technology in the public sector

week 2: ERP and shared services

Northwestern University MPPA 490

Summer 2012 - Greg Wass

1

Technology priorities for public sector CIOs

1. Virtualization (storage, computing, data center)2. Document/Content/E-mail management (active, repository,

archiving, digital preservation)3. Legacy application modernization and upgrade (ERP)4. Networking, voice and data communications, unified

communications5. Web 2.0 (services, collaboration technologies, social

computing)6. Green IT technologies and solutions7. Identity and access management8. Geospatial analysis and Geographic Information Systems9. Business Intelligence (BI) and analytics applications10. Mobile workforce enablement

Source: National Association of State CIOs, 20112

Policy priorities for public sector CIOs

1. Consolidation: centralizing, consolidating services, operations, resources, infrastructure

2. Shared Services: business models, sharing resources, services, infrastructure

3. Budget and Cost Control: managing budget reduction, strategies for savings, reducing or avoiding costs, activity based costing

4. Security: security safeguards, enterprise policies, data protection5. Electronic Records Management/Digital Preservation/E-discovery:

strategies, policies, legal issues, opportunities for shared services, emergency preparedness

6. ERP Strategy: acquisition, implementation, expansion, upgrade7. Green IT: policies, energy efficiency, power management, green

procurement, e-waste8. Transparency: open government, performance measures, accountability9. Health Information Technology: assessment, partnering, implementation10. Governance: improving IT governance, data governance

Source: National Association of State CIOs, 20113

ERP

4

Business functions before ERP

5

Business functions after ERP

6

Brief history of ERP systems

7

Public sector financial processes for ERP

• Revenue and accounts receivable• Grants management and accounting• Budgeting and planning• Requisitions and purchasing• Contract management– Contract compliance

• Supply chain management• Governance (legislative approvals)• Financial accounting and reporting• Performance management/SEA• Payroll

8

Public sector HR/HCM processes for ERP

• Recruiting• Onboarding• Time and labor– Timekeeping– Business rules– Absence management– Dual employment

• Employee performance• Benefits management• Training and development• Ethics/disclosure

9

Other considerations for ERP

1. Major vendors2. On-premise vs. hosted solutions3. ROI/business case (legacy systems, BPI, FTE)4. Scope decision5. BPR, RFP and fit-gap analysis6. Configuration, customization and business process change7. Implementation and project management (executive

steering committee, QA, change management)8. Critical success factors9. Opportunity for organizational transformation (BPI)10. Shared services concepts (HR, fiscal)11. Alternative sourcing (payroll, HR)

10

ERP components / scope

11

The Presentation Layercollects user input andcreates process requests.

The Application Layeruses application logic to collect andprocess the process requests.

The Database Layerstores and retrieves all data.

Communication

Typical ERP architecture

12

Typical ERP project costs

13

ERP implementation issues

Source: Paul Scherer, IBM, from Innovation for the Midsize Enterprise, white paper, 200814

Shared services

15

Public sector shared services models

Source: Deloitte, 201116

Shared services structural decision: example

Decentralization

Higher Costs

Variable Standards

Different Control Environments

Duplication of Efforts

Shared

Lean, Flat Organization

Independent of

Businesses

Identification of Efficiencies

Between Business Units

Understanding of Group Functions

and Missions

Dissemination of Best practices

Centralized

Unresponsive

No Business Unit Control of Central Overhead Costs

Inflexible to Business Unit

Needs

Disconnect from Business Units

Business Units Retain

Control

Recognitionof Local

Priorities

Common Systems & Support

Efficient Knowledge Transfer,

Standards & Tools

Economies of Scale

Shared Service Benefits

Source: State of Illinois, 200917

Shared services organization structure: example

Support Center

Social Services

DH

S

DC

FS

SupportCenter

Environmental and Economic Development

DN

R

EPA

IDO

T

DC

EO

Support Center

Public Safety

ISP

DO

C

DM

A

Regulatory, G&A

Support Center

CM

S

DFP

R

DO

R

Support Center

ISA

C

ICC

B

IBH

E

Higher Education

Support Center

Healthcare

DPH

DH

FS

Agency Employees Served17,600

Employees9,700

Employees17,800

Employees7,100

Employees500

Employees

• Deaf Hearing

• Violence Prevention

• Aging,

• Developmental Disabilities

• Guardianship

• Agriculture

• Arts Council

• Historic Preservation Agency

• CDB

• Prisoner Review Bd.

• Fire Marshal

• IEMA

• Law Enforce’t training Std Board

• Criminal justice Info’n Authority

• DOL

• ICC

• OMB

• WCC

• IDES

• Labor Relations

• Property Tax Appeal

• Dep’t of Human Rights

• Human Rights Comm’n

• Civic Service

• Inspector General

• Ed. Labor Relations

4,300Employees

• Comp. Health Insurance Plan Bd.

