The German Federal Armed Forces has delayed using a new set of bookkeeping applications from SAP due to problems installing the software, according to an article published Thursday in the German business magazine Handelsblatt. The delays are costing the German government 350,000 euros ($350,664) a day in unplanned fees for outside consulting on the project, the article says.
The SAP applications are the centerpiece of a 10-year, 6.5 billion euro ($6.5 billion) computer modernization effort under way at the military agency, the magazine said. SAP, headquartered in Walldorf, Germany, is one of the world's largest suppliers of software applications designed to automate bookkeeping, order processing, and inventory tracking for businesses.
Bill Wohl, a SAP spokesman in the United States, confirmed that the German Federal Armed Forces is a SAP customer but declined to give further information about the project or about the company's relations with the German Ministry of Defense, which oversees the Armed Forces.
Just last month, SAP announced it had won awith the U.S. government for a similar project. Under the three-year, $30 million deal, SAP has agreed to provide accounting software to the Internal Revenue Service as part of a larger information technology renovation project at the tax agency.
Software companies have been eagerlygovernment contracts as businesses around the world cut back on investment in computer systems. On Wednesday, SAP competitor Siebel Systems said it has formed an alliance with government contracting giant Lockheed Martin to sell computer systems.
But SAP's trouble with the German armed forces may be a warning call that government contracts are not always a walk in the park, particularly for a segment of the IT industry prone to projectand missed expectations.
"These federal deals operate in the glare of public scrutiny," said Joshua Greenbaum, a technology analyst at Enterprise Applications Consulting.
"The kind of oversight that goes into government spending does pose a real problem to vendors when things go wrong," Greenbaum added. "The idea that it's a panacea to the software industry is stretching it."