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November 1, 2002
By David Joachim

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	In this article
	Introduction
	Plain Vanilla
	Calculating Returns
	'In a Cave With a Scout'
	On Location, Series II
	Personnel: Susan Hancox
	Personnel: Scott Ogawa
	Personnel: Daniel Nigrin
	Personnel: Kevin Murray

The IT staff at Children's Hospital Boston loves coffee as much as any high-strung bunch of overachievers. But it may take them a year to use all the paper cups their administrative assistant ordered a few weeks ago.

The order was one of admin Tanya Johnson's first using the hospital's new ERP (enterprise resource planning) system, which went live in April. She couldn't tell if the "quantities" field referred to sleeves of cups or boxes of cups, so she erred on the high side. Johnson laughs about the mix-up now, but hundreds of employees are still having trouble adjusting their work styles to the PeopleSoft system, which includes materials management, human resources and financial applications.

Even more troubling than the user problems are the spiraling costs of the Children's PeopleSoft project: $14 million-plus to date, with more than half that going to consultants; the rest has gone for software, hardware, staff and training.

The principals admit--and experts who reviewed details of the implementation agree--that the hospital overpaid and suffered unnecessary pain during the transition because hospital officials deferred big decisions about technical specifications and personnel to PeopleSoft and systems integrator Arthur Andersen (which has since been bought by KPMG Consulting and now calls itself BearingPoint). Susan Hancox, the operations vice president who oversees the hospital's HR and materials management, says she and other Children's executives were naive about how the software industry works and how the agendas of product vendors and integrators can negatively affect the cost and effectiveness of an ERP project.

What follows is a rare behind-the-scenes look at how a user organization can lose control of a big software project--and what it takes to get back on course.

Wholesale Replacement

Some 500 employees who process and approve purchase orders and time sheets now use the PeopleSoft 8.0 system. They include materials management and payroll personnel, as well as department managers who interact with them. The rest of the hospital's 7,000 workers are coming online this month as Children's rolls out PeopleSoft's online benefits module, which lets employees enroll in medical plans and view their pay stubs, among other things.

In one bold stroke, Children's replaced its individual materials management, HR and financial systems. Such wholesale replacement of legacy enterprise applications is common among manufacturers but rare for health-care facilities, experts say. It's also out of character for Children's, a pediatric teaching hospital affiliated with Harvard Medical School. Before the appointment of CIO Daniel Nigrin last year, Children's IT shop usually solved one problem at a time, implementing best-of-breed systems for different operational areas.

The departments affected were running decades-old systems "held together with bandages," Hancox says. Push came to shove when the legacy vendors (Enterprise Systems for materials management, Ross Systems for finance and Cyborg Systems for payroll) threatened to drop support because Children's was using old versions.

"We wouldn't upgrade because always hanging out there was that we were going to get new systems," Hancox recalls. "So everybody was trying to be fiscally responsible, and now the house is getting older while we don't replace the windows and the doors and the roof."

The old systems were incompatible with one another, leading to delays while data was rekeyed and workers placed countless phone calls to determine the status of payment authorizations and checks. Says Hancox, "Here we are, the highest-tech hospital from a patient care standpoint, and we're living in the Dark Ages from a systems standpoint."