HomeMy WebLinkAboutStaff Report 5418
City of Palo Alto (ID # 5418)
Finance Committee Staff Report
Report Type: Action Items Meeting Date: 3/17/2015
City of Palo Alto Page 1
Summary Title: Enterprise Resource Planning Evaluation Findings and
Recommendation
Title: Review of the Assessment Results of the Enterprise Resource Planning
(ERP) Needs and Consideration of the Staff Recommendation to Plan for the
Acquisition of a New Integrated Government-oriented ERP System and
Separate Provisioning of Billing Systems.
From: City Manager
Lead Department: IT Department
RECOMMENDATION
Staff recommends that the Finance Committee: consider the following:
(1) Review the results of the City’s Enterprise Resource Planning (ERP) evaluation. ERP is the
City’s software platform for finance, human resources, public works, and utilities core
functions.
(2a) Review Staff’s plan to evaluate the potential opportunities for using third party-
managed services for functions identified in the scope of the existing City’s ERP system.
(2b) Review Staff’s recommendation that the City should plan for the acquisition of a new
integrated government-oriented ERP and a separate provision of utility and refuse billing
services, taking into account any recent investments in ERP functionality, such as the new
budgeting software, and the results of potential opportunities for using third party
managed services (as recommended in 2a above) in determining the new system
requirements.
BACKGROUND
The City’s association with SAP began in 2002, when the City selected SAP as its preferred
vendor for an Enterprise Resource Planning (ERP) system for the purpose of integrating various
business processes within the City and to pave the path for the City to move toward the
direction of electronic Government. SAP Core modules installations were completed during
fiscal year 2003, when the implementation of the SAP Enterprise Central Component (ECC 6.0)
was completed. SAP has been operating within the City since 2003, supporting Accounting,
City of Palo Alto Page 2
Finance, Purchasing, Project Management, Plant Maintenance, Budgeting, Payroll, Human
Resource Management, and Service Order management functions.
In 2009, the City completed a major upgrade to the SAP ERP system. It also replaced the former
utility billing system (Banner) with the implementation of the SAP module for utilities,
Customer Relationship Management (CRM), Utilities Customer Electronic Services (also known
as My Utilities Account customer portal) and Business Intelligence systems (BI).
Both business and technology needs have changed since SAP was selected and implemented.
Therefore, the City recently conducted a comprehensive evaluation to develop and determine a
refreshed vision to reduce IT application and infrastructure support costs, improve flexibility,
increase ease of use, facilitate further automation of business processes, and improve the
quality and reliability of information for decision making.
In June 2014, staff contracted with Plante Moran (CMR:4560:14) for the Enterprise Resource
Planning Evaluation project to perform an comprehensive assessment of the City’s SAP ERP
environment and identify key strategic options and recommendations. In addition to addressing
the core SAP related functions, the project included the identification and review of major
third-party systems used by the City.
DISCUSSION
The assessment report resulting from Plante Moran’s work was completed in December 2014.
The report’s Executive Summary is attached (Attachment A). In its report, Plante Moran
recommended that the City should replace SAP with a new, fully integrated government-
oriented ERP solution and a separate Utility billing best-of-breed solution.
Staff considered Plante Moran’s recommendation to replace SAP with a new, fully integrated
government-oriented ERP solution with a separate Utility billing best-of-breed solution. Staff
also considered the input of a large SAP stakeholder group, made up of representatives across
departments. Finally the SAP steering committee, made up of leaders from SAP user
departments, provided additional leadership input and recommended the following next steps:
(1a) Evaluate the potential opportunities for using 3rd party managed services for functions
identified in the scope of the existing City’s ERP system.
(1b) Plan for the acquisition of a new integrated government-oriented ERP and separate
provision of billing services. In this proposed planning, the City would take into account any
recent investments in ERP functionality, such as the new budgeting software being
deployed, and also review the results of (1a) – first recommendation item above--in
determining the new system requirements.
The planning and execution of the above two recommendations would require the
identification of a vendor through the RFP process, and the possibility of adding temporary
City of Palo Alto Page 3
staffing, at a cost of up to $250,000. This amount would be included in the FY16 budget. Staff
expects more specific discussion and decisions during Finance’s review of the FY 2016 Budget.
Our discussion tonight is a preview of staff’s plans.
Later in FY 2016, after the getting the results from the RFP process, staff will return to the
Finance committee for a deeper discussion on the implications for moving forward with an
award to a vendor. Staff does not typically come to Finance in advance of the Council meeting
on the award of a contract, but the scale and potential implications of this project warrant in-
depth Committee discussion and recommendations in advance of any full Council
consideration.
For completeness, staff is including the following information as suggestive of future
implementation costs. No consideration is required at this time and the following dollar
amounts are shared for information purposes only. As part of the Plante Moran assessment
study, a five-year total cost analysis was performed. A new integrated government-oriented
ERP system is estimated to cost between $10,000,000 and $15,000,000 (5-year cost).
Approximately 60% will be funded by the Utilities Enterprise Fund and 40% by General Fund.
RESOURCE IMPACT
A project to complete the planning as recommended above will start in early FY16. Staff intends
to bring forward a recommendation to the City Council to fund this project from the
Technology Internal Service Fund as part of the Fiscal Year 2016 budget process.
ENVIRONMENTAL REVIEW
This is not a project under the California Environmental Quality Act (CEQA).
Attachments:
Palo Alto ERP System Evaluation Final Report (PDF)
Enterprise Resource Planning
System Evaluation
CITY OF PALO ALTO, CA | NOVEMBER 24, 2014
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Table of Contents
1 ERP Evaluation ................................................................................................................................. 4
1.1 Project Overview And Executive Summary ............................................................................. 4
1.1.1 Project Background .............................................................................................................. 4
1.1.2 Project Scope ....................................................................................................................... 4
1.1.3 Project Approach .................................................................................................................. 6
1.1.4 Summary of Observations .................................................................................................... 7
1.1.5 Executive Summary of Options and Recommendations ................................................... 11
1.1.6 Plante Moran Recommendation......................................................................................... 13
2 Current State/Gap Assessment ...................................................................................................... 14
2.1 Overview of Findings .............................................................................................................. 14
2.2 General Ledger / Financial Reporting .................................................................................... 14
2.3 Investment/Cash Management .............................................................................................. 16
2.4 Budgeting ............................................................................................................................... 17
2.5 Fixed Asset | Asset Management | Capital Improvement Planning ....................................... 20
2.6 Project Accounting ................................................................................................................. 22
2.7 Procurement ........................................................................................................................... 23
2.8 Accounts Payable .................................................................................................................. 25
2.9 Revenue Collection/Miscellaneous Billing/Accounts Receivable ........................................... 26
2.10 Payroll/Time Entry .................................................................................................................. 27
2.11 People Strategy and Operations (PSO) ................................................................................. 29
2.12 Utility Services Management / Refuse ................................................................................... 31
2.13 Current Technology Profile .................................................................................................... 33
3 ERP Marketplace Assessment ....................................................................................................... 36
3.1 Integrated ERP Environment ................................................................................................. 36
3.2 Best-of-Breed ......................................................................................................................... 37
3.3 Alternative Software Delivery Options: Hosting (“Cloud”) ...................................................... 38
3.4 ERP Vendor Consolidation .................................................................................................... 39
3.5 Summary Comparisons .......................................................................................................... 39
4 Options Analysis ............................................................................................................................. 43
4.1 Option 1: Status Quo with Investment .................................................................................. 43
4.2 Option 2: Upgrade SAP ......................................................................................................... 46
4.3 Option 2, Alternative A ........................................................................................................... 46
4.4 Option 2, Alternative B: .......................................................................................................... 47
4.5 Option 2: Cost Estimates and Summary ................................................................................ 48
4.6 Option 3: New ERP Environment ........................................................................................... 49
4.7 Option 3, Alternative A: .......................................................................................................... 49
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4.8 Option 3, Alternative B: .......................................................................................................... 50
4.9 Option 3: Cost Estimates and Summary ................................................................................ 51
4.10 Plante Moran Recommendation............................................................................................. 53
5 Recommended Next Steps ............................................................................................................. 54
5.1 ERP System Evaluation Approach ........................................................................................ 54
5.2 Phasing .................................................................................................................................. 56
5.3 Staff Backfill............................................................................................................................ 57
5.4 Data Cleansing / Conversion ................................................................................................. 58
5.5 Interface Development ........................................................................................................... 59
5.6 Report Development .............................................................................................................. 59
5.7 Change Management ............................................................................................................. 60
5.8 Communication Planning ....................................................................................................... 61
5.9 Process Re-Design ................................................................................................................ 62
5.10 5ERP System Training ........................................................................................................... 62
6 Appendices ..................................................................................................................................... 64
6.1 Appendix A: Project Charter .................................................................................................. 64
6.2 Appendix B: Application Inventory ........................................................................................ 73
6.3 Appendix C: Response Summary from City-wide User Survey ............................................. 80
6.4 Appendix D: Total Cost of Ownership Details and Assumptions ........................................... 81
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1 ERP Evaluation
1.1 PROJECT OVERVIEW AND EXECUTIVE SUMMARY
1.1.1 PROJECT BACKGROUND
The City of Palo Alto, CA (the “City” or “Palo Alto”) has an estimated 65,000 residents and is located in
Silicon Valley in the San Francisco Bay Area of California. The City’s FY 2014 operating budget is
$447 million and the City employs over 1,000 full and part time staff. Palo Alto is a full service city
providing administration, planning, code enforcement, public works,
water/wastewater/gas/electric/fiber utility, parks and recreation, public safety police and fire services.
The City is also the home to Stanford University, a world renowned Pac-12 conference research
institution.
The City currently utilizes the SAP ERP system to support its major Finance, Human Resource and
Utility Billing processes. The City’s history with SAP began in 2002 when the City selected SAP as its
preferred vendor for an Enterprise Resource Planning (ERP) system with the purpose of integrating
various business processes within the City and to pave the path for the City to moving toward the
direction of electronic Government. In fiscal year 2003, the implementation of the SAP Enterprise
Central Component (ECC 6.0), SAP core modules were completed and the SAP system has been
running in the City since 2003, supporting Accounting, Finance, Purchasing, Project Management,
Plant Maintenance, Budgeting, Payroll, Human Resource Management, and Service Order
Management.
In 2009, the City completed a major upgrade to the SAP ERP system, which also replaced the former
utility billing system (Banner) with the implementation of the SAP IS-U module, Customer Relationship
Management (CRM), Utilities Customer Electronic Services (also known as My Utilities Account
customer portal) and Business Intelligence systems (BI). Both business and technology needs have
changed dramatically since the current ERP solution was selected and implemented. Therefore, the
City desired to conduct a comprehensive evaluation to determine a solution to reduce IT application
and infrastructure support costs, improve flexibility, increase user friendliness and intuitiveness of
system, facilitate further automation of business processes, and improve quality and reliability of
information for decision making.
1.1.2 PROJECT SCOPE
The City engaged Plante Moran to perform a comprehensive assessment of the City’s SAP ERP
environment and identify key strategic options and recommendations. In addition to the core SAP
related functions the project included the identification and review of major best-of-breed and third-party
systems used by the City. The City requested that the evaluation provide the following:
GAP analysis to identify deficiencies in the current system
Identify effectiveness of current system at meeting business needs
Evaluation of hardware
Benchmark maintenance/support costs
Determine if city would benefit by soliciting proposals for alternative ERP solutions
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Specifically, the project scope included conducting project management tasks, reviewing
documentation, conducting interviews and assessing the City’s technical environment to develop this
ERP evaluation for the following functional areas:
Administrative Services
Budget Accounting
Payroll Purchasing
Store
Utilities
Billing Management Device Management
Work Management
Business Intelligence
Financial Contract Accounts
Utilities Customer Electronic
Services
Customer Service and Customer Relationship Management
People Strategy & Operations
Processes and Management
Public Works
Refuse and Recycle Billing
Information Technology
Technology Strategy and Roadmap
All other departments (City Attorney, City Auditor, City Clerk, City Manager, Community Services,
Planning & Community Development, Information Technology, Library, Police and Fire)
Budget/Position
Time Entry
Procurement
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1.1.3 PROJECT APPROACH
The following chart illustrates the approach that was taken in performing the City’s ERP Evaluation:
The project was conducted using a participative and inclusive approach with significant input from the
City management and staff to ensure accuracy, completeness, and ownership of the resulting
recommendations. Participation was obtained through the following activities:
Establishing a Project Sponsor to maintain the project vision, act as a project champion,
provide a strategic perspective, and to remove project roadblocks when necessary.
