Copyright © 2006 Accenture All Rights Reserved. The Business Case for IT: Increasing Public Service...

Copyright © 2006 Accenture All Rights Reserved.

MN Digital Government Summit

The Business Case for IT:The Business Case for IT:Increasing Public Service ValueIncreasing Public Service Value

David A. WilsonAccenture

Managing Director, Finance & Administration Industry

State & Local Government Client Service GroupHigh Performance. Delivered.

2Accenture 2007: All rights reserved.

Topics

• Introduction• Public Service Value Defined• IT Benchmarking• Trends in IT Transformation• Q&A


Government IT must change to provide more value for citizens

Demand for High Performing Governments:

•Governments are expected to hold the line on expenses and taxes•Citizen expectations and demands for improved services are rising •New technologies create an imperative to “keep up” with change•Major programs and traditional methods of service delivery are being challenged, often under the rubric of reform and consolidation•Responsibility and accountability for programs is shifting across government boundaries, with dramatic effects on funding•Transparency of information and accountability for performance is creating demand for measuring, comparing and documenting performance results•Demographic trends are requiring governments to do more with fewer employees•Implementing IT solutions to enable government services can be difficult, expensive, and often does not deliver as much value as it should


Topics

• Introduction• Public Service Value Defined• IT Benchmarking• Trends in IT Transformation


Shareholder Value Model

• Different combinations of Growth and Spread drive intrinsic value creation for shareholders and stakeholders

• Enterprises can map their future trajectory and take appropriate action (long term strategy and/or immediate)

Accenture’s Public Service Value Model

Spread [ROIC – WACC]

Gro

wth

Lower Performing Companies

Higher Performing Companies

• “Outcomes” are a weighted basket of societal achievements

• “Cost Effectiveness” = Outcomes / (Operating Costs + Capital Charge)

• Hypothesis: greater value is created through generating improved outcomes in a more cost effective manner

Cost Effectiveness

Ou

tco

mes

Lower Performing

Public Services

Higher Performing

Public Services

Accenture’s Public Service Value Model (PSV) applies the principles of shareholder value to the public sector, postulating that citizens value a maximum basket of outcomes generated in a cost effective manner.


A Public Service Value focus for IT

• To create public value, organizations must translate resources into a set of real and tangible benefits, which are valued by citizens, service users and taxpayers.

• Outcomes must be balanced with cost effectiveness

• Minimizing back office costs – including IT costs - allows for more resources to be dedicated to citizen-facing activities

• Measuring and comparing IT performance is fundamental to transformation.

Cost Effectiveness

Ou

tco

mes

Lower Performing

Public Services

Higher Performing

Public Services


Topics



NASACT’s State Benchmarking Program

• State steering Committee formed in 2004. A state steering committee was formed with NASACT in early 2004 to explore the use of benchmarking. The Hackett-Accenture team was selected to conduct a benchmarking pilot.

• Pilot Benchmark project. Six states and selected agencies participated in the benchmark pilot (Alaska, Arizona, Nebraska, Oregon, Tennessee and Washington). Pilot results were presented at NASACT conference in November 2004.

• State RFP issued through NASACT. In April 2005 NASACT conducted a formal RFP to select a single benchmarking service provider.

• Vendor selected and tailored program for states. In June 2005 The Hackett-Accenture team was formally selected to support the NASACT benchmarking program in Finance, HR/Payroll, Procurement, and IT. Program launched at NASACT annual conference, August 2005. Contract vehicle now in place for states to select any or all benchmarks, based on their needs.

• 12 States are either in process or have completed the NASACT State benchmark to date.


IT Benchmarking:Measuring the Public Service Value of IT programs

1. IT Performance Data - Where are we and how do we compare to other states and as well as world-class organizations. Helps to establish project priorities.

2. Baseline and future measurement for technology investments - Provides a baseline, supporting a “before and after” comparisons when undertaking an improvement project (such as data center consolidation).

3. Foundation for Business Case - Provides performance insights and quantitative measures into process areas for improvement that will be the starting point for a transformation business case.


