State of Ohio

1
January 10, 2003
State of Ohio
OAKS Project
Presented by Nola Haug, OAKS Program Manager
Presented to CIOs
2
Mission Statement

• Select and implement an Enterprise Resource
  Planning (ERP) solution for state government that
  provides an automated and integrated financial,
  procurement, asset management, capital
  improvement projects, human resources, and
  payroll system that significantly improves the
  efficiency and effectiveness of the State of
  Ohios administrative processes.

3
OAKS Journey Milestones
Conduct Business Needs Analysis (1/02-10/02)
Develop/Release/Award Integrator RFP (1/03-8/03)
Develop/Release/Award Business Needs Analysis RFP
(2/01-01/02)
Develop/Release/Award Software RFP (11/02-5/03)
Conduct Integration Phase (9/03-6/05)

• Financials HR
• Configure/Design
• Convert Data
• Test
• Train

Begin Phased Implementation (7/05-1/06)

• Financials (7/05)
• Procurement (7/05)
• Fixed Assets (1/06)
• HR/Payroll (1/06)
• Capital Proj. (6/06)
• Self-Service (6/06)

Project Complete (6/06)
4
Business Needs Analysis
5
Requirements Evaluation

• Approach
• Covered five core business areas financials,
  human resources, fixed assets, procurement, and
  capital improvement projects
• Conducted joint application development (JAD)
  sessions
• 50 JAD sessions and focus group meetings
• Invited 83 agencies/organizations
• 76 agencies/organizations attended (52 agencies
  and 24 organizations/vendors)
• 92 percent participation rate
• 521 individual participants
• Followed a formal review process
• Findings
• Approximately 2,100 business requirements defined
• All agencies were very supportive of OAKS
  providing that OAKS meets their administrative
  needs in the five core business areas

6
Technical Solution Evaluation

• Approach
• Identified six ERPs AMS, JD Edwards, Lawson,
  Oracle, PeopleSoft, and SAP
• Short-listed Oracle, PeopleSoft, and SAP based on
  five criteria broad functional fit, scalability,
  technical fit, RD investment, and public sector
  experience
• Conducted as-is and visioning sessions with
  technical team
• Reviewed the existing environment and tools
• Collected agency-specific information through
  surveys and outreach meetings

7
Technical Evaluation - The Short List
The vendors further evaluated during the OAKS
Business Needs Analysis were Oracle, PeopleSoft,
and SAP.
AMS JD Edwards Lawson Oracle PeopleSoft SAP

• Functionality
• Scalability
• Technical Fit
• RD Spending
• Public Sector Experience

Oracle PeopleSoft SAP
8
Functionality

• The requirements were categorized into five
  software modules identified by the state.
• Finance
• Human Resources/Payroll
• Procurement
• Fixed Assets
• Capital Projects

9
Scalability
To measure the level of scalability achieved by
each software product, vendors were asked to
demonstrate where their systems have been
implemented for business entities equivalent in
size to the State of Ohio regarding the two areas
listed below.

• Finance and Procurement systems for organizations
  with annual budgets in excess of 50B
• HR / Payroll systems for organizations with more
  than 65,000 employees

10
Technical Fit
To assess technical fit, the team evaluated each
of the software packages in the five areas listed
below

• Ability to supplement package functionality with
  bolt-on software packages such as budget
  preparation, sales and use tax, time entry, bar
  coding, point of sale, and procurement
• Ability to use technical support tools for
  scheduling, software distribution, event
  management, etc.
• Ability to provide data warehousing capability
• Ease of customization and the ability to maintain
  the customizations during upgrades
• Ability to work within the states technology
  strategy

11
Research and Development Spending
To determine the level of investment that each
software vendor makes in research and
development, we gathered information on the RD
spending for each ERP vendor. As a result, we
then rated each vendor based upon total dollars
spent on research and development. Research and
development spending contributes to the future
viability of the ERP package and is an indicator
of the ability of the ERP vendor to continue to
provide timely and frequent technological and
functional upgrades to their product.
12
Public Sector Experience
It is important for a large complex government
organization like the State of Ohio to acquire an
ERP package from a vendor that has a dedicated
public sector development organization. In this
way the State of Ohio, along with other
government customers, will have the ability to
help shape the future direction of the public
sector software package.
13
Consolidated Scoring
The Deloitte Consulting project team followed a
structured four-step process to develop
conclusions for the package short list.

