SUPPORTS ITEM NO. 4
CS&B COMMITTEE AGENDA
JULY 31, 1997
ADMINISTRATIVE REPORT
Dated: June 23, 1997
CC File: 1186
TO: City Services and Budgets Committee
FROM: Corporate Management Team
in consultation with the Corporate Systems Replacement Project
Team
SUBJECT: Corporate Information Systems Replacement
RECOMMENDATION
THAT Council approve funding of $150,000 to provide for the work
leading up to and during negotiation of an appropriate contract
with the preferred vendor, including the engagement of a consultant
to assist this process, in preparation for a report back to Council
in September. Authority is also requested for the City Manager to
appoint the aforementioned consultant, should the cost exceed the
current $30,000 approval authority. Funding for these costs is
available in the 1997 Operating Budget provision for Corporate
Information Systems Replacement.
CITY MANAGER'S COMMENTS
The Corporate Management Team notes that staff have worked for more
than three years under the framework provided in the Information
Systems Plan and the Better City Government Program to bring this
major corporate project to this point. The CMT have reviewed the
recommendations of the staff groups involved in defining the
technology infrastructure and selecting the corporate information
systems and concur that they should be supported. Approval of this
recommendation will allow staff firm up the costs of this important
step for the City leading to a request for Council to approve a
contract for purchase and supply of the recommended software
solutions. On behalf of the Corporate Management Team, the City
Manager RECOMMENDS approval of the foregoing.
COUNCIL POLICY
On June 19, 1990 Council established information as a corporate
priority, and directed that work proceed to "... meet with relevant
departments to develop a work plan for improvements in the City s
information systems."
On December 8, 1994, Council approved the following:
THAT the City Manager report back to Council on staff and dollar
savings achieved through re-engineering prior to applying those
savings to support re-engineering projects throughout the
organization where practical, to fill vacancies or relieve excess
workloads as appropriate, and to support information technology and
systems.
THAT Council authorize the City Administration to proceed with the
implementation of the strategy outlined in the Information Systems
Plan, as well as Internet connections and on-line systems, subject
to follow-up reports on those components of implementation which
require Council's approval.
THAT Council direct staff to prepare a detailed infrastructure and
software implementation plan and budget for consideration in the
1997-1999 Capital Budget.
City Council, on May 18, 1995, approved the Better City Government -
Next Steps report. The report identified 15 major corporate processes
that will be reviewed and improved upon, including the major corporate
systems such as the Budget/Performance Management/Accounting Systems,
Revenue Billing and Collection System, Facility and Building Management
System, and Payroll/Benefits Administration System. The reports outlined
a supporting strategy for information systems.
City Council on July 23, 1996 approved the Long Term Financing Strategy
- Information Technology Replacement Program report, including:
directing staff to continue toward the replacement of mainframe
based systems;
authorizing staff to continue with the software replacement study
work and issue RFPs to the qualified vendors, with report back to
Council for final approval; and,
- approving the funding for the Long Term Financing Strategy, which
includes a total 8 year funding program of $41.29 million.
PURPOSE
The purpose of this report is to provide Council with an update of the
selection process for new corporate information systems, including core
financial, human resource, payroll and fleet management systems, to
replace existing mainframe-based applications. The report also requests
funding of up to $150,000 to complete the negotiation of a contract with
the preferred vendor and its implementation partner.
BACKGROUND
In September, 1994, Council approved the Information Systems Plan (ISP)
which provided the framework for the City to migrate from the current
mainframe environment to a client-server, network-based environment.
Both the ISP and the associated Technology Migration Strategy were
reported to Council as part of the Better City Government Program in
1995 and are integral to the success of that program.
The Better City Government program, including re-engineering of City
services and implementation of best-practices, communications and
organizational change, have validated the systems and technology
strategy outlined in the ISP. More importantly, it has highlighted the
urgency of moving to the systems and technology identified in the ISP as
an essential part of our service delivery solutions.
On July 23, 1996, Council showed continued support for the strategy
underlying the ISP and the software solutions envisioned by the Better
City Government Program, by approving the Corporate Information Systems
Replacement Program, which includes:
direction to staff to work toward the replacement of
mainframe-based systems and migration to the desired
networked, client server architecture;
authorization for staff to continue with software replacement
study work and to issue RFPs to qualified vendors, with report
back to Council for final approval; and,
a long term financing strategy to provide funding for
infrastructure upgrades and information system upgrades.
