc.

That's not to say the original bids were realistic - I have no knowledge of this project beyond what I've read in this article, and I don't know anything close to enough about the situation to judge it anyway. But I wouldn't be surprised either way.

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I can never understand how these companies end up getting paid. Which civil servant was authorised to pay out $6mil but was able to spend over 100 times the amount? Whose signature is on the payments, and who gave them the authority to make the payments? I'm sure you can tell where i'm going with this if it turns out someone was taking money without authorisation, and if it was actually authorised then that raises even bigger questions...

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@ mike007

I regret to say that it doesn't just happen in the public sector; I've seen similar examples in the private sector where a sliding scale of penalties was negotiated, but despite that, they ended up paying the full amount and then even more on top of that, despite the massive delays and serious cost overruns (and in some cases, complete project failure).

I'm sure that part of it comes down to ego; no-one wants to admit that they have made a mistake or that they haven't been as concientious as they should have been in monitoring the project. They do everything (anything?) to keep the project running and end up throwing good money after bad.

I would also say that I've seen some projects where it was doomed to failure; they just didn't get the buyin from anyone involved right from the start; and when the project started going slightly wrong, instead of dealing with the issue, they just swept it under the carpet, hoping that if they ignored the problem it would go away.

The real problem in this case is that a lot of people have really suffered very badly because of the problems (and AFAIK, some are still ongoing). The hearing is highly unlikely to do anything in practical terms to resolve the issues; and I'm betting that as previously, no-one will learn anything from this awful situation. But of course, as it is public money, the tax payers of Queensland end up footing the bill; and they will be paying for this for a long time.

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Re: Patients?

and even sadder, the same company comes back to bid again, and often wins more contracts.

This was a payroll system right? Pretty much the same thing many companies manage to do pretty well most of the time (my experience is that screwups are usually user generated) yet their hideously expensive version of sage still can't get it right. Managers from both the government and IBM need to be taken out a beaten as an example. This BS has to stop but it won't until people are actually accountable. Having done a stint on the railways (engineering) I noted more caution when mistakes potentially meant jail (and the very least the end of your career) then elsewhere when it meant reaching for the excuse book, then turning it into some weird kind of success and getting a bonus.

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Anonymous Coward

Public Sector Procurement You couldn't make it up !

I have worked on large scale shared services transformations for government and while the one I worked on did not overrun by that much and delivered, almost, on time. The ability of public servants to make a mess of defining requirements, agreeing strategy between them and sticking to it during design and delivery I am not surprised that a project of this size became out of control. I have sat in steering committees where senior managers have all agreed a decision and then immediately ignore the decision as soon as they got out of the meeting and pursue their own agenda to the detriment of the project and the client.

Having said all of that the major consultancies also have the innate ability to "F**K" up royally this could have been the perfect storm!

Register keep up the excellent coverage of these situations.

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FAIL

nobody got fired for going with IBM

could this be about to change!

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Happy

Re: nobody got fired for going with IBM

In this case, the probably more interesting question is who gets sued for buying IBM? I can't see Logica or Accenture kicking up too much of a fuss as they have to work with IBM, but I can see the taxpayers of Queensland looking to recoup some costs from Big Blue.

/More popcorn, please!

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Mushroom

SAP Project?

Cost Overrun?

Now there's a surprise (not)

<-- For SAP HQ

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Paris Hilton

SAP

Anyone who has ever had to deal with the byzantine wage and work systems that exist in Australia, constructed by the powerful trade unions for the very purpose of being viciously complex (and thus open to rorting) will be able to nod knowingly at this article.

It is close to impossible to build payroll systems that deal with the millions of exceptions that exist.

Add to this the fact that it is SAP based, another "kiss of death" if ever there was one, and you have a project that will never end and will cost unlimited money and will never actually work.

The Australian Trade Union movement has spent lifetimes crafting trade agreements that guarantee them power in the workplace, and which are more or less technically impossible to implement because no one actually knows what all the rules and exceptions are.

It's a disaster zone, and sadly it is not unique to Australia. :(

Paris: Sanity in our time.

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Re: SAP

"Anyone who has ever had to deal with the byzantine wage and work systems that exist in Australia, constructed by the powerful trade unions for the very purpose of being viciously complex (and thus open to rorting) will be able to nod knowingly at this article."

