Children's also deferred to outsiders in generating a return-on-investment analysis of the project. This was because the hospital had never tracked the ROI of technology projects before. The hospital paid Cap Gemini Ernst & Young $50,000 for an 80-page document that presented the business case, vendor evaluation and detailed ROI analysis.
Children's executives didn't drill down into the ROI figures until well after the go-live date. Hancox blames the tight deadline schedule. Only when she began asking departments to track how well they were accomplishing their ROI goals did she begin to question the validity of the numbers.
For instance, the ROI worksheet for HR called for eliminating "a tenth of an employee here, a tenth of an employee there," she says. "I go back to my HR director and say, 'You've got to start meeting your ROI,' and he says, 'I don't even have enough people to meet this ROI.' "
Patricia Heller, a vice president in Cap Gemini's health-care practice, says she provided Children's with ROI models but that Children's used its own dollar and head-count data to generate the ROI worksheets.
Shortcomings of the ROI model aside, Children's executives say they're already seeing positive results from the ERP project. Directors don't have to wait as long for reports, and the data is more reliable because it's entered into the system only once. Some hard-dollar returns haven't panned out, including $150,000 per year Children's hoped to save in licensing fees for the decommissioned legacy systems (it's more like $75,000, Hancox says). But in all, Hancox expects that by year five of implementation, Children's will cut $2.5 million per year in operating expenses. By then, she also expects the costs associated with the ERP project to exceed $20 million.
Hancox points out that, in some areas, those dollars cut will be replaced by new spending. For instance, Children's figures it will save at least $1 million per year by paying vendors early, but because the money remains in the budget, it will likely be spent. "The practicality of applying the ROI is a huge piece that was never addressed," she says.
Still, Hancox downplays the importance of hard ROI. The cultural gains will be far more pronounced as the software forces employees in different departments to work together. "There's less bureaucracy," she says. "One of our mistakes was that we used ROI as our selling point [to get funding], and that should really be a 'by-the-way' because you're doing this for other reasons. It's not going to carry itself on a financial ROI but rather on a qualitative ROI."
Pains and Gains
Employees who are hands-on with the PeopleSoft applications say they've had difficulty adjusting; ordering too many coffee cups is the least of their problems. Johnson, the IT administrative assistant, complains that the user interface for the time and labor module is clunky. She must continually scroll from top to bottom of the browser screen to fill out time sheets. Also, the sheets require her to fill out every form from scratch, rather than just make changes where exceptions occur. CIO Nigrin says his programmers are working to correct the problem by creating templates for different types of workers.
Johnson has also fallen victim to the limitations of a pure-Web product. She has timed out while completing large requisition forms and been forced to start over. "I was on line 28 of 30 when it went, boop!" she says. Now when she fills out requisitions, she constantly hits Refresh.
Vital Stats: Children's Hospital
1869: Year founded
325: Beds
18,000: Inpatients treated yearly
300,000: Outpatient visits per year
5,000: Full-time employees
800: Active medical and dental staffers
700: Residents and fellows
800: Patient-services staffers
240: IT personnel
13: Consecutive years Children's has been rated the No. 1 pediatric hospital in the nation by U.S. News & World Report
Because she doesn't quite trust the system yet, Johnson maintains most of her paper processes in addition to the new online ones. For example, she asks Ogawa to approve requisitions not only online but also on a paper form. Requisitions for accounts payable are also entered into a Microsoft Access database that the IT department maintains for its own records, says Sheila Mortali, IT business development manager.
"It's certainly not paperless," Mortali says. "It's a lot more work on the input side, but the information is cleaner." Like Johnson's Refresh tactic, Mortali finds her own ways to work around the user-interface limitations. Often she keeps two browser screens running to view financial data, rather than repeatedly pressing the Back and Forward buttons.
The user-interface problems will be resolved over time through vendor upgrades and some custom programming, officials say. Children's experience proved the "never buy version 1.0" maxim because, even though the package is called PeopleSoft 8.0, it's the vendor's first ERP version based strictly on a Web client.
REPORTS
Analyize In-Line NAC strategies and products.
ANALYTICS Plan and design your enterprise blade server deployments
InformationWeek U.S. IT Salary Survey 2008
Salaries for business technology professionals are falling. Here's what you need to know in order to make good hiring decisions and personal career choices. Download Today
REPORTS
ANALYTICS
Follow 
