The federal government has awarded a significant contract to replace Ottawa’s failed Phoenix payroll system to a leading manufacturer of human-resources software developed in Canada.
Ceridian HCM Holding Inc., which is based in Minneapolis but headed by Chief Executive David Osip in Toronto, said that under an eight-year, $16.9 million contract, it would be looking to transfer four government departments, starting with Canadian Heritage. will run a pilot project for , on its cloud-based human-resources software platform, known as DeForce.
After that, “it is expected that additional departments will follow”, moving their payroll processing to the DeForce system, Mr. Osip said in an interview. He described the contract as part of a “multi-decade partnership and collaborative effort” with the government. “Obviously we expect to be very successful and the challenges to the Government of Canada to pay off, because that’s what we do.”
The move is the latest effort to fix payroll for the federal public service, which blew up in 2016 with poor implementation of the Phoenix system. Phoenix, one of the government’s largest internal information technology purchases, caused thousands of public servants to be overpaid, underpaid or not paid at all, and put many of them in deep debt.
The system problem still persists. According to the most recent data from the Public Service Pay Centre, as of August 18, there was a backlog of 115,000 salary transactions that needed to be processed, beyond the normal workload.
The new contract for Ceridian is a significant win for Osip, a South African-born Canadian software entrepreneur who began building DeForce as a Toronto-based startup in 2009 and sold it to Ceridian three years later. At the time, the buyer was a fading technology—one that began life as an IBM entity in 1932 and was acquired in 2007 by US private-equity giant Thomas H. was purchased by Lee Partners. Part of the deal was that Mr Osip would become Ceridian’s CEO.
He later built Ceridian’s effective headquarters and executive team in Toronto, where most of the development work takes place. Mr. Osip shifted Ceridian’s focus to expanding DeForce, which provides payroll and other human-resources services, including benefits, and work force and talent management administration on a single platform. Ceridian’s DeForce Wallet service allows shift workers to make payments on demand; 600 employers have signed up for the innovative offering.
Ceridian went public in 2018 on the Toronto and New York stock exchanges at US$22 per share. Since then the share price has nearly quintupled, bringing the company’s market capitalization to approximately US$16 billion.
In 2018, Mr. Osip made a push for Ceridian to help Ottawa move on from Phoenix’s failed implementation.
Public-service unions gave high priority to Phoenix’s replacement. Debbie Daviau, president of the Professional Institute for the Public Service of Canada, welcomed the new contract with Ceridian. She said in a statement, “We are looking forward to the way Phoenix was rolled out and moving towards a system that will work as ‘advertised’ as it will be thoroughly tested before reaching public servants.” “
Ceridian’s prospects were promising from the start, as the government solicited bids from software firms, not systems integrators like IBM. Ceridian launched a public-affairs campaign lobbiing the government to consider Ceridian the established tech giants who had won Ottawa business over the years.
Ceridian noted that it had hired hundreds of employees in Canada and that DeForce represented domestic innovation governments like Champion. Mr Osip also argued that Canadian governments can fuel the global expansion efforts of domestic innovators by serving as key reference customers.
“The best way the government can support its innovation agenda is to help innovative companies in Canada,” said Mr. Osip. “Getting buying support has always been a challenge. I want all governments in Canada, like other countries, to allocate a percentage of their budgets to Canadian innovation companies. If they did that, you would be giving birth to multi-billion dollar organizations out of Canada.”
Charm acted aggressively. In June, 2019, the federal government announced that Ceridian and foreign giants SAP SE and Workday Inc. were short-listed to provide Phoenix replacements. A month later, Ceridian hired Gianluca Cairo, the then Minister of Innovation, Science and Economic Development, Navdeep Bains’ chief of staff, to oversee a new division to expand its offerings to public sector clients around the world. Ceridian now has hundreds of more than 5,160 customers.
Mr. Cairo assumed office after being approved by Federal Ethics Commissioner Mario Dion. Ceridian said in a statement that Mr. Cairo “has always respected his post-employment obligations relating to his service in the federal government. He has no involvement in any matters in which he worked while in public office.”
Ceridian has known for weeks that it has won the bid, but the news was subject to a “blackout period in relation to the election”, Mr Osip said. He said the government “didn’t want it to be seen as anything to be affected by the election” and added the timing and prize “had nothing to do with the political environment.”
The government’s central IT department, Common Services Canada, said in an e-mail that it looks forward to working with Ceridian on the next phase of the payroll project. It said the contract was decided by the department and not by Liberal cabinet ministers.
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