Palo Alto officials on Monday authorized a settlement with software company SAP Public Services, which claimed earlier this year that the city owes more than $1 million because of the city's increased use of SAP's software.
The settlement, which the City Council approved after a closed session Monday, requires the city to pay SAP $333,481 for additional licenses, in accordance with how the city has used the software. The SAP programs support some of the city's most critical functions, including accounting, utilities and human resources.
Earlier this year, SAP had conducted an audit that found that the city had significantly boosted its usage of the company's products. It claimed in the March audit that the city owed SAP $1,134,930 for additional licenses, according to City Attorney Molly Stump. The city disputed this number and hired its own third-party consultant to provide an impartial review.
The consultant concluded that the city owes the company $333,481. SAP agreed to accept this amount and settled its dispute with the city.
As part of the settlement, the parties also agreed to "update the City's software license user counts" to conform to the city's usage of the software. The agreement requires the city to pay SAP the $333,481 within 30 days.
The City Council is scheduled to approve a contract amendment for the sum next week.
Comments
Old Palo Alto
on Dec 11, 2012 at 6:44 pm
on Dec 11, 2012 at 6:44 pm
...thanks City Manager Keene and Councilmember Klein.
Crescent Park
on Dec 11, 2012 at 7:03 pm
on Dec 11, 2012 at 7:03 pm
The city should use a public domain database system such as MySQL and dump these expensive SOBs like SAP and Oracle, the cost is ridiculous.
Downtown North
on Dec 11, 2012 at 8:12 pm
on Dec 11, 2012 at 8:12 pm
Shocking. Let me guess - did the consultant cost $700k?
Stanford
on Dec 11, 2012 at 8:29 pm
on Dec 11, 2012 at 8:29 pm
All that trying to balance the budget through cutting library services, etc. just bit the city on its collective backside. Sad...as if they couldn't see this coming.
another community
on Dec 11, 2012 at 8:50 pm
on Dec 11, 2012 at 8:50 pm
Hmmm... So the City doesn't know how many (and by inference who) uses the financial software that runs the City and the Utilities.
I'm sure glad I don't have a credit card or any personal information in their system.
Barron Park
on Dec 11, 2012 at 10:28 pm
on Dec 11, 2012 at 10:28 pm
How much more incompetence do we have to put up with? Who is running this City? Is this manager, council, IT, finance directors/leaders really this incompetent?
So who pays for this mess up? The employees OR citizens via more taxes? Do they take $2.00/hour pay cuts to cover up this mistake?
Shame, shame, shame. Digustingly shameful. OH and FYI - unions are not the blame for this. It is pure incompetence by IT staff for starters. AND this is a perfect example of how the city manager and good ole boys shake hands with pals to 'get the work done.'
Midtown
on Dec 11, 2012 at 10:40 pm
on Dec 11, 2012 at 10:40 pm
Many years ago, I founded a software company providing integrated business management solutions. It was so successful that I elected to retire early in reaction to the tax burden at the time.
I had a policy to provide free software and support to government agencies, and accordingly offered Frank Benest my services and software (for free) after I retired. Unfortunately, the city IT folks were defensive and incompetent, and Mr. Benest was absolutely clueless about software as a management tool. Mr. Benest boasted that he didn't use a computer, as if it was something beneath his level as an executive. I still belive the city is suffering from the poor management of Mr. Benest and the manager before him.
another community
on Dec 11, 2012 at 11:29 pm
on Dec 11, 2012 at 11:29 pm
The City was bamboozled into spending millions for SAP by a former City IT director, who used it as a stepping stone to become:
Web Link
Your tax dollars at work ;)
Fairmeadow
on Dec 12, 2012 at 10:00 am
on Dec 12, 2012 at 10:00 am
This article doesn’t contain enough information to fully understand what is going on here—but it’s clear that the City has negotiated a contract with SAP that requires additional payment as use increases. Missing from this article is the yearly license fee, the use levels that this yearly fee is based, and trigger points for additional fees based on increased use.