• The Deloitte OAKS team developed a software
  survey addressing each of the five evaluation
  criteria and submitted it to the Deloitte
  Consulting package experts.
• Each of the Deloitte package experts completed
  the survey for their respective software
  packages.
• As appropriate, the package experts reviewed
  their responses with the software vendors to
  confirm their accuracy and submitted the
  completed surveys to the Deloitte Consulting
  OAKS project team.
• The Deloitte project team analyzed the survey
  results and developed a short list of three
  software packages.

14
Technical Solution Evaluation

• Findings
• All three ERP products are industrial strength
  can support Fortune 20 size organization
• All three ERP products
• operate on mainstream hardware and database
• operate on the UNIX
• support multi-tier architecture
• offer pre-integrated data warehouse solutions
• Existing/statewide technical tools can be used
  for operations and network monitoring (ESM)

15
Gap Analysis

• Approach
• Evaluated the three ERP products against the
  2,100 requirements
• Vendors did self-evaluation on requirements
• Vendors invited to discuss product gaps
• Identified possible resolution for remaining gaps
• Technical solution, process change or both
• Identified process changes based on best
  practices
• Final scoring was based on state-assigned
  weights, extent of gap and effort to close the
  gap

16
Software Gap Analysis Findings
The State of Ohio defined 2,098 business
requirements necessary to meet current and future
business processes. Each requirement was compared
to the capabilities of each software package.
Requirements not fully supported by the base
software will entail gap-closing solutions to
include software modification, business process
change, or a combination of both. This chart
shows the number and the percentage of defined
business requirements met by the Oracle,
PeopleSoft, and SAP software packages.
Requirements Rating



Oracle
PeopleSoft
SAP
Number Fully Supported
1,721
82.0
1,680
80.1
1,698
80.9
Number PartiallySupported
145
6.9
177
8.4
162
7.7
Number Requiring Customization
232
11.1
241
11.5
238
11.3
2,098
100.0
2,098
100.0
2,098
100.0
TOTAL
Summary Conclusion All three ERP software
packages satisfy the majority of the states
requirements with standard configuration.
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Cost / Benefit Analysis

• Approach
• Benefits
• Calculated benefits over a five-year period
  beyond full implementation of OAKS
• Gathered data from
• Meetings with representatives
• Agency surveys
• Agency CIO meetings
• Validated benefits with businessprocess owners
• Costs
• Obtained estimated costs for hardware and
  software directly from vendors
• Documented estimated cost and required resources
  to implement the OAKS system
• Prepared summary information regarding a
  reasonable approach for funding and
  implementation

18
Benefits Overview Intangible
Intangible benefits are OAKS-enabled strategic
achievements that further a management direction,
allow the state to better manage relationships,
or allow the state to achieve qualitative
improvements in processes and functions.
Potential Intangible Benefits

• Improved tracking of capital project schedules
• Reduced efforts for budget control and
  maintenance
• Better outcomes related to vendor/contractor
  selection
• Better analysis of statewide procurement
• Increased Efficiency
• One system can address agency needs
• Reduce approval times via workflow
• Faster procurement of needed supplies,
  commodities and services
• Easier for vendors to do business with Ohio
• Improved Process Integration and Controls
• Integrated processes across functional areas
• Increased standardization and consistency across
  agencies
• Improved payroll position control information
  allowing better control of expenditures
• Consolidate vendor information into one system,
  eliminating redundancy and efforts
• Improved tracking on all processes supported by
  OAKS
• Improved Service Levels
• Multiple channels of service to vendors
• Improved workforce development opportunities

