If you thought Novopay was a mess, wait for IRD

New Zealand’s bungled Novopay schools payroll contract should be a wake up call for government decision makers. Last week Steven Joyce, the minister sent in to fix the mess sacked Talent2.

As Rob O’Neill reports for ZDNet, Talent2 will pay between NZ$18 and NZ$22 million as part of a settlement.

While Novopay was disastrous and painful for teachers and their families, there wasn’t any lasting wider damage.

Enormous risk

That won’t be the case if the huge NZ$1.5 billion IRD system refresh goes wrong. Should the contractors doing the work on New Zealand’s tax system get things as badly wrong as Talent2, the nation could be in for a bumpy ride.

That might be putting things mildly. According to Wikipedia, New Zealand government spending accounts for just short of half of GDP. Take that out of circulation for long and everything could grind to a halt.

The scary part is the chances of things going badly wrong are high.

Unfavourable omens

Pickard Consulting is the lead solutions and applications architect for the Inland Revenue Department transformation project. Pickard Consulting is a SAP shop.

SAP’s main business is selling large-scale Enterprise Resource Planning or ERP software to corporations and government. ERP projects are notorious for missing deadlines and cost overruns.

Don’t take my word for it. Here’s what the State of ERP 2014 survey found:

  • between 53% and 56% of projects run over budget
  • The figure for “duration” (i.e., timeline) overruns was slightly higher and, in fact, is trending worse the past three years.
  • The number of respondents saying they get less than half the expected benefits has risen steadily each year, to the point that two-thirds of respondents in the most recent year (2013) reported receiving half or less of the expected benefit.

Fortune magazine quotes Jim Johnson of the Standish Group saying 90 percent of ERP projects are either late or over budget. He says: “Your chances of coming in on time and on budget are statistically zero

SAP has an interesting track record including being successfully sued by Waste Management for fraud after selling a US$100 million ERP system described as a complete and utter failure. 

So, on the surface, it appears government is willing to entrust the backbone of our economy to a company and industry with a track record of spectacular failure.