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  • As-is and vision meetings Interview with both technical support staff of the five business areas as well as ITSD staff including, DBA’s, network and communication, platform staff. Existing environment Current and supported hardware and platform, database tools, monitoring tools, security, disaster recovery plan, and administrative tools Control-M Tivoli Outreach and surveys Potential replacement internal agency systems, user counts, minimum pc configuration, access to internet, availability of bandwidth
  • How well does the evaluated software fit the State’s module level requirements? Each area created contexts diagram which were used by Deloitte in the evaluation process
  • Can the evaluated software package support a system that is large and complex as that required by the State of Ohio? Is this level of scalability proven?
  • (1) The gap analysis focused on the technical and process gaps between the three ERP packages (Oracle, PeopleSoft, and SAP) and state’s 2100 requirements as defined in the Requirements Analysis document. (2) Fully supported – the requirement can be met Partially supported – one or more elements of the requirement are fully supported AND one or more elements of the requirement are custom supported Requiring customization – requirement cannot be met by the base product with normal configuration It includes ratings for all requirements, but does not consider the state’s weighting of requirements or functions, or the level of implementation effort necessary to satisfy the requirement. Other Items that should be considered in software selection: Integration across modules – SAP has much better integration and single database User friendly design – PeopleSoft is generally considered the easiest of the 3 packages for users to learn Systems already in use by state – Oracle is already being used by 3 state agencies: DOE, BWC, and AOS
  • Benefits are significant. Four key benefit categories: Increased Decision-Making Benefits Increased efficiency benefits Improved Process Integration and Controls Improved Service Levels Benefits in these categories are both intangible and tangible. Also, cost avoidance of status quo is a major benefit to the state. The intangible benefits are not quantified in the business case either because of the difficulty in attaching meaningful dollar values to such broad, transformational achievements or because the information is not currently tracked. Intangible benefits range from improved budgetary forecasting ability, to improved stakeholder satisfaction levels, to better selection of vendor partners based on enhance reporting. Key decision-making benefit: Increased budget management capability The state’s current budget management tools are cumbersome and take valuable analysis time away from key decision-makers. Because of the improved speed with which budget information can be shared, reported upon, summarized, and manipulated, budget managers across the state will be able to utilize OAKS to enhance decision-making. OAKS will simplify “what-if” and other forecasting analyses.
  • Benefits are calculated over a five-year period beyond full implementation of OAKS. This business case assumes that the state will achieve the cost efficiencies identified in this document through cost avoidance of future hires, redeployment of resources, or, as appropriate, through direct staff reduction.
  • Today the state spends more than $2 billion on goods and services. Today, state purchasers have no easy way to find their needed items on hundreds of state contracts maintained by DAS – therefore, state contracts are not used as much as they should be. Today, the state has no practical way to enforce that state purchasers buy required items from state contracts – therefore state contracts are not used as much as they should be. Today, when the state invites bids for state contracts, they have no reliable sales volumes of what the state has historically purchased – therefore vendors are not given accurate sales projections upon which they can supply their best prices. OAKS will address these shortcomings.
  • With OAKS, state purchasers will have one easy-to-use source for locating items which can be purchased from state contracts. This will increase state spending. The OAKS system will enforce use of state contracts where appropriate. This will increase state contract spending. With OAKS, a single database will contain all state purchase history. This will allow the state to give vendors accurate sales projections upon which they can apply their best prices. Coupled with ease-of-use and increased state contract spending, this will save an estimated $45 million.
  • At a high level, The States Accounts Payables Process involves: Goods Receipt Verification Invoice Validation and Approval Warrant Creation and Warrant Distribution This is a labor intensive, paper based system that involves multiple hand-offs, reviews and approvals across the organization This process is performed in 144 state agencies and higher education institutions, each having their own manual goods receipt, voucher approval, and warrant distribution process. The current process on average takes 28 days to complete and has 21 different steps in the best case scenario. (Examples of variations– Agency voucher approvals and obtaining warrants) As a result – the state does not: Electronically match receipt and purchase order information Fully take advantage of vendor discounts which require payment in 10 days Consolidate vendor payments to minimize warrant creation and distribution costs (i.e. a vendor could receive 10 warrants from the state from the same day)
  • With OAKS, the state’s Accounts Payable process will benefit greatly from the best practices supported by the ERP application. Some of the best practices that OAKS will leverage include: Utilization of bar code scanning during the goods receipt process Implementation of electronic matching - ERS (two way) and three way Scheduling the payment cycle to optimize vendor discounts Consolidation of vendor payments across the enterprise Utilization of a central mailing facility As a result, the state’s benefits will include: Reduce processing time by two thirds – it could be reduced down to four days, however we would like to pay in ten days to optimize cash management Migrate process from multiple manual reviews and approvals to systematic matching and approvals Eliminate potentially 260,000 warrants per year by consolidating payments across agencies Strengthen internal controls by eliminating multiple warrant distribution channels Migrate employees from paper and labor intensive processing to a more value added analytical role Total projected savings: $38 Million Increase savings achieved from vendor payment discounts $26.2M Decrease by 50% manual effort on previously authorized payments $8.7M Decrease by 43% expenditures on warrant processing $3.1M
  • Today it can take up to six months to get a new full-time employee on board, due in part, to a manually intensive, 28-step process. Both agency operations and current staffs suffer the consequences. Positions left unfilled, for example, often mean that other employees must either pick-up the slack in under-staffed operations or let important work go undone to the disservice of the state’s customers.
