The Business Case for IT Beverly Wheeler Industry Principal SAP Public Services.

The Business Case for IT

Beverly Wheeler

Industry Principal

SAP Public Services

SAP AG 2002, Title of Presentation, Speaker Name 2

QUESTIONS TO ANSWER

How can organizations analyze and justify a project in these difficult times?

How can you win support and influence stakeholders?

Is it possible to accurately measure and assess ROI (return on investment)?


JUSTIFICATION

Increase Efficiency Increase revenues through better compliance Decrease costs of serving constituents Reduce headcount on non-value add tasks (attrition or RIF)

Increase Productivity Automate processes

Mitigate Risk Minimize reliance on critical skills Adopt open standards Minimize exposure to risky vendors Minimize exposure to a single vendor

Reduce Complexity Training, adopt common tools, standards Provide better flexibility with respect to deploying resources

Improve Flexibility Better respond to changing process demands


QUESTIONS TO ASK YOURSELF

Can you baseline your performance today?

Are the strategic and tactical clear and agreed upon?

What limitations do you face? Unions Existing skills Demographics of existing workforce Political climate and timing

Can the project be implemented in phases?


QUESTIONS TO ANSWER





WINNING SUPPORT

Have a business reason for change

Align the strategy and tactics with the objective

Get stakeholder input early

Secure executive sponsorship THROUGHOUT the project

Calculate the NPV/ROI and have a solid business case

Be realistic about assumptions

Under promise and over-deliver

Think Big/Start Small


QUESTIONS TO ANSWER





CALCULATING ROI

ROI is an art, not a strict science

Do you know your current costs?

Do you have industry benchmarks?

What is the cost of doing nothing?

What are the assumptions?

What costs should be considered? Software, Hardware, Consulting, internal resources,

travel

What is the timeline?

What is your organization’s track record in similar projects?

Where is this technology or system in it’s adoption lifecycle?

ROI or NPV?


ROI Value Assessment Methodology

Value Impact Estimation

1. Strategic value impact (SVI) and strategic process impact

2. Determine what business value the project brings which leads to a better stakeholder value

Two main goals of a Value Assessment

2. Net Present Value (High Level NPV)The NPV of an investment is the total of all payments caused by the customer investment. Short, middle and long-term roadmap about the investment related to the Solution

Net Present Value Calculation

Value Assessment helps you to align business, value and IT topics


Pain Points Comments

Fragmented Systems Landscape

Financial and operational management systems are not integrated to provide timely, accurate information Separate standalone systems exist for: Budgeting and Accounting, Fleet Maintenance, Work Management,

Project and Construction Management, Contract Management, and Human Resources/Payroll Multiple off-line systems are used to track information for reporting purposes

Operational Inefficiencies

Significant amount of manual work and duplicate data entry in basic processes such as payroll and finance Significant amount of time spent on less-value add activities Lack of integration between systems requires manual interfaces and numerous reconciliations to make

sure information is in sync

Inaccurate Data Because information is manually entered into systems, it is sometimes inaccurate Complexity of current systems environment further compounds this problem, as data needs to be re-

entered in many cases Result is that some information can be inaccurate and/or out of date, and managers may need to massage

data before they make decisions based on it

Lack of Accurate and Timely Reporting and Analytical Information

Excessive amount of effort required for analysis and decision support Relevant information is not easily accessible and requires reconciliation between systems Limited real-time visibility into key business information Limited end-to-end business process integration Limited analytics capability impedes decision making

Limited Speed and Agility to Adjust

Current technology & application portfolio hinders responsiveness to business needs Lack of robust applications to support critical business drivers such as construction and maintenance

management Process and data inconsistencies across departments and business units

Business Challenges


Opportunity Analysis

Key Value Drivers

Self service purchase requisition and approval Reduction in maverick spend through compliance to contracts Periodic re-negotiation of contracts through bidding Rationalization of suppliers

Integration of Maximo, P3, and other systems to core enterprise systems

Ability to report and analyze data to make management decisions

Improved procurement efficiency

KEY O

PPO

RTU

NIT

IES

3. Finance

4. Procurement

5. Facilities, Maintenance & Operations

1. HR

Fewer reconciliations required Improved budgeting process Faster time to close Grants management

Integrated HR and Payroll systems Employee and Manager Self-Service Improved recruiting processes Improved analytics capabilities