Defining a Project Manager to ensure prompt and clear communication with the City
department staff, manage project activities, ensure project deliverables were reviewed by the
appropriate City staff, and to provide progress updates to the City management and other
interested stakeholders.
Conducting a project kick-off meeting and building awareness around the project.
Facilitating multiple project management status meetings to manage project activities and
provide status updates.
Conducting interviews with the City departmental end users to evaluate current systems and
business processes. Departmental management was encouraged to participate and invite
team members.
Collection and review of numerous documents provided by the City, as well as completed
questionnaires by the departments.
1. Initiation
•Define Project
Organizational Structure
•Develop Project Charter
•Develop Project Plan
•Establish Project
Collaboration Center
2. ERP Evaluation
•Review City
Documentation
•Conduct Departmental
Interviews
•Assess Technology
Environment
3. Draft
Evaluation Report
•Compile Findings
•Identify ERP Options
•Develop
Recommendations
•Prepare Draft Report
•Develop Action Plan
•Present Draft Findings
4. Finalize Report
•Review Draft ERP
Evaluation
•Update Draft Report
•Finalize Report
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Soliciting input from the participating Departments that included the evaluation of the following
items:
o Identification of current systems
o Duplicate entry / re-keying of information
o Issues with / shortcoming of current systems
o Strengths of existing systems
o Unused features / functionality of SAP
o Opportunities to interface systems
o Unique City business rules
o Vendor interaction
o Current technology project initiatives / Future technology projects
Requesting and collecting data which was used to develop a total cost of ownership (TCO)
analysis.
Developing this ERP evaluation
The overall goal for implementing new technology not only focuses on the technology itself, but also
aims to enhance existing business processes performed by individual departments across the City.
Technology is intended to enhance departmental business processes by:
Making them more efficient
Making them more effective
Improving decision-making
Providing enhanced customer service to both internal and external customers
Improving access to information
Streamlining processes to reduce costs.
The overall goal of this ERP evaluation was to define a future course of action for the City’s SAP
investment and related applications and shadow systems. The approach utilized for collecting
information included interviews with primary process and systems owners, IT staff, and the City
department users regarding the existing technologies and processes.
1.1.4 SUMMARY OF OBSERVATIONS
While the current SAP environment supports the daily needs of the City and supports the ability of end
users to accomplish their responsibilities at a basic level, the current system structure has left the City
with many challenges. The following points summarize the key functional weaknesses regarding the
systems and processes that support financial management, human resources, payroll and other City
administrative functions.
Inefficiencies Due to Redundant Data Entry and Manual Processes
The existence of multiple standalone systems and reliance on desktop applications like Excel and
Access inevitably results in inefficient business processes. Disparate information systems result in
redundant data entry efforts because information is taken out of one system and entered into another.
Even when data can be directly downloaded via automated means, the organization of data and
formatting requires significant effort. In addition, there are still a host of manual processes that support
certain business functions. In a number of cases where standalone systems and desktop applications
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are now being used it is possible that unused modules of the SAP system could support these
functions.
Lack of an intuitive user interface
The City’s current financial, human resources and utility billing systems do not provide end users with
an intuitive and integrated experience across common transactions. With few exceptions, end-users
across all business areas stated that the current system was cumbersome and not user-friendly. The
systems lack sufficient querying tools and most departments rely on the Finance or IT department to
develop and provide many reports.
Workflow within SAP is Not Fully Utilized
One of the benefits of ERP systems is the availability of workflow to signal to a user when items exist
that require approval, review, or attention. The City is not currently using this feature in many areas of
the SAP system. This requires the need for separate manual approval processes and notifications
when work is ready to be completed in the system, leading to inefficiencies in the business process.
The SAP investment is not fully utilized overall
For several reasons, whether it is availability of staff, complexity of the function, or failure to fully meet
the needs of the department, the staff is not utilizing various features of SAP.
Heavy Reliance on IT and Outside Consultants for SAP Enhancement Requests
Along with SAP, the City utilizes a number of stand-alone systems. To meet the ever-changing needs
of government, it is often necessary to add a field or function or tweak a transaction process. These
minor or major enhancements to systems must be prioritized and handled by an IT Department whose
resources are stretched as a result and/or must be outsourced to a third party contractor. Additionally,
most reporting requests must be handled by IT staff, meaning that there is often a delay in getting
necessary information.
Complicated / Limited System Integration Requirements
Numerous standalone systems are used to report and gather data resulting in complex integrations to
the City’s main ERP system. Reliability of data is an issue in many City areas because information is
not processed in real-time or can be immediately synchronized between systems when reporting from
SAP. There are also cases where staff has limited ability to access current information in the required
systems. The cost to establish interfaces between additional systems to ensure timely and accurate
information is available is significant when considering the staff time necessary to test and maintain
these interfaces for the long term. The ERP Applications Environment Diagram represents the
complexity of the City’s existing application landscape. The City intends to continue adding systems to
this environment within the next year adding further system administration responsibility to the team.
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Current ERP Applications Environment Diagram
texttext
SAP ERP
Expanded ERP
Capabilities
Outside Agency /
3rd Party Interfaces
Special Ledger
Project System
General Ledger
Accounting
Financial Supply
Chain
Management
Funds Management
Bank Accounting
WellsFargoPositive Pay, Cleared Checks,
Direct Deposit, AP Checks
US
Treasury
1099s
Social
Security
Administration
Cost Controlling
Business Objects
Sales and
Distribution
Accounts
Receivable
Financial
Accounting
Advanced Micro
Solutions (AMS)Accounts Payable
Doc1/e2Vault
Utilities
Management
Docusign
Purchasing
Checkfree
Online payments
Commerce Bank
E-Payables
Accounts Payable
Business
Warehouse
Asset Accounting
Logistics Materials
Management
Plant Maintenance
Human Resource
Management
Active Directory
Organizational
ManagementBenefits
Time Entry
Payroll
Utility Billing
Device
Management
Customer Service
Financial Contracts
Accounting
Utilities Customers
E-Services
Autodesk Utility DesignUtilities
Management
BMIPurchasing
CivicaIT
CLASSParks and Rec
CORE (iPay)Revenue
Collections
Dassian
OMB
GIS Geodesy
GIS Mapping
GoldMine
Utilities
Management
InTime/ISELINK
Payroll/Time Entry
I-Tron/MVRSUtilities Management
JP Morgan Chase
Smart Data
Accounts Payable
Maintenance ConnectionPublic Works and
Community ServicesMS Access
Utilities Management
MS Excel
Various
MS Project
Project Accounting
NeoGov
PSO
OpenGov
Financial Reporting
Outage ManagementUtilities
Management
Pattern Stream
OMB
Pitney Bowes
Utilities
Management
Questica
OMB
Quick ServeRevenue
Collections
SharePoint
Various
Segal Waters
Compensation Database
Skillsoft
PSO
Spinifex
PSO
SymPro
Treasury
TopobaseUtilities
Management
Training DB
PSO
US BankP-Card
ICMAEmployee Contributions
PARS
Employee Contributions
Hartford
Employee Contributions
ACES
Employee PERS Contributions
CalPERS
Employee Retirement
GreenWaste
Refuse
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Reporting is Inadequate for City’s Needs
The City is faced with a number of mandated reporting needs. The standard reports that are available
within the system do not meet the overall needs of the City. Therefore, many departments are
maintaining separate spreadsheets in order to meet the day-to-day informational needs of the City and
its departments.
Lack of Self Service Functionality
Several employee facing processes are entirely manual and could benefit from better employee and
manager self-service functionality. For example manager self-service for employee performance
reporting is non-functional and employee self-service functionality is limited to read only transactions.
There were a number of consistent themes expressed during the process review sessions. Although it
is difficult to summarize opportunities to resolve dozens of issues identified, the unmet needs which
the City management and staff expressed as opportunities for improvement are as follows.
1. Redesigned and streamlined business processes incorporating established best business
practices.
2. Full integration between all system modules, allowing for the elimination of shadow
systems and other supplemental applications.
3. Real-time, immediate update and access to the financial and human resources
information.
4. Single entry of data and reduction in manual processes.
5. User-friendly, user-driven and flexible reporting tools with distributed, securitized access
to all users.
6. Elimination of paper-based processes and replacement with automated, online workflows
and approvals
7. Self-service capabilities and other “e-government” opportunities such as employee self-
service, remote time entry and mobile workforce capability.
8. Performance measurement and improved reporting capabilities.
9. Improved system of internal controls.
10. Reduced total cost of ownership.
11. City wide document management system and policy is needed. This will also help
automate many workflows.
As these themes indicate, there is an obvious need to improve upon the current systems environment.
To seize on this opportunity, Plante Moran is presenting a variety of strategic options and alternatives
for the City to evaluate as part of this assessment.
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1.1.5 EXECUTIVE SUMMARY OF OPTIONS AND RECOMMENDATIONS
Plante Moran has evaluated the City’s current ERP environment and has observed a clear trend toward selecting best of breed systems that
interface with SAP in order to achieve desired business objectives. In many cases, these best of breed systems replicate core SAP functionality
the City cannot realize at present. In recognition of this trend, three key options, with multiple best-of-breed alternatives have been identified to
assist the City to identify a viable strategic approach to further investment over the next five years. Each option offers some advantages and one
offers the most cost-effective and most suitable alternative based upon Plante Moran’s experience conducting system needs assessments and
selections when facing circumstances similar to Palo Alto. The table below defines these options and detailed information relative to each option.
The specific advantages and disadvantages of each option are provided in detail in a later section of this report.
OPTIONS DEFINITION AND EXECUTIVE ANALYSIS
Options Description
Option 1: Status Quo with Investment
ON PREMISE: Status Quo Current SAP
Modules + Existing Applications (Best of Breed
Systems) w/ Extended SAP Support
This option represents the City’s current investment position with the resources currently in
place supporting the SAP environment on premise today. It also represents the existing mix
of best of breed or third party applications interfaced with SAP supporting the budgeting, fixed
asset / asset management, human resources, purchasing, revenue collection, treasury, and
utilities management. The City is paying a premium for the addition of best of breed solutions
when core SAP functionality exists but cannot be fully realized.
Option 2a: Upgrade SAP
ALL IN CLOUD: Upgrade SAP Modules + Other
Existing Applications + Planned Applications
(Includes SAP Utility Billing)
This option represents the City’s migration to a Hybrid Cloud where the City would take
advantage of the HANA Enterprise Cloud to take advantage of hosted and managed services
from SAP. The City would assume maintenance responsibility for the non-SAP applications
that would reside in this environment and will retain ownership of these licenses.
Option 2b: Upgrade SAP
MIXED ENVIRONMENTS: Cloud Upgrade SAP
+ Existing + Planned Applications + On-Premise
Utility Billing Best of Breed
This option is essentially the same as 2a above with the exception of the addition of a utilities
best of breed system. The overlap between the core SAP and best of breed solutions
remains in this option and it does not appear to offer a viable strategic alternative.
Option 3a: New ERP Environment
NEW Fully Integrated ERP Environment + Utility
Billing Best of Breed
This option assumes the City reinvests in a new, fully integrated ERP solution that would take
advantage of the capabilities of a solution. The City would prepare an RFP for a solution that
incorporates all of the required functionality in addition to integrating with a new utilities best of
breed system.
Option 3b: New ERP Environment
NEW Limited ERP Environment + Existing
Applications + Planned Applications + Utility
Billing Best of Breed
This option assumes the City reinvests in a limited ERP environment where the existing and
planned best of breeds would be acquired in addition to a best of breed utilities management
system.
