The government of Manitoba wants to streamline and improve how it delivers services to its citizens, so that information is available when they need it and where they need it. The big stumbling block has been the stovepiped operations that sit behind these unifying initiatives.
For many governments, attempts at reengineering the disparate systems into something cohesive have floundered because the technology to make it happen just didn't exist.
But Manitoba has begun the process that will eventually lead to a more efficient sharing of information throughout the huge Canadian province. This spring, the government launched an enterprise-wide finance and human resource computer system, using software from SAP America. The software, commonly known by its generic title enterprise resource planning (ERP), allows the government to perform a range of tasks and to tie the information together.
For the first time, Manitoba and a growing number of state and local governments have a technology that makes reengineering possible. In the private sector, where ERP has already taken root, reengineered business practices are producing big benefits. Firms have reported that significant costs savings and productivity improvements are not uncommon.
Measuring those particular benefits in government is not as easy, but Manitoba is certain of what it will achieve. "We contemplate a fair amount of savings in the streamlining and standardizing of operations," said Kalev Ruberg, Manitoba's chief information officer.
IBM, Intel, Microsoft and ERP
ERP has been around since the 1970s, when SAP, the leading software vendor, introduced the technology. But it wasn't until the 1990s, when the firm introduced a client/server version of its product known as R/3, that ERP began to take off. Today, it's a $15 billion market that's expected to grow 37 percent over the next five years, according to the Boston-based market research firm, AMR Research.
In the private sector, ERP systems automate manufacturing processes, organize accounting data and streamline human resource departments. The idea is that information is entered once at one end and then integrated with other operations, shared with other practices and accessed in a realtime environment. ERP is used by a diverse number of firms, including IBM, Intel and Microsoft, which use it to run their high-tech businesses.
In the public sector, ERP systems are concentrated in finance and human resources. On the financial side, the integrated software packages may provide general ledger, accounts payable and receivable and various specialized accounting functions, including ordering. For human resources, ERP packages may track employees, and handle payroll, benefits and pensions.
In 1997, the federal, state, local and education sectors together represented about 4 percent of the ERP market and had a growth rate of 21 percent, according to AMR. While these numbers pale next to such manufacturing sectors as automotive and electronics (see chart), the government market, along with several other nonmanufacturing areas, is considered hot by AMR and other research firms.
Just a few years ago, up to 70 percent of all reengineering projects failed because computers didn't give workers the information they needed to perform in a reengineered environment, according to Michael Hammer, the man behind the management phenomenon of the '90s. Today, those numbers are beginning to change thanks, in part, to ERP, which helps agencies define what kind of information they need, who needs it and when.
Interestingly, at the same time that ERP systems are taking root, anecdotal evidence is emerging that demonstrates the rising investment in technology is finally boosting the nation's rate of productivity. For years, the output of goods and services per worker barely advanced 1 percent a year. Since 1996, that number has been growing 2 percent annually, and technology appears to be the driving force, according to The New York Times.
While economists continue to debate whether technology is producing an economic payoff, state and local governments are already discovering a range of benefits from ERP. Standardization, lower costs and overcoming Y2K problems were some of the chief advantages mentioned by state and local managers.
"Standardization was a key driver for using ERP in Manitoba," Ruberg said. "The government wants to present a single face to taxpayers. This kind of system helps us do that and it helps us put more delegation and responsibility on the front line."
Manitoba began work on its ERP project in October 1997, when it hired Deloitte & Touche Consulting to assist with development and implementation. Right now, the system, which runs on Hewlett-Packard's UNIX platform, supports 1,200 state users with revenue, expenditure, procurement, pay and benefits applications. Eventually, 2,500 workers will be using SAP's software when the implementation is fully operational.
In Kansas, Y2K concerns, coupled with increased demands for greater efficiencies, led the state to pull the plug on its legacy human resource system and replace it with ERP software from PeopleSoft. Like Manitoba, the state brought in consultants from Andersen Consulting to assist with reengineering prior to implementation.
According to Don Heiman, CIO for Kansas, ERP has given the state's human resources a number of benefits, including more functionality, greater flexibility and improved access to information. "It's opened up an interesting world for us," he commented.
For some jurisdictions, the transformation brought on by ERP can be immense. Las Vegas was using an 18-year-old software program when the decision was made to throw it out and replace it with software from Oracle Corp. In July 1998, after a 12-month implementation, workers began running the city's finance, procurement and human resource applications on the new system. Life hasn't been the same since.
Joseph Marcella, the city's CIO, cited two key benefits: improved control over information, such as contracts, and better integration of information. "Payroll is completely shared with human resources, something that never happened before," he said. "As soon as HR puts something into the system, we have the change in payroll: insurance, workers' compensation, bank deposits. It's all instantaneous."
The same kind of revolutionary integration occurs in procurement. Requests for goods and services are now online. The purchasing staff automatically creates purchase orders from electronic requisitions submitted by employees; the city purchases the items; employees receive them; and accounts payable pays the invoices, which are posted to general ledger. "The workflow is really solid," said Marcella.
Now instead of ordering from the warehouse, which incurs a 15 percent handling surcharge, each city department places orders directly with the vendor, saving the city that 15 percent. Because procurement is now integrated with HR, only authorized employees can access the system to make entries. Again, the city benefits from better information control and integration.
Marcella said the city doesn't expect cost savings from the system, which cost $1.7 million, but it does expect to avoid some costs. "You have to remember that Las Vegas is one of the fastest-growing cities in the country," he said. "We are adding 6,000 new residents each month. At that rate of growth, we're not looking to cut costs, but leverage our investments."