Increased Decision-Making
The intangible benefits are not quantified in the
business case because of the difficulty in
attaching meaningful dollar values to such broad,
transformational achievements or because the
information is not currently tracked.
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Cost / Benefit Analysis
Tangible benefits are those potential benefits
where a firm estimate of dollar or time savings
may be attributed to the benefit based on a
proper set of assumptions.
Potential Tangible Benefits
Benefits (in Millions of Dollars)
Procurement
45.0 26.2 4.2 1.6 77.0

• Achieve higher volume of purchase discounts and
  improve consistency of purchases within
  guidelines by 40
• Increase savings achieved from vendor payment
  discounts
• Decrease by 50 the cost to create purchase
  orders
• Reduce time required to add vendors, maintain
  vendor information or respond to vendor inquiries
• TOTAL PROCUREMENT BENEFITS

Finance and Budget

• Decrease by 16 the effort for accounting and
  transaction processing
• Decrease arbitrage rebate payments by 75
• Decrease by 50 manual effort on previously
  authorized payments
• Decrease the cost of printing and shipping
  reports
• Decrease effort related to automated and manual
  data reconciliation
• Decrease by 43 reduction the expenditures on
  warrant processing
• Reduce by 75 the time required to respond to
  agency inquiries
• TOTAL FINANCE AND BUDGET BENEFITS

24.0 18.6 8.7 5.2 3.6 3.1 0.8 64.0
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Cost / Benefit Analysis
Potential Tangible Benefits
Benefits (in Millions of Dollars)
Human Resources and Payroll

• Decrease cost of processing applications by 74
• Decrease effort for disability claims by 28
• Decrease time require in researching employee
  requests by 66
• Decrease cost of processing Personnel Actions by
  75
• Decrease time spent processing employee data by
  50
• Decrease by 70 benefit enrollment
  administration costs
• Decrease payments to non-eligible participants of
  benefit plans by 100
• Decrease by 50 the cost for recruiting
  advertising
• Decrease off-cycle payments by 75 and reduce
  payroll errors by 50
• TOTAL HUMAN RESOURCES AND PAYROLL BENEFITS

15.3 41.3 10.9 8.5 6.3 3.7 3.1 2.0
1.9 93.0
Fixed Assets and Others

• Decrease by 67 the cost of physical inventory by
  the use of bar-coding technology
• Decrease by 50 time spent recording new fixed
  assets
• Decrease the cost of printing 200 forms
• Decrease by 80 time on central review of fixed
  assets
• TOTAL FIXED ASSETS AND OTHER BENEFITS
• TOTAL POTENTIAL BENEFITS FOR ALL BUSINESS AREAS

11.4 4.6 0.8 0.4 17.2 251.2
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Better Leverage for Purchasing Power (Procurement)
As Is
State of Ohio Agencies
Locate desired item
Order desired item
CAS
OBM State Accounting

• Generate P.O.
• Print P.O.
• Maintain purchase data

DAS State Procurement
Vendor source information
Bid and negotiate contract
Request purchase information
Consolidate analyze purchase history
Agency source information

• Insufficient use of previously negotiated state
  contracts
• Purchasing volumes underestimated due to
  inaccurate data
• State is not leveraging its purchasing power

21
22
Better Leverage for Purchasing Power (Procurement)
To Be
OAKS
State of Ohio Agencies

• Search wizard
• Electronic catalogs
• Manage purchase order
• Workflow routing for approvals
• Maintain data warehouse

Locate desired item
Order desired item
OBM State Accounting
DAS State Procurement
Bid and negotiate contract
Request purchase information

• Improved search capabilities and more effective
  controls will increase utilization of state
  contracts
• Single source of purchasing information allows
  accurate retrieval of state contract purchases
• Vendors bid lower prices resulting in an
  estimated 45 million in savings for the state

