Wednesday, June 09, 2010

Ballard Signs $16 Million Contract With Financially-Struggling IT Company

Due diligence is apparently not one of Ballard's Rules. The administration of Mayor Greg Ballard put out a press release today announcing that the City had inked a $16 million contract with Zanett, Inc. to implement an enterprise management Oracle sofware solution for city-county government. “This project is being driven by the collective goal to make Indianapolis-Marion County one of the most efficient municipalities in the country,” said ERP Executive Committee member, I.T. Board Member, and Controller, David Reynolds. “Residents should expect to receive the highest quality of service from their local government, and a fully integrated and functional ERP system will allow us to meet that demand.”

According to Tech Trader Daily, Zanett recently announced that it expected to be delisted from NASDAQ because its stock continued to trade below $1 a share. "Yesterday, the company announced that it expects to receive a Nasdaq de-listing notice related to having a stock price trading under $1 for too many days in a row," TTD reported in March of this year. "The company, an IT services consulting firm, said it plans to appeal. In trading Wednesday, the stock fell 3 cents to 31 cents." TTD commented at the time that "something peculiar [was] going on . . . with a micro-cap stock called Zanett, Inc." TTD went on to discuss how the company claimed that business was booming, having just recently signed $12 million in contracts during the first two months of the year. After the company released its press release in March, the price of its shares shot up 521% in a single day of trading from 31 cents to $1.93. It makes you wonder if someone wasn't trading on inside information about future contracts to be signed with the company, including the Indianapolis deal just announced today for the stock to move that much after it announced it might be delisted. According to the IBJ, the publicly traded company last year reported a $2.3 million loss on $41.4 million in revenue. The latest trading of the stock today as reported by Daily Finance shows the trading down 3.85% at $1.25 a share off its 52-week high of $3.74 a share.

The final price tag for the Indianapolis contract announced today is much higher than expected according to the IBJ. "Early estimates had pegged the Indianapolis IT project’s cost at $4 million for implementation, plus another $1 million for annual maintenance," Peter Schnitzler reports. "But that was before its scope had been professionally studied by a vendor and become fully understood." He continued, "Rodman pointed out that, in the bidding process, some vendors pegged the project’s full cost as high as $30 million." Apparently the Ballard administration has already dumped $2 million into the project from funds set aside in the current IT budget. An expert told Schnitzler that the planned project might be a bit of "overkill."

I used to be general counsel for an IT company. I can tell you from my experience during the late 1990s and early 2000s with my former employer, whose primary customers were government agencies, that I often heard complaints from government agencies who implemented Oracle's PeopleSoft software. Its costs are outrageous, and its effectiveness is often overrated. I think it's designed to ensure that the customer will have to keep going back for expensive maintenance overhauls to keep the revenues flowing to Oracle for years to come. It is astonishing that the Ballard administration would dump this much money into a new IT project at a time that the City-County government budget could be facing enormous deficits. I would like to know who these vendors used to lobby for this contract. It might say a lot about why Ballard was so anxious to sign the deal.

19 comments:

Paul K. Ogden said...

Gary, I worked at the State a few years ago. The State used, and still uses, PeopleSoft software for state personnel matters. You apply for a job with the State, you have to use PeopleSoft. You take an state employee ethics class you have to use the PeopleSoft system.

It is the most horribly designed system known to man. People applying for jobs in my division would just give up it was so hard to manuever through the system to apply for a job. It is the type of user-unfriendly system you'd see maybe in the middle 1980s, not something you'd see in 2010.

Jon said...

Someone should ask our mayor why we always buy the high priced spread. Oracle, as in an Oracle databases, own PeopleSoft and both of these products are extremely pricey. Not only is PeopleSoft and Oracle expensive to purchase they both require considerable dollars to support and maintain. There are other less costly solutions out there but we never seem to purchase those systems. Time to follow the money again folks.

Downtown Indy said...

Back in March the City also turned on another 'high priced spread' system - Accella Citizen Access.

That is the stuff they use to enter and track various activities in the Code Compliance division.

It's horrible and replaces what seemed to be an entirely functional and user friendly tool. The web interface is now 5 times slower to access info because it is all buried behind multiple mouse clicks and you can't just go straight to what you want - you have to drill down repeatedly to find basic info like due dates and what the complaint or action pertains to.

And, if you don't know which of the 6 top level dvisions your case is under, you have to look through all of them until you find it.

That was probably several million dollars of waste right there.

Advance Indiana said...

I always get a kick out of the people they put on these IT selection committees. They are always totally clueless and buy into whatever crap is being fed to them. Governments across the country have wasted billions of dollars on technology over the past 20 years simply because the people making the decisions had no clue what they were being sold. I mean, the administration actually included comments from Marilyn Pfisterer on its press release making the announcement. She is a nice lady, but she has no business making any decision that requires an education level beyond the sixth grade.

Advance Indiana said...

Here's the quote: “ERP will promote efficiencies, and eventual cost savings within the enterprise,” said City-County Councilor Marilyn Pfisterer. “This will allow the City-County to make better, faster and more informed decisions.”

She has no idea what any of this means.

Sean Shepard said...

My guess is that there are probably very, very low-cost open source options that would be (a) free and (b) run on low cost Linux (a number of 'free' and 'pay for support' variants abound) systems. It would be a wonderful project to work with any government agency in looking for opportunities to (save millions of dollars) where possible leveraging these kinds of technologies.

There is a tremendous support community for this kinds of stuff and all kinds of developers that would work (for compensation of course) to modify, add to or otherwise make something work for any government agency. Best thing is, you typically have access to the entire source code so there is no "what if X goes out of business" ... who cares? You have the source code!

