ERP on the front burner

States gear up for new round of IT projects<@VM>12 ERP dos and don'ts<@VM>ERP business in 2005

"It may sound odd to invest at a time when we are having [budget] problems, but we got into this situation by not investing in hard times and spending money foolishly in good times."? Matt Miszewski, Wisconsin CIO

Rick Steele

"Each year, we seem to hear about ERP, how it is going to be the next big thing ... But we just don't see a huge number of contracts falling." ? Jim Krouse, Input analyst

Rick Steele

More than a half dozen state governments are poised to embark on enterprise resource planning projects this year as they try to improve their back office functions.

"There is a substantial uptick in activity in the ERP space," said David Wilson, managing partner for finance and administration with the state and local practice of Accenture Ltd. "We're seeing a lot of statewide implementations coming down the pike."

Statewide projects involving one or more ERP modules, such as payroll, personnel and financial management, are more popular than ever, government officials and industry executives said. Chief information officers view ERP initiatives as one of the most effective ways to generate IT savings and gird for the possible return of lean budgets.

"We are obsessed with looking for cost savings," said Matt Miszewski, Wisconsin's CIO. "And since we were looking for cost savings, we found a whole bunch of [potential] cost savings in back office functionality."

Wisconsin plans to issue an RFP this year for a statewide ERP implementation that would cover finance, payroll, personnel and purchasing, he said. The state expects to spend $100 million over 10 years. A contractor would handle 60 percent of the work, and the state would handle the remaining 40 percent.

In May, Accenture won an $85 million project from Ohio to implement ERP software that the state purchased last year from PeopleSoft, now part of Oracle Corp.

BUSINESS BOOMS

Among the states expected to issue bids for ERP projects are New Hampshire, Tennessee and Wisconsin, industry officials said. Other states considering projects for one or more modules include Alaska, California, Kentucky, New Jersey and North Carolina.

ERP is a business management system that automates and integrates an organization's major financial and administrative information systems. For governments, these information systems include accounting, budgeting, payroll, personnel and purchasing. The ERP modules can be implemented in stages, referred to as waves, or simultaneously, known as the big bang approach.

Several cities and counties around the nation are pursuing ERP projects, said Jim Krouse, manager for state and local market analysis with the market research firm Input Inc. of Reston, Va.

Input does not forecast spending for government ERP, but Krouse said the cost of a statewide implementation can range from $10 million to more than $100 million, depending on the size of the state and the number of modules implemented. A local government ERP project might cost $10 million or less, he said.

[IMGCAP(2)]Krouse said he is skeptical as to whether the opportunity is as promising as some believe.

"Each year, we seem to hear about ERP, how it is going to be the next big thing and everybody is geared up for it. But we just don't see a huge number of contracts falling," he said. "Various state governments will get there, but there have only been a few of major scope so far."

ERP's appeal lies in its ability to reduce or eliminate redundant processes and operations, Krouse said. But just because a government wants to accomplish this does not necessarily translate into the ways and means to do it, he said.

"ERP is a full-swipe method to help consolidate operations and reduce those types of outdated, redundant areas," he said, referring to the core functions, such as finance, personnel and payroll, that ERP software addresses.

For ERP projects to succeed, several conditions must exist, such as the presence of a large data center, availability of funds and high-level leadership commitment, Krouse said.

"There is a lot of support for it in theory, but there really has to be the financial commitment, and that is often slower to develop," he said.

TODAY'S MOTIVATION

A decade ago, state officials viewed ERP primarily as a way to modernize and upgrade technology, but these days, they are enticed more by the cost savings and process efficiencies, Wilson said.

"It's not just paving cow paths with new technology and software. It's about transforming back office processes to work more efficiently and effectively," he said.

Mike Keating, vice president of U.S. West and State and Local Business for CGI-AMS, agreed. Customers "need to spend significant time upfront getting their own team in the mind-set of trying to get business change out of these projects rather than just implementing a new system," he said.

CGI-AMS Advantage Financial Management software suite is used by more than 190 public sector clients, including Iowa, Massachusetts and New York City. The company announced in May that it had won a contract renewal worth $33 million over five years from Los Angeles to implement its latest version of Advantage.

Pennsylvania is one of the largest states to successfully complete a statewide implementation, analysts and government officials said. The project, known as Imagine PA, was finished last year when BearingPoint Inc. finished implementing SAP software for more than 50 state agencies.

The McLean, Va., systems integrator was paid $140 million for the project, said Art Stephens, Pennsylvania's CIO.

Although Pennsylvania can point to many advantages from the project, it can't pinpoint specific dollar savings, because the state didn't develop a business case at the beginning of the project, he said.

"It's hard to recreate [the savings]," Stephens said. "We don't have the benchmark numbers with which to compare it."

It took Pennsylvania more than three years to complete its project, Krouse said.

"It's not like BearingPoint just came in and flicked a switch on the SAP software, and everything went merrily along," he said. "They've been engaged for a number of years."

MEASURING STICK

Accenture is relying on its experience implementing ERP in more than six states over the past decade to see it through the Ohio project. The company is teaming on the three-and-a-half year Ohio Administrative Knowledge System project with more than a dozen partners, including PeopleSoft Inc., CGI-AMS and IBM Corp.

CGI-AMS will be responsible for converting its legacy financial system, and IBM will augment Accenture's implementation efforts, said John Hrusovksy, managing partner of Accenture's state government practice in Ohio.

