Tuesday, December 16, 2008


“This case offers LA school district and Deloitte in $18m settlementexamples of the worst sorts of customer and consulting behavior.”

ZDNet IT Project Failures Blog(!) | Posted by Michael Krigsman

Categories: Project failures, Government projects, IT issues, CIO issues, Consulting..., End-user impact, SAP

Tags: Deloitte LLP, Settlement, Payroll, IT Devil, Payroll Solutions..., Operational Accounting, Finance, Michael Krigsman

Tuesday, 16 December 2008 - Implementation consulting firm, Deloitte, will pay the Los Angeles Unified School District (LAUSD) $8.25m and forgo $10m in unpaid invoices to settle a long-standing dispute over payroll problems arising during an SAP implementation. The agreement comes almost two years after severe payroll issues caused upheaval among teachers in the district.

According to the Los Angeles Times:

The payroll system, based on software designed by a German company, SAP, and tailored to the district’s needs by Deloitte, cost $95 million. It was a disaster from the moment it went online in January 2007, spitting out checks that were wildly inaccurate, including $53 million in overpayments to Los Angeles Unified employees.

The district, which issues 120,000 paychecks a month, eventually paid $37 million in repairs and delays, but did not get the system working to its satisfaction until January, a year after it was launched.


LAUSD teachers paid a high price for mistakes made by both the district and Deloitte. As I wrote previously, several conditions came together to cause this problem:

  • University payroll is inherently complex
  • Roll out and testing were likely flawed
  • The union work rules may be overly complicated
  • I suspect Deloitte has pussy footed the issue, to avoid pissing off this big client
  • SAP hasn’t taken a sufficiently proactive role

Perhaps unsurprisingly, union president, A.J. Duffy, called the settlement “outrageous,” saying Deloitte should have paid least $20 million to $30 million in settlement:

“This is what we’ve come to expect from Supt. Brewer,” Duffy said, “shortchanging members and employees and having no sense of responsibility for the harm that Deloitte . . . has done to his employees.”

The LA Times added:

David Tokofsky, a former school board member who voted for the initial contract with Deloitte but later was critical of the company, also said the firm had gotten off cheap. “I guess this is one major company the federal government doesn’t have to bail out, because the district just did,” he said.

Although tempting to place full blame on Deloitte because they make a simple and easy target, such conclusions would not be consistent with the facts. Despite the significant human suffering paid by teachers, this problem was ultimately a shared problem caused by actions from both Deloitte and the school district. Although I do think the settlement was lower than reasonable, the amount does reflect this shared responsibility.

The IT Devil’s Triangle dictates that three primary participants drive success or failure on technology implementations: customer, consultant, and software vendor. In this case, both LAUSD and Deloitte contributed to the problems. Although SAP was only the software provider, nonetheless it should have taken stronger and earlier steps to help resolve issues.

This case offers examples of the worst sorts of customer and consulting behavior. I believe the customer’s leadership was insufficient to the challenge of this implementation, while Deloitte brought unqualified resources to bear on a complex situation.

[Image via iStockPhoto]

Michael Krigsman is CEO of Asuret, Inc., a software and consulting company dedicated to reducing software implementation failures. Click here to discuss this post with him on Twitter.

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