GTSI acknowledges rough PeopleSoft rollout

Von Marc L.

A challenging US$10 million rollout of PeopleSoft Inc. ERP software at a government IT products and services provider hurt the company"s bottom line, disrupted customer relations and will delay it from achieving its long-term financial goals.

Chantilly, Va.-based GTSI Corp. Wednesday announced that its second-quarter financial results would be "negatively impacted" by lower bookings and shipments arising from "internal distractions and other difficulties" caused by the implementation. The ERP vendor"s software is now part of Oracle Corp."s portfolio.

Moreover, GTSI said in a statement that its plan to double revenues to $2 billion by 2007 is now in jeopardy.

"The second quarter has been a tough one for our customers, vendor partners and employees," said Dendy Young, chairman and CEO of GTSI. "We have been experiencing difficulties in delivering products to many customers in a timely manner due to software problems with our ERP implementation. This has caused disruption to some customer relationships."

The problems have been so severe that on May 31 the company announced it couldn?t provide monthly revenue, backlog and booking reports because it couldn?t validate the data generated by the ERP system.

GTSI bought the PeopleSoft ERP software in July 2004. Before it was rolled out, GTSI used an "unsupported legacy platform" so heavily customized that only its internal staff could maintain it, said a GTSI spokesman. The legacy software also could not scale sufficiently.

The company expected the new software to help increase productivity by allowing more proactive supply chain management, enabling customer and vendor profitability assessments and improving order management operations.

However, because the software was geared more toward manufacturing, GTSI had to reconfigure it to support reseller operations. "That"s part of what you find in these situations," said the spokesman. "You go through alterations of the product and you encounter difficulties."

Without offering details, he said those difficulties included both software bugs and procedural errors. PeopleSoft also connects to a number of third-party systems that support GTSI?s distribution center.

"We"ve worked through an awful lot of issues in the last several months," in part by using Oracle-PeopleSoft support, he said. Although the company has been able to handle orders through the rollout and continues processing shipments, it is doing so at a reduced rate.

The spokesman offered no estimate of how much money GTSI has spent to address issues related to the ERP software implementation.

However, in the 10-Q form it filed with the U.S. Securities and Exchange Commission on May 9, GTSI did say the implementation "has consumed resources, diverted management"s attention and increased our training costs.?

The company also said it believes it has solved most of its operational issues, and the spokesman said it still expects to double its revenues, although "it"s taking a little longer than anticipated." GTSI also said it plans to close its books for the quarter by Aug. 9.

?It?s clear this was an implementation that ran amuck,? said Joshua Greenbaum, an analyst at Enterprise Applications Consulting in Berkeley, Calif. ?It indicates a lack of proper planning and lack of good management, and this is all the more shocking because this is a technology service company.?

Oracle did not immediately respond to requests for comment.