The IT manager, the City Manager, the Finance Department should be keenly aware of these financial obligations. It wouldn’t hurt for the City Auditor to also be involved with monitoring software license compliance. The article doesn’t provide any clue as to which of these key managers has been responsible for license compliance in the past—or how this very necessary task should be conducted in the future.
Another aspect of this matter that is disturbing is the difference between SAP’s demands of $1+M for additional fees, and the City’s much smaller $333K offer. This suggests that there is no clear way to determine how to compute additional fees. No doubt this is a ploy of SAP to generate larger fees, but the City should not have signed a contract that obligates it to unspecified fee increases. Unfortunately, “government” doesn’t seem to hold people accountable.
The new Auditor reviewed the use of the SAP system last year. This audit found numerous instances of poorly managed security by the employees using the system. As a result, the City Manager authorized the hiring of a “SAP Security Manager” (at about $130K). It was not clear what this fellow was supposed to do, since the City does not publish work plans for its key managers—but it seems like this fellow should have been assigned the task of commercial software license compliance—since this is really not a difficult task, at least at the basic level.
The City hired an outside firm to evaluate its increased obligations to SAP. It really is difficult to understand why it’s own IT managers could not do this. The fact that the proper management of the SAP system, both from a secure use point-of-view, and now from a license compliance point-of-view, really suggests that there is inadequate management up-and-down the chain-of-command at City Hall.
Sadly, since this matter was presented to the City Council behind closed doors, the Council will not be able to discuss it in public. And the consultant’s report will no doubt be considered as “work product” by the City Attorney—thereby making it beyond public access via a Public Records Request. So—virtually everything about this matter will stay buried from public view.
City Manager James Keene talks about Palo Alto becoming a “Digital City”. While this is an admirable goal—it’s really difficult to see that he has the slightest idea what he is talking about. Software is not “magic bullet” that solves all of your problems. Managing large systems takes skill, and a lot of hard, tedious work. It’s difficult to see that Keene and his key managers are doing what needs to be done to make these systems fulfill their promise, and to justify their expense. Sadly, our City Council doesn’t seem up to the job either.
Palo Verde
on Dec 12, 2012 at 10:20 am
on Dec 12, 2012 at 10:20 am
OO, good catch. Wayne, good comments. Any idea how many million$ spent on SAP? The average tax-payer doesn't have a clue. Licensing fees are opaque and seem dependent on number of keystrokes or page views per user, and which modules are accessed. I'll guess $3500 per "Professional User" per year, and add 25% for the maintenance contract. Don't know how many employees we have in the ERP and CRM functions. Must be pretty heavy usage to have accumulated an alleged $1,134,930 discrepancy, which would of course be "list price" which SAP is willing to discount in order to keep us in the fold.
Charleston Meadows
on Dec 12, 2012 at 10:22 am
on Dec 12, 2012 at 10:22 am
Missing from the news coverage is who is accountable for this oversight, and what were the consequences?
Without accountability, there is no management. Once again, we hear a lot of congratulations to everyone for doing such a good job, but the job is not getting done.
Seems like a shadow of the California Ave. blame avoidance tactic without the trees.
Any ideas on how we can demand accountability?
Fairmeadow
on Dec 12, 2012 at 10:38 am
on Dec 12, 2012 at 10:38 am
> accountability
This is a really huge problem with “government”. It’s clear that the whole system (Federal-down to local government) is designed so that there is no clear accountability, unless some sort of felonious activity on the part of an employee can be demonstrated, and even then, it’s hard to fire Union employees.
In terms of software license accountability, there is software available that will analyze the files on a computer system for ownership, that allows a site to determine if its use of third-party software is in compliance. The IT Manager is the first person in the chain-of-command that should be expected to be accountable. But the City Manager really should be responsible for allowing these sorts of failures to occur.
In terms of SAP, there is no reason that the SAP software could not monitor its own use—providing the local SAP/IT manager(s) with use reports that would provide clear evidence of use, as well as warnings when use levels hit “trigger points” for license compliance. The City needs to hire people who can think out-of-the-box and push its vendors, like SAP, to provide this sort of administrative support for SAP customers. At the worst, the City should pay SAP to put this sort of capability into its software.