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Plante Moran performed a total cost analysis (TCO) for each option presented above. This analysis takes into consideration the one-time cost as
well as estimated ongoing costs, for each option based on assumptions defined later in this report. A summary analysis of the total cost of
ownership for each option identified in the report is provided in the table below:
Option 1 Option 2a Option 2b Option 3a Option 3b
ON PREMISE
Status Quo
with Investment
ALL IN CLOUD
Upgrade SAP and
Retain Existing Best of
Breed Systems
MIXED ENVIRONMENTS
Upgrade SAP Core
Financials/HR/Payroll Modules
Only Keep Existing Best of Breed
Systems Obtain Best of Breed
Utility Billing System
NEW ERP
Go to Market for a Fully
Integrated Public Sector
Focused ERP Solution and
Procure a Separate Utility
Billing Best of Breed Solution
NEW ERP
Go to Market for a Fully Integrated Core
Financials/Human Capital Management
Solution, Retain the Current Best of
Breed Systems and Procure a Utility
Billing Best of Breed
EXTERNAL COSTS
One-Time Cost Summary
Software License Fees -$ 3,628,151$ 3,391,151$ 1,069,984$ 1,670,133$
Additional Hardware Costs N/A N/A N/A N/A N/A
Consulting Implementation / Data Conversion / Interface
Development -$ 589,350$ 1,009,757$ 2,142,027$ 2,338,275$
Training N/A 566,850$ 686,850$ 120,000$ 250,850$
System Selection & Implementation Planning Fees N/A N/A 80,000$ 200,000$ 200,000$
Total External One-Time Costs -$ 4,784,351$ 5,167,758$ 3,532,012$ 4,459,258$
Reoccurring Cost Summary
Annual Software Licensing & Solution Support 667,910$ -$ 64,138$ 241,675$ 205,874$
Consulting Support Services 250,000$ -$ -$ 80,698$ 64,425$
Cloud (includes Licensing, Support, Interfaces & Consulting
Services)-$ 3,421,439$ 2,921,439$ -$ 646,080$
Training 112,500$ 150,000$ 165,000$ 75,000$ 115,000$
Total External Recurring Costs 1,030,410$ 3,571,439$ 3,150,577$ 397,373$ 1,031,379$
INTERNAL COSTS
Reoccurring Cost Summary
Current Support FTE 2,073,000$ 510,000$ 510,000$ 510,000$ 510,000$
Additional Support FTE'S -$ 530,000$ 530,000$ 400,000$ 530,000$
Total Internal Recurring Costs 2,073,000$ 1,040,000$ 1,040,000$ 910,000$ 1,040,000$
Year #1 Grand Total Cost 4,133,820$ 6,267,261$ 6,650,668$ 4,442,012$ 5,942,168$
FIVE YEAR ESTIMATES
Five-Year Estimate *17,138,248.00$ $25,559,803 $24,182,480 $9,911,572 $14,608,045
* Estimate includes one-time and reoccurring costs during year one, annual software licensing and solution support for planned application purchases in year one are assumed to incurred in years 2-5 only, and the future value of investments
has been adjusted for years 2-5 to account for a 3% annual rate for inflation.
Executive Summary of ERP Evaluation Project Alternatives
Cost Category
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1.1.6 PLANTE MORAN RECOMMENDATION
The SAP system offers a significant range of functionality and is capable of meeting most of the City’s
ERP needs. However, the City has not demonstrated the capacity of effectively utilize the range of
features offered by this complex system. The primary challenges with maintaining Options 1 and 2
would be the inefficiencies due to multiple systems and the cost of maintaining and supporting the
SAP system and the interfaces with a proliferation of best-of-breed solutions in the long run. Internal
and external costs to support the current environment, variety of standalone systems, and the lack of
integrated information are also main drivers for the City to consider additional options. Plante Moran
does not view Option 1 as a viable long term strategy primarily because the current version is not
supported by SAP starting in 2016.
At the time that the City purchased the SAP system, the ERP software market was quite limited.
Today there are a number of ERP options, designed explicitly for and available to, cities the size and
complexity of Palo Alto. Some of today’s ERP systems offer not only the core ERP functions, but also
many of the Expanded Capabilities, as shown in the prior diagram.
Overall, the City may decide to continue with SAP, but in view of the total cost of ownership differential
as well as the problems that it has had in maintaining and optimizing SAP in the past, Option 3 may
allow the City to lower the total cost of ownership and improve the functionality for City end users.
We recommend that the City issue an RFP to evaluate best of breed solutions with a fully
integrated public sector focused ERP solution and procure a separate utility billing best-of-
breed solution.
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2 Current State/Gap Assessment
2.1 OVERVIEW OF FINDINGS
One of the main strengths of the City’s current set of business systems is that they enable the City
business processes – i.e., employees are paid on time, purchases are made, applicants are hired,
financial reports are completed, and funds are budgeted and accounted for. In general, the current
systems facilitate basic financial, purchasing and human resource functions. There are, however,
some weaknesses that will be reviewed in further detail in the functional assessment areas below.
2.2 GENERAL LEDGER / FINANCIAL REPORTING
The City utilizes SAP for General Ledger, Budget Control and core Financial Reporting. SAP was
implemented over 10 years ago and is still supported by the vendor to this day. A majority of the
organization utilizes SAP for basic financial reporting purposes, however many of the departments
utilize Excel spreadsheets for budget tracking/reporting, as reporting from SAP has been described as
difficult.
Overall, the chart of accounts at the City has five segments and can approach 30 alpha numeric
characters as defined below:
Segment: Fund
Cost
Center
Business
Area/Dept. Account WBS
# of
characters:
3 8 3 5 10
As a whole, the current Chart of Accounts accommodates GAAP based on GASB standards for the
City’s CAFR. Despite not being on the most recent version of SAP, City staff has been able to
maintain a high level of effectiveness in its accounting processes.
STRENGTHS
The strengths of the current General Ledger / Financial Reporting environment include:
1. Chart of Accounts Structure: The current Chart of Accounts adequately accommodates
required GAAP based on GASB standards for the City’s CAFR.
2. Interdepartmental funds transfer: The system enables the transfer of funds between
departments, funds and projects through an automatic fund balancing feature. The feature
allows an authorized user to complete entries across multiple funds and the system prepares
the balancing entries in the background. This capability provides prevents these transfers
from creating out of balance situations and prevents the need to manually perform these
entries.
3. Audit Trail/Drill Down Functionality: Basic audit trail and drill down functionality is available
within SAP.
4. Closing Flexibility: SAP effectively supports month end and annual closings.
5. Familiarity with system: The current accounting staff is knowledgeable and familiar with the
current system.
6. Useful query/reporting tools: Users identified the query feature and Spinifex reporting tools
as major strengths that need to be retained in a new solution. However, staff would like
additional functionality, such as the ability to drill into further information from the reports.
7. Upload tools: SAP has functionality to upload journal entries from Excel into the financial
system.
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WEAKNESSES
1. Data Integrity: During the initial SAP implementation the City converted historical data which
is causing data integrity issues (remaining AR balances) to this day. While this is not an issue
resulting from SAP, this information converted resulted from an implementation process that
was not validated and it perpetuates error within the system.
2. Chart of Accounts and Validations: Not enough automated validations were implemented
when it comes to creation of new GL accounts, thus duplicates exist. Unique description for
each general ledger account is needed to avoid confusion when posting transactions and
generate reports. This is a process issue that has no relationship with SAP.
3. Manual Processes: SAP has automatic and recurring journal entry functionality, however it is
not being utilized. While the City does have the ability to utilize a template to upload the
journal into SAP, it requires manual intervention to open up the template and execute the
journal process. This is a process issue and not identified as an SAP system functional
deficiency.
4. Journal Entries Workflow: Requests for journal entries from the departments are submitted
via a hardcopy memo, which is difficult to track and ensure completion. Staff would like to
submit journal entries electronically, along with supporting documentation.
5. Reporting Tools: It is difficult for the casual system user to write new reports with the SAP
and Spinifex reporting tools. Staff indicated that the current financial system is not user-
friendly and provides limited ability to extract, manipulate and analyze data. Third party CPA
(MGO) compiles the CAFR and annual Streets Reports on behalf of the City. The City needs
more access and transparency in the third party system. Microsoft Excel is heavily used to
analyze the financial results (i.e. budget to actual variances).
6. Internal Orders Functionality: The City uses The Internal Orders functionality of SAP for
tracking statistical data for expenses relating to grants or specific sub-projects. It is also used
in other areas including Planning, Community Services, and others.
7. Accounting Decisions Responsibility: Various City departments have their own Accounting
liaison that make accounting decisions, which should reside strictly with the trained accounting
staff. This is recognized as a process and governance issue unrelated to SAP’s system
capabilities.
8. Electronic Document Management: Reviewing backup documentation is currently a
manual/paper process. Departments will park their journal entries in the system and send
paper "backup" for accounting to review.
9. Loss of Institutional Knowledge: City has lost quite a bit of institutional knowledge through
retirements which has hurt the SAP support structure. As a result, much of the functionality
SAP can provide has been ‘lost’ as the City power users retire. This is identified as a system
governance issue and not related to an SAP functional limitation or deficiency.
10. Reporting System Gaps: FI and FM funds integration reports differ in the way SAP is
configured resulting in conflicting reporting results creating confusion among the user base.
11. Donations Tracking: Accounting has to track outside of SAP and Questica the status of all
donations since the amounts cannot be determined by the individual departments at this time.
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OPPORTUNITIES
1. End-user financial reporting will be greatly improved from either an SAP upgrade of the
implementation of a new system, as many of the components and CAFR required financial
reports are provided out of the box from a host of potential vendor solutions.
2. If the City decides to upgrade its current SAP environment, it should start taking advantage of
the Internal Order feature for interdepartmental costs allocations or for tracking costs of a
specific job, allocating the costs to an asset, cost center or GL Account and analyzing the cost
centers for better-decision making purposes. Furthermore, the City should take advantage of
the SAP automatic and recurring journal entry functionality and turn on the journal entry
approval and posting workflow by turning on email alerts and modifying the rights of the roles
for the users involved in the process, in such a way that segregation of duties is achieved or
maintained.
3. A modern system can potentially provide users with improved non-financial reporting tools,
increased account and budget validation at the point of data entry, and greater ability to drill
down into system transactions. The City owns SAP Business Intelligence module, which is
currently used only by Utilities department. This City should consider expanding the use of this
tool across all departments in order to achieve better reporting and creation of user defined
automated dashboards that include financial and non-financial metrics.
4. The chart of accounts structure and cost center structures need to be optimized in order to
better align with business needs and provide more meaningful information to decision makers
and citizens.
5. A future system should include accounts payable invoice scanning, document storage and
retrieval, and electronic workflow processes. The City is currently contracting to outsource the
payables processing through Commerce Bank to provide these services, it is more efficient to
perform these functions within the core ERP whenever possible.
2.3 INVESTMENT/CASH MANAGEMENT
The City has the responsibility of managing many types of debt and investment instruments that
require significant planning and tracking efforts for ensuring sufficient funds are available to cover
liability and contractual obligations. The City’s Money Management / Treasury Division is responsible
for investing the City’s cash resources, investments, and facilitating the debt financing process in
accordance with the City’s investment policies and State statutes.
The City currently uses the Sympro software to centrally track the City’s investment portfolio activity
valued at $500 million. The software generates reports for analysis, reconciliation, and meet legal and
accounting reporting requirements including the production of quarterly investment reports for City
Council, forecasting investment maturities, and ensuring the City has sufficient cash liquidity.
Examples of reports generated including GASB 40, owned security list, variety of interest earnings,
past and future maturity activity, etc.
STRENGTHS
Sympro is a versatile and appropriate system for managing City’s investment portfolio.
WEAKNESSES
1. SAP Use: SAP is not being used to track the City’s management of investments and cash
flows and there is no programmed interface between Sympro and the City’s SAP GL at this
time. This requires all activities including, but not limited to, interest earnings, purchases, and
sales, to be represented as manual journal entries.
2. Reporting and Analysis: Cash flow analysis is currently being managed in MS Excel to
represent the needs of the entire organization.
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3. Staff Availability: Because cash flow forecasting involves manual processes necessary to
update these Excel workbooks to synchronize transactions, there is greater overhead to
produce current, actual summaries of cash flow forecasts reflecting the City’s current
investment holdings.
OPPORTUNITIES
It is very common for ERP vendors to partner with investment management solution providers,
including Sympro, to offer a direct integration with the ERP system can be achieved. A direct
integration with the City’s ERP system would:
1. Reduce administrative overhead involved in creating journal entries for account updates in
the GL and provide greater line item control options.
2. Provide the City with options to have utility and non-utility accounts receivables represented
in addition to an expense side module so a single cash flow analysis could be represented.
2.4 BUDGETING
Starting with the FY 2016 budget, the City’s annual operating and capital budgets are developed with
Questica Budget software, using extracted financial data from the City’s Enterprise Resource System
(SAP). Previously, the General Fund Long Range Financial Forecast (LRFF), labor cost modeling,
financial reporting, and monitoring of the City’s budget were completed on spreadsheets. Starting in
the FY 2016 budget process, Questica Budget will be used to develop, monitor, and review the City’s
budget.
