Information Technology Long Term Plan and Long Term Financing Plan

There is a variety of Council policy related to the Information Technology Long Term Plan and the supporting Long Term Financing Plan. This policy and related Council decisions are reviewed in this report.

The purpose of this report is to provide Council with an update on the Information Technology Long Term Plan and the Long Term Financing Plan that supports it.

On June 19, 1990, Council established information as one of the City’s corporate priorities and directed that work proceed to “. . . plan for improvements in the City’s information systems.”

On December 8, 1994, Council approved the Information Systems Plan (ISP) which was the first step towards a new vision of how information and technology were to be managed and utilized in the City and set a strategic framework and a road map for advancing the overall goals and vision for the City’s information systems. Council also instructed staff to develop and submit a funding request to the 1997 - 1999 Capital Plan process to ensure that funding for these initiatives would be considered as part of the City’s overall funding priorities.

Following from the ISP approval, staff undertook a series of studies to define technical standards and architecture, as well as to set out an overall migration strategy that would see the City move from a mainframe environment to the client-server, network based environment envisioned in the plan. Both the Technology Migration Strategy and the Information Systems Plan were reported to Council as part of the Better City Government reports and are integral to the success of that program.

On May 18, 1995, Council approved the Better City Government - Next Steps report. This report established technology as a key enabler of process redesign and directed attention to necessary improvements in major corporate information systems such as the Budget/Performance Management/Accounting systems, Payroll and Benefits Administration systems, the Revenue Billing and Collection systems and the Facility and Building Management systems. The systems priorities established under the Better City Government program were the “applications response” anticipated as part of the ISP.

The need for technology and systems solutions were also identified in other City initiatives:

… business process reviews that were undertaken as part of the Better City Governmentprogram identified the need to replace existing software in order to make information more easily accessible in the organization, to eliminate manual work which added no value to business processes, to improve decision making and to improve service to our clients and customers.
… CityPlan encouraged the development of community identity, public participation and a more neighbourhood-based service delivery system. Initiatives such as community-based policing, Neighbourhood Integrated Service Teams, information kiosks at branch libraries and the CityPlan Community Visions project all depend on technology infrastructure and systems that give staff and the community access to the same information.

In 1996, staff presented a proposed program for meeting the expectations of the ISP along with a funding request to the 1997 - 1999 Capital Plan process. This request included $44.1 million of information technology project work to complete the migration of systems from the mainframe and to accommodate new business systems. In addition, it was estimated that additional net operating costs of $9.2 million would be incurred over the life of the long term plan. This request included:

Component	Costs	Description
Information Technology Infrastructure	$19.9 million	expand network connectivity; replacement program for PCs and terminals; upgrade desktop capabilities; expand shared GIS services
Software Replacement - Core Systems	14.3 million	core financial, human resource; payroll and fleet systems
Software Replacement - Miscellaneous Systems	7.7 million	revenue billing systems, including property tax, bylaw fines; property management; Prism
Geographic Information System	2.2 million	geographic information platform and mapping system replacement
Increased Operating Costs	9.2 million	increased operating costs for communications costs, hardware and software support and licencing and software sustainment, net of mainframe cost savings
Total	$53.3 million

In bringing this proposal to Council, staff reported that the current method of funding systems infrastructure and applications was ad hoc and erratic and did not reflect the extent of the City’s investment, and dependence, on technology and information systems. The Capital Plan Review Group recognized that funding for the replacement and upgrading program could not be accommodated within the current Capital Plan, but at the same time recognized the urgency of moving forward in a planned fashion, including:

… the need to upgrade many of the City’s systems to be Y2K compliant, including the financial and human resources systems
… the need for coordinated migration planning that had a planning horizon beyond the three year capital plan. Without this longer term approach, the City would be faced with additional costs to build temporary interfaces between systems that were being upgraded or replaced. Moreover, maintaining two platforms and dual systems during the transition period committed the City to extra licencing and maintenance costs and would result in a strain on staff resources.
… the need for a sustainable funding strategy that went beyond a three year horizon. The City’s investment in technology assets had grown significantly and the ability to make the improvements anticipated required proper financial planning to ensure orderly replacement, in the same manner as was applied to water, sewer, streets and building infrastructure.

