Yet another black eye for German software giant SAP (SAP).

Last month Jeweler Shane Co. blamed difficulties trying to get SAP software running as partly responsible for the company's bankruptcy. Now the State of California -- already in dire financial straits -- is giving up on its SAP implementation after sinking $25 million into the project and seeing nothing out of it.

CIOinsight: Schwarzenegger has long eyed the payroll as a way to stave off financial shortfalls until a budget reaches his desk for signing. Last July, the governor attempted to cut back payroll by temporarily dropping workers down to minimum wage until a budget deal was hammered out by lawmakers.

This plan was obstructed not by political wrangling or labor lobbyists -- it was held up by absolutely ancient IT infrastructure and a beleaguered project to upgrade to SAP.

The California State Controller's Office (SCO) is currently running on an old COBOL-based payroll system that dates back to the 1970s. The SCO began an initiative in 2006 to update this system, with initial estimates targeting full implementation by 2009. State Controller John Chiang said that the systems needed to carry out Schwarzenegger's minimum wage plan would not be available for six months. That was last summer.

Just this January, the SCO announced that it was canceling its contract with the consulting company in charge of the project and had not estimated when it would hire another firm to carry on. That was $25 million into an estimated $69 million project.

Earlier this month, SAP co-CEO Leo Apotheker angrily denied there were problems with SAP's software, and blamed consulting firms like IBM (IBM) and Accenture (ACN) for sending people who knew nothing about the software to clients as experts on SAP. Leo also has said SAP's new cloud-like package, SAP Business Suite 7, should be easier to implement.

Plenty of blame to go around, we think. At least in the California bomb, the consulting firm involved was BearingPoint, which yesterday filed for bankruptcy. Accenture has already moved to acquire part of BearingPoint's operations.