Accenture competed for the ERP implementation contract against a team led by BearingPoint that included Deloitte, Ciber Inc. of Denver, and Unisys Corp., he said.

The project will roll out in four phases, Hrusovksy said. The first and second phases will be the core financial modules and the core personnel and payroll, respectively. The third and fourth phases will be the remaining financial modules and remaining personnel and payroll modules, he said.

The project is expected to save Ohio $251 million over five years, according to state officials. Accenture is encouraging Ohio not only to benchmark its back office functions but also to plot a road map for a back office transformation strategy over five years.

"A common denominator for private sector companies is that they know how well their back office functions are operating," Hrusovksy said.

Getting a handle on back office functions is incentive enough for states such as Wisconsin, which operates 38 separate personnel and payroll systems and 59 financial management systems, Miszewski said. Even though the state is struggling with a $1.6 billion budget deficit, it is determined to implement ERP to alleviate future fiscal problems.

"It may sound odd to invest at a time when we are having these problems, but quite simply, we got into this situation by not investing in hard times and spending money foolishly in good times," Miszewski said. "There is no better time than the present."

Senior Writer William Welsh can be reached at wwelsh@postnewsweektech.com.
"Imagine PA," Pennsylvania's statewide enterprise resource planning project, spanned the administrations of governors Tom Ridge (R) and Ed Rendell (D).

Charles Gerhards, chief information officer under Ridge, and Art Stephens, who is CIO under Rendell, offered these tips on how to steer statewide ERP projects to success.

DO

1. Get high-level support for the project from executive management such as the governor, lieutenant governor and cabinet secretaries.

2. Hire an experienced systems integrator that has implemented the ERP software suite you select.

3. Make communications a top priority. Regularly talk to stakeholders such as agency heads, vendors and affected employees.

4. Establish a decentralized governance team responsible for leading change in the agencies.

5. Set reasonable expectations for everyone and everything involved. "It's like landing a plane with no landing gear," Gerhards said. "Rarely with a program this complex will you have a smooth touchdown with smiles. Our job is to get everyone off that plane safely, but expect turbulence."

6. Establish an intensive, just-in-time training program. "Training is critical," Gerhards said. "It is difficult to do, because you have large numbers of people with different skill levels, and you are trying to change processes that have been in place for years."

DON'T

1. Treat ERP as just an IT project but as a business
transformation project.

2. Embark on a statewide ERP initiative across administrations.

3. Go for the big bang approach. Consider a wave approach where modules are rolled out separately.

4. Oversell the approach. "This isn't the nuclear toaster," Stephens said. "It will change the way we operate, but it won't fix the everyday problems we have."

5. Try to do everything at once. Decide whether to change business processes or to install the new solutions first.

6. Cut corners. "I've seen a number of these efforts where [the customer] has underestimated the investment required, and the training and staffing weren't sufficient for the knowledge transfer," Gerhards said. "Go with what the systems integrator is suggesting. Take that plan seriously, and don't try to carve pieces out of it." OREGON

Agency: Portland Bureau of Purchases

Project: New enterprise resource planning system

RFP release: August

Award due: October

Summary: The bureau, on behalf of the Office of Management and Finance, is considering buying software and implementation services for a new ERP system. The city plans to take a phased approach that involves creating a business case, developing a request for proposal and implementing the new system.

NEW HAMPSHIRE

Agency: Concord Department of Finance

Project: ERP system

RFP release: August

Award due: October

Summary: The Purchasing Division is considering an ERP system for better administration, human resources and customer relationship management.

VIRGINIA

Agency: Department of Veterans Services

Project: ERP financial module

RFP release: August

Award due: December

Summary: The Virginia Department of Veterans Services may want to purchase an ERP module to automate its financial system. In addition, the agency may integrate the system with other state systems, such as e-procurement, payroll and vendor payment.

NEW YORK

Agency: Rockland County Department of General Services

Project: ERP purchasing module

RFP release: August

Award due: October

Summary: The Rockland County General Services Department may want help in implementing a PeopleSoft ERP purchasing module as part of a larger initiative to implement new financial, purchasing, payroll and human resources systems.

FLORIDA

Agency: North Lauderdale Office of the City Clerk

Project: ERP system

RFP release: July

Award due: September

Summary: The North Lauderdale Office of the City Clerk may implement an ERP system for government financial management and other integrated software to enhance productivity and accountability.

MICHIGAN

Agency: Washtenaw County Department of Finance

Project: ERP system

RFP release: June

Award due: September

Summary: The Washtenaw County Department of Finance may want an integrated ERP system to replace its software. The county anticipates 250 users will access the new system via personal computers, although the number could be higher when time sheets are entered every two weeks.

WASHINGTON

Agency: Bellingham Office of Purchasing

Project: ERP payroll and human resource components

RFP release: June

Award due: October

Summary: The Bellingham Office of Purchasing wants an integrated payroll and human resource information system solution to serve 800 employees at more than 30 locations.

NEW HAMPSHIRE

Agency: Department of Administrative Services

Project: Statewide ERP system

RFP release: May

Award due: September

Summary: The New Hampshire Department of Administrative Services, on behalf of all state agencies, wants an ERP system to support accounts payable, asset and inventory management, budgeting, financial accounting, grant and project management, human resources, purchasing, revenue and receipts and treasury.

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