In order to respond to the funding issue, the Capital Plan Staff Review Group proposed a new funding mechanism which was intended to provide a stable source of financing into the future. This was accomplished by appropriating a mixture of existing funding in the Operating Budget along with an on-going portion of the Capital Plan (Capital from Revenue).

On July 23, 1996, while considering the financial limits for the 1997 - 1999 Capital Plan, Council approved the Information Technology Long Term Financing Plan. This strategy included an eight year funding program extending from 1997 through 2004 and involving expenditures of $53.3 million which were to be funded by cash contributions and operating savings. The primary components of this plan included:

Component	Costs	Description
Total Estimated Expenditures 1997 - 2004	$53.3 million	see table above
Cash Funding Provided	$(41.3) million	Capital from Revenue PC Replacement Program Corporate Training Program Strategic Initiatives Fund
Estimated Benefits	(15.8) million	preliminary estimate of operating & other costs savings
Total Contributions 1997 - 2004	$(57.1) million
Net Benefit	$(3.8) million

In addition to approving the long term financing strategy, Council instructed staff to continue working toward implementation of the ISP, including replacement of the mainframe and replacement of the core corporate information systems. Specific project budgets were to be reported back to Council for approval.

The following summarizes the major areas within the Information Technology Long Term Financing Plan. A summary of the costs is attached as Appendix A.

On July 31, 1997, Council approved the first component of the Information Technology Infrastructure Expansion and Replacement Program. The cost of this first year of infrastructure work was $2.8 million and additional ongoing operating costs of $236,000 were identified beginning in 1998. Funding for this component was committed from the Information Technology Long Term Financing Plan.

In October, 1998, Council approved the second year of work in the infrastructure program at a cost of $3.5 million. Additional ongoing operating costs of $126,000 were identified beginning in 1999. The cost of the program was committed from the long term financing plan and the operating costs were added to the Operating Budget in 1999.

In an accompanying report, the General Manager of Corporate Services is recommending the third component of this work be approved at a cost of $2.8 million, bringing the commitment to improved connectivity, infrastructure and hardware to $11.4 million of the original $19.9 million identified in the Information Technology Long Term Financing Plan.

With completion of the work approved as part of the infrastructure program, the City will have:

… installed and upgraded data communications services to 90 City work sites, including installation of copper wire, fibre optic or wireless connections.
… consolidated and upgraded local area networking facilities in Engineering, Corporate Services, Park Board and Legal Services, including replacement of 40 network servers and centralization of data backup processes.
… provided emergency power to keep core systems operating in case of a power failure.
… replaced approximately 1,800 obsolete microcomputers based on a four-year replacement program.
… replaced 625 IBM and Library mainframe terminals which were unable to support current generation information systems with networked-based microcomputers.
… completed extension of e-mail, scheduling software to all desktops and completed a major application upgrade.
… extended internet and intranet access tools to all networked sites.
… upgraded the operating systems on 3,000 desktop microcomputers to a common standard.
… upgraded telephone system to support additional communications capacity and services.
… upgraded mainframe computer hardware to ensure operations until migration plan completed.

Although the intent of the original technology infrastructure plan remains in place, technology has changed since 1994 and the specific solutions pursued to achieve the original objectives of the ISP have been adjusted. This has led to slightly higher costs than anticipated in the original financing plan, with the total now anticipated to be $22.9 million by 2004, including both implementation and ongoing operating costs. Allocation of the balance of this funding is subject to annual review and approval by Council.