Yeah sure, because in an age of ever increasing CEO salaries, parliamentary super for life and a failure of the executive to put in place a system of payroll that works... It is definitely the unions fault.

Way to draw a long bow.

Maybe just stick to bitching about IBM. After all it was not the unions who got paid 400 million for a broken system.

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Re: hungee Re: SAP

Agreed, it would seem other organizations in Queensland manage to pay their staff despite the unions, so I'd have to say the blame lies more with IBM.

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Re: SAP

If you read closely, IBM was paid $37m - still a big increase but not the $400 million or the $836 million - that big money was probably almost entirely internal - i.e. union & management - costs. So no, this is not 'evil big company screwing naive government agency'. This is just 'SAP is a PITA'.

This type of overrun seems to happen a lot in big SAP systems implementations - the same may be true of PeopleSoft and Oracle, I don't know. People do not realize that 'computerizing' business practices (which is what SAP is basically doing) is a huge undertaking, especially when the organization is large and the business rules are complex, as these Aussie 'wage and work systems' apparently are. You have no idea how complicated your business is until you try to write down the process in the level of gory detail that is required to automate it.

A company I used to work at, with 65,000 employees split between US and international did the SAP thing. Their original plan was to roll out in the US first, then do international. The whole project was to take a year or two (I forget) and about $300 million, of which IIRC $30-$50 million was to go to the vendor (software, hardware, services). By the time the US was done it had taken five years, the cost was over $1 billion. The company cancelled the international rollout, and SAP stock dropped significantly the next day. The additional costs were almost entirely internal labor and training.

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Re: SAP

Some interesting facts about payroll project

- They had about 80,000 employees to pay

- Because of the multiple awards and hideous complexity of the awards (think "hand washing allowance"), there are approximately 24,000 different possible combination of items on a pay slip.

- Most of the mentioned $450M (or $1.2 B projected cost) is for the clerical support to process pays, not the IT cost

While the IT project was a horrendous screw-up with bad design choices (e.g. award processing is done in SAP AND in the front end WorkBrain scheduling/time keeping software) equally bad was the management of change, business process.

They did many things wrong

- changed the organisation, payroll system, scheduling system, time sheeting system all at once

- went live without adequate testing

- wrote a poor contract with IBM, allowing them to eventually bill twice the original contract value.

- did not change the major weakness in their business process, which was to process pays before they received time sheets, meaning that they were forever having to go back and adjust pays, sometimes up to 2 years in arrears

- decided to integrate WorkBrain and SAP even though it had never been done before

However, while I am no fan of SAP, this implementation does produce the correct result if given the correct input data. The huge cost is mostly in the administration to provide the correct time info. (So it's clearly a bad design, but it does work with herculean effort).

Not everyone came out badly though. HP sold a couple of extra Superdomes. I'm sure the salesman was happy.

No need to find a conspiracy here, when mere incompetence will suffice.

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FAIL

Re: SAP

My company employs 100+ people. We are in the transport industry.

Don't fucking lecture me about the influence of trade unions on payroll systems. You are a prick and you are clueless.

As other posters have noted, the payroll rules are indeed monstrously complex and there is exactly one group that bears the responsibility for this state of affairs.

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Stop

Re: Gary Bickford Re: SAP

".....This is just 'SAP is a PITA'...." Hmmmmm, so that SAP software, it got to be so popular because it was a "PITA"? No, it got to be popular because - if you employ or contract people that know what they're doing - it works really well. The key with SAP, as with any complex software, is to employ competent project management and techies that know their stuff. Going on the evidence, IBM obviously did not, or simply cared more about squeezing every last cent out of the customer rather than building a working solution.

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Perhaps some responsibility should be taken by the people that negotiated and signed the contract.

In the real world a price is agreed and the terms of payment are agreed. The final payment is not normally made until the system meets the agreed specification. The contractor is normally responsible for the cost of fixing bugs etc. If the agreed specifications have changed then the customer would be expected to meet the cost of the changes.

Where was the fallback option, surely the original system was still available.

Could only happen in the world of Government contracts.

Heads should roll.

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