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UncategorizedSF gives $50 million to Oracle -- for what?

SF gives $50 million to Oracle — for what?

Two supes question long-term software contract that may be obsolete a year or two after it starts

Sup Jane Kim wants the city to get away from huge software contracts with giant corporations when so much open-source software is available
Sup Jane Kim wants the city to get away from huge software contracts with giant corporations when so much open-source software is available

By Tim Redmond

JUNE 17, 2015 — When proposed contracts come before the Board of Supervisors, they generally get approved without much challenge or question. The Budget and Finance Committee is supposed to check out the details; the budget analyst looks at the numbers. In a typical meeting, a dozen or more contracts, often totaling tens of millions of dollars, are approved by unanimous consent.

Not so yesterday, when two supes challenged a deal with Oracle and Accenture worth more than $50 million– but the rest of the board approved it anyway.

City contracts are one of the places where mischief happens in local government. The city spends such a vast amount of money that in the past we’ve seen all sorts of examples of deals going to friends of the mayor, deals going to campaign contributors … all sorts of ways that big chunks of taxpayer money went into dubious deals.

This particular contract may be just fine and dandy – but Sups. Jane Kim and David Campos raised some troubling questions.

The contractors are supposed to upgrade the city’s ancient software systems for financial administration and accounting. As Kim noted, the Controller’s Office showed her how the current system works – with decades-old computers using a black screen and green letters. It’s done; it has to be fixed.

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There’s already money in the budget for the project, which makes perfect sense: You don’t scrimp on systems that track more than $8 billion in city money.

Here’s how it’s supposed to work: When you do a deal like this, you put out a request for proposals, you get bids, and you pick the best one.

In this case, according to the budget analyst, Oracle and Accenture came in $10 million above the next bidder. But the Controller’s Office said that cost was only one factor, and chose the Oracle and Accenture over two other competitors, CGI and Phoenix/SAP.

The original proposal was for five years, at about $26 million. After Oracle and Accenture were chosen, city officials went back to the company and negotiated a much longer deal, raising the price to more than $50 million.

The other two competitors weren’t given a chance to bid on the longer contract.

All of that’s a bit concerning, Campos said. “The size of the [final] contract is so much higher [than the original proposal] that it undermines the point of competitive bidding,” he said. “When you have a [project] scope and then turn around the double the scope, perhaps [with competitive bidding on the larger contract] you might have had a different outcome.”

Kim had a much larger concern. The current system the city uses is way, way out of date, she said. But “the system we are voting on today is likely to be our system for the next 25 years.” And soon, she said, “the system will look just as outdated and scary” as the current technology.

That’s because companies that sell licensed software like Oracle tend to set things up so it’s hard to change vendors. “That’s part of Oracle’s business plan,” she said. “They get you and you just can’t get out.”

More and more private companies, she said, are opting to use open-source, flexible – and free – software for things like accounting, she said. In this tech hub with so many options, the city should look for ways to “wean us off our dependence on giant companies.”

(Of course, Oracle brought us the America’s Cup – and look how well that turned out for the city.)

Nobody else on the board expressed any concerns. The motion to approve the contract for more than $50 million passed 9-2.

Tim Redmond
Tim Redmond has been a political and investigative reporter in San Francisco for more than 30 years. He spent much of that time as executive editor of the Bay Guardian. He is the founder of 48hills.
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62 COMMENTS

  1. @Almondy – From the evidence at hand, you know people who work in tech marketing. Actual technologists don’t use marketing buzzword phrases like “best of breed,” we just roll our eyes at them. Nor does the monochrome console discussion evince much awareness of what Oracle is or does. I’ve actually worked in the database industry as a software engineer and I can assure you that Oracle’s dominance is due to marketing, not technical advantage.

    Computing power has advanced to the point where a database’s less-efficient software architecture and extravagant hardware requirements can go unnoticed compared to, say, a decade ago. These days the important thing differentiating them is the add-ons. Oracle’s add-ons are designed to lock the customer in, which is again a sales and marketing advantage, not a technical one. There are open-source add-ons for open-source databases, though some of this has been bought up by Oracle.

    In short, Jane Kim’s arguments are exactly right about these technologies.

  2. Tech isn’t a “once and done” thing. It is a fiscal obligation that will go on forever.

    Why do you think our local tech enterprises are so successful?

    And at least they are located here, so that we all benefit from the fruits of their global leadership.

  3. I know plenty of people who work in Tech, and they say that Oracle is the best.

    And you have to pay up for quality.