2. Payroll

Automated time reporting Decreased errors and manual adjustments Automatic garnishments Online pay stubs

6. Transportation Integration of Transportation’s systems to core enterprise

systems Improved data accuracy and availability Ability to report and analyze data to make management

decisions


Key Opportunities Analyzed

KEY O

PPO

RTU

NIT

IES

3. Finance

4. Procurement


1. HR

2. Payroll

6. Transportation


1. HR

Limited access to information Because information is stored in multiple systems and is

difficult to access, HR employees spend much of their time processing transactions vs. more strategic activities

Schools have limited access to HR data and need to call whenever they need information

The school board has limited visibility into HR information to help in making key decisions

Multiple systems and processes result in data integrity issues; no “single version of the truth”

Only a few employees understand how to find the correct information for reporting purposes, and many of them are retiring

Manual processes Multiple systems require duplicate data entry (e.g., TAS,

HRS, etc) HR transactions are time consuming; even within HRS,

employees need to go through multiple screens to do one transaction

For recruiting, each area has its own method for tracking and following up with prospects; most are manual.

There is minimal sharing of information across District HR units regarding existing job openings and efforts to fill those openings

Reporting processes are manual; employees need to look through multiple systems to find information

Pain Points

Lifecycle Management Integrate employee processes with business processes to achieve

optimal business results Enable workforce cost planning & simulation Conduct career succession planning Enable shift planning with multiple workforce calendarsTransaction Management Conduct HR Administration Manage payroll, benefits, time managementPosition Budgeting & Control Determine financing requirements of vacant positions on the basis of

Personnel Cost Planning. Relationship Management Enable Manager Self-Service Enable Employee Self-ServiceRecruiting Enhance recruiting process and enable full visibility Streamline and work flow enabled on-boarding process Improve processes for job bidding trackingPerformance Management Enable employees to enter and review performance appraisals and

display employee data, e.g. benefits enrollment, profiles, salary history, etc.

Quickly create training that aligns with performance needs Align individual activities and tasks with the corporate vision to

increase contributions from human capital

Solution Enablers


1. HR Benefits

Strategic Benefits Integrated analytics providing better access to information to make business

decisions

Consistent execution of corporate strategy through better visibility and accountability

Ability to attract, develop, and retain talented people

Ability to manage changing organizational culture and employee attitudes

Fewer interfaces, skill sets, and software packages

Delivery of integrated business processes driving efficiency and productivity

Value Source Baseline $ Improvement % Benefit ($M)

Employee Self Service $3.0M1 80%-90% $2.4 - $2.8

Manager Self Service $46.3M2 10% - 20% $4.6 - $9.2

Recruiting and Hiring $5.1M3 15% - 25% $0.8 - $1.3

Reporting $2.5M4 25% - 75% $0.6 – $1.9

Total Annual Benefit ~$8.4 – $15.1

Tangible Benefits

Notes: 1. Based on 75,000 HRS transactions per year that could be moved to ESS and 100,000 duplicate transactions entered into TAS. Per Hackett Group, the average cost per transaction is $17. 2.Based on 9260 total managers (2510 certificated managers + 6750 Classified managers; assume they spend 10% of their time on administrative issues related to managing employees; 3. Based on 101,147 applicants processed per year. Assumes 10% are hired at a cost per hire of $500. 4. Based on 503 total employees in HR. Assumes each spends 10% of their time finding information for reporting purposes.


Key Opportunities Analyzed

KEY O

PPO

RTU

NIT

IES

3. Finance

4. Procurement


1. HR

2. Payroll

6. Transportation


2. Payroll

Current system presents high risk Current 30 year old payroll system does not adequately meet

the needs of employees, within and outside of schools Significant ITD and Payroll Unit resources are used to keep

the payroll system running, vs. providing service to schools through more strategic activities

Only a few ITD employees have in-depth knowledge of how the Payroll system functions. Most of this knowledge is not documented

Turnover rate is high in Payroll; many employees leave before they are fully trained on the system

Payroll and HR systems are not integrated Reporting capabilities are limited

Manual processes and high error rate Multiple payroll runs are required (9 per cycle), with a high

volume of adjustments (24,000/pay cycle) requiring significant manual effort

Resolving errors requires significant resources; employees in Payroll incur 16 to 20 hours per employee per week in overtime to resolve errors