  • OAKS will reduce by as much as 45 days the length of time needed to hire a new employee. OAKS’ workflow capabilities, for example, will help eliminate 16 of the steps common in today’s process. OAKS will decrease the costs of: processing application by 74% recruitment advertising by 50% processing Personnel Actions by 75% Time savings like these relate to an estimated $25.8 million.
  • -         Approximately 1.8 million assets must be inventoried every 2 years -         Based on research conducted by Deloitte and discussions held with various agencies, the avg. time required to inventory 1 asset is 3 minutes. -         The current process is manually intensive -         Great risk of human error in identifying exceptions (Found, Not on List – Not Found, On list)
  • -         Bar code scanning technology will decrease the average time to inventory an asset by 2/3. -         Information will be more reliable as human error in dealing with numbers is reduced. -         Time will be saved because exception lists will be automatically generated. -         Potential for increased accountability – because of reduced time to inventory assets, inventories could be performed annually rather than biannually -         Barcode scanning could be accomplished without OAKS. However, it is complicated by the fact that there is one central asset management system and approximately 27 agency owned systems. Costs would be great: o        Difficult for one software package to work with 28 separate systems o        Major effort to integrate barcode software with each system. -         Improved asset accountability leads to more credible CAFR reporting, a stronger balance sheet and improved debt ratings
  • Within OAKS, capital improvement projects, financials, fixed assets, human resources, and procurement will access the same data, avoiding the extra effort that today requires data reconciliation. In addition, the significant reduction in reconciliation errors will yield direct cost savings to the state, as will automatic edits and system checks. Reduce Cycle Times Eliminate paper processes Reduce time for requisition and approvals Reduce multiple checks to the same vendor Automate application process and screening new applicants Automate and implement self-administration of benefits Enable Self-Service for Employees and Vendors Improve Project Management Support Improve competitive bidding through electronic bidding and management Decrease the time it takes to complete a project through better management reporting and analysis Reduction in project rework Reduce Effort to Complete Eliminate almost all duplicate entry of data Eliminate manual compilation of reporting data Eliminate Department “Shadow Systems” to track budget balances and other administrative data Increase efficiency of HR position and employee maintenance activities Increase Accountability and Control Ensure consistent definitions of business processes, policy and procedures Establish uniformity for business related data Establish system controls for manually intensive processes (enforcing budgetary control) Develop and implement a strategic procurement initiative More transparency of data / external reporting Better Decision-making Support Improve the ability and decrease the time it takes to compile reports Improve the alignment of the State’s organization along business process lines Improve information about enterprise commodity consumption Improve the ability to monitor actual costs associated with individual work efforts Ability for decision makers to access structured data online and user friendly ad hoc reporting tools Modernize Technology Environment Reduced maintenance costs for once disparate systems Improved skill levels of IT staff Reduction in overall number of systems that must be supported by the State
  • If the state does not go forward with OAKS, it will incur ongoing costs associated with operating and maintaining the existing central and agency systems, as well as making potential investments in enhancing existing systems or implementing new systems. Cost avoidance benefits represent a summary calculation of cost to be incurred by the state if OAKS is not implemented. The cost avoidance savings include both central administrative systems and agency administrative systems that are candidates for replacement by OAKS, as well as the cost of potential upgrades or replacements. By replacing the existing central administrative systems with OAKS, the state could save $105 million, $64 million of which relates to system upgrades or replacements that would have been necessary without OAKS. The state could save an additional $90 million in agency system costs, $87 million of which relates to agency systems that could be replaced because OAKS would provide their current functionality.
  • The dollar amounts (with notes) are on slides 35 and 36 Integrator Costs. Integrator costs represent one-time initial project investments. They include integrator implementation costs and initial hardware/software acquisition costs. Integration costs cover the 34-month implementation timeline and a final six-month post-production support period. State Costs. State costs represent one-time costs incurred for state project resources and facilities during system implementation. These include state staff participation during implementation, hardware and software maintenance, and overhead costs during implementation. State project costs cover the 34-month implementation timeline and a final six-month post-production support period. Annual Production Costs. Annual production costs begin to accrue once the first OAKS module/function becomes operational. These costs include ongoing costs to maintain the OAKS program management office (including help desk functions), ongoing software and hardware maintenance, overhead costs, and costs for ERP application software upgrades. Annual production costs will continue throughout the operational life of OAKS. Annual production costs beyond the six-year benefits realization period are estimated to be approximately $17 million annually.
  • The core financial modules of general ledger, procurement, accounts receivable, and accounts payable will be operational in month 22 of the project. Other financials functions, including fixed assets, grants, capital improvement projects, and vendor self-service, will go live over the course of the subsequent 12-month period. The core human resources functions including human resources (including benefits), and payroll are scheduled to go live in month 28. The remaining human resources functions, including employee self-service, will go live six months later. The implementation plan calls for the core financial functions to be implemented at the start of the state fiscal year (July 2) and the core human resources functions to be implemented at the start of a calendar year (January 1).
