The Department of Water Affairs has awarded T-Systems SA a three-year, R77 million contract to manage and modernise its SAP system, which is currently being upgraded, at a time when the department is working on improving its financial position.
The deal, worth R67.5 million when VAT is stripped out, is an SAP Application Management and Modernisation (AMM) contract and was awarded following a tender process. It follows on T-Systems' contract to implement a revenue-stabilisation programme in 2010 to improve business systems and processes.
The AMM solution, based on T-Systems' AMbition methodology, aims to ensure the department's current SAP 4.7 environment is maintained and continuously improved, while allowing for the smooth transition to ECC 6.0, SAP's latest enterprise resource planning (ERP) solution, to which it is being upgraded.
T-Systems' SA MD, Gert Schoonbee, explains that T-Systems will gradually take over as EOH wraps up stages of the upgrade and is already on site. This allows for case management in parallel, he notes.
Core business
Schoonbee says SAP is the department's core business system, which it uses to manage revenue collection. He adds that it has other bespoke solutions for water management, but SAP is vital to the business side.
The department is emphasising the strategic importance of SAP in its application portfolio through the contract, says Schoonbee. He adds that the department is not just looking at a once-off upgrade, which is EOH's task, but rather at ongoing management and maintenance, emphasising its relevance.
"The Department of Water Affairs plays a strategic role in the sustainability and growth of SA."
Schoonbee says the AMM methodology and implementation will "undoubtedly" enable the department to exploit the benefits of its SAP environment to meet its core business objectives. According to T-Systems' Web site, AMM allows companies to save as much as 30% of current costs and scale resources up or down rapidly and flexibly.
T-Systems has taken on some risk in that the contract, which would usually be based on resources or hours worked, is at a fixed price, says Schoonbee. He notes that while this adds some risk for T-Systems, this should work out best for both parties.
The department has come under fire for running over budget with tenders previously.
Tackling problems
Senior manager in the auditor general's office, Wikus Jansen van Rensburg, told a Parliamentary portfolio committee in March that the department had been qualified on billing issues in the 2011/12 financial year.
The AG's report noted that the office could not find "sufficient appropriate audit evidence about accuracy of goods and services reflected as R2. 2 billion and was unable to confirm the expenditure by alternative means".
Jansen van Rensburg said the department was making improvements in the 2013/14 year and minister Edna Molewa wrote in the annual report that it was "well" on its way to achieve a clean audit in 2014.
However, said Jansen van Rensburg, there were still a number of issues of non-compliance, and proper business processes were needed. He added that key leadership positions were being filled and ICT played a big role, given the volume of transactions.
Skilling up
In addition, the contract includes the development of a centre of excellence, which should aid the department in getting more value out of the deal, says Schoonbee. The centre aims to develop the department's ability to support its AMM infrastructure after the contract comes to an end.
Schoonbee says, as part of the centre, it will take on and train employment equity graduates. Eight graduates and a team leader will receive an 18-month internship, for which T-Systems SA will spend around R900 000 getting them to an SAP skill level, he adds.
After the end of the programme, the company and the department will decide whether to take the interns on full time or as contractors, says Schoonbee. He says this will create a pool of skills resources for the department and introduce newly skilled resources into the market.
A recent AG report found that a total of R102 billion was spent on consultants between the 2008/09 and 2010/11 financial years, and more than a billion of this amount went to IT projects that were overpaid or never completed. It says the audit shows consultants are often employed to provide competencies for which departments should have internal staff.
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