• I llinois Medical District Commission

• Veterans Affairs

Support Center

Social Services

DH

S

DC

FS

DH

S

DC

FS

SupportCenter

Environmental and Economic Development

DN

R

EPA

DN

R

EPA

IDO

T

DC

EO

IDO

T

DC

EO

Support Center

Public Safety

ISP

DO

C

DM

A

ISP

DO

C

DM

A

Regulatory, G&A

Support Center

CM

S

DFP

R

DO

R

CM

S

DFP

R

DO

R

Support Center

ISA

C

ICC

B

IBH

E

Higher Education

Support Center

Healthcare

DPH

DH

FS

DPH

DH

FS

Agency Employees Served17,600

Employees9,700

Employees17,800

Employees7,100

Employees500

Employees

• Deaf Hearing

• Violence Prevention

• Aging,

• Developmental Disabilities

• Guardianship

• Agriculture

• Arts Council

• Historic Preservation Agency

• CDB

• Prisoner Review Bd.

• Fire Marshal

• IEMA

• Law Enforce’t training Std Board

• Criminal justice Info’n Authority

• DOL

• ICC

• OMB

• WCC

• IDES

• Labor Relations

• Property Tax Appeal

• Dep’t of Human Rights

• Human Rights Comm’n

• Civic Service

• Inspector General

• Ed. Labor Relations

4,300Employees

• Comp. Health Insurance Plan Bd.

• I llinois Medical District Commission

• Veterans Affairs

Source: State of Illinois, 200918

The scope decision: example

Establis

h

SSO

HR and Fiscal

Grants

Legal, Legislative, Facilities, Other

• Bring in Grants processes• Provide tools and system modules to

support Grants management activities

• Begin with HR / Fiscal transactional processes• Implement integrated systems to support HR / fiscal • Bring in other specialized HR / Fiscal processes

• Create Shared Services Vision, Structure and Governance• Identify scope and plan for bringing processes into shared

services

• Identify and bring other processes into the shared service organization

Source: State of Illinois, 200919

The scope decision: example

State servicesShared services

vision

Options to expand on previous initiatives

Administrative Services (e.g., Human Resources (incl Timekeeping)/Payroll/Fiscal)

√

Grants Management (e.g. grant application, monitoring and reporting) √

Customer Service (e.g. State-wide call center, consolidated front-office service locations)

√

Business Portal (e.g. business application and authorization) √

Information Technology Infrastructure √

Fleet √

Facilities Management √

Other Services (e.g., Communications/Media, Legal, Internal Audit) √

Source: State of Illinois, 200920

Shared services/ERP business case: example

Item Description

Estimated Savings $229 Million in estimated total estimated savings over five years. This amount consists primarily of savings generated through increases in the efficiency of administrative functions and the elimination of maintenance costs of computer systems identified for replacement.

Estimated Costs $108 Million in total estimated costs over five years. This amount consists primarily of costs associated with implementing integrated administrative systems (e.g. purchase of software, hardware, implementation services, contractors and training). The quantitative and qualitative benefits described below are dependent on deployment of this technology.

Estimated Net Benefits

$121 million in estimated net positive cash flow over five years.

Net Annual Benefit (after five years)

$110 million in estimated reduced operating costs, recurring annually, beginning in Year 6.

Estimated Payback Period

3.3 years

Project Duration 5 years (plus initial six month planning phase)

Source: State of Illinois, 200921

Shared services project governance: example

Cluster SSC

Support Services Director

Support Services

Center Staff

Host Agency A

Statewide Support Services Board

Agency B Agency C Agency X

COO / Head of Shared Services

(Governor’s Office)

Customer / Client Support Services Board

Cluster Chair

Agency

Support Services Director reports to the COO / Head

of Shared Services

Cluster Chair represents other cluster agencies on the State-wide Board

Cluster Chairs sit on the State-wide Board that is chaired by the COO / Head of Shared Services

Cluster Board is comprised of agency representatives

Cluster SSC

Support Services Director

Support Services

Center Staff

Host Agency A

Statewide Support Services Board

Agency B Agency C Agency X

COO / Head of Shared Services

(Governor’s Office)

Customer / Client Support Services Board

Cluster Chair

Agency

Support Services Director reports to the COO / Head

of Shared Services

Cluster Chair represents other cluster agencies on the State-wide Board

Cluster Chairs sit on the State-wide Board that is chaired by the COO / Head of Shared Services

Cluster Board is comprised of agency representatives

Source: State of Illinois, 200922

Shared services critical success factors

23