  4. Home sharing, car haring, ride sharing, bike sharing, shuttle sharing, and dare I say software sharing? Don’t you just love San Francisco’s current public-private partnerships?

    Welcome to Ed. Lee’s San Francisco, where government commercializes public resources and grants *special permissions* to a select group of disruptive companies who write big fat checks to legislators. Of course all of this “disruption” is supposed to “trickle down” to the rest of the city.

  5. “Kim had a much larger concern. The current system the city uses is way, way out of date, she said. But “the system we are voting on today is likely to be our system for the next 25 years.” And soon, she said, “the system will look just as outdated and scary” as the current technology.” That’s because companies that sell licensed software like Oracle tend to set things up so it’s hard to change vendors. “That’s part of Oracle’s business plan,” she said. “They get you and you just can’t get out.”

  6. I’m suggesting that the questions brought up by Kim and Campos should have been addressed. And do I trust the Lee administration to do the right thing when there is big money at stake? The answer is no.

  7. Are you suggesting that there wasn’t a thorough analysis and study by subject matter experts? Or are you just guessing?

  8. A small business couldn’t handle a big project like this, and has a much higher risk of going belly up leaving the city in a mess.

  9. This part of the thread is off topic. Kim didn’t question the need for an upgrade, just how and to whom it was awarded, both very good points. A BOS more interested in guarding taxpayer money would have looked at these issues more closely before approving it.

  10. At best this is sloppy handling of public funds, at worst outright corruption. We have a board and mayor whose connections to ethical behavior are teuous.

  11. Fine. But Oracle is ripping the City off. “Disruption!” “Innovation!” There are plenty of small businesses in the Bay Area that could use the money. Oracle doesn’t deserve or need it.

  12. Anybody in tech who looks at this contract will see an obvious giveaway to Oracle. Open-source would be much cheaper and could be easily implemented by 1 of 100 companies chomping at the bit for this contract at much lower cost.

    “That’s because companies that sell licensed software like Oracle tend to set things up so it’s hard to change vendors.”

    Yup, That’s the Oracle Business Model. Once they’ve got their cancer into your system, you are screwed.

    Here’s the problem: Nobody at city hall knows anything about systems costs, and we all got screwed by their stupidity, as usual.

  13. According to the Budget and Finance Committee meeting, it sounds like the increased contract amount is mainly due to multiple one-year options to extend the service agreement, which sounds like a prudent measure for cost certainty. If cost isn’t the primary factor in the bid selection, the extended terms probably wouldn’t have made a difference anyway.

    Kim’s point about the possibility of an open-source financial system may be valid, though I feel like brings the question of what system would equipped to handle an large entity like the City and who would be liable if something went wrong with it.

  14. Accenture… the folks who audited Enron and found everything just effing fine. Why does this company still exist?

  15. Their competitors are all private sector entities too. SAP is German, I believe. Why not keep the money in the Bay Area?

  16. How about slow, unreliable, error-prone and frustrating?

    Seriously dude, go down to the A-R office and ask them to do something.

  17. Yes, and that’s exactly the line I was responding to. “It looks old” is not a reason to spend $50M.

  18. Did you read the article?

    “As Kim noted, the Controller’s Office showed her how the current system works – with decades-old computers using a black screen and green letters. It’s done; it has to be fixed.”

  19. Those dumb terminals and the mainframe they’re connected to work, that’s why they’re still around. City Hall is hardly the only place you’ll find them. There may well be actual compelling reasons to upgrade, I don’t know, but “they still have monochrome monitors!” isn’t one.

  20. Oracle’s lobbyist is Alex Tourk, who also is lobbyist for Airbnb, Conway, Uber, POA and others. In the first quarter of 2015, he was the pass-through for as much as $40,000 in campaign contributions to Ed Lee and Julie Christensen. The Ethics web page on lobbyist disclosure gives the amount of each contribution (typically $500) and the name of the donor, but not the employer, so it is not possible to see how many tens of thousands came from Oracle employees, etc. Too bad, since contributions from those negotiating contractors are illegal and a criminal misdemeanor.

  21. Oracle are best of breed for this kind of thing. And at least the money stays in the Bay Area. I’m comfortable with this.

    Go to the assessor-recorders office and watch the clerks entering data into 1980’s style dumb terminals. It’s probably the only place outside of a museum where you an see them

  22. It’s just another shameless giveaway of public money for personal gain. Those who voted for this boondoggle obviously expect to be rewarded somewhere down the line.
    Kudos to Supes Kim and Campos for showing some integrity and guts.

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