USC Spent Millions for Software It Already Had

March 14, 2016

Investigative Reports

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By RON AIKEN

USC-1

Duplicate systems purchased at enormous cost, reasons doubted

BREAKING UPDATE: Multiple sources have confirmed to The Nerve Tuesday morning that approximately 30-35 consultants and contractors have been laid of PeopleSoft’s HR component and given end of the day (today) to leave. The HR rollout, last scheduled for January, has been delayed indefinitely. OneCarolina Phase II management staff were also fired: director Kristine Sunda, project manager Howard Haynes and overall lead John Graham. For real-time updates, follow @RonAiken and @TheNerveSC and sign up for breaking email alerts to your inbox by clicking button at right of page. — Ron Aiken

On Oct. 26, 2009, the executive committee of the University of South Carolina Board of Trustees voted to approve Phase I of the OneCarolina initiative, “a project to completely overhaul the University’s 30-year-old administrative systems, which included student information, business and financial, and human resources systems, to improve business processes,” said USC vice president for Information Technology and Chief Information Officer Bill Hogue.

The firm that won the bid was SunGard (now Ellucian) Higher Education’s Banner software suite at a three-year price tag of $42.5 million, with $35 million of that in one-time funds. The announcement was the culmination of three long years of delays related in part to the economic challenges of the Great Recession and in part due to protests and appeals from losing bidder Oracle. SunGard was represented at that board of trustees meeting that day by the man who made the sale, Columbia-based director of strategic accounts Lynn Derrick.

When asked at that meeting how long the software was expected to last, Hogue said the lifespan of the software was from 10 to 15 years, board minutes show.

Just two years later, however, USC was bidding out for the same software it already had purchased that would handle the finance and human resources components of OneCarolina. Much to Banner’s chagrin, the $34.8 million contract went to rival Oracle, whose regional vice president of sales was none other than Lynn Derrick, who had switched companies in 2011

“A GREAT DAY”

The October 2009 award of the contract to SunGard was celebrated as a huge victory by its sales team, some of whom spoke to The Nerve on condition of anonymity.

“We were beyond psyched,” a then-SunGard employee said. “We had worked so hard on it and it had been such a struggle with so many delays, but it was finally here.”

“I remember we went out to Villa Tronco to celebrate, and Lynn Derrick was on top of the world,” another source said.

The reason is easy to understand. On deals such as these, the paydays for lead salespeople are big.

Really big.

“I would not be surprised if Lynn made seven, eight hundred thousand on the deal,” a person closely involved with the sale said. “The lead salespeople can make hundreds of thousands of dollars, easy, on sales like this. Maybe more.

“It was a huge win for SunGard.”

With the project a go, work began in January 2010. The entire project was formed around six modules, each with their own software and implementation schedules – student admissions and recruitment, student finance (tuition and fees), student registration, student financial aid, finance and human resources.

The Banner purchase included the software for all six components up front. The only fees that would come down the road – and not insignificant ones – would be on the implementation side as each one was rolled out over the next few years according to a fluid timetable.

In late 2011, with the Banner implementation racking up “success after success” according to a May 2011 OneCarolina update, Lynn Derrick left SunGard to take a promotion with former adversary Oracle, becoming a regional vice president for Higher Education tasked with selling its leading higher-education product, PeopleSoft.

Less than a year later, on Oct. 4, 2012, USC made the unusual decision to abandon the final components of SunGard’s implementation – the finance and human resource software it already had purchased but would now shelve – and rolled out USC-RFP-2305-BB advertising a contract to “Provide human resource, payroll and finance services.”

Twelve days after the RFP was posted, a pre-proposal conference was held at USC. Five firms bid, one of whom was Oracle. Representing Oracle at that meeting were six people, including Derrick.

After the formal vetting process concluded, on Oct. 22, 2013, the university proudly announced it had selected a vendor for Phase Two of the OneCarolina project: Oracle.

Once again, Derrick could celebrate. The same was not true of his former colleagues.

“We felt like they sniped our business,” said a source with SunGard, which became Ellucian in March 2012, said.

“They had already purchased the HR and finance software from us,” a former SunGard salesman said. “We had every intention of rolling out and proceeding with the implementation before we found out it was going to be re-bid out then given to Oracle.

“It didn’t make any sense. The value of having an entire university system integrated under the same software platform is obvious. The systems can speak to one another, the maintenance and support people are the same, you’re already on campus and have relationships.

“Bringing in competitive software with its own issues and people and support that wasn’t as good as ours, in my opinion, was just crazy.”