DISCUSSION
This report deals with replacement of the City's core corporate
information systems--the financial system, the human resources system,
the payroll system and the fleet management system. These systems are
at the core of our operations as they provide the means by which the
City accounts for and manages some of its most important
resources--financial and human. Moreover, these four systems represent
the City's most significant commitment to mainframe computing and are
identified in the Better City Government Program as the highest priority
systems for replacement. In addition to providing significantly more
functionality for the City, these new systems will also serve as the
foundation upon which other system improvements can be built.
System replacement is important for a variety of reasons:
technology issues, including:
impending mainframe obsolescence and the goal to
introduce new network technology
the impending "Year 2000" problem
service improvements to provide systems support for more
effective service delivery as identified in the Better City
Government Program
management improvements better management tools and information
to improve efficiency and accountability in our operations
The following table indicates the scope of the change in the way the
City will do business with new systems in place:
Current Environment: Future Environment:
transaction oriented strategic focus on key
"administrivia" business issues
emphasis on paper processing emphasis on service to
centrally controlled business customers
processes decentralized processes with
cumbersome, unfriendly system employee and, perhaps,
interfaces customer self-service
redundant systems and data user friendly, intuitive GUI
entry requirements interfaces
voluminous and dated batch best of breed information
reporting systems offering significant
stovepipe processes and efficiencies in operations
systems and service delivery
inability to harness new on-line, real-time
tools for communication and information coupled with
management powerful reporting and
management tools
enterprise-wide integration
of systems managing
resources, funding and
geography
new technologies such as
internet, workflow, barcoding
and scanning
The City is not alone in moving to new systems. The Year 2000 issue
alone is compelling many public and private sector organizations to move
to new systems. The following is a sample of other organizations that
have recently made similar assessments of their information processing
needs and have concluded that replacement systems offer the best
alternative and longer term value:
ICBC City of Richmond City of Kelowna
BC Gas City of Surrey City of Coquitlam
GVRD District of Maple Ridge City of Waterloo
WCB Metro Toronto City of Mississauga
BC Tel City of Edmonton UBC
Province of BC Province of Alberta Province of Nova Scotia
The issues, risks and benefits are very similar across all organizations
that are considering systems replacement. Surveys show that the City's
strategy of using commercially available packages is now the norm.
Moreover, for most of these organizations, the decision among software
vendors and implementation partners comes down to the same ones as those
identified for the City.
The corporate information systems proposed for the City promise a user
friendly, integrated system environment that will eliminate wasteful
manual procedures and duplication of data entry, will streamline
business processes and provide a new dimension in functionality and
management information than is now available. The benefits of these
improvements will flow to stakeholders within the organization as well
as to our business partners and customers outside the organization.
The Replacement Decision
The conclusion of the project team that has been reviewing these issues
for the City is that maintaining a status quo position on the major
corporate information systems is not viable. These systems are captive
to obsolete technical platforms, will require significant upgrading to
deal with the year 2000 issue and do not provide the functionality and
built in business process benefits that will be necessary to achieve the
technical, service delivery and management benefits contemplated in the
Information Systems Plan and Better City Government Program.
Short term solutions to the technical problems are possible but are not
recommended. The financial, human resource and fleet management systems
can be upgraded to deal with the Year 2000 issue. This will require an
investment of up to $750,000, in addition to a considerable investment
of staff time and effort. However, these solutions ignore the fact
that our current applications are becoming obsolete and that this
investment will provide no additional functionality and will only delay
the need to replace these systems for two to three years.
The System Selection Process
The objective of the selection process was to evaluate and select the
best overall financial, human resource, payroll and fleet management
system for the City. At the outset it was acknowledged that a "suite"
of products from a single vendor would likely be the best approach to
new software solutions, however, this was not an overriding requirement
in the selection process. Indeed, the recommendation of this report is
that different vendors be used for the financial, human resource and
payroll systems than for the fleet management system.
