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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