  • Integrator Costs are based at $190/hr + 15% for expenses = $218.50/hr Assumed a 50/50 split in hours between vendor and state; 1.03m hrs total est’d Software ERP Base software 22,943 Additional software licensing 1 2,536 Applications support software 620 System mgmt & support software 900 Testing software 250 LMS software 500 Web based training software 27 TOTAL 27,775 1 Additional software licensing Oracle: iRecruitment, iLearning, Tutor for Applications, Oracle DB Enterprise Edition, etc. PeopleSoft: Enterprise Portal, Enterprise Warehouse, Oracle DB Enterprise SAP: BSI Tax Software, iTutor, Oracle DB Runtime License Hardware includes: ERP Hardware 3,394 Data Storage Hardware 4,000 Subtotal ERP Hardware 7,394 Training & Support hardware 104 Agency Implementation hardware 4,000 11,498 INTERNAL COSTS State Staff estimated at $45/hr technical and $29/hr functional Facilities – PMO Costs Hardware/Software Maintenance = $2.4M hw + $13.1M sw
  • Integrator costs = integrator implementation costs + initial s/w license costs + h/w acquisition costs. Oracle PS SAP TOTAL initial hardware acquisition costs 13.7 10.7 10.2 11.5 initial software acquisition costs 32.8 25.2 25.4 16.9 Integrator staffing 106.2 103.5 110.0 106.6 Total integrator costs $152.7 139.4 $145.5 145.9 integrator costs est’d between $ 139 M and $ 153M . No inflation adj.   Oracle’s has the highest initial s/w acq cost and the most significant h/w requirements of the three packages. SAP has the highest integrator costs because of the technical skill required to customize the product to close identified gaps.   The s/w license & maintenance costs are priced at list, available state term schedule, or federal GSA schedule prices. Hardware costs are priced at list. The state may be able to negotiate better pricing as it proceeds through the acquisition process and may benefit from more competitive integrator pricing. State Costs include the cost of state staff ($21.4) , overhead ($3.1), and s/w & h/w maintenance ($15.5) during the project implementation timeframe. State costs fall between $36M & $45M. Oracle’s costs are over 20% higher than SAP primarily driven by the highest est’d s/w & h/w maintenance costs of the three. Annual Production Costs = the total cost of operating the system once the first module goes live, including project mgmt($45.8), overhead ($2.9), ongoing s/w maintenance($30), ongoing h/w maintenance ($14.5), and upgrade costs ($7.1). PMO includes mgmt office, help desk, IT staff, functional staff, change/training. Overhead includes non-ERP system hardware & software costs (e.g., desktops, printers,etc.), phones, facility security, email & network charges. Upgrade costs include external consulting, internal staff costs, and hardware upgrade costs. Production costs fall between $92M & $113M over a 6yr period after implementation of the 1st module. Annual production costs beyond the 6yr benefits realization period are est’ to be ~$17M/yr.
  • Assumes integrator on board by 9/1/03 with Financials go-live 7/1/05. The state will achieve full investment payback in the 6th or 7th year 3 year implementation timeframe + subsequent 5 year benefit period Potential benefits exceed costs in each year following the full implementation Costs include integrator, state, and annual production costs The potential net benefits are highest the year after the financial modules are implemented because of one-time cost avoidance savings related to financial system replacement/consolidation. Inflation rate 4%; discount rate 6%
  • Elias

    1. 1. State of Ohio OAKS Project Presented by Nola Haug, OAKS Program Manager January 10, 2003 Presented to CIOs
    2. 2. Mission Statement <ul><li>Select and implement an Enterprise Resource Planning (ERP) solution for state government that provides an automated and integrated financial, procurement, asset management, capital improvement projects, human resources, and payroll system that significantly improves the efficiency and effectiveness of the State of Ohio’s administrative processes. </li></ul>
    3. 3. OAKS Journey Milestones Project Complete (6/06) Develop/Release/Award Integrator RFP (1/03-8/03) Conduct Integration Phase (9/03-6/05) Conduct Business Needs Analysis (1/02-10/02) Begin Phased Implementation (7/05-1/06) <ul><li>Financials (7/05) </li></ul><ul><li>Procurement (7/05) </li></ul><ul><li>Fixed Assets (1/06) </li></ul><ul><li>HR/Payroll (1/06) </li></ul><ul><li>Capital Proj. (6/06) </li></ul><ul><li>Self-Service (6/06) </li></ul>Develop/Release/Award Business Needs Analysis RFP (2/01-01/02) Develop/Release/Award Software RFP (11/02-5/03) <ul><li>Financials & HR: </li></ul><ul><li>Configure/Design </li></ul><ul><li>Convert Data </li></ul><ul><li>Test </li></ul><ul><li>Train </li></ul>Establish & Implement Program Management Office (10/00-5/01)
    4. 4. Business Needs Analysis
    5. 5. Requirements Evaluation <ul><li>Approach </li></ul><ul><li>Covered five core business areas: financials, human resources, fixed assets, procurement, and capital improvement projects </li></ul><ul><li>Conducted joint application development (JAD) sessions </li></ul><ul><ul><li>50+ JAD sessions and focus group meetings </li></ul></ul><ul><ul><li>Invited 83 agencies/organizations </li></ul></ul><ul><ul><li>76 agencies/organizations attended (52 agencies and 24 organizations/vendors) </li></ul></ul><ul><ul><li>92 percent participation rate </li></ul></ul><ul><ul><li>521 individual participants </li></ul></ul><ul><li>Followed a formal review process </li></ul><ul><li>Findings </li></ul><ul><li>Approximately 2,100 business requirements defined </li></ul><ul><li>All agencies were very supportive of OAKS providing that OAKS meets their administrative needs in the five core business areas </li></ul>