22
23
As Is
Accounts Payable Processing (Financials)
Vendor
Receive warrant
Send invoice
Ship goods
State Agencies
Vendor copy (voucher support)
Match attach warrants to detail
Stuff envelope mail
Record file receipt info
Receive invoice
Receive goods
Agency copy (voucher support)
Create voucher in CAS
Match invoice to receipt info
Print voucher (3 copies)
Forward voucher support
Approve voucher
OBM copy (voucher support)
Retrieve warrants
OBM State Accounting
CAS

• Post vouchers
• Create warrant writing file

Receive voucher support
Record approval in CAS
Sort deliver to reviewer
Review voucher support
Warrant Writing System
Auditor of State

• Create warrants
• Create remittance advice

Print warrants remittance advice
Ship to warrant desk
Separate sort by agency

• A 21-step, 28-day process currently used by 144
  entities
• No automatic electronic matching of
  receipt/invoice to purchase order
• Not optimizing vendor discounts
• Vendor payments not consolidated

23
24
To Be
Accounts Payable Processing (Financials)
Vendors
Receive warrant remittance advice
Send invoice
Ship goods
OAKS
State Agencies

• Match receipt information to PO
• Match invoice information to PO
• Create payment request
• Apply vendor discounts
• Create warrant writing file

Record invoice
Scan goods received
Warrant Writing System
Auditor of State

• Create warrants
• Create remittance advice

Print warrants remittance advice
Ship to central mailing center
Central Mailing Center
Automatically stuff envelope and mail

• Leverage a variety of best practices to reduce
  process time to 5 steps over 10 days
• Utilize electronic matching
• Optimize vendor discounts with payment
  scheduling
• Eliminate up to 260,000 warrants per year
  through consolidated payments
• Realize an estimated 38 million in savings

24
25
Hiring a Full-Time State Employee (HR)
As Is
Applicant
Start employment
Accept offer
Submit applications online (OLEAP)
Confirm interview schedule
Inquiries interview / application status
Search for job postings
OLEAP
Create and present offer
Post jobs
Schedule / Co-ordinate interviews
Personnel Officer
State Agencies
Management approval 3
Query OLEAP for applications
Research and report
Create media ads
Data entry from app PA forms Create new hire
record in HR2K
Management approval 2
Screen/rank applications
Print applications
Develop schedule / record interview date
Media ads edited / approved by centralized
recruitment office
Distribute new hire notification
Management approval 1
File interview notes, apps and PA forms
Prepare apps for interview team
Complete Personnel Action form
Agencies place Media Ads
Process apps
Recommend hire
Interview results
Media
Advertising coordinator places advertisement
Time Line
20 Days Advertise
30 Days Screen/Rank Applications
30 Days Interview / Recommend Hire
20 Days Approvals
12 Days Updates
Total 112 Days

• A 22-step process requiring multiple manual
  approvals taking an average of 5-6 months to
  complete
• Duplication of advertising costs
• 200,000 applications manually screened and
  ranked each year

25
26
Hiring a Full-Time State Employee (HR)
To Be
Applicant
Self
-
Service via Portal
Self
-
Start employment

Search for Job posting


Submit Application



Inquire on application interview status

Schedule/accept interview

Schedule/accept interview


Review and accept offer
OAKS
OAKS
Personnel Officer
Personnel Officer

Combine advertisements

Combine advertisements

Initiate advertisement

Initiate advertisement

Screen, rank applications

Screen, rank applications

Review and approve list

Review and approve list

Schedule interview

Schedule interview

Extend offer

Extend offer

Create Employee Record

Create employee record

Hire / status change

Hire / status change
State Agencies
Communicate status change via
Communicate status change via

Media Ads

Media Ads
Workflow
Created
workflow
Created
Advertisements
Advertisements edited/approved by centralized
recruitment office
Recommend
h
ire
Notify Interview
Interview Result
Approve Personnel Action
Recommend
h
ire
Notify interview
Interview result
Approve personnel action
Edited / Approved
Team of interviews
via Workflow
team of interviews
via workflow
by Centralized
Recruitment Office
Media
Posting placed on Job Boards
Posting placed on job boards
Time Line
67 Days
-
Start to Finish
67 Days
-
Start to Finish