ERP is recognized as one of the largest, fastest-growing and most influential computer applications. But like any tech-related phenomenon, there's a dark side. Reports about cost overruns and lengthy delays have appeared in the press as often as success stories.
However, the public sector hasn't suffered some of the extreme problems plaguing ERP projects in the private sector. Part of the reason may have to do with project size. Manufacturing and other industrial firms have built ERP systems costing tens of millions of dollars and taking years to implement. In government, most projects cost less than $5 million, making them more manageable.
Manitoba's ERP project was 98 percent on time. Ruberg attributed the timeliness to the work of Deloitte & Touche and his staff. In Las Vegas, Marcella said the city struggled with implementing some of the more complex applications, but the consultants hired by the city to help install the system were among the reasons why the project was essentially on time and under budget.
According to Marcella, Las Vegas was one of the first cities to implement Oracle's ERP software for finance and HR. As a result, the city had to modify the system to fit its needs, something most consultants tell customers to avoid. "We were one of the first cities to run with this and as a result, it wasn't easy," Marcella said. "We didn't have people who were extremely experienced."
The same problem hit Kansas, which installed the first module of its ERP software in 1995. "We were one of the early buyers from PeopleSoft," Heiman said. "We had to tailor the commercial product for the public sector."
Today, companies like PeopleSoft, SAP, Oracle and J.D. Edwards have products tailored towards the government market, making the modification issue somewhat moot.
But problems can occur even when a jurisdiction implements ERP on time and within budget. As Marcella explained, "any time you do a project of this size, you always have Murphy's law hovering."
Take, for example, Sacramento County in California. Last year, it installed SAP's R/3 system to manage the county's finances, resources, purchasing and human resources. The job was completed in nine months, but not without some Herculean efforts by staff to meet the deadline.
"We were working seven days a week, 80 hours a week toward the end," said Georgia Cochran, the county's project manager.
The system has significantly improved the way the county manages such things as benefits for its 12,000 employees and it has helped with purchasing. But Cochran admitted that reengineering the county's business process wasn't a benefit of ERP. "Some people are still in shock [from the system]," she said. "They weren't ready for a business-process change. People want to control their databases. There's lots of turf issues still going on."
Needing Some Nurturing
ERP systems in government are still in the early growth phase. As word spreads about the benefits of ERP, cities, counties and states of all sizes will begin projects. Already, the Canadian government is installing a massive ERP system in its 45,000-employee tax-collection department (see Government Technology, December 1998). ERP vendors, such as PeopleSoft, are reporting a growing number of installations in mid-sized and even small governments.
From both the public and private sectors, experts and users have begun listing a host of recommendations to ease the pain of implementing these beneficial-but-complex software systems. Some caution not to expect perfection with systems of this size and complexity. Others have urged that organizations don't make the mistake of viewing ERP as a technology initiative. According to Fortune magazine, about 80 percent of ERP's benefits come from what you change in your business. The software is just an enabler.
Most government managers who have implemented ERP would concur. Engage the users, they say. "They have to understand their role in the project," said Manitoba's Ruberg.
And don't downplay user training. "The training never stops with ERP," Marcella said. "It's continuous. You've got to care and feed this system, because the technical and functional issues never go away."
GOVERNMENT ERP SYSTEMS AT A GLANCE:
JURISDICTION: Sacramento County, Calif.
APPLICATIONS: Finance, Resource Management, Human Resources
ERP SOFTWARE: SAP
PLATFORM: Sever -- Digital Alpha 4100; Database -- Oracle; Desktops -- Windows
NUMBER OF USERS: 1000
APPLICATIONS: Finance, Human Resources
ERP SOFTWARE: SAP
PLATFORM: Server -- Hewlett Packard; HP/UX; Desktops -- Windows
NUMBER OF USERS: 1200; 2500 when fully implemented
JURISDICTION: Las Vegas
APPLICATIONS: Finance, Human Resources, Procurement
ERP SOFTWARE: Oracle
PLATFORM: Server -- Digital Alpha 8400; Desktops -- Windows NT
NUMBER OF USERS: 500
COST: $1.7 million
JURISDICTION: Kansas, Department of Administration
APPLICATIONS: Human Resources
ERP SOFTWARE: PeopleSoft
PLATFORM: Server -- Sun Solaris (Unix); Database -- Oracle; Desktops -- Windows
NUMBER OF USERS: 90
COST: $3.8 million
PEER ADVICE FOR ERP
DON HEIMAN, CIO, KANSAS:
Make sure you understand your infrastructure requirements and have properly sized the infrastructure before starting.
Have the support and technical teams tightly coupled with the project.
After you finish, do a post-mortem. Write up lessons learned and things you could have done better. Don't lose the quality of the experience in both positive and negative terms.
JOSEPH MARCELLA, CIO, LAS VEGAS:
Project management is crucial. We had managers and then teams for each component of the software modules. In addition, we had a manager for the technical side of the project.
ERP's complexity isn't so much of an issue, rather it's the change brought on by the system.
KALEV RUBERG, CIO & DEPUTY MINISTER, MANITOBA:
Maintain and control project scope and be ruthless about it.
Keep critical project dates in mind.
Keep clients involved and engaged. They have to understand their role in the project.
GEORGIA COCHRAN, PROJECT MANAGER, SACRAMENTO COUNTY:
Think of the ways the client does business and process flow.
Listen to their recommendations and keep an open mind.
Have teams from different departments throughout government engaged in the project. The people who don't come to the project meetings can be true road blocks.