Following approval of the Information Technology Long Term Financing Plan and instruction to proceed with selection of core corporate software, staff began a review of the “best of breed” applications that could replace the City’s financial, project costing, HR/Payroll and Fleet Management systems. On July 31, 1997, staff reported on an extensive product selection process that included both technology and business staff. The recommendation was that the City purchase and implement SAP software as replacement for financial, human resource and payroll systems and CCG Systems for replacement of the City’s fleet management system. A budget of $20.9 million for this implementation project was approved by Council on September 9, 1997. Consistent with the original intent, the source of funding for this project was the Information Technology Long Term Financing Plan. An additional $250,000 was subsquently approved for development of a City training facility in part to accommodate the training needs related to the project.

An integral component of the review of software options undertaken by staff was a cost-benefit study based on the functionality that the new software products could offer the City. Although this study was not based specifically on the chosen software, it did identify a broad range of benefit that might be achieved by the implementation of fully integrated software like SAP. These savings flowed from the increased functionality of the application, from the application of best business practices and the availability of improved information processing and management capabilities. The results of this review validated and built on the benefits identified in 1996 and indicated that the cost of the system implementation could be recovered within the time frame of the long term financing plan.

Implementation of core finance and HR/Payroll modules of SAP began in October 1997 and continued for 14 months before the finance and materials management modules went intoproduction on January 1, 1999. The HR/Payroll modules went live on June 4, 1999. Following the go live dates, the legacy systems were retired with the cost savings associated with licencing and maintenance being allocated to the long term financing plan. At the same time, the SAP project entered a period of stabilization during which configuration was completed, reporting functionality was enhanced and additional staff training has taken place. These efforts resulted in an increased budget for the project of $3.0 million which Council approved on November 2, 1999.

The following summarizes the various stages of the cost estimates of the core systems replacement project and the actual expenditures estimated to March, 2000:

	July, 1996 Capital Plan Estimates	Approved Budget Sept, 1997	Amended Budget Feb, 2000	Actual Expenditures March, 2000
Contracted Implementation Costs	$14.3 million	$11.2 million	15.8 million	$15.3 million
City Implementation Costs	not included	5.7 million	6.0 million	7.1 million
System Hardware	not specified	1.2 million	1.6 million	1.6 million
Fleet Management	included	0.7 million	0.7 million	0.2 million
Contingency	not incuded	2.3 million	allocated	allocated
Total Budget	$14.3 million	$21.1 million	$24.1 million	$24.2 million

The Information Technology Long Term Financing Plan anticipates that the City will capture benefits from the implementation of SAP over the term of the plan that will offset this investment. Approximately $4.7 million in savings has been identified and will be allocated to the plan by 2004. With the SAP system now stabilized, the process of validating and capturing the additional benefits identified in the original business case and in subsequent reviews undertaken by staff and consultants has begun.

SAP requires ongoing support, both from technology and business perspectives. An accompanying report seeks Council approval for the resources necessary for the ongoing sustainment of SAP. These costs, estimated at $1.9 million in 2000 and $1.4 million annually thereafter, will be provided from reassignment of existing departmental resources and from within the Information Technology Long Term Financing Plan.

The SAP software will also require periodic upgrades to take advantage of the continuous improvements being made to the system and to ensure that the City’s working version is fully supported by the developer. During 2000/2001, the City will be required to spend approximately $800,000 to upgrade from our current version to a more recent release. Upgrade costs will recur approximately every three years thereafter. These costs are also provide for in the long term financing plan.

To date, the City has implemented only a portion of the functionality that SAP provides. However, any additional configuration beyond this first phase will be dependent on the development of appropriate business cases which indicate a payback or which can be accommodated within the Information Technology Long Term Financing Plan.

The long term financing plan provides funding for the technology infrastructure and information system needs of the public library. As noted above, the City’s terminal and microcomputer replacement program has provided funding for similar requirements at the library. In addition, the department’s automated circulation system will require upgrading or replacement within the term of the long term financing plan. The cost of these projects at the Library are estimated at $5.1 million over the next five years. To assist with these replacements, technology funding has been provided to the financing plan from the Library’s operating budget to support these upgrades and replacements.

