Enterprise Compliance Today

Safety In Size? Not For IBM Software Implementations

Posted by Greg Carroll on Tue, Mar 26, 2013 @ 05:02 AM

How Queensland Health paid dearly for choosing a giant for a new payroll system.

 

corporate governance

People go with big companies because they feel safe. A familiar refrain is, "no one ever got fired for buying IBM." This debacle, where the final cost was 200 times the original price, shows how flawed that thinking is. Learn about our implementation method »

Australia has a new contender for most disastrous IT project ever. Our previous leader had been Customs’ Integrated Cargo System, which went so badly wrong in 2005 that cargo started piling up on wharves around the nation during Christmas that year, and backing up shipping traffic around the world. However, for sheer amounts of money thrown down the toilet and incredibly poor governance, you just can’t beat Queensland Health’s payroll system.

Today let’s look at some of the frightening statistics that have been borne of this bungle. In our next post, we'll look at some of the lessons learned.

What happened

The original contract price for the delivery of the new payroll system by IBM to the government was $6.19 million. It's a lot of money, but no one ever got fired for buying IBM, right? Yet by the time the system went ‘live’ in March 2010 the amount paid to the company was more than $37 million. On top of that, the government’s own costs to get it up and running were a further $64 million.

Then independent auditor KPMG reviewed the project and found that it had incurred operating costs of $440 million and that it would cost a further $836 million to make the system work for another 5 years. That makes a grand total of over $1.25 billion. Ouch! Now I’m not the greatest mathematician in the world, but that's about 200 times the original quoted price of $6.19 million.

I'm not saying that Queensland Health was wrong to consider IBM's system. I'm saying it's shortsighted to equate vendor size with quality of implementation. People often go with big companies because they feel safe. But your project is only as safe as the people implementing it.

Maybe hiring IBM increases your risk

Project management isn't like picking a box of something off a shelf. The job is really about trying to anticipate issues, and ensuring that you can handle them before they occur. Does the team from the big company have a good track record implementing the kind of project you have in mind? It's often the small vendors that are more attuned to that way of thinking. It's the approach we take at Fast Track, and it has paid off for our customers.

In our next blog post, we'll look at some of the lessons learned from the Queensland Health project, and how reflecting on them will help if you are examining your compliance tools.

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Tags: Best practices, project management