Time reporting process is manual, requiring significant data entry and increasing the likelihood of errors

Employees entering time are not held accountable for the accuracy of their information

Deduction process is manual, such that a great deal of labor cost is incurred by the District to process relatively simple transactions

mySAP HR Payroll Includes core payroll activities and workflow processing to streamline

and automate activities, including:

Essential core payroll functions Direct deposit off-cycle payrolls Off-cycle payrolls Retroactive adjustments Calculation of averages Assessment of time data Loans Garnishments Year-end processing

Includes Payroll Accounting, Tax, Social Insurance, Travel Expenses Administration, Incentive Wages, Posting to Accounting, and Forms

Provides organizations with options to establish a service delivery model to suit their specific requirements

SAP Employee Self-Service functionality for payroll enables employees to easily change their address, add to or change their banking information, display and print payslip information, or change their withholding amounts.

Pain Points Solution Enablers


2. Payroll Benefits

Strategic Benefits Less risk than with current 30+ year old system Improved data accuracy Improved reporting capabilities Improved ability to meet employee needs Faster response times to employee inquiries and changes

Value Source Baseline $ Improvement % Benefit ($M)

Reduction in Adjustments $2.7M1 90%- 95% $2.4 - $2.5

Improved Time Reporting $11.6M2 80%-100% $9.3 - $11.6

Self Service $2.1M3 60%- 90% $1.2 - $1.9

Garnishment $0.2M4 65% $0.1

Reduction in Overpaid Wages TBD5 TBD TBD

Total Annual Benefit ~$13.1– $16.1

Tangible Benefits

Notes: 1. Based on 309,333 payroll adjustments in FY 2004 and 20 minutes per adjustment. Improvement estimate of 90 – 95% is the estimate of employees in Payroll. 2.Based on 2.68M time sheets per year and 10 minutes for the timekeeper to analyze each time sheet; 3.Based on 80,000 employees who are paid via ADP direct deposit. Assumes it costs $2 to print and mail each pay stub; 4.Based on 136 hours per week for manual computation and re-work of garnishment (85% of the time of four employees). 5. Per a study done by Anderson, is losing $18.7M in overpaid wages each year because employees “over-report” the amount of time they work. We have not included this amount, as it was not discussed in interviews.


Customer Example: Value Assessment

Quantitative assessment of benefits: process efficiency (in $)

* Total estimated potential improvements ** Basic criterion = for example, number of Leave Requests*** Basic values **** Average costs = employee costs per minute *

process duration per minute+ incl. duration employee, for example

Costs ****

$ 449,805

$ 6,047,280

$ 0.72

$ 20.83

$ 1,093,750

$ 175,308

$ 51,412

BestCase

RealisticCase

WorstCase

$ 240,195

$ 3,552,172

$ 111,974

$ 214,121

$ 367,500

$ 32,396

$ 5,570,415 $ 5,049,252 $ 4,528,088

$ 299,570

$ 4,430,237

$ 121,305

$ 267,051

$ 398,125

$ 41,232

$ 269,883

$ 3,991,204

$ 116,640

$ 240,586

$ 382,812

$ 36,814

$ 9,727$ 12,894 $ 11,310

Total* Variance

+/-11%

+/-4%

+/-11%

+/-4%

+/-12%

+/-11%

60%

54%

33%

35%

21%

66%

+/-14%22%

Subprocesses

Org. Mgmt/HR Funds & Position Mgmt: central

Pro

cess

eff

icie

ncy

Administration

Expense reports

Recruitment

Training & Event Mgmt: Central

KF Basic criterion**Basic values***

Total for process efficiency

Org. Mgmt/HR Funds & Position Mgmt: Decentralized

Number of workdays

Number of workdays

Number of notifications

Number of travel expenses

Number of advertisements

Number of business events

1302

18,400

300,000

35,000

250

650

Training & Event Mgmt: ITNumber of

business events1525

Duration

10 mins +

37 mins +

9 days

6 hours

45 mins

part of the

ROI analysis


RECOMMENDATIONS

Remember that process improvement is a process, not an endpoint.

Remember that technology is only an enabler of change.

Be realistic about your organization, the expectations, and the climate for change.

Build the business case, based on the probability of your assumptions to support the value.

The Business Case for IT Beverly Wheeler Industry Principal SAP Public Services.

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