The workflow process of receiving a budget proposal, packaging decision materials, and compiling text
and figures into the budget document will be automated using Questica Budget and the budget
document publishing software (PatternStream). Questica is integrated with the City’s current ERP
system (SAP) and PatternStream.
During the fiscal year, the Office of Management and Budget (OMB) and city departments adjust
department budgets to reallocate existing funds into more appropriate line items or augment a
department budget based on Council action. Beginning FY 2016, workflow for these processes will be
managed using Questica Budget by documenting the budget change and its justification. Any budget
change in Questica Budget will be adjusted in SAP through an interface that occurs daily.
STRENGTHS
The strengths of the current Budgeting environment include:
1. Systems Integrations: Budget preparation in Questica Budget is integrated with SAP and
Pattern Stream. The workflow and budget entry for this process will be managed by Questica
Budget with a daily interface to SAP to record the transaction in the financial system.
2. Streamlined Processes: Questica Budget results in a more a more streamlined budget
process. Staff in departments will provide information for budget change submittals, Budget
Amendment Ordinances (BAO), and annual budget proposals in a work flow environment.
Specific budget proposals for vehicle requests or position requests will be routed through the
workflow process to Public Works or People Strategy and Operations, respectively. OMB and
department staff can review and approve proposals and generate decision packages for
decision makers to review in a controlled setting.
3. Automated Workflows: Questica software has workflow capabilities for receiving a budget
proposal, packaging decision materials, and compiling text and figures into the budget
document, which eliminates manual processes, reduces errors, and allows Analysts in OMB to,
work with departments on cost saving measures
4. Reporting and Modeling Capabilities: Budget modeling, summarization, and reporting are
performed in Questica Budget. The functionality of the budget system allows staff to input
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escalation factors or dollar amounts for these scenarios and have these changes
automatically flow through the next ten fiscal years.
5. Performance Management and Dashboard Monitoring: The City reviewed various
performance management software solutions. Questica Budget released a performance
management module with dashboard capabilities in summer 2014. Staff intends to bring
forward a contract amendment in the fall to the City Council to change the license agreement
from seat licenses to a site license at a highly reduced cost. It is expected that managing the
City’s operations through central review of performance measures and dashboards will
enhance productivity and services for residents and the community.
6. Automated Spending Controls: SAP’s Budgeting Availability Controls (AVC) is used to warn
the user if 10% or 5% of budget remains. The department must then submit a budget change
request to OMB.
7. Efficiency Gains: With the implementation of Questica Budget software manual processes
will be eliminated, which reduces errors and allows Analysts in OMB and the departments to
work on higher value tasks such as cost saving measures, organizational analysis, and
performance management.
WEAKNESSES
The weaknesses of the current Budgeting environment include:
1. PO and PR Carry Forward (Reappropriations): The City carries forward its Purchase
Orders and Purchase Requisitions from one year to another. In the New Year the Accounting
department is posting the accruals thereby creating problems for budget reports by
department. The City is working to perform a change to the Municipal Code to address this
issue.
2. Cost Allocations: OMB department does not understand the basis of how percentages of
overhead costs allocations was determined and the execution of this process in SAP (no
assurance that is complete nor accurate). The configuration of these cost allocations was
performed by staff during SAP’s initial implementation who are no longer in the City’s employ
and the knowledge to understand how these were established was undocumented. OMB is in
the process of implementing Questica which will address this shortcoming.
3. SAP Reporting: Generating custom reports from SAP is difficult (i.e. department budget
showing key parameters) and requires a program to write the report. It is very difficult to obtain
fund reserve balance reports for any of the funds in real time. Data reports do not have the
required detail (i.e. budget to actual reports). Report data varies when reports are generated
by different users and cannot be tied back to the cost centers detail. As a result, departments
do not have confidence in the data in some reports.
4. SAP User Friendliness: Some City Departments do not use the SAP system to track and
report transactions (i.e. Public Safety) due to the perceived level of difficulty to produce reports.
As a result, departments feel they are not in control of their financial situation. In extreme
cases, due to the lag in P-card transaction posting, departments fully expend their budget and
have the need to submit a budget change request..
5. SAP User Training: Users are in high need of continuous training when it comes to budget
management and reporting in SAP modules (SAP FM, SAP PS, etc.).
PENDING ISSUES
1. Double Entries: SAP will remain the system of record for Position Management due to the
ERP system controlling and maintaining employee master data. Position cost center
allocations will be maintained in SAP. Since the budget for positions will be developed in
Questica Budget, and unless SAP and Questica Bydget integrates position changes during
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the Questica Budget implementation, position changes derived from the annual budget
process must be performed in parallel with both systems (SAP and Questica Budget).
OPPORTUNITIES
In the near term, the City will benefit from implementing and integrating Questica budgeting system
with SAP. The expected advantages of reducing the staff time involved in the budget development,
review, approval and adjustment processes in combination with an electronic workflow-driven
environment is anticipated.
In an optimally configured system the City would be able to accurately define and track progress
toward mission elements, while taking advantage of the following additional opportunities:
1. Streamline and make transparent the overhead costs allocations to easily check
completeness and accuracy
2. Gain control over budget line items changes, made directly within the system, via user security
rights and automated approval workflows
3. Implement better automated spending controls, fund center assignee controls, position
management controls etc.
4. Avoid double entries in two systems when it comes budgeting changes
5. Track donation status within the ERP system by the individual department
6. Improve reporting granularity, accuracy, confidence and speed
7. Increased user friendliness when it comes to usage of the ERP system due to its predefined
module functionality and reporting capabilities
Further the City should consider:
1. Providing formal and informal annual ERP and non-ERP systems training to end user, based
on business need and keep track of each user training compliance
2. Documenting in a “Center of Excellence” repository the best practices and lessons learned to
which all users have restricted access based on their business needs
3. Hold each Department accountable for maintaining updated policies, procedures, user
manuals and desktop procedures for all systems
4. Enforce ERP and non-ERP systems governance, especially when turnover takes place within
the Departments
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2.5 FIXED ASSET | ASSET MANAGEMENT | CAPITAL IMPROVEMENT
PLANNING
The City has decentralized asset management responsibilities involving multiple divisions and
departments. Community Services, Public Works, Utilities, and Administrative Services are key
service providers with responsibilities to ensure the City’s infrastructure assets provide reliable,
predictable levels of service at the lowest cost possible. The City recently completed an Enterprise
Asset Management Needs Assessment, Selection, and Implementation Plan to improve and manage
on the asset management practices. The assessment revealed the City had been maintaining its fixed
asset inventory to compliance with GASB 34 standards using SAP’s Fixed Asset module. New capital
projects and capital rehabilitation projects that extend asset life are captured from invoices and
timecards and posted into SAP’s project module. The project module is reconciled with the
construction in process account and project costs are capitalized annually during the year a given
project is closed.
The City maintains a rolling, five year capital improvement planning window which categories projects
into programs and into funds to facilitate the reporting process. Budgets for projects are developed by
phase, by program, and by project which assists in the management activity tracking process. The
City is further required to track its infrastructure investments by IBRC category which introduces a
more granular reporting and tracking requirement beginning with this year’s asset management
requirements.
STRENGTHS
1. Project Accounting: The City’s ability to account for labor and contracted costs by project
through the City’s time and attendance system in SAP so these costs can be accounted for
and capitalized, as appropriate, is a model best practice (as evidenced in non-internal service
funds or those involving Account 471).
2. Budget Development: Additionally, the City’s recent investment in Questica this year will
completely transform the budget development process for FY 2015 by establishing a
structured workflow for all departmental budget item submissions. It will reduce administrative
overhead in managing numerous complicated Excel spreadsheets and will integrate directly
with SAP which will be expected to remain as the system of record for all budget to actual
reporting within the City. Questica will provide the ability for departments to submit budget
changes for projects, close out projects, reallocate funds between projects, open new projects,
and tag new sources of revenue. Daily updates will be provided from SAP into Questica to
enable departments to more readily retrieve current state budget to actual information by
project, program, or fund.
3. Grant Accounting: The City is currently managing its $2.5 million in grants successfully
through SAP where each department is responsible for administering their own grant
obligations including advances (e.g. VTA), CDBG, FAA (new airport operations), county
(transportation reimbursement), and utilities (Santa Clara County Water District). The grant
reporting and tracking needs have been sufficient for those responsible in tracking this
information.
WEAKNESSES
1. Use of SAP Modules: The City’s asset management activities outside of the Utilities Department
are not using any of SAP’s Plant Management (PM) module capabilities. As a result, there is very
limited asset management accounting for activities involving regular and capital maintenance due
to several factors including:
The use of disparate systems and databases that are not integrated with SAP or its interfaced
systems preventing the City from portraying a uniform view of its asset infrastructure.
The inability to portray accumulated maintenance deficits contributing to accelerated asset life
deterioration
The absence of any work order or service request management tools to track regular and
preventive maintenance leads to increased asset liability.
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2. Capital Improvement Planning (Budget to Actual Reporting): The City does not currently
have a means to generate reports allowing departments to determine the status of a multi-year
projects. This is caused by the need to carryover previous year(s) funding from earlier budgets
when a project spans more than one fiscal year. When this happens, the ability to freeze a
project prior to the carryover at a specific point in time to reflect current to actual details is not
possible.
3. Tracking Internal Labor Against Projects: The means to provide an instant status report that a
project manager can design and initiate exports from remains elusive and not possible to
generate without advanced SAP system knowledge. This restriction appears to be limited to
internal service fund activity tracking at this time as CIP projects do not appear to have this
restriction.
4. Absence of a Comprehensive Asset Infrastructure Inventory: Capital assets are typically
tracked by aggregated quantities which is adequate for meeting GASB 34 accounting guidelines
but are insufficient for operational asset management activities. Non-capitalized assets also
involve significant maintenance responsibility for the City and are not inventoried in any system,
including SAP at this time. Without a comprehensive inventory, there is no way for the City to
manage its overall maintenance obligations to know where maintenance has been deferred or
needs to be performed.
5. Absence of Multi-Year Asset Maintenance/Management Forecasting: The City does not
have a program in place that forecasts asset maintenance needs beyond the five-year rolling CIP
planning horizon. The City currently recognizes fixed asset lifespans for infrastructure at 40+
years but there is no current planning mechanism in place to represent these longer term
commitments.
OPPORTUNITIES
The City’s recently completed Enterprise Asset Management System (EAMS) Needs Assessment,
Selection, and Implementation Strategy report identified the following opportunities that could be
realized through the use of an Enterprise Asset Management System. Integrations with the ERP
environment are necessary to execute a number of the following items:
1. Maintain Current Asset Inventories for Current Asset State Evaluations: The EAMS
must allow City staff to establish a comprehensive, uniform, current-state inventory asset
types across operational divisions in Public Works, Community Services, and Administrative
Services by current asset operating status (e.g. current/active, scheduled, retired). This
inventory needs to identify capitalized and non-capitalized fixed assets so they can be
associated with the identification numbers currently in SAP for fixed asset value tracking (e.g.
government-wide financial reports, statement of net assets).
2. Provide a Basis for Budgeting and Capital Asset Planning: The means to track budget to
actual cost at the asset detail level in addition to the project and program levels through the
City’s ERP presents new opportunities to weigh asset management alternatives at both the
near and long term. At present, the City’s operational divisions are identifying priorities based
upon an annual budget cycle and a five year capital investment timeframe. The lifespan of
most infrastructure far exceeds this planning window (often greater than 20 or more years).
The ability to identify past, present, and future resource asset resource commitments will
ultimately determine if infrastructure is being managed as cost-effectively as possible or if
corrective measures are necessary to prevent reduced asset life.
3. Balance New Infrastructure Investment Planning with Operations & Maintenance:
Operations and maintenance (O&M) budgets need to be re-evaluated to determine the impact
to service levels as operations and maintenance budgets are expected to support a larger
asset pool. In most cases, the size of asset pool increases at a rate faster than the amount of
funds allocated to O&M activities. This obviously diminishes the organization’s ability to
realize the given assets expected lifespan.
