As the University of California began to feel the pinch of state budget cuts during the economic recession, it introduced a new initiative promoting systemwide efficiencies to save the university hundreds of millions of dollars.
A centerpiece of the initiative, known as Working Smarter, would be UCPath, a new payroll system integrating UC’s 10 campuses, five medical centers and office of the president. It would be phased in over four years at a cost of $170 million, eventually saving the university more than $100 million per year.
But it has fallen at least two years behind schedule, its cost has ballooned to $220 million and counting, and the financial benefits of the overhaul are now unclear. The university is forging ahead, with no end date in sight.
Even in a state with a long history of bungled computer projects, UC’s troubles are significant.
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“You have a project that is out of control, poorly planned and lacks basic governance,” said Michael Krigsman, an IT industry analyst. “In other words, who is minding the store while this is going on?”
UC President Janet Napolitano remains confident of the project’s ultimate success.
“I think (UCPath) will work,” she said, “and it will provide savings and consistency in payroll moving forward.”
UC is dealing with the project’s problems as it grapples with Gov. Jerry Brown and lawmakers over state funding for the university. UC has tentatively approved a tuition increase and suggested it would cap enrollment of California residents if it doesn’t receive more money from the state budget. Assemblyman Kevin McCarty, D-Sacramento and chairman of the budget subcommittee conducting an in-depth review of UC spending, said the panel is “monitoring” the computer project.
UCPath – which stands for payroll, academic personnel, timekeeping and human resources –was conceived in 2009 as a necessary upgrade to the university’s outdated, 30-year-old payroll technology.
“We had no choice but to completely replace the system,” UC Chief Financial Officer Nathan Brostrom said. “It really is a ticking clock.”
But the university figured it could achieve significant savings by consolidating all of UC’s 195,000 employees in a single payroll, rather than having each campus replace its own system, which Brostrom said would cost up to twice as much.
Processes would be standardized and most of the work would move to a shared services center, reducing redundancies in personnel and activities across the campuses, while leaving some human resources employees to focus on higher-level strategy. UC contracted with Oracle to provide software, maintenance and consulting.
“The savings are against every campus doing it on their own,” Brostrom said.
An update at the January 2012 Board of Regents meeting proposed three waves of implementation, beginning with pilot projects at UCLA and its medical center, UC Merced, UC Santa Cruz and the president’s office the following January. The remaining campuses would go live within the next three years.
The initial pilots, set for January 2013, have yet to begin.
The regents only received their next report on UCPath’s progress last July. The final steps of the design phase had just been completed, they were told, and deployment would begin with the office of the president in December. The remaining pilots would follow in 2015, with a final schedule, estimated to extend through 2017, promised for January.
At the meeting, Napolitano praised the “reboot” of a “very doable and necessary project” that “didn’t get started in the right way.”
Those deadlines came and went as well. Brostrom said they hope to have their next update in July or this fall.
“It has been far more complex and complicated than we had ever envisioned,” he admitted.
The fundamental issue, according to university officials, is not developing the technology but transforming UC’s operations to mesh with it.
Brostrom said the current payroll systems had more than 1,000 interfaces that the university had to unravel and strip out, including business processes like employee benefits that would normally be handled manually.
The UCPath team brought together representatives from every campus to winnow those processes down to 100 and set systemwide standards. Some questions were as small as whether the workweek should run from Sunday to Saturday or Monday to Sunday.
“It was much more difficult from a technology perspective than if we simply pluck out (the current systems) and pluck in this new technology,” Brostrom said.
The cost will continue to rise as the timeline extends. Some of that is from keeping the current payroll system going longer than anticipated, but it is mostly driven by labor – UC employees working to implement the new system, as well as external contracts.
Brostrom hopes the university will be able to make up some time by collapsing the waves of campus-by-campus implementation, but the delays have muddied the savings UCPath was supposed to generate.
“A lot of that was built on standard benchmarks,” he said. UC still has to “do a more realistic audit of what the savings are going to be.”
Nevertheless, Brostrom promises UCPath is “a very, very worthy project.”
“We’ve really turned the corner,” he said. The shared services center is set up in Riverside, and the UCPath team is in the middle of doing “functional tests.” The plan is to go live with the pilot in the president’s office later this year.
Napolitano defends the work that the university has done so far.
“Yes, it’s taken longer than people anticipated, but it’s a big, complicated project, where you are merging dozens of different systems,” she said. “It’s easy to talk about doing something like that. It’s very difficult. The state of California has never managed it with its payroll.”
California’s state government axed its payroll overhaul in 2013 after spending $250 million, only to see it fail spectacularly. The effort to replace a Vietnam War-era system with new technology is on hold.
Napolitano said the university has “some very strict management milestones we will meet” to finish UCPath.
Brostrom did not offer a specific timeline, saying the project’s completion is “driven by performance rather than an arbitrary date.”
That is a “major red flag” for Krigsman.
“It’s a very significant overrun,” he said. “Now they’re declining to provide estimates of what the total is. It’s rather extraordinary.”
He added that it is not unusual, nor is it an excuse, that the complexity in a big payroll upgrade is the business transformation. But it is noteworthy that the timeline and budget remain open-ended, he said, with management still unable to develop a sense of their exact scope.
“The only people who could afford to do this are people who have a blank check,” he said.
Call The Bee’s Alexei Koseff, (916) 321-5236. Follow him on Twitter @akoseff.