During the 1990s, as university IT departments began to worry about Y2K, many allocated millions of dollars to upgrade their IBM mainframes and Honeywell DPS 90s. After interviewing software vendors, they often settled on a package from PeopleSoft, which promised important links to student records. With this system, a student who dropped a course would wind up with an automatic adjustment in his or her financial-aid package.
The University of Minnesota budgeted almost $43 million for PeopleSoft about five years ago; Ohio State and Cleveland State allocated $51.5 million and $4.2 million, respectively. But the deals slowly soured: Administrators discovered glitches when they tried to share data among several offices. To make the software work, tech officials realized they'd have to rewrite much of the code. According to the Chronicle of Higher Education, the University of Minnesota went overbudget by $10.3 million, Ohio State by $30 million—and Cleveland State had to add an additional $7 million to install the new system. Long delays were inevitable.
PeopleSoft's CEO made a public apology, but several Big Ten colleges were so frustrated with the fifteen-year-old Pleasanton, California, software company's response that they wrote a pointed letter. "There are too many bugs and patches," it read in part. "Packaging, new releases, and fixes are not well tested and poorly deployed."
Higher Learning
The PeopleSoft-university conflict deserves further consideration in light of the recent debacle involving Oracle and California—the state government spent $95 million last year on software it didn't need, then backed out of the contract in a political hurricane. Over the last few years, client companies have become more sophisticated while many software companies continue to push unwieldly contracts involving unnecessary programs, too-frequent upgrades, heavy consulting fees, and unneeded services.
"You've got this push-pull dynamic going on that's typical of immature industries. Buyers are unaware and sellers are more than happy to over-push what they've got," says Ted Schadler, a software analyst at Forrester Research. "I don't know if I'd call it snake oil salesmen—that's not what I mean—but buyers are saying 'enough already.' That's the way this industry has run for more than twenty years now."
Unlike the state of California, the Big Ten universities resolved their software-company grievances the old-fashioned way—by meeting regularly with PeopleSoft executives and ironing out the issues. "All seven of [the Big Ten schools that signed the letter] are some of our very, very best customers and have been involved in development partnerships with us," says Judy Chappelear, PeopleSoft's director of marketing development for higher education. "Our customers have been very successful and are moving forward."
Adds Tom Scott, the University of Wisconsin's assistant vice chancellor of student affairs: "You sit down across the table and act like adults. I know that sounds too simple, but I think that's what we did."
But not every college resolved its PeopleSoft issues so easily. In May, Cleveland State sued Kaludis, the consulting company that first linked CSU with PeopleSoft in 1996, for unspecified damages. In the suit, as reported by the Chronicle of Higher Education, the university alleged Kaludis "fell far short of its promises, and provided CSU with little or no viable project management and an unworkable computer system."
The state of California used an outside consultant, too, to help broker its gigantic software deal with Oracle—and ran into trouble on a much larger scale. State officials contacted Logicon, a high-tech consulting company that has since changed its name to Northrop Grumman Information Technology, for advice. As negotiations went on, Logicon became Oracle's partner, making millions on the deal. State auditors later labeled such "double-dipping"—in which the consultant becomes a player—a "bad business practice."
Oracle-gate began, at least publicly, in mid-April, when an auditor announced that the state had purchased more software contracts than it had employees. The state, it turned out, had entered into a six-year term with Oracle (far too long given a rapidly changing tech market); it hadn't protected itself if Oracle were to lower its prices; and it negotiated a purchase price that didn't include upgrades. Plus, California had given almost all of its decision-making power in this case to Logicon. Taxpayers were to lose $41 million because of the deal.
Finally, in May, Oracle and California negotiated to unravel the original $95 million contract. By the time the political dust had cleared, several state officials had resigned. Public hearings began; the once-vaunted Department of Information Technology shut down; and Clark Kelso, a legal scholar, came in as state chief information officer to initiate broad software-buying reforms. Among Kelso's proposals: a government technology oversight board to monitor all software contracts, and transferring control of the state's Web site from ten private companies to a group of almost entirely government employees.