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4. Integrate City’s EAMS with ERP Human Resources, GL, and Budgeting Modules:
o The ability to access personnel rates through the HR module and assign these rates
to work activities within the City’s EAMS will ensure direct labor costs associated with
projects are accurately represented and available. Budgeting integration will allow for
capital maintenance or construction activities to be captured according to existing
project/program accounts. It will also facilitate the collection of this information at the
operations detail level. This allows for improved fixed asset reporting and accounting
at the end of each fiscal year when this inventory is updated. Integration with the GL
will allow for specific labor, materials, and equipment to be expensed to the assigned
account numbers which will expedite budget-to-actual reporting and improve the City’s
capability to calculate actual service level cost.
2.6 PROJECT ACCOUNTING
The City is currently using the SAP-PS (Project System) for its project cost accounting activities in
addition to Microsoft Project and Microsoft Excel. Project accounting is conducted by phase, by
program, and by individual project and typically involves larger capital projects involving public works,
utilities, and facilities related projects. Projects are typically created through the budgeting process on
a rolling five-year cycle. The City is able to use the SAP-PA to track project phasing but is not
currently using project task tracking capabilities at this time. Project management activities involving
scheduling, task assignments, activity dependencies, and milestone completion percentages are
performed outside of SAP using Microsoft Project or Excel.
STRENGTHS
1. Labor Cost Tracking: Project accounting is very effective at capturing labor costs through
SAP’s time and attendance entry system which can be coded directly to specific projects.
This provides a very efficient and effective means of providing labor cost allocations to
projects and also produces reports with accuracy. The City maintains tracking relationship
information for budgeted CIP projects against current and scheduled projects. Because of
these strengths the City has been able to:
2. Reporting Compliance: SAP allows the city to comply with all external reporting
requirements (e.g. Federal, State).
3. Disaster Reimbursement: In emergency or disaster declaration situations, the City has the
ability to track emergency related project costs through SAP’s project accounting toolset
allowing for reimbursement reporting. This is a critical function necessary to support public
safety and public works professionals responsible for ensuring the delivery of essential
services.
WEAKNESSES
1. Project Budget Tracking: One of the greatest obstacles to SAP’s project accounting system
is the capability of tracking real-time project budget or contract balances. Presently, project
managers are responsible for tracking their own project costs, tasks, and retainage in Excel
spreadsheets. This creates reporting challenges as information pertaining to the completion
status of project tasks, retainage release approvals, and vendor performance is not being
captured within SAP. Which results in a lost ability to generate standardized project status
reports. It is possible for departments to overspend their project budgets without exceeding
budget controls on a multi-year type project involving multiple funds. Therefore, budgetary
controls are not effective in these types of situations. Project managers are also constrained
by the fact that they cannot represent prior year budget to actual reporting because funds can
be carried over from the previous fiscal year. This precludes the ability to represent project
variances at previous points in time when conducting project status comparisons on similar
types of projects. It also prevents project managers from determining the amount remaining to
fund their projects.
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2. Project close-out: since project open/close dates are not consistently defined in SAP, the
ability to run a report on project closeout status leaves many projects open beyond their actual
lifespan. It also requires project managers to manually notify their financial analysis and/or
accounting when projects are completed to effectively closeout a project (e.g. releasing
payment/performance bonds, liquidating escrow accounts, accurately tracking the valid dates
for warranty coverage, etc.).
3. Contract Compliance: Contract administration is also complicated by the fact that there is no
way to track a contract back to multiple projects or from multiple contracts back to a single
contract. The absence of this knowledge prevents the organization from identifying the quality
and performance of prior vendors in addition to knowing whether vendors are authorized to
continue working for the City in accordance with performance requirements (e.g. liability
insurance is current, performance guarantees in place, business licenses are up to date, W-
9’s are still valid, etc.). At present, there is no relationship between the project management
module and SAP’s MM (Materials Management) where contract information resides.
4. Reporting Limitations: User/custom reporting queries are currently limited to those
personnel who are granted access to the SAP system and/or are afforded sufficient user
rights. SAP allows for users to have the ability to query on any data fields, project information,
or account codes however, many project managers are reported to not have sufficient access
system to generate their own reports. It should be noted, this information may not always be
consistently entered into SAP and therefore a process improvement opportunity could resolve
this challenge.
OPPORTUNITIES
In order to improve efficiencies in the area of project accounting, the City should consider the following
opportunities:
1. SAP’s Project System provides the opportunity to track projects encompassing multiple funds
and/or departments but this functionality is currently not being utilized. This creates situations
where shadow systems must be relied upon for accurately tracking this information to ensure
expenses are fairly allocated to the appropriate fund(s) involved.
2. The ability to reference contract terms involving the scope, services, materials, and milestones
through the Project System would be very beneficial. This would also avoid the time
consuming process involved in generating reports from purchase requisitions in order to locate
contract documents for specific projects and programs.
3. The City should identify options to institute project workflows that will enforce standardization
across all projects and departments involving approvals, expenditures, and receipts based
upon the City’s internal reporting policies and procedures. The ability to closeout projects on a
timely manner, represent project costs accurately for future performance comparison and
institute standardized reporting will provide a means to establish reliable performance metrics
in the future. This will also enable the City to benchmark its performance against other peer
municipalities as the City seeks to evaluate similar project types.
In late 2011, an Infrastructure Blue Ribbon Commission issued a report recommending the City invest
in an infrastructure management system. The system would track the condition and use of City
infrastructure at the project level with the intention of providing the basis for asset-detail budgeting and
longer-range asset maintenance projections. A new Enterprise Asset Management System (EAMS)
which will be capable of tracking work activities at the asset, project, program, and fund levels. The
system’s future (anticipated) integration with the City’s ERP will provide a means of capturing project
specific labor, equipment, materials, contract specifications, and other cost details. The opportunity to
provide project specific details involving work performed, GL line items charged, and dates of
performance will significantly advance the City’s project administration and reporting capabilities.
2.7 PROCUREMENT
The City has conducted extensive evaluations of its Purchasing Division policies, procedures, and
requirements under the City’s Municipal Code and Charter over the past four years. In 2011, the
Leadership ICMA team evaluated the City’s procurement operations and City’s Purchasing Manual. In
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2014, the City commissioned NIGP Consulting to prepare recommendations (Periscope Report) to
improve the administrative efficiency of the purchasing process in addition to focusing the
department’s efforts to become more strategic in focus. Reoccurring observations from the following
observations that were taken into account during the ERP evaluation process by Plante Moran:
Continued staff turnover in the Purchasing Division has led to inconsistency in administering
the purchasing manual and guiding staff through the purchasing process including contract
administration, bid solicitation, and the submittal of purchase requisitions
Formal and informal staff training is necessary for both purchasing and non-purchasing staff
to ensure purchasing processes are understood and enforced uniformly throughout the City’s
operations
Decentralization of the purchasing process has been identified as a strategic objective for the
City. The ability to allow departments greater flexibility to manage their own solicitation
process while maintaining necessary oversight controls administered by the City’s Purchasing
Division was repeatedly identified
A need to streamline the administrative process involving informal and formal solicitation
requirements was recognized by weighing the administrative costs to administer each form of
competitive bidding process against the overall risk to the City
The City currently issues about 2,220 purchase orders annually representing a total spend of
nearly $190 million
The City now requires a purchase order for any purchase over $5,000 at present and is
encouraging the use of P-Cards (avoiding the need to issue a PO) as a way to facilitate the
purchasing process and reduce the amount of time necessary to complete a purchase
Informal purchases (three quotes obtained by department) require about 3-6 weeks for
processing and formal procurements (public advertisement) require between 6-12 weeks to
process from start to finish
Limited oversight and flexibility relating to purchasing processes in SAP have lead the
Division to seek Requests for Proposal for the procurement of an e-procurement system
(including vendor self-registration) to replace the use of SAP as the Division’s main
purchasing system.
The Division has also investigated the potential investment in a document management
system to associate documents to purchasing and contract transactions in the new e-
procurement system.
STRENGTHS
The City has successfully initiated a P-Card system that has integrated with the SAP system for single
unit purchases under a $5,000 threshold. The City is currently able to pre-encumber funds when
purchase requisitions are made and encumber funds when a purchase order is issued. City staff are
able to see both types of encumbrances on their budgets in real time when reviewing their budget
status by fund (including specific line items).
WEAKNESSES
1. Contract Management: SAP’s Supplier Relationship Management Module (SRM) processing
is not being used to maintain contracts in SAP which limits capabilities for accessing contract
data and requires that the City maintain contracts with the creation of a purchase order.
Decentralization in the purchasing process along with missing controls in the SAP system
require that both the Purchasing Division and City departments manually monitor open
purchase orders. The system does not currently maintain contract expiration data and
automatically carries open purchase orders are carried over to subsequent fiscal years.
2. Lack of electronic workflow: SAP’s configuration is also noticeably weak in supporting
workflow processes. For example, W9 processing can be an issue for purchases made below
the PO threshold if the vendors W9 is not on file. The system allows purchases to be made
without confirming that the vendor has a W9 on file.
3. Commodity Codes: The City does not currently use NIGP codes but realizes the future
benefit in utilizing commodity codes.
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4. Limited Process Control: There is a weak relationship between the Municipal Code and
City’s Purchasing Manual. Inconsistencies provide for risks and create possible areas of
failure.
OPPORTUNITIES
The City’s selection of a new e-procurement system gives the organization flexibility to evaluate its
current purchasing processes and determine where these processes can be improved. When
evaluating a new “Best of Breed” purchasing system the division should consider:
1. Associating commodity codes to account codes to enable the organization to classify
purchasing data by products and services. The use of commodity codes facilitates the
grouping, categorization and analysis of spend data supporting the development of term
contracts.
2. Investigating/continuing to investigate the potential investment in a document management
system to associate documents to purchasing and contract transactions in the new e-
procurement system. A document management system is also necessary to take advantage
of vendor self-registration capabilities.
3. Establishing workflow controls for purchases that do not require a PO. A control to verify that
the vendors W9 is on file before automatically purchasing from a vendor would eliminate the
risk that purchases have been made from a vendor without a W9 on file.
4. Tracking vendor performance. Currently the City can’t track failure to perform situations.
Maintaining this additional vendor data can help the City make financial investments that have
the highest ROI.
Outside of Purchasing’s technology initiatives, the Division should evaluate, review and revise terms in
the Purchasing Manual to be consistent with the Municode. In accordance with the Periscope report,
the Code is law and is the highest level of procurement policy. The Manual should include the
requirements of the Municode.
2.8 ACCOUNTS PAYABLE
The City is entering into a contract with Commerce Bank to outsource its payment functions. This
process is set to start planning the project January 1st, 2015 with a go-live on or before June 30th. The
bank will scan invoices and pay vendors via credit card, check or ACH payment. These outsourced
activities will provide badly needed accountability over vendor invoices, increase efficiency of and
provide accountability over the invoice approval process, provide an electronic storage and retrieval
system for vendor invoices, and eventually may reduce overhead expenses related to processing
payments and cutting checks. Activities performed by the bank will be reported via an electronic
reconciliation file from Commerce Bank to the City. In addition to these services staff at the City are
also using Advanced Micro Solutions (AMS) 1099-ETC software and JP Morgan Chase Smart Data.
STRENGTHS
The City is currently issuing check runs on a weekly basis and this frequency is generally higher than
many communities Plante Moran evaluates. This practice prevents the City from incurring additional
liability for late fees when invoices are remitted by the departments on a timely basis.
WEAKNESSES
1. Limited Process Control: Decentralization in the process along with the absence of a vendor
self-service function has created situations where departments hold onto invoices creating
unknown liabilities, year-end accrual issues, unhappy vendor’s, late fees etc. Outsourcing the
City’s payment functions will eventually eliminate this issue to some degree assuming
departments promptly approve their invoices for payment.
2. Employee reimbursements: There are many California Public Records Act requests on
employee reimbursement transactions. It is vital to the organization that supporting
documentation is available and accessible. The absence of an integrated document
management system creates the need for shadow systems/shadow processes, especially
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where associated documentation is vital to maintain. The employee expense reimbursement
process exists mostly outside of the financial system. Supporting documentation is maintained
at the department level outside of SAP and is attached and forwarded to AP via excel
spreadsheet. This process is expected to move from AP to payroll.
OPPORTUNITIES
An integrated content management system would support the City’s response to public requests for
information as well as help support the organizations transparency. The outsourcing of the payables
function will reduce staff overhead for the City and will introduce the benefits of a third-part document
management system.
