Week 2: ERP and shared services


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Slides for the course "Technology in the Public Sector" at Northwestern University, MPPA program, Summer 2012

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Week 2: ERP and shared services

  1. 1. technology in the public sectorweek 2: ERP and shared services Northwestern University MPPA 490 Summer 2012 - Greg Wass 1
  2. 2. Technology priorities for public sector CIOs1. 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, 2011 2
  3. 3. Policy priorities for public sector CIOs1. Consolidation: centralizing, consolidating services, operations, resources, infrastructure2. Shared Services: business models, sharing resources, services, infrastructure3. Budget and Cost Control: managing budget reduction, strategies for savings, reducing or avoiding costs, activity based costing4. Security: security safeguards, enterprise policies, data protection5. Electronic Records Management/Digital Preservation/E-discovery: strategies, policies, legal issues, opportunities for shared services, emergency preparedness6. 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, 2011 3
  4. 4. ERP 4
  5. 5. Business functions before ERP 5
  6. 6. Business functions after ERP 6
  7. 7. Brief history of ERP systems 7
  8. 8. 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
  9. 9. 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
  10. 10. Other considerations for ERP1. 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
  11. 11. ERP components / scope 11
  12. 12. Typical ERP architectureCommunication The Presentation Layer collects user input and creates process requests. The Application Layer uses application logic to collect and process the process requests. The Database Layer stores and retrieves all data. 12
  13. 13. Typical ERP project costs 13
  14. 14. ERP implementation issuesSource: Paul Scherer, IBM, from Innovation for the Midsize Enterprise, white paper, 2008 14
  15. 15. Shared services 15
  16. 16. Public sector shared services modelsSource: Deloitte, 2011 16
  17. 17. Shared services structural decision: example Shared Service Benefits Decentralization Shared Centralized Lean, Flat Unresponsive Higher Costs Organization Independent Common No Business Unit Variable Business Systems & Control of Central Standards of Units Retain Businesses Support Overhead Costs Control Different Control Identification Efficient Inflexible to Environments Recognition of Efficiencies Knowledge Business Unit of Local Between Transfer, Needs Priorities Business Units Standards & Duplication of Tools Efforts Disconnect from Understanding Business Units of Group Functions Economies and Missions of Scale Dissemination of Best practicesSource: State of Illinois, 2009 17
  18. 18. Shared services organization structure: example Environmental Social Public Regulatory, Higher Healthcare and Economic Services Safety G&A Education Development DCEO DHFS DCFS DFPR IDOT ICCB IBHE ISAC DMA CMS DOC DOR DHS DPH DNR EPA ISP Support Support Support Support Support Support Center Center Center Center Center Center Agency Employees Served 17,600 4,300 9,700 17,800 7,100 500 Employees Employees Employees Employees Employees Employees • Deaf Hearing • Comp. Health • Agriculture • Prisoner Review • DOL • Violence Insurance Plan • Arts Council Bd. • ICC Prevention Bd. • Fire Marshal • Historic Preservation • OMB • Aging, • Illinois Medical Agency • IEMA District • WCC • Developmental Commission • CDB • Law Enforce’t • IDES Disabilities training Std • Veterans Affairs Board • Labor Relations • Guardianship • Criminal justice • Property Tax Appeal Info’n Authority • Dep’t of Human Rights • Human Rights Comm’n • Civic Service • Inspector General • Ed. Labor RelationsSource: State of Illinois, 2009 18
  19. 19. The scope decision: example Legal, Legislative, • Identify and bring other processes Facilities, Other into the shared service organization Grants • Bring in Grants processes • Provide tools and system modules to HR and support Grants management activities Fiscal sh bli • Begin with HR / Fiscal transactional processes ta • Implement integrated systems to support HR / fiscalEs SSO • Bring in other specialized HR / Fiscal processes • Create Shared Services Vision, Structure and Governance • Identify scope and plan for bringing processes into shared services Source: State of Illinois, 2009 19
  20. 20. The scope decision: example Options to expand Shared servicesState services on previous vision initiativesAdministrative 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, 2009 20
  21. 21. Shared services/ERP business case: exampleItem DescriptionEstimated 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 $121 million in estimated net positive cash flow over five years. BenefitsNet Annual Benefit $110 million in estimated reduced operating costs, recurring annually, (after five beginning in Year 6. years)Estimated Payback 3.3 years PeriodProject Duration 5 years (plus initial six month planning phase)Source: State of Illinois, 2009 21
  22. 22. Shared services project governance: example Cluster Chairs sit on the State-wide Board that is chaired by the COO / Head of Shared Services COO / Head of Shared Services Statewide Support Services Board (Governor’s Office) Cluster Chair represents other cluster agencies on the State-wide Board Support Services Director Customer / Client Support Services Board reports to the COO / Head of Shared Services Cluster Host Agency B Chair Agency C Agency X Agency A Agency Cluster Board is comprised of agency representatives Cluster SSC Support Services Director Support Services Center StaffSource: State of Illinois, 2009 22
  23. 23. Shared services critical success factors 23
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