Development of GIS was identified in the ISP as one of the City’s core infrastructure technologies. Geographic information is the common denominator linking together information related to a significant component of the City’s business. When fully implemented, GIS will provide staff with simple access to most of the City’s geographically based information such as addresses, assessment and property tax information, zoning, inspection districts, permitting activity, registered voters, street conditions and building restrictions. Being able to pull geographically based information together and view it on map-based screens will make it easier to retrieve and integrate data as well as provide a highly visible way of examining data trends. It will also make it easier to provide a higher level of service to the public. Development of VanMap, now available on the City’s intranet, is an example of the way GIS can bring information from a variety of sources together to improve service.

Development of GIS was an original component of the Information Technology Long Term Financing Plan, although only a portion of the system development was funded from the plan. The City is participating in a partnership with Autodesk Inc. and other municipalities in developing GIS and its applications, a mechanism that will allow the City to leverage its funding to gain access to applications that would demand considerably more resources if we were to develop them on their own. Currently, the long range financing plan includes a commitment of $1.57 million to GIS, with the balance of the funding to build out the platform and to provide the applications that it supports to be provided from operating savings or charges to the internal and external beneficiaries of the system.

The Information Technology Long Term Plan has also provided for a variety of miscellaneoussystems projects, including:

… Quickfind: an online City directory available on all desktops
… BCAFIS Upgrade: Upgrading of the Police Department Automated Fingerprint System for Y2K compatibility
… Year 2000 Upgrade: Review and upgrading of miscellaneous City systems for Y2K compatibility.

The total cost of these projects is approximately $1.5 million. Although these were not anticipated in the original financing plan, they have been funded here so that priorities can be set among corporate technology and systems projects.

As noted above, there are two primary components of funding within the Information Technology Long Term Financing Plan; specific funding from the Operating Budget and cost savings captured as a result of the systems work undertaken in plan.

Over the 1997-2004 period, the Information Technology Long Term Plan identifies $52.1 million in specific funding from the Operating Budget:

… Allocation from the Capital Plan: In 1996, Council agreed that approximately $26.4 million (1996) would be committed from Capital Plans on an ongoing basis to support the financing plan. This funding is provided by reducing the annual Operating Budget contribution to each Capital Plan by $10.0 million (1996). With inflation, this allocation totals $27.8 million by 2004.
… Existing technology funding: In 1996, Council approved an ongoing $1.0 million allocation in the Operating Budget for the replacement of microcomputers which will provide $8.0 million over the 1997 - 2004 period. In addition, ongoing funding for technology improvements from departmental budgets has been consolidated in the plan for a total contribution of $7.1 million over the term.
… Staff Training and Development Funds: A significant component of technology infrastructure and systems upgrade projects is devoted to training staff that must use it. During the 1997 - 2004 period, with the replacement of the City’s core information systems, it is appropriate that a high priority be given to ensuring staff are prepared for the major process changes that will occur and are adequately trained to use the new systems. As a result, a total of $4.0 million is committed through 2004.
… Strategic Initiatives Fund: The Better City Government Program includes ongoing funding for process improvement projects. As the Information Technology Long Term Financing Plan supports the most significant process improvement project currently being undertaken, it is appropriate that a portion of these funds be allocated to the financing plan. The Corporate Management Team makes decisions annually on the amount of funding available but to date has committed a total of $5.2 million over the term of the plan.

The second source of funding in the long Term plan is operating savings that result from the implementation of new information systems. In the original financing plan, it was anticipated that atotal of $15.8 million would be available from this source over the 1997 - 2004 period. These savings were to be achieved from: rationalized data entry; a reduction in time spent on reconciliations; an improvement in accounts receivable and inventory management; the elimination of manual systems; better attendance management; a reduction in manual payroll processing; and mainframe cost savings. Much of the work to identify savings from the core systems implementation project was completed prior to the selection of SAP. However, review of this work during project implementation and research of the benefits achieved by other organizations that have implemented SAP indicate that achieving this level of benefit over the term of the long term plan is not unrealistic. As noted above, benefits realization is an important component of the sustainment initiative being proposed in an accompanying report.