2.9 REVENUE COLLECTION/MISCELLANEOUS BILLING/ACCOUNTS
RECEIVABLE
Payments arrive at the City via a variety of methods and departments. The Cashier’s Office and
several departments accept cash payments, with some departments taking deposits directly to the
City’s bank. The City also uses a lockbox for utility payments. Procedures across the City for
recording and processing receipts vary (including both manual and automated methods for sending
receipt information to Accounting Department). Revenue Collections department and 12 other
departments across the City collect revenue and fees. Revenue Collections department has 4
cashiers. CORE system (the cash receipting system) and SAP (SCM and AR) are the primary cash
receipting, billing and posting systems at the City.
The City outsourced to third party vendor the collection of paramedic receivables.
STRENGTHS
The strengths of the current Miscellaneous Billing/Accounts Receivable environment include:
1. Multiple Receiving Methods: The current set of systems effectively accommodates the
organization’s receiving methods (i.e., Cash, Lock Box, Credit Card, Check, ACH, Credit
Memos, etc.)
2. Debit Card Transactions Processing: Transitioning to iPay (web version of Core system)
will allow processing of debit card transactions
3. Query Capability: Ability to query information in Core system
4. Revenue Collections Controls: Good controls have been put in place, like locked offices
with restricted access to cash registers, unique log-on in Core and locked cash drawers,
password protected the safe, no posting to accounts with no revenue allowed in SAP.
WEAKNESSES
The weaknesses of the current Miscellaneous Billing/ Accounts Receivable environment include:
1. ACH Payment Processing: ACH Payment processing is not automated. They are posted via
manual adjusting entries by the Accounting department, after research is performed to
determine whose department they pertain to.
2. Account validation: Core does not validate account numbers before posting transactions.
As a result, cashiers can post transactions to incorrect or invalid accounts. These errors are
not identified until they are interfaced with SAP. The process could be streamlined if cashiers
were notified of the errors, via a pop-up error message or other notification, before the
transaction was posted.
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3. Duplicate Records: SAP has many customer duplicates that need to be cleaned out. Thus,
the reporting of owed and paid amounts from SAP is hard to track by customer. This is a
process issue unrelated to the core functionality of SAP.
4. Reconciling Items: SAP GL does not match CORE system cash receipts balances.
Departments are not reconciling their cash receipts to their paid receivables. Some
departments rarely resolve reconciling items between SAP GL and their subledgers, leaving
them on the list of reconciling items for ever. This is a process issue unrelated to the core
functionality of SAP.
5. Delinquent Accounts and Interest Calculation: The SAP interest calculations are currently
incorrect due to wrong AR aging terms in SAP (SAP has 60-90-120 AR collection terms and
they need 30-60-90). As such, staff have to manually calculate interest on each of those
accounts and the automatic delinquent letters generated by SAP, are replaced with the
corrected manual ones by Revenue Collections department.
6. Police Department Issues: Police Department doesn’t have an automated POS system to
collect cash, even though it handles thousands of dollars/month and is in real need of a
system.
7. SAP Reporting: SAP AR Aging Reports have too many inaccuracies (cancellations, partial
payments, etc.), since SAP GL and Core are not reconciled. This is a process related issue
and not related to SAP’s core functionality.
8. SAP Training: Departments expressed the need of further training relating to SAP cash
receipts and receivables. They don’t feel like tracking and reporting of receivables and cash
receipts information in SAP is flexible or friendly enough (i.e. they can’t make a distinction
between write off and a cancelation of a receivable, document number type is the same for an
invoice, a cancellation and a write off type transaction on the reports, they can’t view
breakdown of payments that are received by payment type, etc.).
OPPORTUNITIES
In order to increase revenue realization, the City should consider the following opportunities:
1. Accounting should reconcile and resolve on time the cash receipts reconciling items between
SAP GL and Core system
2. Implement account validations in Core to validate account numbers before posting
transactions via a pop-up error message or other notification.
3. Clean up SAP customer duplicate records
4. Adjust AR aging terms in SAP from 60-90-120 to 30-60-90 to avoid recalculation of interest
and retyping of delinquent notices
5. Roll out the use of Core system to all other cash collecting departs (i.e Police department)
6. Train cash receipting departments how to use SAP tracking and reporting functionalities
2.10 PAYROLL/TIME ENTRY
The City’s Payroll process supports between 1100 – 1400 employees (depending on those employees
that are seasonal) and 11 different compensation/memorandum of understanding (MOU) plans.
Because of the many differences across the plans the fields in SAP need to be very specific.
Managers are responsible for approving timecards for salary staff and entering time for hourly staff.
Payroll processing is bi-weekly and all staff are paid on the same pay cycle regardless of
classification. The majority of employees take advantage of direct deposit and employees receive
their pay advices through email and through employee self-service.
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STRENGTHS
The SAP system is currently capable of handling most pay scenarios for standard classifications. A
simulated payroll is run on Monday and data elements associated with each payroll run including the
dates, number of work days, holidays, and accruals can be verified. FLSA reporting is fully supported
and overtime calculations impacting FLSA can also be handled. Strong capabilities also include:
1. Interfaces: Files are created by the SAP support team for CalPERS, ICMA, Mass Mutual,
and SSA so these organizations can receive notice of payroll disbursements. Other forms of
interfaces exist for situations involving:
a. COBRA Billings
b. Deferred Compensation
c. Annual Tax Witholdings to IRS
d. Garnishments
e. Work Orders (time entry against work orders)
f. Check Reconciliation
g. Budgeting (merit date and associated pay increases)
h. Deferred Compensation
i. Flex Spending
2. Employee Self Service: Allows employees to see accruals, benefit enrollment, and access
their pay advices on demand. Employees can edit their time cards within a six week period.
More capabilities could be realized but the current SAP version of ECC 6.0 does not allow for
an optimal configuration to support with the present City resources.
3. Absence/Leave Management: SAP enforces all PTO accruals and enforcement including
FMLA, donations of sick time to other employees, attendance policy management, and other
forms of general tracking are fully supported.
WEAKNESSES
1. Lack of electronic workflow: The absence of workflows, change notifications and the lack-off
ability to access data detail impacts managers’ ability to efficiently manage time card
approvals. The payroll process is dependent on each manager’s approval of their staff’s time
cards during the period. Some of the road blocks preventing timely submission of timecard
approvals include:
2. Data Validation: Approval of timecards that reference incorrect pay codes. Pay code detail
can only be viewed during time entry, not during approvals. Because of this, managers must
be familiar with all of the different compensation codes applicable to the staff they manage.
3. Workflow Notifications: Timecard edits after approval don’t trigger a re-approval workflow.
Managers do not receive a notification for timecard edits made after a timecard has been
approved. Managers are dependent on employees to notify them of these changes or the
change may go unapproved.
4. Shadow Systems: Hourly staff time detail is tracked outside of the system. Depending on the
department, hourly staff supporting data exists outside of SAP in the form of a paper sign in
sheet with time in/out or in an excel spreadsheet. Supervisors are responsible for entering
time for hourly employees and supporting documentation must be maintained.
5. Set-Up Challenges: Union detail is tied to pay code instead of job title/role In addition the
system restricts employees to enter time based on the schedule configured for their role. This
prevents some employees from entering the actual time worked (e.g., employees can’t enter
less/more than scheduled hours, night or weekend time unless they have a flex schedule).
6. Lack of Scheduling Functionality: Scheduling functionality is not available in the current
time and attendance system. Managers maintain shadow scheduling tools such as shared
outlook, Google, or paper calendars to manage employee time off throughout their
department.
7. Limited Training/Knowledge Transfer: It was also apparent during these sessions that
knowledge transfer across departments is limited because of the City’s decentralized
structure. As departments experience turnover and become dependent on shadow systems to
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conduct processes knowledge of current/available functionality may be lost. The group
participating in the cross-functional time entry/payroll session expressed frustration over
managing leave requests without a leave request submission portal. Discussion led to the
discovery that leave request submissions and approval capabilities exist in employee self-
service.
OPPORTUNITIES
In a decentralized environment it is even more essential that organizations focus on communicating
knowledge consistently and frequently. Documented processes that are continuously updated or
having quarterly management discussion sessions, for issue resolution discovery (mentioned in the
example above) are good communication practices.
Overall, the weaknesses that exist in the time entry/payroll processes exist because of the current
systems configuration or lack of functionality. In a new payroll environment union details could be tied
to job title/role instead of using different pay codes to differentiate between union employees.
Workflow and scheduling functionality should also be investigated during the selection of a new
system.
2.11 PEOPLE STRATEGY AND OPERATIONS (PSO)
People Strategy and operations (PSO) owns the employee lifecycle data for approximately 1,091
regular and up to 400 temporary/seasonal employees. The City has a complex collective bargaining
environment, with nine separate employee groups, some with different contract provisions. The
processes that PSO “owns” range from recruitment to new hire, benefits and compensation,
promotions, leaves of absence, changes in schedules and salary to retirement or end of employment.
Additional processes include that PSO manages include labor negotiations, discipline and grievances,
customer service inquiries, risk management, workers compensation, compensation, job descriptions,
salary schedules, employee development and training, succession planning, performance assessment,
and exit interviews.
PSO utilizes SAP for the majority of employee transactions from onboarding through employee
termination. In addition, NeoGov is utilized by the City for recruiting, applicant tracking and hiring
purposes. To summarize, human resources is another area in which it has been necessary to
purchase or develop a number of standalone systems in order to perform necessary business
functions. The lack of integration between these many systems results in a lot of manual reconciliation
and duplicate data entry.
STRENGTHS
The strengths of the current SAP and NeoGov environment include:
1. Basic Human Resources Management: Overall, the system facilitates many basic human
resources functions in an effective manner.
2. Security: The system has the ability to restrict user access to employee records.
3. Online applications: The City accepts online applications via NeoGov. Candidates are able
to enter their own information and have the flexibility to apply for a position from anywhere at
any time.
4. Job Descriptions: Job descriptions are retained in SAP and thus could be accessible to staff
and candidates via employee self-service and online recruiting.
5. Limited Self-Service: Employees can view read only payroll and benefit information online.
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WEAKNESSES
The key weaknesses of the current environment include:
1. Employee File: SAP maintains one master employee file, however departments must keep
paper files outside the system to be able to capture the level of employee information they
require.
2. Position Control: The position control ability within SAP is limited, with a particular problem
being an inability to tie positions to the budget.
3. Volunteer/Intern Management: Volunteer Management is a decentralized process, with
limited central PSO control.
4. Lack of Electronic Workflow: All Personnel Actions are paper driven processes which are
very tedious/labor intensive.
5. Lack of electronic document management: The employee record is kept in paper as the
current system does not accommodate scanned images/attach to the employee file.
6. Licenses and Certifications: The City uses multiple systems across departments to track
required licenses and certifications.
7. Compliance Reporting Limitations: The current system does not track federal compliance
related items such as EEO job categories. This makes reporting very tedious/labor intensive.
8. Employee Performance Management: Employee goal plans and performance evaluations
are a paper based process. While grading/comments are captured in SAP, the annual
evaluations are facilitated outside of the system.
9. Discipline Tracking: SAP is not being utilized to track disciplinary actions or employee
grievances. All associated grievance or disciplinary documentation is housed in the City's
SharePoint system.
10. Limited Employee Self-Service: The City does not have more robust employee self-service
functionality such as electronic benefit self-enrollment functionality.
11. Limited Manager Self-Service: SAP does not enable managers to manage their teams and
for employees to manage their transactions and information.
12. Reporting Limitations: The reports in some cases may lack the detail needed and this can
drive the need for separate spreadsheets to track personnel data. There are mandated reports
that need to be filed that SAP simply does not track. EEO reports are difficult to configure,
partly because the system was not set up for governmental reporting. Again, this leads to
redundancies and process inefficiencies.
OPPORTUNITIES
If fully deployed, a public sector focused ERP system will provide functionality that can resolve many
of the items listed above. Some of these automated functionalities include:
Automated performance evaluation/review
Tracking for investigations, disciplinary action, FMLA, grievances, reasonable
accommodations, etc.
Workflows for policy distribution, employee changes and improved data integration for auto-
populating information
Employee Self Service
Benefit Self Service
Overall, with new software integration and workflow many of the issues listed above will be resolved
and a savings of resources should be realized.
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2.12 UTILITY SERVICES MANAGEMENT / REFUSE
The City of Palo Alto Utilities (CPAU) started using SAP for their Utility Billing software needs in 2009.
Refuse billing was added to SAP ISU-BM at a later date. CPAU is currently serving about 30,000
customers and manages seven different types of services.