To date, the key steps in the selection process have been as follows:
define key business and functional requirements;
issue an Request for Information and select shortlisted vendors;
develop scenarios scripts for package demonstrations;
issue Request for Proposals with system requirements to selected
vendors;
evaluate the vendor proposals and conduct demonstration
sessions;
prepare final evaluation and select preferred vendor;
This report represents completion of these first steps. The next steps
in the process, leading to finalizing a contract and beginning the
implementation process are:
negotiate a contract with the preferred vendor and
implementation partner (July-August);
seek Council approval to enter into a contract (September);
install and implement the purchased package (September 1997 to
September 1999).
Staff will be begin negotiation with the preferred vendors shortly and
anticipate a report back to Council in early September seeking approval
to enter into a contract for purchase and implementation of the
recommended systems.
The program to replace our information systems will take several years
to achieve. Staff have already invested three years of work in defining
and positioning the City to migrate applications off the mainframe
computer. Several of our smaller systems have already been replaced.
There is considerable work left to do, both in providing the platform
and installing the new software. It is anticipated for example, that
from the implementation decision date, it will take up to three years to
install and have available all of the functionality of a new financial,
human resource and payroll systems.
The Recommended Solution: Financial, Human Resources and Payroll
The project team considered submissions from two vendors and their
implementation partners for the financial, human resource and payroll
components of the systems and a single vendor for the provision of the
core financial / project costing system only.
SAP Canada / Ernst & Young Consultants
PeopleSoft / Anderson Consulting
Oracle Financial/SQL Systems
In terms of its ability to provide an integrated software solution with
the functionality required by the City, the proposal from SAP Canada /
Ernst & Young is considered to offer the superior value to the City.
Staff have advised both PeopleSoft / Anderson Consulting and Oracle
Financials/SQL Systems of that decision and will begin discussions with
SAP / Ernst & Young to finalize a supply and implementation contract.
Final approval of that contract will be before Council in September.
The Recommended Solution: Fleet Management
None of the final vendors offered a software solution that met the
City's expectations for a fleet management system. The project team,
therefore, began a search for a separate fleet management system with
one of the criteria being that the selected product would have to be
integrated with the financial, human resource and payroll systems
solution.
The team has concluded that CCG Systems offers the product that best
meets the City's current needs. CCG Systems has a proven product with
over 150 sites in North America. It offers "real time" updates to
capture and make available relevant information. It also provides work
planning and scheduling capabilities and on-line information about
warranties and preventative maintenance and well developed reporting and
management tools. None of these capabilities are available with our current system and cannot be fully satisfied by the alternative offered
by SAP Canada.
While the project team recommends that CCG Systems be the City s fleet
management system, it remains committed to the overall goal of
integrating all of the City s core systems. Therefore, the approach to
be taken to purchasing the CCG Systems software will be through the SAP
Canada / Ernst & Young contract for the core systems, making the
responsibility for system integration rest with the core systems
implementation consultants. Should it not be possible to negotiate such
an arrangement with SAP Canada / Ernst & Young, staff will report back
for approval of a direct purchase of CCG Systems Fleet Management
software.
Project Costs
In July 1996, Council approved the Information Systems Financing Plan
which provides a source of funding for system improvements that are
anticipated to cost up to $44.0 million by 2005. The system
replacements contemplated in this report are the key components of that
plan and involve purchase and implementation of software, staff
training and provision of the technical infrastructure and hardware
necessary to make it all work.
Based on the proposal from SAP Canada / Ernst & Young and on the
anticipated additional City costs associated with implementation, the
financial, human resource, payroll and fleet management system
implementation costs are anticipated to be in the range of $20.2 million
(including applicable taxes) over the period from September 1997 through
1999, as follows:
Financial, Human Resource and Payroll $12.44 million
Fleet Management 0.70 million
City Implementation Costs 5.25 million
Contingency (10%) 1.80 million
Total $20.19 million
This projection of software/implementation costs at $12.44 million,
compares to the estimates in the Information Systems Replacement
Financing Plan (July, 1996) of $14.3 million. The balance of the costs
represent the City's commitment to provision of a staff implementation
team, staff training on the new system and system-specific
infrastructure costs.