    6. 6. Technical Solution Evaluation <ul><li>Approach </li></ul><ul><li>Identified six ERPs: AMS, JD Edwards, Lawson, Oracle, PeopleSoft, and SAP </li></ul><ul><li>Short-listed Oracle, PeopleSoft, and SAP based on five criteria: broad functional fit, scalability, technical fit, R&D investment, and public sector experience </li></ul><ul><li>Conducted as-is and visioning sessions with technical team </li></ul><ul><li>Reviewed the existing environment and tools </li></ul><ul><li>Collected agency-specific information through surveys and outreach meetings </li></ul>
    7. 7. Technical Evaluation - The Short List AMS JD Edwards Lawson Oracle PeopleSoft SAP <ul><li>Functionality </li></ul><ul><li>Scalability </li></ul><ul><li>Technical Fit </li></ul><ul><li>R&D Spending </li></ul><ul><li>Public Sector Experience </li></ul>The vendors further evaluated during the OAKS Business Needs Analysis were Oracle, PeopleSoft, and SAP. Oracle PeopleSoft SAP
    8. 8. Functionality <ul><li>The requirements were categorized into five software modules identified by the state. </li></ul><ul><li>Finance </li></ul><ul><li>Human Resources/Payroll </li></ul><ul><li>Procurement </li></ul><ul><li>Fixed Assets </li></ul><ul><li>Capital Projects </li></ul>
    9. 9. Scalability To measure the level of scalability achieved by each software product, vendors were asked to demonstrate where their systems have been implemented for business entities equivalent in size to the State of Ohio regarding the two areas listed below. <ul><li>Finance and Procurement systems for organizations with annual budgets in excess of $50B </li></ul><ul><li>HR / Payroll systems for organizations with more than 65,000 employees </li></ul>
    10. 10. Technical Fit To assess technical fit, the team evaluated each of the software packages in the five areas listed below: <ul><li>Ability to supplement package functionality with bolt-on software packages such as budget preparation, sales and use tax, time entry, bar coding, point of sale, and procurement </li></ul><ul><li>Ability to use technical support tools for scheduling, software distribution, event management, etc. </li></ul><ul><li>Ability to provide data warehousing capability </li></ul><ul><li>Ease of customization and the ability to maintain the customizations during upgrades </li></ul><ul><li>Ability to work within the state’s technology strategy </li></ul>
    11. 11. Research and Development Spending To determine the level of investment that each software vendor makes in research and development, we gathered information on the R&D spending for each ERP vendor. As a result, we then rated each vendor based upon total dollars spent on research and development. Research and development spending contributes to the future viability of the ERP package and is an indicator of the ability of the ERP vendor to continue to provide timely and frequent technological and functional upgrades to their product.
    12. 12. Public Sector Experience It is important for a large complex government organization like the State of Ohio to acquire an ERP package from a vendor that has a dedicated public sector development organization. In this way the State of Ohio, along with other government customers, will have the ability to help shape the future direction of the public sector software package.
    13. 13. Consolidated Scoring The Deloitte Consulting project team followed a structured four-step process to develop conclusions for the package short list. <ul><li>The Deloitte OAKS team developed a software survey addressing each of the five evaluation criteria and submitted it to the Deloitte Consulting package experts. </li></ul><ul><li>Each of the Deloitte package experts completed the survey for their respective software packages. </li></ul><ul><li>As appropriate, the package experts reviewed their responses with the software vendors to confirm their accuracy and submitted the completed surveys to the Deloitte Consulting OAKS project team. </li></ul><ul><li>The Deloitte project team analyzed the survey results and developed a short list of three software packages. </li></ul>
    14. 14. Technical Solution Evaluation <ul><li>Findings </li></ul><ul><li>All three ERP products are industrial strength – can support “Fortune 20” size organization </li></ul><ul><ul><li>All three ERP products: </li></ul></ul><ul><ul><ul><li>operate on mainstream hardware and database </li></ul></ul></ul><ul><ul><ul><li>operate on the UNIX </li></ul></ul></ul><ul><ul><ul><li>support multi-tier architecture </li></ul></ul></ul><ul><ul><ul><li>offer pre-integrated data warehouse solutions </li></ul></ul></ul><ul><ul><li>Existing/statewide technical tools can be used for operations and network monitoring (ESM) </li></ul></ul>
