FRAMINGHAM (10/03/2003) - More than two years after it chose PeopleSoft Inc.'s software for a massive human resources system, the U.S. Department of Defense is finally ready to start development work on the US$320 million-plus project. But it will take another four years to complete the rollout, military officials said.
The project, which is about 12 months behind schedule, will create a single system for HR and payroll operations across all branches of the armed forces, incorporating data on more than 3 million military personnel worldwide. The DOD paid PeopleSoft $48 million for an enterprise software license in August 2001, and this week it named Northrop Grumman Corp. as the prime contractor on the implementation under a nine-year, $281 million contract.
U.S. Navy Capt. Valerie Carpenter, the joint program manager, said the HR project will replace 79 systems within the DOD. She added that Pentagon officials in February plan to release projected ROI figures for the initiative, which is officially known as the Defense Integrated Military Human Resource System, or DIMHRS.
The DOD project will be the largest installation of PeopleSoft's human resources applications thus far by an order of magnitude, said Bruce Triner, director of defense special programs at the Pleasanton, Calif.-based vendor. It's also expected to be the first rollout by any user of the PeopleSoft 8.8 global payroll module, according to Carpenter.
But progress has been slow, even though the DOD's plan from the start was to configure the system so it would be in line with private-sector HR procedures and require a minimal amount of software customization. "We'd rather not reinvent the wheel and rewrite code," Carpenter said. "We're looking for PeopleSoft to be installed as much out of the box as possible."
PeopleSoft's applications were picked over rival products because IT officials at the Pentagon felt they would most closely support its needs, she added. But after the selection was made, the DOD did what it described as an "extensive fit-gap analysis" to further investigate how well the software met its requirements.
The DOD had planned to have part of the system in place by last fall, but Carpenter said the process of reviewing the prime contractor bids submitted by Northrop Grumman and other systems integrators took longer than expected because of the detailed nature of their proposals.
"I don't think anybody could have predicted the length of the (prime contractor) acquisition period," said Jon Jensen, a Northrop Grumman executive who led the Los Angeles-based company's effort to win the contract. "It was probably a disappointment for a lot of folks in terms of time frame." Jensen works at Northrop Grumman Information Technology, the Herndon, Va.-based operation that will manage the DIMHRS project.
Breaking It Down
Carpenter said that because of the project's uniqueness and complexity, military officials made the decision to separate development into two phases, the first of which involved the five systems integrators that were competing for the prime contractor's job. In September 2002, the Pentagon gave the companies small contracts to develop documentation and recommended system specifications.
The companies in December submitted implementation plans that weighed a combined total of 4,800 pounds, Carpenter said. Last week's choice of Northrop Grumman to manage the rollout signals the actual start of work on the system, which marks the beginning of Phase 2.
But Northrop Grumman still needs to finalize the technical design and a detailed rollout schedule, both of which are due within the next six months. The DOD hopes to get the U.S. Army online with DIMHRS by November 2005 and then add the other military branches over the following 24 months.
"It's not rocket science, but it's not as easy as it looks at first blush," Carpenter said.
Ray Bjorklund, an analyst at consulting firm Federal Sources Inc. in McLean, Va., predicted that the project's total cost could reach $500 million if administrative expenses and ongoing maintenance fees on some of the DOD's legacy systems are included. Pentagon officials declined to comment about his estimate.
Work on the project will be centered at a DOD IT facility in New Orleans. The Pentagon plans to run the PeopleSoft applications on IBM Unix servers and link them to a single logical database that will be built on IBM's DB2 software and contain consolidated information about all military personnel. The DOD will also install backup systems for disaster recovery purposes, Carpenter said.
Impact of Oracle Bid Downplayed
Defense officials involved in the DIMHRS project said they don't see Oracle Corp.'s hostile attempt to acquire PeopleSoft as a big obstacle to the Pentagon's rollout of its new human resources system.
U.S. Navy Capt. Valerie Carpenter, the joint program manager responsible for development of the HR system, said the takeover bid that Oracle announced in June hasn't been a cause of worry for her. "The DOD has a valid contract with PeopleSoft, and if they were bought out by Oracle, we would expect Oracle to honor that contract," she said.
"At this point, it's not considered a viable threat," said Jon Jensen, who led Northrop Grumman's successful effort to be named the prime contractor for the project.
Jensen noted that the buyout offer initially caused worries throughout the IT industry because of concerns that Oracle would stop actively selling PeopleSoft's applications. The takeover attempt is currently on hold while federal officials examine its possible antitrust implications.
Jensen speculated that if Oracle succeeds in its quest to buy PeopleSoft, the Pentagon's project could be delayed or even reconsidered. But, he added, "unless something dramatic happens, we're on stable ground.