Technology Infrastructure

Application Management

Planning & Strategy

Management & Administration

Infrastructure ManagementOperations

ManagementSecurity

ManagementDisaster Recovery

Planning

End User SupportHelp DeskEnd User Training

Infrastructure DevelopmentPlanningConstruct Implement

Control & Risk Management

Accenture/Hackett’s IT benchmark framework

Application MaintenanceApplication

SupportEnhancement

DeliveryUpgrade

Execution

Application Development and ImplementationPlanningConstructImplement

Quality AssuranceChange

Management

Risk ManagementAudit and

Compliance

IT Business PlanningAlignmentProject

PrioritizationCommunication

Enterprise Architecture PlanningGovernanceStandards

Management

Emerging TechnologiesTechnology

Evaluation

Function ManagementFunction oversightPersonnel managementPolicy and procedures oversight


World-Class is defined as top quartile performance in both efficiency and effectiveness

• Member of Executive Committee

• Reporting relationship

• Percentage of budget control

• Planning and strategy resource commitment

• Business transactions automated

• Projects meeting requirements

• Percent SLA being met (internally and externally)

• Standard adherence

• Vendor & supplier rationalization

• Simplification of information access

• Usage of self-service

• Degree of turnover

• Advanced business degrees

EFFECTIVENESSEFFICIENCY• IT cost per end-user• Process costs per end

user

• Technology Investments

• Number of FTEs

• FTEs per processing groups

• Spans of control

• Number of Help Desk Calls

• Projects meeting budget

• FTE productivity - Applications

• Projects delivered on time

• Help Desk 1st call resolution

• Number of data centers

• Number of applications

ABC Org..Peer Group

Hackett Value Grid™IT SampleIT Sample


Excellence is no accident…. World-class organizations operate and perform very differently than their median peers

Hackett 2006 Functional Performance Data

Overall IT costper end user

Median WC

-7%

Median client spends $5.7 Million less per 10,000

end-users; less adept at leveraging IT to reduce

labor costs

8,4589,024

Overall Finance costas a % of revenue

Median WC

45%

Median client has $5.5 Million in potential finance

process cost savings per $1 Billion of revenue

1.22%

0.67%

Overall HR costper employee

Median WC

13%

Median client has $2.5 Million in potential HR

process cost savings per 10,000 employees

1,864

1,614

Overall Procurement cost as a % of spend

Median WC

25%

Median client has $2.1 Million in potential procurement

process cost savings per $1 Billion of spend

0.64%

0.85%

ITFINANCE HUMAN RESOURCES PROCUREMENT


States Participating in Benchmarking (as of July 2007)

Program Launched at NASACT Conference in Portland in August 2005

State Benchmark Status

Tennessee FIN, HR, IT, PROC Completed

Arizona FIN Completed

Delaware FIN, PROC Completed

Colorado FIN Completed

Massachusetts FIN Completed

Mississippi FIN, HR, IT, PROC Completed

Georgia FIN, IT Completed

Alaska HR Active

Alabama FIN, HR, PROC Active

New Jersey FIN, HR, PROC Active

Ohio FIN, HR, IT, PROC Active

Oklahoma FIN Active


Topics



New Business Demands on IT:Requires a Different Style of Infrastructure

New technology capabilities and competitive pressures are driving businesses to become “Always On, Always Active, Always Aware”

• Being in constant contact with suppliers, partners, products and customers across value chains will increasingly be a business norm

• Significant increase in the quantities of data flowing into the enterprise; real time and offline analytics create competitive advantage

• Increasingly mobile workforce, requiring computing capabilities wherever they work

• Business processes and applications must change to be able to accommodate increasingly unpredictable demand

Applications and services are constantly available

Maintenance windows no longer exist; changes must be able to be made while “online”

Traditional security boundaries change – greater reach, granularity and federation

Virtualized storage; variable capacity networks; self-protecting data; intelligent automated processing of data to filter out ‘noise’

Seamless networking, regardless of location

Multiple device support; greater use of thin clients

Sharing of resources across applications; virtualization; integration based on standards; composite applications

Characteristic Implications on Infrastructure


Trend Towards Shared IT Enterprise Services: Consolidation and Redesign of IT Infrastructure into Shared IT Services across agency boundaries.