    15. 15. Gap Analysis <ul><li>Approach </li></ul><ul><li>Evaluated the three ERP products against the 2,100 requirements </li></ul><ul><li>Vendors did self-evaluation on requirements </li></ul><ul><li>Vendors invited to discuss product gaps </li></ul><ul><li>Identified possible resolution for remaining gaps </li></ul><ul><ul><li>Technical solution, process change or both </li></ul></ul><ul><li>Identified process changes based on best practices </li></ul><ul><li>Final scoring was based on state-assigned weights, extent of gap and effort to close the gap </li></ul>
    16. 16. Software Gap Analysis Findings The State of Ohio defined 2,098 business requirements necessary to meet current and future business processes. Each requirement was compared to the capabilities of each software package. Requirements not fully supported by the base software will entail gap-closing solutions to include software modification, business process change, or a combination of both. This chart shows the number and the percentage of defined business requirements met by the Oracle, PeopleSoft, and SAP software packages. Summary Conclusion: All three ERP software packages satisfy the majority of the state’s requirements with standard configuration. Requirements Rating Oracle % PeopleSoft % SAP % Number Fully Supported 1,721 82.0% 1,680 80.1% 1,698 80.9% Number Partially Supported 145 6.9% 177 8.4% 162 7.7% Number Requiring Customization 232 11.1% 241 11.5% 238 11.3% TOTAL 2,098 100.0% 2,098 100.0% 2,098 100.0%
    17. 17. Cost / Benefit Analysis <ul><li>Approach </li></ul><ul><li>Benefits </li></ul><ul><li>Calculated benefits over a five-year period beyond full implementation of OAKS </li></ul><ul><li>Gathered data from: </li></ul><ul><ul><li>Meetings with representatives </li></ul></ul><ul><ul><li>Agency surveys </li></ul></ul><ul><ul><li>Agency CIO meetings </li></ul></ul><ul><li>Validated benefits with business process owners </li></ul><ul><li>Costs </li></ul><ul><li>Obtained estimated costs for hardware and software directly from vendors </li></ul><ul><li>Documented estimated cost and required resources to implement the OAKS system </li></ul><ul><li>Prepared summary information regarding a reasonable approach for funding and implementation </li></ul>
    18. 18. Benefits Overview: Intangible <ul><ul><li>Improved tracking of capital project schedules </li></ul></ul><ul><ul><li>Reduced efforts for budget control and maintenance </li></ul></ul><ul><ul><li>Better outcomes related to vendor/contractor selection </li></ul></ul><ul><ul><li>Better analysis of statewide procurement </li></ul></ul><ul><li>Increased Efficiency </li></ul><ul><ul><li>One system can address agency needs </li></ul></ul><ul><ul><li>Reduce approval times via workflow </li></ul></ul><ul><ul><li>Faster procurement of needed supplies, commodities and services </li></ul></ul><ul><ul><li>Easier for vendors to do business with Ohio </li></ul></ul><ul><li>Improved Process Integration and Controls </li></ul><ul><ul><li>Integrated processes across functional areas </li></ul></ul><ul><ul><li>Increased standardization and consistency across agencies </li></ul></ul><ul><ul><li>Improved payroll position control information allowing better control of expenditures </li></ul></ul><ul><ul><li>Consolidate vendor information into one system, eliminating redundancy and efforts </li></ul></ul><ul><ul><li>Improved tracking on all processes supported by OAKS </li></ul></ul><ul><li>Improved Service Levels </li></ul><ul><ul><li>Multiple channels of service to vendors </li></ul></ul><ul><ul><li>Improved workforce development opportunities </li></ul></ul><ul><ul><li>Increased self-service for employees </li></ul></ul>Increased Decision-Making Potential Intangible Benefits Intangible benefits are OAKS-enabled strategic achievements that further a management direction, allow the state to better manage relationships, or allow the state to achieve qualitative improvements in processes and functions. The intangible benefits are not quantified in the business case because of the difficulty in attaching meaningful dollar values to such broad, transformational achievements or because the information is not currently tracked.
    19. 19. Cost / Benefit Analysis Potential Tangible Benefits Procurement <ul><li>Achieve higher volume of purchase discounts and improve consistency of purchases within guidelines by 40% </li></ul><ul><li>Increase savings achieved from vendor payment discounts </li></ul><ul><li>Decrease by 50% the cost to create purchase orders </li></ul><ul><li>Reduce time required to add vendors, maintain vendor information or respond to vendor inquiries </li></ul><ul><li>TOTAL PROCUREMENT BENEFITS </li></ul>Finance and Budget <ul><li>Decrease by 16% the effort for accounting and transaction processing </li></ul><ul><li>Decrease arbitrage rebate payments by 75% </li></ul><ul><li>Decrease by 50% manual effort on previously authorized payments </li></ul><ul><li>Decrease the cost of printing and shipping reports </li></ul><ul><li>Decrease effort related to automated and manual data reconciliation </li></ul><ul><li>Decrease by 43% reduction the expenditures on warrant processing </li></ul><ul><li>Reduce by 75% the time required to respond to agency inquiries </li></ul><ul><li>TOTAL FINANCE AND BUDGET BENEFITS </li></ul>$ 45.0 $26.2 $4.2 $1.6 $77.0 Benefits (in Millions of Dollars) $24.0 $18.6 $8.7 $5.2 $3.6 $3.1 $0.8 $64.0 Tangible benefits are those potential benefits where a firm estimate of dollar or time savings may be attributed to the benefit based on a proper set of assumptions.