The software and implementation costs proposed by the vendor will be
reviewed through the negotiation process and staff anticipate that these
estimates represent the top end of the City's costs for this project.
The terms of the proposed contract with SAP Canada / Ernst & Young,
including the final costs, will be reported to Council on September 9,
1997 when authority to sign the contract will be requested.
The next steps of the selection and contract negotiation process will
require the City to undertake some additional work for which funding
will be necessary. For example, it is anticipated that the City could
benefit by the use of a consultant to assist in the negotiation process.
In addition, there will be the need to undertake some initial task in
advance of implementation to assist in the definition of project scope
for negotiation purposes. This a very large and complex contract and
the City will benefit from the use of these resources to aid in the
negotiation process. Funding of up to $150,000 is recommended to cover
these anticipated costs. Moreover, as Council will be in recess during
the period in which this work is necessary, authority is requested for
the City Manager to approve the necessary contracts which exceed the
normal $30,000 authority limitation.
The costs associated with purchasing and implementing new core software
for the City are an important component of a much larger initiative that
is funded through the financing plan approve by Council in 1996. The
other components which will be reported to Council in the near future,
will include continued upgrading of the City s technology infrastructure
and communications capabilities and build-out of the Geographic
Information System (GIS). These two components are expected to add up
to $7.0 million to the total cost of systems development and replacement
costs during the next four years. A complete cashflow analysis for
this systems work will be before Council in September at the time the
software contact is reported back.
Project Benefits
The costs of the project are high, however, the direct and indirect
benefits that will flow from it are also substantial. In order to
demonstrate the impact of these benefits, staff undertook a generic
business case analysis based on the anticipated functionality of the new
breed of software products being considered for the City. The business
case demonstrates how the increased functionality, best-practices
business processes and improved information processing and management
capabilities of these software products would provide tangible and
intangible savings in City operations. These savings are summarized in
the following table:
Core System: A n n u a l Anticipated Sources:
Savings:
Core Financials $ 3 . 8 rationalize data entry
million reduce time spent on
reconciliation
improve accounts receivable
administration
faster data updates
better financial systems
integration
close cycle end/year end books
faster
eliminate manual systems
improved inventory management
Human Resource $ 1 . 6 improved attendance management
/ million improved WEB administration
Payroll reduction in manual payroll
operations
F l e e t $ 0 . 5 improved shop floor
Management million productivity
reduced outside vehicle rental
costs
Other $ 1 . 4 migration off the current
million mainframe platform
Total Savings $ 7 . 3 annually
million
Also anticipated are one-time savings because these
systems will solve the Year 2000 issue that the City
would have to address at a cost of up to $750,000 over
the next two years.
The extent to which these savings can be converted to real expenditure
reductions or improved productivity with the preferred software product
cannot be confirmed until a more detailed analysis (called a "gap
analysis") can be undertaken to identify the extent of process change
that will follow implementation. Although this analysis will not take
place until the first phase of implementation, the implementation plan
to be outlined to Council when staff report back with a proposed
contract, will lay out the way in which these benefits will be
identified and captured.
The process changes that will result from implementation will impact on
all areas of the organization, including staff. However, Human
Resources Strategy, approved by Council on May 18, 1995, provides a
safety net beyond collective agreements for employees affected by work
redesign or process improvement. Specific initiatives will depend on
individual circumstances but could include reassignment of staff along
with the provision of re-training opportunities to broaden the scope of
work activities and develop competency profiles that match new workplace
demands. The objective is to provide employees with more meaningful
employment and with the opportunity to add value to City services.
CONCLUSION
Following from Council's direction contained in approval of the
Information Systems Plan, the Better City Government - Technology
Strategy and the Corporate Information System Replacement Plan, staff
have concluded the selection process for new corporate financial, human
resource, payroll and fleet management systems. Implementation of these
new systems will address a series of technological, service delivery and
management issues and are justified in part on a business case which
promises a significant direct payback in increased productivity and
reduced costs. The selection process has now reached the stage at which
negotiations will be undertaken with the preferred vendors with a view
to finalizing a contract. Funding is requested for resources to assist
the City in that task. Once a contract has been negotiated, Council
will be asked to authorize it and provide the funding necessary to begin
the implementation phase.
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