For Lee C. Wilbur, there was the matter of the mice.
To be sure, like other senior financial executives at outfits installing enterprise resource planning (ERP) systems, Wilbur, CFO of The Jackson Laboratory in Bar Harbor, Maine, has found that people problems can cause as many mishaps as flawed technology can.
Inept internal information-technology people as well as untested systems integrators can cause ERP cost overruns, delay projects, and threaten a company’s image and customer relations, CFOs and risk management consultants say.
Dan Brennan, chief operating officer and cofounder of Gladwyne Software Surety, a King of Prussia, Pa.-based risk management consulting company focusing on information technology, says it’s common for IT project costs to burgeon beyond limits.
Systems integrators working on an open-ended, time-and-materials basis rather than for a fixed fee have an interest in quoting low on a project and seeing the work grow as the project proceeds. They benefit by placing a “veil of complexity” over their work, he says.
Brennan gives the example of a project Gladwyne worked on recently that involved a leading communications firm he wouldn’t name. Originally, the integrator on the project came in with an estimate of $7.8 million for the work on a time-and-materials basis.
Asked for an estimate of what the job would cost on a fixed-fee basis, however, the integrator returned in two days with a figure of $19.9 million.
“You can see why they go over budget” on open-ended contracts, says Brennan.
Even in fixed-fee contracts, there’s “a natural competitiveness between the system buyer and the provider,” the consultant says. “The buyer wants to get the most work and customization,” he adds, and “the integrator wants to claim victory and get out.”
It was different for Jackson Laboratory, a non-profit, genetic research facility that supplies about two million mice a year to universities, medical schools, and research laboratories as part of its mission.
Besides the challenges of integrating the mouse-development functions into its Oracle 11i ERP system, the people problems Jackson has faced in installing the system stem from internal human resource problems, rather than troubles spawned by software suppliers or systems integrators, Wilbur says.
“We’re very, very lean in terms of staffing,” the CFO says of Jackson. “When you take your best and brightest [to be part of the ERP installation], not many are left to do the everyday work.”
Each of the lab’s major functions—including obtaining grants, producing research resources, and administrative support—has only about two or three people at the top. And each of those has been toiling at both a day job at the lab and participating in the ERP installation.
“We’ve got a very strong level of expertise, but not a lot of depth below those [people],” laments Wilbur. “Unfortunately, that’s part of life in a not-for-profit.” Thin staffing has probably caused two-thirds of the project’s cost overruns, Wilbur says, although he’s not sure by how much costs have outstripped expectations. The CFO says Jackson is running “pretty close” to the $5 million budget it estimated for software, hardware, consulting, and training.