    20. 20. Cost / Benefit Analysis Human Resources and Payroll <ul><li>Decrease cost of processing applications by 74% </li></ul><ul><li>Decrease effort for disability claims by 28% </li></ul><ul><li>Decrease time require in researching employee requests by 66% </li></ul><ul><li>Decrease cost of processing Personnel Actions by 75% </li></ul><ul><li>Decrease time spent processing employee data by 50% </li></ul><ul><li>Decrease by 70% benefit enrollment administration costs </li></ul><ul><li>Decrease payments to non-eligible participants of benefit plans by 100% </li></ul><ul><li>Decrease by 50% the cost for recruiting advertising </li></ul><ul><li>Decrease off-cycle payments by 75% and reduce payroll errors by 50% </li></ul><ul><li>TOTAL HUMAN RESOURCES AND PAYROLL BENEFITS </li></ul>Benefits (in Millions of Dollars) $15.3 $41.3 $10.9 $8.5 $6.3 $3.7 $3.1 $2.0 $1.9 $93.0 Potential Tangible Benefits Fixed Assets and Others <ul><li>Decrease by 67% the cost of physical inventory by the use of bar-coding technology </li></ul><ul><li>Decrease by 50% time spent recording new fixed assets </li></ul><ul><li>Decrease the cost of printing 200 forms </li></ul><ul><li>Decrease by 80% time on central review of fixed assets </li></ul><ul><li>TOTAL FIXED ASSETS AND OTHER BENEFITS </li></ul><ul><li>TOTAL POTENTIAL BENEFITS FOR ALL BUSINESS AREAS </li></ul>$11.4 $4.6 $0.8 $0.4 $17.2 $251.2
    21. 21. Better Leverage for Purchasing Power (Procurement) As Is <ul><li>Insufficient use of previously negotiated state contracts </li></ul><ul><li>Purchasing volumes underestimated due to inaccurate data </li></ul><ul><li>State is not leveraging its purchasing power </li></ul>OBM State Accounting CAS Request purchase information Consolidate & analyze purchase history State of Ohio Agencies DAS State Procurement Locate desired item <ul><li>Generate P.O. </li></ul><ul><li>Print P.O. </li></ul><ul><li>Maintain purchase data </li></ul>Order desired item Vendor source information Agency source information Bid and negotiate contract 21 Vendor Catalogs
    22. 22. Better Leverage for Purchasing Power (Procurement) To Be <ul><li>Improved search capabilities and more effective controls will increase utilization of state contracts </li></ul><ul><li>Single source of purchasing information allows accurate retrieval of state contract purchases </li></ul><ul><li>Vendors bid lower prices resulting in an estimated $45 million in savings for the state </li></ul>OBM State Accounting Request purchase information State of Ohio Agencies DAS State Procurement Locate desired item Order desired item OAKS Bid and negotiate contract <ul><li>Search wizard </li></ul><ul><li>Electronic catalogs </li></ul><ul><li>Manage purchase order </li></ul><ul><li>Workflow routing for approvals </li></ul><ul><li>Maintain data warehouse </li></ul>22
    23. 23. Accounts Payable Processing (Financials) As Is <ul><li>A 21-step, 28-day process currently used by 144 entities </li></ul><ul><li>No automatic electronic matching of receipt/invoice to purchase order </li></ul><ul><li>Not optimizing vendor discounts </li></ul><ul><li>Vendor payments not consolidated </li></ul>Send invoice Ship goods Receive invoice Create voucher in CAS OBM State Accounting Record & file receipt info Match invoice to receipt info Print voucher (3 copies) Record approval in CAS CAS Receive voucher & support Sort & deliver to reviewer Review voucher & support Vendor copy (voucher & support) Forward voucher & support Approve voucher <ul><li>Post vouchers </li></ul><ul><li>Create warrant writing file </li></ul>State Agencies Vendor Agency copy (voucher & support) OBM copy (voucher & support) Auditor of State Warrant Writing System <ul><li>Create warrants </li></ul><ul><li>Create remittance advice </li></ul>Print warrants & remittance advice Ship to warrant desk Separate & sort by agency Receive warrant Retrieve warrants Match & attach warrants to detail Stuff envelope & mail Receive goods 23
    24. 24. To Be <ul><li>Leverage a variety of best practices to reduce process time to 5 steps over 10 days </li></ul><ul><li>Utilize electronic matching </li></ul><ul><li>Optimize vendor discounts with payment scheduling </li></ul><ul><li>Eliminate up to 260,000 warrants per year through consolidated payments </li></ul><ul><li>Realize an estimated $38 million in savings </li></ul>Scan goods received Send invoice Ship goods Record invoice OAKS <ul><ul><ul><li>Match receipt information to PO </li></ul></ul></ul><ul><ul><ul><li>Match invoice information to PO </li></ul></ul></ul><ul><ul><ul><li>Create payment request </li></ul></ul></ul><ul><ul><ul><li>Apply vendor discounts </li></ul></ul></ul><ul><ul><ul><li>Create warrant writing file </li></ul></ul></ul>Warrant Writing System <ul><ul><ul><li>Create warrants </li></ul></ul></ul><ul><ul><ul><li>Create remittance advice </li></ul></ul></ul>Print warrants & remittance advice Ship to central mailing center Automatically stuff envelope and mail Receive warrant & remittance advice Auditor of State State Agencies Vendors Central Mailing Center Accounts Payable Processing (Financials) 24
    25. 25. Hiring a Full-Time State Employee (HR) <ul><li>A 22-step process requiring multiple manual approvals taking an average of 5-6 months to complete </li></ul><ul><li>Duplication of advertising costs </li></ul><ul><li>200,000 applications manually screened and ranked each year </li></ul>As Is 25 State Agencies Applicant Query OLEAP for applications OLEAP Screen/rank applications Print applications Process apps Develop schedule / record interview date Prepare apps for interview team Schedule / Co-ordinate interviews Recommend hire Management approval 3 Research and report Complete Personnel Action form Create and present offer Interview results Data entry from app & PA forms; Create new hire record in HR2K Distribute new hire notification File interview notes, apps and PA forms Submit applications online (OLEAP) Confirm interview schedule Inquiries: interview / application status Accept offer Media Create media ads Media ads edited / approved by centralized recruitment office Agencies place Media Ads Advertising coordinator places advertisement Search for job postings Management approval 1 Management approval 2 Personnel Officer Time Line 20 Days Advertise 30 Days Screen/Rank Applications 30 Days Interview / Recommend Hire 20 Days Approvals 12 Days Updates Total 112 Days Start employment Post jobs HR2K