• Reduce the number of steps to 7 and the hiring
  timeline to 3 months on average
• Use ad-sharing techniques to reduce advertising
  expenditures by 50
• Realize an estimated 25.7 million through time
  and cost savings

26
27
Performing Physical Inventories (Fixed Assets)
As Is

• 1.8 million assets need to be inventoried every
  two years using a manually intensive and
  redundant process
• At 3 minutes per asset, the inventory requires
  90,000 hours of effort
• Bar-coding not feasible in todays environment
  (27 agency-owned systems 1 central system)

27
28
To Be
Performing Physical Inventories (Fixed Assets)
Download a list of assets to be inventoried into
bar-code scanner
Travel to location to be inventoried
Scan all the assets in the location
This process can be repeated at each of the over
100 agencies based on the organizational
structure. For a large agency such as DRC, DOT
or DNR, this process may be repeated 30 - 50
times.
OAKS
Exception Reports
Research and resolve differences, make
corrections in OAKS
Upload all data scanned into system

• Increased accountability possible with more
  frequent inventories
• Two-thirds reduction in time, saving 30,000
  hours each biennium
• Easier CAFR reporting, stronger balance sheet,
  and improved debt ratings
• Realize estimated 4.6 million in savings

28
29
Redundant Administrative Systems
29
30
OAKS Five Business Processes Integrated
One OAKS System 90 Million Savings

• Reduce Processing Cycle Times
• Reduce Manual Reconciliation
• Reduce Manual Effort
• Increase Fiscal Accountability and Control
• Better Decisions
• One System Consistent Data
• Modern Technology Environment
• Integrate Data Sharing Across State Government
• Integrate Business Processes Across Operations

By reducing the number of disparate systems
containing redundant and fragmented information,
the state will not only reduce the IT costs of
running multiple systems, but will also reap the
benefits of error reduction, process
efficiencies, and tighter controls that accompany
vendor self-service.
31
Avoided Costs of the Status Quo
The state is currently incurring or will incur
these costs over the next five years even if OAKS
is not implemented.
32
Estimated OAKS Tangible Benefits
Benefits reflect hard dollar savings in external
payments. The integrated OAKS solution is
expected to generate cost-effectiveness and other
positive impacts. These potential benefits are
valued at 251 million in time savings and
reduced expenditures. Also, OAKS could allow the
state to avoid an additional 195 million in
expenditures due to the replacement of current
statewide and agency administrative systems.
business processes should be re-engineered to
utilize best practices built into ERP software.
This process could reduce operating costs by 10
to 15 in large agencies MIC 2002
33
Estimated Costs
One-time and ongoing costs are based on the
integration schedule, standard rates, and
estimates from vendors.

• One-time integration contractor costs
• Hardware acquisition
• Software license
• Integrator staffing
• One-time state costs
• Hardware maintenance during implementation
• Software maintenance during implementation
• State staffing to support implementation
• Ongoing production costs
• Production cost associated with implemented
  modules
• Five-year production costs after full
  implementation

34
Integration Timeline
2004
2005
2006
Year
2003
Month
Jul
Sep
Jan
Jul
Sep
Mar
Mar
Jan
Jul
Sep
Mar
Jan
Jul
Mar
Sep
Jan
RFP Contract
Software
Integrator
Common
Architect Design
Go Live
Mini Go Live
Mini Go Live
Finance Build
Finance
Budget Prep
Fixed Assets Grants
Vendor/Customer Self-Service Capital Improvement
Projects Year-End
General Ledger Accounts Payable Accounts
Receivable Procurement
Go Live
Mini Go Live
Human Resources
Human Resources Build
Training Recruiting Health Safety Complaint
Mgmt Employee Self-Service
HR Payroll
Data Warehouse
Data Warehouse Build
Mini Go Live
ERP Data Warehouse
Legacy Data Warehouse
35
Estimated One-time Costs to Implement
36
Summary Business Case
Fundamentally, the business case for OAKS is
strong. The tangible benefits are estimated to be
the same across all three ERP packages and total
446 million. This includes 251 million of
benefits from organizational improvements and
increased efficiencies and 195 million in
avoided costs of continuing to operate and
enhance existing systems, i.e., avoided costs of
status quo. The cost estimates are slightly
different across the three ERP packages. The
summary business case reflects average costs for
the three packages. One-time project costs for
software and hardware licensing and integrator
costs are estimated to be 146 million. State
staffing, overhead costs and software and
hardware maintenance costs for the duration of
the project are estimated at 40 million. Ongoing
production costs are estimated at 96 million for
the first five years following full
implementation of OAKS, and at 17 million
annually thereafter.
(In Thousands of Dollars)
OAKS Potential Savings Costs
FY 04
FY 05
FY 06
FY 07
FY 08
FY 09
FY 10
FY 11
Total
OAKS Potential Benefits/Savings