Sca

le &

Eff

icie

ncy

Service & Perceived Responsiveness

DistributedModel

SharedIT Enterprise

Services

CentralizedModel

Focus on both increased efficiency and increased service levels within the IT infrastructure

Advent of Client/Server and ERP technologies

Ability to reengineer processes to:

Optimize degree of sharing to achieve scale

Incorporate best practices Maintain end-to-end process

integrity and control Early adoption in the U.S.

private sector demonstrated potential

Targeting 15 - 30% productivity improvements

The objective of these IT Common Services is to deliver the optimum in cost-effective, high quality services.


Shared Enterprise IT Services Model

Definition

• Shared IT enterprise services are any infrastructure offerings within an enterprise that have a separate set of dedicated resources (e.g. people, assets) managed through a single, centralized organization that serves more than one business unit.

Objectives

• Consolidate and redesign infrastructure, staff and support functions to deliver the most cost effective and high quality services possible


Building the Enterprise IT Service Model: IT Enterprise Services Trends in Government Organizations

Deployment of

innovative technology solutions

Creation of innovative partnerships with the

private sector

Shared computing

environments and lower operating

costs

Reduced overall cost of technology to

States and their agencies

Improved agency

operations and citizen services

Providing cost effective and

enhanced services through public-

private partnerships

Consolidation of

facilities, hardware,

and software

Implementation of

significant cost-savings

initiatives

Realignment and

possible relocation of IT staff

Best utilization of skill-sets and

labor requirements

across the state

Continuing budget pressures, demands for more better services and a more secure environment, are driving

IT enterprise initiatives.


*Savings may be recognized in other areas of IT†Savings may be much higher in terms of loss prevention

Application Enabling Infrastructure

• Component Reuse• Development/Training Costs• Development Infrastructure

Example Components

Sample Cost Reduction

Opportunities

Typical % IT Cost

Reduction

Enterprise Enabling Infrastructure

Platforms

Operations Management

Infrastructure Layer

• License/maintenance fees• Eliminate duplicate services• Corporate data architecture

• Data Center Consolidation• Server/Storage Consolidation• Outsourcing/Out-tasking

• Contractor Rationalization• Outsourcing/Out-tasking• Reduced outages/downtime• Automation

10 - 20

20 - 35

20 – 35*

15 – 25*

5 – 10†

15 – 30*

Total

• Component Frameworks• Application Server• Dev. Env’t. and Tools

• Email Consolidation• Intranet/KM• Middleware/EAI• Database

• Data Center• Legacy Systems• Intel/Unix Servers• Desktop

• Performance Planning• High Availability• Service Level Mgmt

Security • Reduced Outages• Loss Prevention• Single Sign-on

• Risk Assessment• Security Architecture• Enterprise Security• Managed Services

15 – 30%

Network • WAN Migration to IP-VPN’s• Voice/Video/Data Convergence• Carrier Renegotiation/RFP• Use of Managed Services

• LAN/WAN• Voice/Video• Remote/Internet

Industry Sample Consolidation Savings


IT Investment Benefits

Significant increase in business value

Gross savings in IT spend

Enhanced IT capabilities

Moderate initial investment

IT Transformation

Optimized IT spending mix

Enhanced business capabilities

Benefits:Benefits:• 15-40% improvement in cost of

IT (depending on IT organisation and systems maturity - and level of courage)

• Moderate initial investment can drive significant stakeholder value returns

• A way to get “bold” change across all of a government IT organization capabilities

• Strengthens long-term relationships at the top level between IT organization and government executive leadership


AdministrativeShared Services

Financial

Purchasing

Human Resources

CommonEnterprise

Service

Shared ITInfrastructure

Citizen View of Government: Focused on Outcomes…. Not Programs, Systems and IT

Transformed Government

Common Citizen Services

Case Management

BusinessRegulations.

Persons

TransactionManagement

Agencies

Policy

Single Entry to Government Services

Tax Payments

Departments

Technology


Wrap-Up

Q & A

Copyright © 2006 Accenture All Rights Reserved. The Business Case for IT: Increasing Public Service...

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