Week 2: ERP and shared services
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technology in the public sector
week 2: ERP and shared services
Northwestern University MPPA 490
Summer 2012 - Greg Wass
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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
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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
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ERP
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Business functions before ERP
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Business functions after ERP
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Brief history of ERP systems
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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
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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
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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)
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ERP components / scope
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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
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Typical ERP project costs
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ERP implementation issues
Source: Paul Scherer, IBM, from Innovation for the Midsize Enterprise, white paper, 200814
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Shared services
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Public sector shared services models
Source: Deloitte, 201116
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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
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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
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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
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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
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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
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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
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Shared services critical success factors
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