STRENGTHS
1. SAP Customization: The current SAP software can be configured to the City of Palo Alto
Utilities’ needs. An example would be the many unique validations that have been created in
the Utilities Billing to alert the end user when there is a billing exception. Users like the fact
that many views can be customized, the Utilities Billing layouts are flexible and FICA screens
can be modified to users’ desire
2. Data Availability: Level of detail that is available in Utilities Billing view in IC Web is
impressive. The amount of data available and the display of Business Partner & Premise in IC
Web are important to the Utilities users.
3. Data Export: Departments can easily export data from SAP to Excel
4. System Speed: In general SAP is very reliable and fast
5. Reporting Flexibility: The device management and FICA module of the SAP Utilities has a
lot of flexibility when it comes to reporting
WEAKNESSES
1. SAP ISU Maintenance: Because SAP is complex, is hard to maintain it with only internal
resources, thus specialized consultants are required. CPAU is only able to maintain the
software with its current resource. The City's SAP knowledgeable staff has been reduced so
that the remaining staff only have time to maintain the database. All enhancements have to be
contracted out to a third party and it has been difficult and expensive to find quality consultants
to make the necessary enhancements.
2. SAP ISU Customization and Upgrades: It is time consuming and costly to maintain and
customize SAP ISU modules
3. SAP ISU Standard Reporting: Very few standard reports have been defined in SAP so the
CPAU relies on the SAP BI software for most of their reporting needs. However, BI is very
complex and requires a specific skill set to master. Thus the data is typically downloaded and
manipulated in MS Excel. All statistical reporting comes from Green Waste so the City is very
dependent on their third party hauler for data. Currently Green Waste maintains all the data on
who has the trash containers/bins. If this information was included in the file that is sent to the
City, the City would no longer be dependent on Green Waste for their reporting needs. Service
Orders Dashboard with employee defined areas is needed to visualize all SO information on
one page.
4. Legislative Requirements: SAP ISU modules have not been upgraded in a while, thus the
software configuration does not incorporate the latest legal requirements which has forced the
City to use manual workarounds in order to fulfill legal requirements. This is becoming an
issue with net metering and peak/off-peak billing. As the utility industry becomes more
environmental friendly, more legislation will likely occur that will affect how the bills are
processed. If the software does not have updates to automate these mandated processes,
manual workarounds will have to continue.
5. SAP Training: A user needs to be trained well to maneuver through the program. Most people
only know what they use frequently and really don’t know what else might be available to
assist them with their job. Some also don’t understand how their actions in the software affect
others.
6. Utilities Business Practices: Most users feel that standard functionality is missing in the SAP
ISU software; therefore they have to find less efficient methods to perform tasks to do their
jobs, which adds more stress and frustration. The identification of best practices and possible
best of breed utilities software to satisfy them should be taken into account.
7. Pressure to Improve Services: Due to the location of Palo Alto the majority of the City
customers are more tech savvy than average, therefore their expectations for sophisticated
tools are higher than normal, which leads to pressure for improvement. The current customer
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utilities portal is lacking presentation and requires core functionality that is absent in the
current release.
8. Utilities Billing: Corrections/fixes/enhancements to the utilities invoice are challenging,
lengthy, costly, time consuming and difficult for the customer to understand. If an adjustment
needs to be made on a bill from a few months back, each bill after that adjustment will also
have to be manually adjusted. The current utility invoice/bill is not customer friendly. Some of
the miscellaneous refuse charges are billed through SD because there is no account in CRM,
but it is billed on a utility invoice with no description and it causes many customers to call in for
assistance on what they are being billed for. Budget billing is very complicated for the
customer and time consuming for staff when a payment is missed. This is due to penalty
amount not being printed on the budget bill. For payment arrangements, the staff has to create
two payment arrangements per customer to ensure that the unpaid amount goes back into
delinquency.
9. Utilities Rates Calculations: The rate design is challenging and limited in SAP. The City is
running out of rate codes so they are limited in adding more services. To set up rate
assistance, currently the user has to mark a flag twice on each service.
10. Refuse Billing: The design/configuration for refuse billing had to be manipulated to work with
the configuration set up for utilities, since the City did not purchase the SAP Waste & Recycle
module. Also there are issues with transferring of data between the third party (GreenWaste)
hauler’s software and SAP, which has caused incorrect billings.
11. System Validations: Many validation rules have been set which is causing thousands of
exceptions/plausible to be reported which is taking many labor hours to research and fix.
Many classification of errors once analyzed, no longer need to be reviewed at each step in the
billing process but they still reoccur.
12. Meter Reading Technology: It is very outdated. Reads are being hand keyed into the
majority of the hand held devices. Only 11% are drive by radio type meters. The downloading
the meter information to the hand helds is very complicated and restrictive. The SAP system
only allows for one meter read action per day.
13. Meter Inventory and Inspections: Meter inventory is difficult to enter. Meter
testing/inspection results cannot be tracked in SAP so Excel is being used instead.
14. Utilities AR Collections: Currently SAP ISU FICA does not have an aging report that shows
customers and how delinquent they are. Therefore, many delinquent accounts get unnoticed
until 6 months later. Accounts that have a delinquency less than $150, do not go through the
delinquent process and are maintained on a separate spreadsheet. Comparison of SAP ISU
AR balances to SAP SD AR balances is not performed currently.
15. Service Order Management: Customers cannot enter their own service order. The electrical
engineers create the service order estimate using AUD software and then the estimates are
loaded in SAP to compare to actuals. When looking at charges on a service order, the cost
line items do not sum up to the same line that has the planned cost, so the plan/Actual
comparison % is never accurate. City has no way of dispatching service order tasks directly
from SAP to employee calendars.
16. SAP ISU Integrations: There is no direct integration of Geodesy with SAP ISU modules (i.e.
DM). Every installed meter has information that has to be inputted into the GIS software.
17. IC Web Issues: CSR Dashboard is seriously lacking regarding ready data. Retrieval of data
requires multiple selections. Back buttons in IC Web do not consistently go back one level.
Lack of refresh button.
OPPORTUNITIES
If the City of Palo Alto Utilities would fully implement a best of breed utility billing software solution it
would resolve many of the weaknesses listed above. Some of the advantages of implementing a best
of breed solution are:
1. A fully featured, functional and configurable solution, one that is constantly evolving to meet
CPAU’s business needs without significant customizations or need for external spreadsheets
to complete core business process functions.
2. Integration with industry-leading applications due to formed partnerships and extensive
experience interfacing and integrating with many other third party applications.
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3. Successful implementations because the vendor’s staff only works with utility operations.
4. Hundreds of standard reports come with the standard software.
5. Majority of the best of breed solutions also come with an Ad-Hoc reporting tool that is very
user friendly.
6. A robust web portal which allows the CPAU’s administrator to make changes to the portal
when necessary.
7. The use of mobile devices in the field.
8. Standard software product releases and updates which include State and/or Federal
mandated changes. The cost of these updates is usually included with the software
maintenance agreement.
9. Regional user group meetings focused only on utilities.
2.13 CURRENT TECHNOLOGY PROFILE
OVERVIEW
The City’s IT staff with the sporadic help from outside consultants, support over 200 applications and
charge back the rest of the city departments. The current IT environment at the City includes:
1. The City network is spread across 30 sites interconnected in a star topology and uses dark
fiber optic connections, running at 1GB for the majority of the sites. The City has a dedicated
Gigabit fiber infrastructure connecting all remote sites, so all sites can be actually treated as
part of an extended LAN topology.
2. The City uses HP network equipment and is configured to have firewall redundancy, IPS
redundancy and core aggregation switch redundancy.
3. Remote access to the network is provided via PPTP VPN with AD/RADIUS authentication and
remote desktop service. The other network security features are rogue AP detection, wireless
spectrum, redundant controllers, and access control.
4. The City does not have a “bring your own device” or a mobile data management policy, but is
currently evaluating potential strategies and solutions which will allow access to the City’s
data. SolarWinds is used to administer, monitor and detect network issues.
5. For majority of the servers, the CPU utilization is normally greater than 50%, but the City does
not formally track the network traffic volume associated with the servers. For the server
maintenance, the City has vendor hardware and software maintenance contract.
6. Windows 2003 is the operating system used on the majority of the servers in the data center.
There are instances of Unix/Linux servers at the City as well. System access audits are
performed on a regular basis and access is adjusted accordingly.
7. The organization has standardized on the use of HP-UX 11.31 servers. The City has no cloud
services and is looking into various options (SaaS, IaaS and PaaS). A centralized storage
system is available for use and has expansion capabilities, but not without affecting the
backup windows currently being utilized.
8. Key services and applications on the servers are monitored using Solution Manager and early
watch reports. Backups are currently performed periodically to disk and then to tape and disk-
to-disk-to-tape using HP Data Protector 6.x software. The results of the backups are
monitored.
9. Oracle database platform is used as database management systems which serve various
applications.
10. Outlook is used for office productivity such as e-mail and calendaring, and there are
approximately 1200 e-mail mailboxes in use at the City.
11. The SAP ECC 6.0, BI, CRM, and ISU are installed on premise, on non-virtualized servers
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STRENGTHS
Selected strengths of the current IT environment include:
1. Network: The availability of the network is very high while its reliability is stable with minor
issues
2. Data Center Security: All systems in the data center are protected by UPS systems and also
by a power generator. Access to the data center is protected by a door access control system.
3. Antivirus and Anti-spyware: The operating system is running on the latest service pack and
antivirus and anti-spyware are run multiple times a day.
4. Audits: Security and license audits are conducted yearly
5. System and Data Backups: Nightly there is a file system back up, weekly database backups,
data is tested quarterly and an official test policy has been put in place
6. Data Retention: The city if following the 7 year data retention policy by keeping back-up tapes,
which are Weekly/monthly sent to off storage location
7. Centralized Management: The City is using Solution Manager to reduce and centralize the
management all its systems and end-to-end business processes
WEAKNESSES
The key weaknesses of the current environment include:
1. Encryptions: The backups are not encrypted, but are stored at an off-site secure data center
2. Server Redundancy: The City doesn’t have server redundancy
3. Workflow/Notifications: The City has not implemented in the SAP modules and portals the
workflows and notifications
4. Cloud services: The City doesn’t currently use any type of cloud services (SaaS, IaaS, PaaS)
5. Document Management System: The City didn’t purchase or implement any major
document management systems, due to storage space concerns
6. Data Archiving Strategy: The City doesn’t have in place a data archiving strategy for the
SAP ECC 6.0 data.
7. Disaster Recovery Plan: The City currently doesn’t have a documented disaster recovery
plan in place
8. Service Packs/Updates: SAP upgrades have not been performed in long time
9. IT Policies: The City had not written and implemented some of its IT policies, like the "Patch
Policy"
10. SAP Training: SAP is complex, but reliable and most issues come down to IT training
11. SAP Consulting Support: Third party SAP support consultants available in the market don’t
have deep knowledge of the areas the City needs help with. The ones that are available are
very expensive and need to be booked ahead of time and they work on East Coast timeframe
OPPORTUNITIES
Overall, specific opportunities for improvement in regard to the current technology environment
include:
1. The IT department should finish the full implementation of Solution Manager.
2. The City should consider encrypting at least of its backups stored at the off-site data center.
3. IT processes should be documented and followed to ensure policies and best practices are
followed.
4. The City should implement and document its disaster recovery plan as soon as possible
5. Regardless of its ERP system in operation, the City should not allow more than 1 year to pass,
before it performs the latest upgrade. Otherwise it runs the risk of not being able to operate
properly and not have the ERP system supported by the vendor, Thus, the IT depart should
install the latest SAP upgrades as soon as possible, if the City will decide to keep SAP as its
ERP of record.
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6. The City should consider implementing and turn on as many Workflows and Notifications as
possible in order to improve segregation of duties issues and help users complete
appropriately and on time all they tasks
7. The City should consider its storage issues and find a solution to implement a City wide
document management system and policy, to help user handle all support documentation
electronically relating to various transactions to meet statutory requirements
8. Budget permitted, the City should consider implementing a data archiving strategy, but only
after it stabilized its processes and finished implementing its main software systems
9. The IT department should document and maintain written SAP support procedures, to ensure
consistent and proper maintenance of the system
10. Since ERP systems are complex, all IT staff should be trained through rotation every year in
the latest changes of the ERP system in order to maintain it properly
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3 ERP Marketplace Assessment
3.1 INTEGRATED ERP ENVIRONMENT
The purpose of the Marketplace Assessment is to provide the City with an overview of the current
financial system and ERP software vendor marketplace. Information provided in this marketplace
assessment was gathered from prior Plante Moran project and consulting experience, feedback from
City staff during interviews, and external research.
