In 2013, California’s Sacramento City Unified School District (SCUSD) decided to improve its approach to finance, HR, and payroll management. Hoping to cut costs and streamline operations, the district hired software as a service (SaaS) provider, Workday. 

However, two tumultuous years later, the project failed. In 2018, SCUSD sued Workday and its service partner, Sierra-Cedar, for $5.2 million, citing instances of fraud, contract infringement, and code defiance, among other claims. 

What led to the Sacramento School District Workday failure? How can your organization avoid similar problems? Let’s take a closer look.

The Sacramento School District Workday Failure: What Happened?

When the project began in 2013, the school district’s chief business officer (CBO) worked with a consultant to research software solutions that could centralize and simplify its current HR and ERP systems.

After months of evaluation, SCUSD decided to hire Workday, even though the SaaS company had not completed any K-12 implementations at that time.

Workday proposed a cloud-based software system to meet the district’s needs and brought a service partner on board named CedarCrestone. Together, the companies proposed starting the project with a budget of $816,000, which would cover the initial year of Workday cloud fees. The total contract was budgeted for $3,871,000 and was set to span from August 2014 to October 2015. 

The next two years saw a few major changes:

  • CedarCrestone merged with Sierra Systems US to make Sierra-Cedar
  • The current CBO left SCUSD
  • The January 2016 go-live date was pushed to July 2016

As the go-live date neared, there was a glaring issue that couldn’t be ignored: The project team routinely tested the new payroll system but couldn’t surpass the 70% quality rating. With an annual payroll of $250 million, this was a risk the team couldn’t take, so they announced the project would not go live, and in November 2016, they killed it altogether.

A new superintendent took control of SCUSD in 2017. Then, in 2018, the district filed a lawsuit against both Workday and Sierra-Cedar, claiming that the partners:

  • Violated California’s Business and Professions code
  • Misrepresented their abilities and competencies
  • Breached project-related contracts

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4 Lessons Learned from this SaaS Failure

1. Vet Partner Experience

At the time of the project, neither Workday nor Sierra-Cedar had a presence in the academic field. SCUSD claimed that they used this project as a “test run,” intending to ramp up their presence in this field and gain credibility as education technology providers. 

Regardless of their motives, one thing is clear: Their lack of experience in the academic space meant that the designed systems never cumulated into functional technology. 

While it’s important to make sure providers are fully qualified, it’s equally important to vet any partners or consultants you bring on board.

2. Ensure IT Involvement

It’s unclear whether there was a dedicated IT team working on the SCUSD project. There is no mention of such a team in the lawsuit, nor is it included in any board documentation. If this is the case, it helps explain why so many critical issues were overlooked.

An experienced CIO would vote against implementing software that had not yet been proven in the educational niche. There’s simply too much at risk, especially considering the industry has razor-thin margins and strict regulatory compliance mandates.

3. Carefully Review Contracts

Almost immediately, there were inherent issues with the SCUSD contracts. Later, the district would claim that they were written in a way that allowed Workday/Sierra-Cedar to rake in massive fees regardless of project performance.

The district was required to pay fees that totaled more than $1.5 million before the software even went live. In addition, it had to pay for training before training even started. These extra expenses were on top of the hourly rate that SCUSD was paying Sierra-Cedar. 

Before moving forward with a prospective partner, be sure to carefully review all contract verbiage. An ERP contract negotiation expert is invaluable in this regard.

4. Encourage on Project Participation

Technical issues aside, this project was also riddled with people problems. Not only was there a blatant lack of participation from the district’s IT and legal teams, but it’s likely that no one in the district was very engaged in the effort from the beginning. 

In addition to a designated project team, there should also be people within the organization that can ramp up enthusiasm and interest around the effort. This includes employees who can oversee organizational change management to facilitate a smooth transition onto the new ERP system

Looking Ahead to ERP Success

The Sacramento School District Workday failure is a master class in how to flunk an ERP implementation. In this case, there were weaknesses on both sides. 

If you’re planning your own IT project, remember to choose the right systems integrators, check your contracts, and ensure sufficient in-house resources. Our ERP consultants can help you ask the right questions so you can avoid ERP failure. Contact us below for a free consultation. 

About the author

As Director of Panorama’s Expert Witness Practice, Bill oversees all expert witness engagements. In addition, he concurrently provides oversight on a number of ERP selection and implementation projects for manufacturing, distribution, healthcare, and public sector clients.

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