• Tangible Benefits

15,881
36,397
46,224
48,902
50,897
52,932
251,233

• Status Quo Cost Avoidance (Savings)

41,056
41,010
42,650
22,557
23,459
24,398
195,130
TOTAL POTENTIAL BENEFITS/SAVINGS
56,937
77,407
88,874
71,459
74,356
77,330
446,363
OAKS Costs

• Integrator Costs

41,740
8,222
0
0
0
0
145,856
46,893
49,001

• State Costs

12,307
2,249
0
0
0
0
40,006
9,404
16,046

• Annual Production Costs

10,300
15,811
19,632
20,332
16,928
17,325
100,328
0
0
TOTAL POTENTIAL AVERAGE COSTS
64,347
26,282
19,632
20,332
16,928
17,325
286,190
56,297
65,047
POTENTIAL SAVINGS
(7,410)
51,125
69,242
51,127
57,428
60,005
160,173
(56,297)
(65,047)
37
OAKS Potential Payback

• Payback achieved in the third year after full
  implementation
• Benefits far exceed costs in each year after
  implementation
• Cumulative savings will exceed 100 million five
  years after implementation

Costs
Average Payback Period for Oracle, PeopleSoft
SAP - Discounted
Benefits
Net Savings
200,000,000
Cumulative Savings
150,000,000
100,000,000
50,000,000
0
2004
2005
2006
2007
2008
2009
2010
2011
Dollars
(50,000,000)
(100,000,000)
(150,000,000)
(200,000,000)
(250,000,000)
Fiscal Year
38
Conclusion
The potential benefits of OAKS outweigh the
associated costs.

• Business case is compelling
• Significant tangible benefits of 446 million
  over five years
• Short-term investment payback (third year after
  full implementation)
• Dramatic increase in operational efficiencies,
  process controls and service levels (intangible
  benefits)

Total Potential Costs (average) 286M
Integration Costs146 M
Total Potential Benefits 446M
Total Discounted Costs
Integration Costs
State Costs 40 M
State Costs
Tangible Benefits 251 M
Tangible Benefits
Production Costs
Production Costs100 M
Cost Avoidance Savings 195 M
Cost Avoidance Benefits

• Cost and risk of continuing operations is
  increasing
• Aging central and agency systems (15 40 years
  old)
• Investment continues in central systems
• Agency spending on stand-alone systems will
  increase
• Timing is critical
• Market conditions are ideal to obtain
  advantageous vendor pricing
• Implementation now will position Ohio as a
  technologically advanced and citizen-friendly
  state
• Environment of greater public accountability
  necessitates increased technological flexibility

we are the pioneers of Ohios third frontier
a frontier of exploration and discovery where
knowledge is king. Governor Taft, 2002 State
of the State Address
39
Next Steps

• Obtain go/no-go decision
• Executive sponsorship
• Formal commitment from all key stakeholders
  within the state
• Commitment to make appropriate resources
  available
• Funding
• Release software RFP
• Prepare system integrator RFP
• Execute Change Management Activities
• Maintain agency involvement through meetings and
  communications

40
Questions
Please visit the OAKS Web Site
http//www.ohio.gov/oaks/