PhillyDeals: SAP to replace American Water's software

American Water has picked SAP North America of Newtown Square over rival Oracle Corp. to replace its decade-old customer, financial and operating software.

It's a big win for SAP: The cost "will be in the $250 million-to-$300 million range over a five-year period," John S. Young, chief water technology officer at Voorhees-based American Water, told me.

The for-profit, investor-owned company has bought municipal and private water systems around the United States. Why aren't homegrown and off-the-shelf computer systems good enough?

"What a customer wants today is drastically different from what they expected a dozen years ago," Young told me. "They want bills over the Internet. They want self-service. Our old systems couldn't do these things."

The company software-shopped for a year. "There's SAP, and there's Oracle, and then there's a lot of niche players," Young said. "We were looking for an end-to-end system: Enterprise resource software. Finance. HR. Procurement. Enterprise asset management - how we manage the pipes and the pumps and the treatment plants. And, finally, a customer information system linking callers to phone centers in Illinois and Florida."

The more you can buy from one vendor, the better the systems tend to fit. So, for example, when a pipe breaks, employees can quickly find the leak, warn customers, stop the flow, make repairs, and send payments.

Young's staff weighed basic questions: "What does the hardware cost? How easy can we train people?" SAP needed fewer computer servers than Oracle. But SAP also had a reputation for being hard to learn. "We talked to enough users who said . . . they wouldn't give it up. So, including the price, we decided to go to SAP."

Most years, American Water spends $20 million to $30 million of its $800 million-plus capital budget on software upgrades. Adding SAP will roughly triple that budget for five years.

SAP North America president Robert Enslin promised the spending will buy more efficient systems. But Young said American Water can't yet estimate savings, or improvements.

In time, "we'll dive down and [find] the efficiencies," he added. "We'll put the numbers through rigorous scrutiny. Because we know our regulators will," when American Water goes to "recover the costs" from state public utility commissions, through higher water rates.

With just a few "no" votes, from around Philadelphia, Pennsylvania's House of Representatives Tuesday approved a pair of bills (H.B. 1502 and 1503) to force builders in the state to use the federal E-verify program to prove workers have valid Social Security numbers and are in this country legally.

Lead sponsor Rep. John Galloway (D., Bucks) told me he wished the bills would apply to all Pennsylvania companies, but he couldn't get colleagues to go that far. Citing 2007 research by the Pew Hispanic Center, he estimated at least 18,000 foreign construction workers labored illegally at the state's job sites.

"I have no idea, and I don't care" how much extra it would cost if builders are forced to hire Americans at higher wages, he said. It's more important to punish contractors who "exploit" workers here illegally.

American Civil Liberties Union of Pennsylvania lobbyist Andy Hoover calls the bill "an invasion of privacy" and predicts federal courts will rule it unconstitutional because the federal government, not the states, is supposed to enforce immigration laws.

Rep. Tony Payton (D., Phila.) Tuesday introduced a bill (H.B. 2560) to cut the state's corporate net income tax rate to 7.9 percent, from 9.9 percent, and require combined reporting by corporate affiliates, which backers say would close lucrative Delaware tax shelters to companies here.

Payton said the bill renewed recommendations by the state tax-reform commission that failed to pass five years ago.

"This is the fairest way of making us more competitive," he told me. "I hope to start discussions with the leadership as we debate our budget" this summer.