"It's a possible nightmare scenario faced by any business undergoing a major technological transition.
For the first six months of its fiscal year, Lexington's city government was denied access to key financial information because of ongoing problems with a newly implemented computer system intended to improve data access and efficiency. While the problems have largely been corrected for the city at this point, many are left to wonder how such a breakdown could happen and how others might avoid a similar fate.
The STARS program is a $10.3 million enterprise resource planning (ERP) program initiated by the Lexington-Fayette Urban County Government to integrate the information from multiple departments including finance, human resources, budgeting and purchasing, into a unified database. The new system is intended to bring the city's hodgepodge of older mainframe computer systems up to speed with today's real-time technology.
Expected benefits of the transition include the ability for the city to share data more easily between departments with more user-friendly reporting tools, more self-service access through online features for citizens, employees and vendors, and improved tracking and budgeting capabilities.
Those benefits, however, have been slow in coming. The first phase of the project, which focused on core financial functions including the city's general ledger, accounts payable, accounts receivable, online procurement, purchasing and billing, went live in July 2006, but it has since been plagued by an array of major and minor problems. As a result, the city was unable to produce a reliable financial statement for fiscal year 2007 or year-to-date budget numbers until shortly before Mayor Jim Newberry's State of the Merged Government Address on January 30. The city's general ledger was not interfaced with all of its data sources to ensure the accuracy of the government's record-keeping, and at times, failures in the city's accounts payable system delayed vendor payments and required the city to cut checks manually to its suppliers.
The city issued a stop-work order in early January to its implementation partner, the consulting firm Cherry Road Technologies based in Parsippany, N.J., which had also started some initial work on the implementation of the project's core human resources phase. A second consulting company, Metaformers, was recommended by the city's software supplier, Oracle, and brought on board to correct the existing problems. To date, Cherry Road Technologies had been paid $1.3 million of the $4.4 million budgeted for their services in their existing fixed-dollar contract.
"I can't find words to express the level of frustration I have with this issue," said Mayor Jim Newberry during a January 16 council work session where council members were briefed on the status of the STARS system, which was at that point still unfixed. "It is absolutely impossible for us to do the kind of job we're supposed to be doing for the people of this community when we don't have access to reliable, accurate and timely financial information We're sailing without a compass right now."
Lee Nelson, a managing member of the Tennessee-based company Verasion Consulting, has served as the project manager for the University of Kentucky's ERP implementation, which has been ongoing since the summer of 2005. UK's implementation, which also covers financial, purchasing, inventory management, payroll and time management functions, has been relatively smooth so far, Nelson said. The university expects to take the last phase of its program, a student-based campus management tool, live at the end of February.
Nelson has had no involvement in the LFUCG STARS project, but he said there are many challenges to be faced in any ERP implementation, regardless of the size of the project.
"Typically when you first start out, you're going to deal with some performance issues within the system," Nelson said. "You test the system, you load-test the system, you simulate that, but ultimately that's a simulation. You can come close to simulating reality, but a simulation's never going to be reality."
In a typical ERP implementation, Nelson said, overcoming the organizational change can be more formidable than the actual software installation.
"I honestly think the software side of an implementation is the easiest," Nelson said. "It's the organizational side that can be the most difficult, especially when you are dealing with organizations that have been around a long time. They get very set in their ways, and any time you implement new software, you're changing the way people do business, and that can be very disruptive."
In the case of the city's project, LFUCG's acting chief administrative officer Charlie Boland said the normal and expected growing pains on the part of the city's staff were exacerbated by the system's ongoing technical problems. At this point, the majority of those are behind them. Although some minor adjustments still remain be made, the problems experienced with the core financial component of the STARS project have been largely resolved, Boland said, and the city is preparing to move forward.
At this time, the project is still on budget, according to Boland.
Although the additional expense incurred for the consulting services of Metaformers was not anticipated, the cost has been absorbed with funds earmarked for professional consulting services, among other things, within the $10.3 million project budget. However, changes will need to be made to the project before the implementation of further phases, and the extent to which those changes may influence the project's budget is not yet known. Determining factors will include the terms of any negotiated settlement amount should the city choose to terminate its relationship with Cherry Road and the bids received if the project is re-opened to new vendors. A decision on any future dealings with Cherry Road had not been made as of early February, but the issue is expected to be resolved quickly.
The schedule for the city's budgeting process for the next fiscal year has not been affected by the delays in accessing the city's financial statements, said Jim Deaton, LFUCG's budgeting director.
In the meantime, lessons have been learned from the problems the city has experienced, Boland said. As the remaining phases are implemented, the city plans to require more extensive pre-testing procedures prior to any "go-live" implementation, a component that was somewhat vague in the city's initial RFP, Boland said.
UK's implementation landscape involved a development system, a quality assurance system for testing and a production system for conducting the university's day-to-day business, Nelson said. The implementation plan included several rounds of testing, including area-specific unit testing and integration testing that checks the integrity of the whole system. Additional testing was used to test security and interfacing aspects as well.
Mayor Newberry and others have raised questions about the possible use of a parallel system to safeguard against transition problems. In UK's ERP implementation, parallel testing was used for the payroll aspect of the model, Nelson said, but the practice can be a considerable burden on an organization. In addition, he said, a company typically cannot ensure that every staff member will conduct the dual entry required to make a parallel system work.
Beyond more extensive testing, the city plans to re-examine the structure of relationships between different project members, including the establishment of more clear lines of authority for the city's project administrator. Because some questions have been raised regarding the abilities of the implementation team members who worked directly on the project, greater documentation of the skill sets of the actual implementation team dispatched to Lexington will be required.
At this point, the original 17-month timetable, which called for completion of the project by June 2007, has been extended by four months to October, but that date is subject to change, Boland said
Timetables aren't going to dictate when we're done with the project," he said. "We're going to make sure that it's right."
Taking control of an ERP implementation, Nelson said, is half the battle.
"The biggest challenge is recognizing early on the need for the organizationto take ownership of the project," Nelson said. "Your goal ultimately is to implement software successfully and then be able to support it yourself."
"It's not rocket science," Nelson added. "What that takes is dedication and involvement from an organization from the beginning to the end."
And despite the delay in obtaining reliable financial statements for the city, Newberry said his first glance at the numbers was encouraging.
"Our expenses, thanks to a lot of good effort on the part of the civil servants in the urban county government, have been controlled, so we're a little below where you'd expect to be on expenses. We're slightly above on the revenue side, although I think a lot of that has to do with the fact we've already collected our property taxes. So we'll need to really sit down and analyze it."
"But at least," he added, "I've got something to analyze now."
Business Lexington staff writer Erik Carlson contributed to this report."