It was also, the same SunGard employee said, a lot more expensive.

“They had already paid for HR and finance from SunGard, the licensing. If they stayed the course with Banner, they’d have spent significantly less, a fraction of what they paid Oracle.

“I mean, you thought it was great in 2010, then three years later scrap it and spend three times the money.”

WHY SWITCH IN THE FIRST PLACE?

There’s no debate that USC’s payroll system was decades old and in dire need of an overhaul. According to a current grants manager at a large USC college, processing payroll meant getting three signatures by hand and snail-mailing it across campus for processing, where changes sometimes wouldn’t be reflected for weeks.

“Meanwhile with our existing financial software I could process grants in the millions of dollars with five online signatures in one afternoon,” the manager said. “We needed the help in payroll, and I think people were eager to see an upgrade.”

Despite purchasing the software in 2013, it did not go live – and even then, without its sister program, the HR component – until July 1, 2015. The problems with that launch and its subsequent escalation across campus have been documented here.

As to why USC switched from SunGard/Ellucian’s Banner software to Oracle’s Peoplesoft, USC spokesperson Hickman said it was a group effort.

“That decision was made unanimously by the project team based on a conclusion that Ellucian’s technical and product blueprints would not yield the quality of services that USC needs,” Hickman said. “Banner is working and we receive extremely high user ratings from students. Our goal is to stabilize PeopleSoft by the end of the fiscal year.”

For industry professionals, however, the switch made little sense.

“I don’t know of any of the hundreds of institutions that bought the Banner software then turned around and switched out midway through,” said a former sales representative with SunGard. “You pay so much more that way. I mean, it’s taxpayers money, and it’s wrong to spend it that way just on the surface. I don’t know how they justified this.”

The former employee also said user reviews for the HR and finance components are stellar across the country.

“It’s a great product,” he said. “Hundreds of institutions in North America use Banner for HR and finance successfully. It’s not like, ‘Hey, this is a risky product.’”

“There’s just no reason to switch because you pay a significant amount more.”

For a business manager at a satellite campus who called The Nerve, the total cost now for One Carolina and its poorly functioning PeopleSoft systems is not worth the investment.

“We’re at what, $80 million now and we still don’t have the HR component and I still can’t see a budget or pay vendors?,” the manager said. “And yet, I can’t get an employee who has worked for me for 15 years a raise because someone new they hired makes less and it would upset their ‘band’ pay-scale system? It’s ludicrous.”

For the longtime grant manager at a major USC college, the daily struggle only gets worse as time goes on.

“I come in and get berated by professors who don’t understand why their grant accounts are so off,” the manager said. “And then I get no help from the university’s dedicated PeopleSoft specialists or IT? It’s insane. If I didn’t need the benefits and love working for the university, I’d be finding something else to do, because this does not make coming into work fun.

“We’re coming up now on end of fiscal year, and it’s going to be a train wreck for a lot of people.”

Just last November, the University of Florida had to repay the federal government $19.8 million for accounting irregularities on hundreds of grants it administered in a settlement that alleged, among other charges, overcharging and improper accounting of costs – the same allegations USC staff now are making.

The University of Florida uses PeopleSoft.

Can the same happen at USC?

“It’s a program in a whole lot of trouble,” said a former IT developer who worked on the PeopleSoft implementation at USC before leaving when staff turnover became excessive.

“The people who worked on it to begin with, I was in an office with folks who had a combined 60, 70 years of PeopleSoft experience.

“They were ignored, and as they grew frustrated with USC management they left and were replaced with people far less experienced who they could pay a lot less. The management team on the technical side had no PeopleSoft experience. They were Banner people who didn’t understand what technical fixes were needed or how to do them.

“It was just a recipe for a nightmare implementation, and that’s exactly what they got. It’s going to get worse before it gets better. I’m glad I got out when I did.”

At least one person, though, came out ahead.

“Lynn Derrick made out like a bandit on these deals,” the former SunGard salesman and colleague of Derrick’s said. “It’s been a very good two sales for him.”

Calls and an email to Ashley Grant, head of PeopleSoft correspondence with the Division of Information Technology, were not returned. Messages left with Bill Hogue were not returned. Calls and emails sent to John Graham, the PeopleSoft infrastructure manager at USC, have not been returned, and a request for comment from USC president Harris Pastides has not been received.

Reach Aiken at 803-254-4411 or email him at ron@thenerve.org. Follow him on Twitter @RonAiken and @TheNerveSC. Sign up for email alerts to receive breaking news at the top right-hand side of the page.

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