    26. 26. Hiring a Full-Time State Employee (HR) To Be <ul><li>Reduce the number of steps to 7 and the hiring timeline to 3 months on average </li></ul><ul><li>Use ad-sharing techniques to reduce advertising expenditures by 50% </li></ul><ul><li>Realize an estimated $25.7 million through time and cost savings </li></ul>26 Personnel Officer • Initiate advertisement • Review and approve list OAKS Self - Service via Portal • Search for Job posting • Submit Application • Inquire on application & interview status • Schedule/accept interview • Recommend h ire • Combine advertisements • Screen, rank applications • Schedule interview • Extend offer • Create Employee Record • Hire / status change • Communicate status change via Workflow Notify Interview Team of interviews Interview Result Approve Personnel Action via Workflow Posting placed on Job Boards Media Ads Created Advertisements Edited / Approved by Centralized Recruitment Office Time Line 67 Days - Start to Finish State Agencies Applicant Personnel Officer • Initiate advertisement • Review and approve list OAKS Self - • • • • Schedule/accept interview • Review and accept offer Recommend h ire • Combine advertisements • Screen, rank applications • Schedule interview • Extend offer • Create employee record • Hire / status change • Communicate status change via workflow Notify interview team of interviews Interview result Approve personnel action via workflow Posting placed on job boards Media Ads Created Advertisements edited/approved by centralized recruitment office 67 Days - Start to Finish Start employment Media
    27. 27. Performing Physical Inventories (Fixed Assets) As Is <ul><li>1.8 million assets need to be inventoried every two years using a manually intensive and redundant process </li></ul><ul><li>At 3 minutes per asset, the inventory requires 90,000 hours of effort </li></ul><ul><li>Bar-coding not feasible in today’s environment (27 agency-owned systems; 1 central system) </li></ul>27
    28. 28. Performing Physical Inventories (Fixed Assets) To Be <ul><li>Increased accountability possible with more frequent inventories </li></ul><ul><li>Two-thirds reduction in time, saving 30,000 hours each biennium </li></ul><ul><li>Easier CAFR reporting, stronger balance sheet, and improved debt ratings </li></ul><ul><li>Realize estimated $4.6 million in savings </li></ul>Travel to location to be inventoried Download a list of assets to be inventoried into bar-code scanner Scan all the assets in the location This process can be repeated at each of the over 100 agencies based on the organizational structure. For a large agency such as DRC, DOT or DNR, this process may be repeated 30 - 50 times. Research and resolve differences, make corrections in OAKS Upload all data scanned into system OAKS Exception Reports 28
    29. 29. Redundant Administrative Systems 29
    30. 30. OAKS: Five Business Processes Integrated <ul><li>Reduce Processing Cycle Times </li></ul><ul><li>Reduce Manual Reconciliation </li></ul><ul><li>Reduce Manual Effort </li></ul><ul><li>Increase Fiscal Accountability and Control </li></ul><ul><li>Better Decisions </li></ul><ul><li>One System – Consistent Data </li></ul><ul><li>Modern Technology Environment </li></ul><ul><li>Integrate Data Sharing Across State Government </li></ul><ul><li>Integrate Business Processes Across Operations </li></ul>One OAKS System $90 Million Savings By reducing the number of disparate systems containing redundant and fragmented information, the state will not only reduce the IT costs of running multiple systems, but will also reap the benefits of error reduction, process efficiencies, and tighter controls that accompany vendor self-service. Accounting and Budgeting HR / Payroll Procurement Capital Projects OAKS Fixed Assets
    31. 31. Avoided Costs of the Status Quo The state is currently incurring or will incur these costs over the next five years even if OAKS is not implemented.
    32. 32. Estimated OAKS Tangible Benefits “… business processes should be re-engineered to utilize best practices built into ERP software. This process could reduce operating costs by 10% to 15% in large agencies…” MIC 2002 Benefits reflect hard dollar savings in external payments. The integrated OAKS solution is expected to generate cost-effectiveness and other positive impacts. These potential benefits are valued at $251 million in time savings and reduced expenditures. Also, OAKS could allow the state to avoid an additional $195 million in expenditures due to the replacement of current statewide and agency administrative systems.
    33. 33. Estimated Costs <ul><li>One-time integration contractor costs </li></ul><ul><ul><li>Hardware acquisition </li></ul></ul><ul><ul><li>Software license </li></ul></ul><ul><ul><li>Integrator staffing </li></ul></ul><ul><li>One-time state costs </li></ul><ul><ul><li>Hardware maintenance during implementation </li></ul></ul><ul><ul><li>Software maintenance during implementation </li></ul></ul><ul><ul><li>State staffing to support implementation </li></ul></ul><ul><li>Ongoing production costs </li></ul><ul><ul><li>Production cost associated with implemented modules </li></ul></ul><ul><ul><li>Five-year production costs after full implementation </li></ul></ul>One-time and ongoing costs are based on the integration schedule, standard rates, and estimates from vendors.