Most companies, organizations and government agencies don't fully realize what can be done for them at much lower cost these days. Unfortunately, unless your set up the right way there isn't a lot of money in pushing the "free" or "low cost" solutions. You don't need Windows, you don't need MS Office, you don't need IIS, MS SQL or even expensive CRM or ERP solutions in many cases.

Sometimes, the actual RFIs or RFPs are even written by the large providers. In the telecommunications business the large providers always had their own boilerplate RFP materials and it was a big win if you could get your customer (or prospect) to use yours because of the nuanced bias inherent to them. Doesn't mean that happened here - just noting anecdotally.

Unigov said...

Downtown - "Accella Citizen Access" - thank you - the new system is HORRIBLE, you have to know the exact address to do a query. They couldn't have designed a worse lookup function if they tried.

As for Ballard, well, go look at Rex Early's book about how the original cable TV contracts were rewarded.

Indy Student said...

Gary, when looking over the IT board, apparently there's a second board that consists of actual people that work in IT. I don't see why that isn't the primary board. Let all these political types go screw off and have lunch somewhere instead of making decisions in a field they know nothing about.

Isn't Frank Anderson on the IT board?

Advance Indiana said...

Here's a case in point to my earlier comment. A few years back, the Indiana courts announced it had inked a deal with CA to develop and implement a statewide court management system. My company had previously sold CA products but cut our ties because nobody want to buy their enterprise management system. It seemed the many businesses and governments that had bought their were displeased. We were shocked that the courts chose CA because they had absolutely no experience with court systems. We had just successfully completed the implementation of a court system for Lake County in partnership with CourtView, which was already implemented successfully in Tippecanoe and Vanderburgh Counties. It made no sense why the state courts would choose CA. A few years and a few million dollars later, the state courts figured out that CA didn't know what the hell it was doing. CA walked away and returned every dime it had been paid and the courts had to start all over again. It is still not fully implemented and it's been almost a decade. You had to wonder just who the courts consulted before choosing CA; if they had done any reasonable due diligence on court systems, they would have never chosen them.

Advance Indiana said...

Here's a case in point to my earlier comment. A few years back, the Indiana courts announced it had inked a deal with CA to develop and implement a statewide court management system. My company had previously sold CA products but cut our ties because nobody wanted to buy their enterprise management system. It seemed the many businesses and governments that had bought their systems were displeased. We were shocked that the courts chose CA because they had absolutely no experience with court systems. We had just successfully completed the implementation of a court system for Lake County in partnership with CourtView, which was already implemented successfully in Tippecanoe and Vanderburgh Counties. It made no sense why the state courts would choose CA. A few years and a few million dollars later, the state courts figured out that CA didn't know what the hell it was doing. CA walked away and returned every dime it had been paid and the courts had to start all over again. It is still not fully implemented and it's been almost a decade. You had to wonder just who the courts consulted before choosing CA; if they had done any reasonable due diligence on court systems, they would have never chosen them.

Advance Indiana said...

Go check out Ballard's campaign finance reports and see how much some of these MBE/WBE businesses have contributed to him. They sure as hell ain't giving him money because he's doing a good job running city government.

Downtown Indy said...

“This will allow the City-County to make better, faster and more informed decisions.”

Wouldn't that boil down to simply THem giving the latest iPhone to 3-4 B&T attorneys?

Indy Student said...

Sean, as someone who works in IT, what you say 100% true. I can only speak from my experience, but I love the gmail system. I hate Outlook, the setup, and the seemingly random problems it often causes. My business account and personal account are both on gmail, so I can check it from any computer and still get the fancy @businessname.com thing. You'd think EVERYONE would be doing it by now.

But people are so entrenched in their ways. They HAVE to use Microsoft Office, Outlook, or else they just have no idea what to do.

And it isn't an age thing either. Us young people can be just as problematic when it comes to technology.

At some point, businesses and governments need to realize that not everyone is a computer nerd and they'll need to do company wide training on computer basics just like they would do company training on how to fill out forms from HR, or sales techniques, or what have you.

But when and if that day comes, I might need a new line of work. Maybe teaching those classes...

Marycatherine Barton said...

Yeah, who lobbied you for this contract, Mayor? Thanks to AI for so clearly writing this post. Actually, with the background and type you use, it is always so easy to read here.

dcrutch said...

You have to go biological parenting being more important than protecting children to find something more overtly nuts.

Why can't things that should obviously be user-friendly be tested by a bunch of users before selection? Do you typically buy a car before driving it? I guarantee you don't for your wife before she drives it.

I'm not on the inside, but from the outside it reeks of corruption or ignorance, as much as bringing a halt to exploring privatized stadium management- without telling us why.

Jon said...

Per the city controller, David Reynolds, at a meeting of the administration and finance committee on 6/8, the five year cost will be 18.8 million.

Advance Indiana said...

That presumably includes the $2 million the city already dumped into the project. My guess is that was paid to an IT consultant, who wrote the RFP to ensure that PeopleSoft got the contract.

Concerned Taxpayer said...

The city must already be using this screwed up program.
I tried to report a problem with an automatic signal & the girl in the "Mayor's Action Center?" told me she couldn't find the intersection without an EXACT ADDRESS!
Well...INTERSECTIONS DON'T HAVE EXACT ADDRESSES!!!!!!!!!
So I guess the problem will just continue.

Downtown Indy said...

C. T., the current tool for the MAC is Seibel CRM. Seibel CRM was sucked up by .. ta da .. Oracle - 4 years ago.

They have always been anal about the exact address for any complaint. I wrangled with one of them once, giving the intersection and telling them I didn't know the address. They insisted it 'can't be put into the system without an address.' While I had them on the phone I google mapped it and digured it out for them.

So much for 'action.'