It’s great that the City is increasing its SAP use. It’s not so great that we are always behind the 8-Ball when it comes to using the software appropriately, or effectively.
Old Palo Alto
on Dec 12, 2012 at 10:49 am
on Dec 12, 2012 at 10:49 am
Not to mention that the SAP system that Palo Alto uses is antiquated and inadequate. Ask anyone at City Hall what they have to grapple with. Shame that all this money has been thrown at a system that does not adequately serve the accounting purposes of the City.
another community
on Dec 12, 2012 at 11:36 am
on Dec 12, 2012 at 11:36 am
I always had to laugh at Palo Alto. When other cities had been doing time cards and tracking other hours through the computer, we were still doing time cards by hand up untill earl 2000's. The IT department is a joke. When most cities have filters for looking at unwanted or inappropriate sits, Palo Alto has none. I used to see employees looking at FB, eBay, Craig's list or worse with no accountability and for hours at a time!! My hubsand works for a small company that tracks all employees time on the computer and at what time and how long on each site. Palo Alto in the middle of the dot com hub with the worse IT!
Palo Verde
on Dec 12, 2012 at 12:25 pm
on Dec 12, 2012 at 12:25 pm
I don't know the details of the Palo Alto situation, but I am a user of SAP at my company where the software tracks people's time, time on projects, time on vacation, etc. I have found our SAP applications extremely user unfriendly, so unfriendly that it is almost as though they were designed to be that way. Is this the sort of software that they are trying to charge an arm and leg for? If so, there are better products out there.
Midtown
on Dec 12, 2012 at 4:38 pm
on Dec 12, 2012 at 4:38 pm
What a waste it seems $$$.
Meadow Park
on Dec 12, 2012 at 9:40 pm
on Dec 12, 2012 at 9:40 pm
@Wayne, good comments as usual.
When the leaders of an organization understand both the real business issues at hand, and the capabilities of software support, then things work out well.
Unfortunately, most of the time, leadership doesn't even understand the real problems in their organization, and look to flashy salesmen from large companies peddling software that solves all business problems. Turns out that companies like SAP only provide complex crap software, but their standing in the business community is more important than real results when clueless leaders grasp for easy solutions.
Midtown
on Dec 12, 2012 at 10:48 pm
on Dec 12, 2012 at 10:48 pm
I am completely puzzled by the term of use of SAP software. Every time a user signs-in the software must check the number of users against the number of concurrent licenses purchased by the custo9mer. After the limit is reached, the software must not allow more sessions until other users logoff. This is the responsibility of the license manager of SAP. If the license manager of SAP is defective, the city is not obligated to pay any penalty. Palo Alto is at the heart of SV. It is amazing that no one in the city has questioned SAP about the correctness of their license manager.
Midtown
on Dec 13, 2012 at 12:55 am
on Dec 13, 2012 at 12:55 am
Yet another instance of incompetent and wasteful management by James Keene and his bevy of managers!!
These are the people who should pay the fine out of their inflated salaries--I don't see why Palo Alto residents should.
Community Center
on Dec 13, 2012 at 9:01 am
on Dec 13, 2012 at 9:01 am
Are they using the system to track the energy usage of the residences???
OK If it is a networking licenses limited to 100 people. IT needs to check the group users before installed it on every computer. But I doubt there's more than 10 SAP programmers working in the city.
another community
on Dec 13, 2012 at 10:06 am
on Dec 13, 2012 at 10:06 am
My only experience with SAP was filling out travel expense reports at a previous employer. It left much to be desired. I can't for the life of me figure out how these companies convince organizations to purchase their software. Does anyone do a cost/benefit analysis? I mean even if it was given away for free it still wastes resources by forcing people to learn to use non-obvious clumsy software.
another community
on Dec 13, 2012 at 11:05 am
on Dec 13, 2012 at 11:05 am
When I worked at HP, SAP was under examination for installation. After spending $10 million, HP rejected it. My boss said that it was a system designed and written by "sadistic teutones."
Old Palo Alto
on May 1, 2013 at 7:32 pm
on May 1, 2013 at 7:32 pm
....oh well, it only cost taxpayers $333,481 this year.