The summary in Appendix A indicates that the Long Term Financing Plan currently has a shortfall of approximately $9.5 million. This deficit arises from a number of factors:

… increase in the Technology Infrastructure costs as the scope of connectivity and networking required to support systems needs were confirmed;
… increase in the Core Systems Replacement costs beyond the original budget levels;
… inclusion of projects not originally anticipated in the plan; and
… project benefits not fully identified

Despite these changes, staff are committed to bringing the plan into balance by 2004. The highest priority is the realization of benefits anticipated from the core corporate systems project. With SAP now reaching a stabilized state, a Benefits Realization initiative has begun with a mandate to prove the original expectation for benefit through a detailed review of major business processes. This review will concentrate on ensuring that the “best practice” options provided in SAP have been built into our materials management, finance and human resource and payroll processes and that the City is taking advantage of and capturing the associated efficiencies. The initiative will also review the benefits that improved information processing and management have had on the organization. This work is expected to result in recommendations for business process change, that may range from small changes to the way departments process transactions to broader process or even organizational change. Operating savings or other benefits identified in this process will be directed to support the long term financing plan.

Similar initiatives to capture value from the other applications developed within the long term plan will be the norm.

Achieving benefit from the new applications implemented under the umbrella of the long term plan is likely to impact all areas of the organization. This was the original expectation for the core systems replacement project and it continues to be a goal and a commitment. Improving the management of information, realigning our processes and reducing duplication will result in cost reductions. If there are staffing implications any resolution will be guided by the Better City Government Human Resources Strategy, approved by Council on May 18, 1995. The strategy seeks to avoid layoffs where possible by providing for reassignment of staff along with the provision of retraining opportunities to broaden the scope of work activities so that employees can be provided with moremeaningful employment and the opportunity to ad value to City services.

The strategy involved in the technology investments made to date has been that the provision of basic infrastructure is a cost that is unlikely to be recovered but one that must be made if the City is to provide the management and public service tools necessary to meet City’s business demands. However, it is anticipated that where investments are made in specific business applications, the City should look for a return on that investment. That strategy will continue to be utilized in looking at additional information system improvements in the future.

The Information Technology Long Term Plan addresses many of the specific needs of the organization for technology infrastructure and information systems, however, it is not all inclusive. Information technology staff from throughout the organization have begun a review of other corporate and departmental information systems and their need for upgrading or replacement. Establishing priorities and accommodating those needs over the next few years will present a significant challenge from both a human and financial resources perspective. Preliminary estimates suggest that additional expenditures of $20 million beyond those included in the long term financing plan could be necessary, if all of these systems needs are to be met in the next five years.

For the most part, it is anticipated that systems improvements will only be undertaken on the basis that they are required to maintain minimum technology standards or that they add value to the City’s business, either from a financial or public service perspective. This will require the development of appropriate business cases prior to bringing proposal forward for Council approval.

In 1990, the City established information as a key corporate resource that should be properly managed. The Information Systems Plan approved by Council in 1994 provided the vision for moving forward and the Information Technology Long Term Financing Plan approved in 1996 provided a sustainable source of funding to develop the technology infrastructure and to upgrade or replace the core corporate information systems necessary to enhance the City’s business.

Much progress has been made. Communications and networking infrastructure has been developed. Standardized desktop services have been rolled out to more than 3,000 personal computers that allow access to the information which is core to our business. We are nearing completion of the project to not only replace but to significantly upgrade the core financial, materials management, human resource and payroll systems. The GIS platform is being developed and the first applications that bring geographically based information to our desktops are now available.

By the end of 2000, the costs of this work undertaken since 1996 will approach $40 million. However, the costs remain within the bounds of the long term financing plan and there is a commitment to bring that plan into balance by 2004.