    34. 34. Integration Timeline Architect & Design Budget Prep HR Payroll Human Resources Build Month Finance Human Resources Data Warehouse General Ledger Accounts Payable Accounts Receivable Procurement Fixed Assets Grants Training Recruiting Health & Safety Complaint Mgmt Employee Self-Service ERP Data Warehouse Finance Build Common Go Live Go Live Data Warehouse Build Vendor/Customer Self-Service Capital Improvement Projects Year-End Mini Go Live Mini Go Live Mini Go Live Mini Go Live Legacy Data Warehouse 2004 2005 2006 Jul Sep Jan Jul Sep Mar Mar Jan Jul Sep Mar Jan Jul Mar Sep RFP & Contract Software Integrator Year 2003 Jan
    35. 35. Estimated One-time Costs to Implement
    36. 36. Summary Business Case Fundamentally, the business case for OAKS is strong. The tangible benefits are estimated to be the same across all three ERP packages and total $446 million. This includes $251 million of benefits from organizational improvements and increased efficiencies and $195 million in avoided costs of continuing to operate and enhance existing systems, i.e., avoided costs of status quo. The cost estimates are slightly different across the three ERP packages. The summary business case reflects average costs for the three packages. One-time project costs for software and hardware licensing and integrator costs are estimated to be $146 million. State staffing, overhead costs and software and hardware maintenance costs for the duration of the project are estimated at $40 million. Ongoing production costs are estimated at $96 million for the first five years following full implementation of OAKS, and at $17 million annually thereafter. OAKS Potential Savings & Costs <ul><li>Tangible Benefits </li></ul><ul><li>Status Quo Cost Avoidance (Savings) </li></ul>TOTAL POTENTIAL BENEFITS/SAVINGS OAKS Costs <ul><li>Integrator Costs </li></ul><ul><li>State Costs </li></ul>TOTAL POTENTIAL AVERAGE COSTS POTENTIAL SAVINGS FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 Total $15,881 $36,397 $46,224 $48,902 $50,897 $52,932 $251,233 $41,056 $41,010 $42,650 $22,557 $23,459 $24,398 $195,130 $56,937 $77,407 $88,874 $71,459 $74,356 $77,330 $446,363 $41,740 $8,222 $0 $0 $0 $0 $145,856 $46,893 $49,001 $12,307 $2,249 $0 $0 $0 $0 $40,006 $9,404 $16,046 $64,347 $26,282 $19,632 $20,332 $16,928 $17,325 $286,190 $56,297 $65,047 ($7,410) $51,125 $69,242 $51,127 $57,428 $60,005 $160,173 ($56,297) ($65,047) <ul><li>Annual Production Costs </li></ul>$10,300 $15,811 $19,632 $20,332 $16,928 $17,325 $100,328 $0 $0 (In Thousands of Dollars) OAKS Potential Benefits/Savings
    37. 37. OAKS Potential Payback Average Payback Period for Oracle, PeopleSoft & SAP - Discounted ($250,000,000) ($200,000,000) ($150,000,000) ($100,000,000) ($50,000,000) $0 $50,000,000 $100,000,000 $150,000,000 $200,000,000 2004 2005 2006 2007 2008 2009 2010 2011 Fiscal Year Dollars <ul><li>Payback achieved in the third year after full implementation </li></ul><ul><li>Benefits far exceed costs in each year after implementation </li></ul><ul><li>Cumulative savings will exceed $100 million five years after implementation </li></ul>Costs Benefits Net Savings Cumulative Savings
    38. 38. Conclusion <ul><li>Business case is compelling </li></ul><ul><ul><li>Significant tangible benefits of $446 million over five years </li></ul></ul><ul><ul><li>Short-term investment payback (third year after full implementation) </li></ul></ul><ul><ul><li>Dramatic increase in operational efficiencies, process controls and service levels (intangible benefits) </li></ul></ul><ul><li>Cost and risk of continuing operations is increasing </li></ul><ul><ul><li>Aging central and agency systems (15 – 40 years old) </li></ul></ul><ul><ul><li>Investment continues in central systems </li></ul></ul><ul><ul><li>Agency spending on stand-alone systems will increase </li></ul></ul><ul><li>Timing is critical </li></ul><ul><ul><li>Market conditions are ideal to obtain advantageous vendor pricing </li></ul></ul><ul><ul><li>Implementation now will position Ohio as a technologically advanced and citizen-friendly state </li></ul></ul><ul><ul><li>Environment of greater public accountability necessitates increased technological flexibility </li></ul></ul>“… we are the pioneers of Ohio’s third frontier – a frontier of exploration and discovery where knowledge is king.” Governor Taft, 2002 State of the State Address Total Discounted Costs The potential benefits of OAKS outweigh the associated costs. Tangible Benefits Production Costs State Costs Integration Costs Cost Avoidance Benefits Tangible Benefits $251 M Production Costs $100 M State Costs $40 M Integration Costs $146 M Cost Avoidance Savings $195 M Total Potential Costs (average) = $286M Total Potential Benefits = $446M
    39. 39. Next Steps <ul><li>Obtain go/no-go decision </li></ul><ul><ul><li>Executive sponsorship </li></ul></ul><ul><ul><ul><li>Formal commitment from all key stakeholders within the state </li></ul></ul></ul><ul><ul><ul><li>Commitment to make appropriate resources available </li></ul></ul></ul><ul><li>Funding </li></ul><ul><li>Release software RFP </li></ul><ul><li>Prepare system integrator RFP </li></ul><ul><li>Execute Change Management Activities </li></ul><ul><ul><ul><li>Maintain agency involvement through meetings and communications </li></ul></ul></ul>
    40. 40. Questions Please visit the OAKS Web Site: http://www.ohio.gov/oaks/