Arkansas set to pull the plug on SAP budgeting system

The state of Arkansas is on the verge of unplugging a balky SAP budgeting application installed five years ago in a move connected to ongoing litigation between the state and SAP AG.

The 4-year-old lawsuit filed in the Circuit Court of Pulaski County, Ark., alleges that the budgeting application failed to work as promised and that the state's core IT platform based on SAP's software didn't meet specifications for accessibility by handicapped users.

A spokesman for Arkansas Gov. Mike Huckabee confirmed that the performance-based budgeting system is on the chopping block and will be turned off at an as-yet undetermined time.

The budgeting application was to be part of the state's core IT backbone, known as the Arkansas Administrative Statewide Information System. AASIS went live in July 2001 and was built primarily around SAP's R/3 ERP software. At the time, the software was integrated into R/3. Most observers agreed that other than the issues outlined in the lawsuit, the AASIS implementation has been successful.

The state contracted with SAP for the system in February 2000, and currently puts the cost of AASIS at US$60 million -- twice the estimated budget at the project's start.

After the initial installation of the system failed, the state turned to a third party, Protech Solutions Inc. in Little Rock, Ark., to provide the component. That $2 million effort is widely seen as having failed.

For its part, SAP insists that AASIS is a success overall and claims that the system has the support of the governor.

"We delivered a tool for budgeting for the state, and they chose not to use it early on," said William Wohl, a spokesman for SAP America Inc. As for the litigation, he said, "the position the state took is not SAP's."

Arkansas Attorney General Mike Beebe, who is representing the state in its lawsuit, said the technology behind the performance-based budgeting software in AASIS was originally designed to provide individual agencies with more budgeting freedom while ensuring that they hit operational targets.

"The business model of budgeting traditionally uses line items," said Beebe. "This grants more flexibility to agencies but has a risk and rewards system, dependent on meeting goals and mission compliance."

The most recent version of the lawsuit, filed on Feb. 11, 2004, states that "SAP's first attempt to deliver a budgeting system within AASIS as required by the contract wasn't complete when SAP unilaterally changed course. SAP's second attempt to provide a budget system 'outside' the integrated system on a business warehouse platform also failed."

In addition, because AASIS was not in compliance with handicap-accessibility requirements, a court shut down some nonessential portions of the system last July, according to Beebe.

At times in the past several years, he said, some legislators have discussed unplugging the entire system, though that rhetoric has died down lately.

"We could end up with another vendor if they can't provide the software to our satisfaction," Beebe speculated. "My personal opinion is that AASIS should provide what was contracted for."

He added that if SAP can't fix the budgeting application and meet the handicap-accessibility requirements, "they should pay the amount necessary for another vendor."

Beebe said the state is still preparing for a trial in its lawsuit against SAP. No trial date has yet been set.

The governor's spokesman declined to disclose the damages that the state is seeking from SAP.

Beebe noted that, in general, SAP blames the problems on a lack of adequate training and resources from the state, while Arkansas blames the performance of the software.

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