Generally, enterprise financial system solutions evolved out of a desire to provide the functionality of
two or more systems, such as Financials and Human Resources, in an integrated software solution.
Enterprise software solutions experienced its first major growth in private sector businesses in their
manufacturing and supply chain operations. Many of these “Tier 1” ERP solution providers offer broad
solutions designed specifically for the private sector. Over the past several years, these solutions
were enhanced, configured and tested in public sector organizations. With these enhancements,
these solutions originally developed for private sector organizations could now be deployed in a public
sector setting.
There are also a number of “Tier 2” ERP software providers that originated and offer specific vertical
solutions designed for the public sector including fund accounting encumbrance accounting,
sophisticated budgeting, grants management, etc. and capabilities which are pervasive in this
segment. These solutions are typically characterized as “Tier 2” solutions and are normally deployed
in medium sized public organizations. Over time, there has been increased focus from these Tier 2
vendors towards developing niche solutions designed to compete with the Tier 1 providers. A third tier
of software providers also exists that are implemented in small organizations and will not be discussed
in this report due to the lack of relevance to the City. Medium size government agencies, such as the
City, often select financial management solutions identified as either Tier 1 or Tier 2 solutions.
The most basic differentiation between Tier 1 and Tier 2 providers lie within the depth of functionality,
breadth and complexity of the software.
Tier 1 providers have a broader offering that often include modules for Customer Relationship
Management (CRM), Enterprise Asset Management (EAM), Learning Management, Analytics and
Reporting, Data Warehousing, and Project Management modules. While Tier 1 providers offer robust
core financial modules, as well as HR and Payroll, typically they rely on third party vendors for
functionality specific to government activities in other functional areas. Most, but not all, Tier 1
providers have a large network of implementers available to implement their solution, many of which
have dedicated public sector practices. The most significant challenge with Tier 1 solutions is that
government agencies often find that they are not able to dedicate enough technical resources to
leverage expansive capabilities of the system to meet their needs. Due to their flexibility (thus
complexity) Tier 1 implementations are most successful at organizations with structured IT software
governance and/or ERP process governance, not typically demonstrated in organizations which have
implemented a fragmented software approach. In addition to the necessary governance, strong IT
project management is also critical for Tier 1 deployment. In several instances, Plante Moran has
worked with public sector clients who have implemented Tier 1 ERP systems and the following
situations have prevented them from realizing the full benefit of these systems; thus diminishing their
return on investment:
The governmental body did not budget the necessary capital to implement the solution and
optimize current business processes due to cost factors related to capital budget and resource
constraints.
The operating costs to maintain Tier 1 solutions relative to software maintenance and support
consumed operating budgets thus creating a situation where hiring the necessary internal
resources to maintain and enhance these systems (e.g., data mining, workflow, custom
reporting, etc.) was not feasible.
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Users of Tier 2 solutions often find that these solutions are more prescriptive; i.e., governmental best
practices are designed within the application. This is intuitive since Tier 2 solutions were designed for
use within the government sector. They may offer less flexibility and configurability than Tier 1 system
but, as a result, are typically less cumbersome to implement within their organization, because of their
native public sector design and more prescriptive implementation approach. Tier 2 vendors tend to
have their origin based in the government sector and have been improving and updating their software
products to offer a greater range of modules and functionality. As such, the Tier 2 vendors are touting
themselves as viable alternative solutions to Tier 1 providers. However, beyond enhanced
functionality, the scalability of the services being offered by Tier 2 solution providers is a strong
consideration when determining the best overall solution. Unlike Tier 1 solution providers, nearly all
Tier 2 solution providers implement their own software and do not rely on third party implementers.
The software marketplace has seen the emergence of solutions being touted as Tier 1.5’s, or “one and
a half.” Originally positioned as Tier 1 or Tier 2 solutions, these vendors have now positioned
themselves between the two tiers and often offer enhanced functionality in areas such as HR and
Payroll. They are also offering modules that are able to scale up to a larger client’s complexity and
transaction volume but at a lower cost and time to implement as compared to a Tier 1 provider.
Many of the solution providers will propose modules in the first two areas noted above as components
of their overall solution set that are characterized as “best-of-breed” solutions. For HR/Payroll
specifically, there are a number of niche solutions that have frequently been implemented by public
sector organizations to complement their existing financial system investment to obtain a “best-of-
breed” approach.
3.2 BEST-OF-BREED
A modification to Integrated ERP for delivering enterprise information solutions is the “best of breed”
approach. This solution architecture is based upon selecting the best individual product solution for
each functional requirement within the organization. The City’s current environment represents a “Best
of Breed” approach, utilizing a combination of systems, for example: SAP (Financials), Questica
(Budget) and custom/shadow systems that are not state-of-the-art. Because a business enterprise
operates in an integrated, rather than “stovepipe” fashion, creating an enterprise information solution
using a “best of breed” strategy involves designing, implementing, and supporting the required
technology integration. This, in fact, has represented a significant challenge for the City. Hence, the
City should seriously consider the various potential benefits and challenges inherent in a “best of
breed” approach.
In some cases, there isn’t a choice, and the organization must integrate “best of breed” products to
address requirements. This is the case when the functionality is specialized enough so that it does not
exist in extended ERP systems, e.g., GIS, DCS/SCADA, and LIMS. This is one of the reasons why
ERP vendors and 3rd Party software companies have developed Enterprise Application Integration
software, as well as why consulting firms offer network integration programming assistance.
Benefits of “Best of Breed.” The “Best of Breed” solution strategy enables the organization to select
the optimal solution for a particular problem or function within the enterprise. Hence, on a
requirement-by-requirement basis, there is less compromise required. This can also have some
benefits related to sizing the solution. The customer can avoid “overkill,” or “gold plating” solutions on
the one hand or, on the other hand, have an insufficient technology fit relative to requirements, that
may later result in the development of supplementary, or shadow systems to make up for product
limitations. Because of the more exact “fitting” of the solution to the discrete problem, the initial license
and implementation costs may be more appealing. A critical element is the importance of identifying
and understanding the organization’s functional requirements.
Challenges of “Best of Breed.” The countervailing perspective, as previously described in this
chapter’s description of ERP systems, is that the whole of the enterprise solution is greater than the
sum of its parts. Hence, optimal individual product selections may not result in the best enterprise-wide
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information solution. This can be reflected in both the technical challenges required for creating and
maintaining an integrated solution, the likely limitations of even an integrated “best of breed” solution,
and the total cost of ownership.
“Best of Breed” solutions, being created and implemented by different firms lack the single integrated
enterprise database common to ERP solutions. With ERP solutions, integration is designed into the
product and data is shared in real-time between the application modules. With “best of breed”
solutions, the customer must design and manage application integration. Current technology makes
this somewhat easier with industry programming and database standards, and well as Enterprise
Application Integration software. However, design, customization and maintenance of integrated
systems is far from trivial. Without integration, a “best of breed” approach can’t be considered an
enterprise information system.
Integration of systems can exist at a variety of different levels. One should be careful not to allow
vendor claims of product “integration” to be taken at face value. The devil is in the details. The
following are examples of some of the problems and implications relative to the integration challenge:
End user ability to drill-down into the underlying data may be more limited if data resides on
multiple platforms and databases.
Report development and crosscutting analysis of data across the organization is more
complex and will most likely require the development of an enterprise data warehouse.
Workflow technology may be more limited across platforms. Microsoft Office email products
can be used as a common “pipeline” backbone for workflow notifications. However not all
vendors have workflow capabilities that are integrated with off-the-shelf Office products.
A more global issue is that when a customer adopts a “best of breed” strategy, they assume primary
responsibility for identifying, creating, enhancing, and maintaining product integration. One of the
inherent benefits of the ERP approach being sold by vendors, and demanded by the market, is in
providing and supporting an integrated enterprise solution. As a result, the market applies additional
pressure to drive creative responses to integration challenges. To some degree both ERP and “best of
breed” vendors have created discrete integration solutions. This is usually in response to individual
client requests, and if there is sufficient demand, vendors may productize and provide varying degrees
of support for these solutions. However, as previously noted, the nature of these interfaces needs to
be carefully evaluated.
An additional consideration is accurately estimating the total cost of ownership. The cost of the
solution is typically identified as including initial licenses, training and implementation costs, as well as,
ongoing costs for maintenance support. In addition, a significant cost may be related to developing
and maintaining interfaces between systems. IT staff or consultants must create and document point-
to-point interfaces between applications or implement and maintain Enterprise Application Integration
software. Developing integration capabilities is a type of customization and, as a result, must be
tested when relevant software application product upgrades are implemented. Hence, the total cost of
creating an integrated, “best of breed” solution should include these total lifecycle costs, including the
opportunity cost of applying IT staff and resources to create and maintain these interfaces.
3.3 ALTERNATIVE SOFTWARE DELIVERY OPTIONS: HOSTING (“CLOUD”)
In the past ten years alternative software delivery models have made their way into the ERP
marketplace, the most popular of which are hosted solutions. While the popularity of hosted enterprise
solutions did not materialize in the early part of this decade as many had predicted , organizations are
slowly embracing hosted solutions in order to relieve some of the burden of an overworked business
and technical staff. There are a variety of hosting models available to the public sector today, many
of which have been used interchangeably by vendors providing enterprise software to the public
sector and all identified as ‘the cloud.’
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In general, the market for full scale ERP delivered via ‘the cloud’ is still immature in the public sector.
However, SaaS has proven successful for more specialized applications such as document
management, CRM, and selected human resources applications. Private Cloud Computing is among
the highest interest areas across all cloud computing according to Gartner, with 75% of respondents in
Gartner polls pursuing a strategy in this area. One of the major goals is the evaluation of virtualization-
driven value and benefits. In addition, Software as a Service is rapidly gaining adoption; leading
Gartner to forecast more than 50% of respondents will have some form of SaaS based application
strategy by 2015. Factors driving this adoption are the high priority organizations are putting on
customer relationships, gaining greater insights through analytics, overcoming IT- and capital budget-
based limitations, and aligning IT more efficiently to strategic goals.
Overall, hosted solutions are gradually becoming a popular way to acquire modern software while
containing costs, especially amongst small-mid market public sector organizations.
3.4 ERP VENDOR CONSOLIDATION
Consolidation among public sector software vendors has left a fewer number of vendors providing
customized services to the Public Sector than in prior years. Organizations such as Harris, Oracle,
SunGard Public Sector, and Tyler Technologies have acquired competing software offerings over time
and, to varying extents, marketed, licensed, implemented and supported each of them. As such, the
remaining vendors have a larger installed base per vendor. It is anticipated that, over time, these
vendors will reduce, not increase, the number of ERP solutions that they will maintain and support for
the public sector. This consolidation of solution offerings is typical in the software industry as a result
of their desire to create a sustainable business model. Thus, it is important during the due diligence
and contract negotiation process, to consider any the future product plans available from software
providers, with the purpose of maximizing solution longevity and avoiding expensive capital outlays for
upgrades and for replacements.
3.5 SUMMARY COMPARISONS
Summary Comparison: Tier 1 versus Tier 2
The following table identifies some of the key differences between Tier 1 and Tier 2 software providers
on issues such as support requirements, cost of implementation services, cost of major version
upgrades, software support channel, and other factors:
Characteristic Tier 1 Vendors Tier 2 Vendors
Sample
Representative
Vendors:
Oracle (PeopleSoft and Oracle e-
Business Suite)
Workday
SAP
Oracle (JDE 1.5)
Lawson – (1.5)
CGI – (1.5)
Others
SunGard Public Sector (e.g.
OneSolution)
Tyler Technologies MUNIS and
Eden
New World Systems
Harris (e.g. Innoprise, etc.)
Others
Design
Considerations
Developed product for private sector
and later adapted for public sector
Many modules specific to public sector
Larger organizations with greater R&D
budgets, offer more robust technology
Primarily designed for public sector
More prescriptive functionality and
less conducive to customization
without altering source code
Often leverage common municipal
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Characteristic Tier 1 Vendors Tier 2 Vendors
Robust development tools
Scalable to leverage most robust
development and database
environments
technology standards (e.g. MS SQL
database). Some support Oracle
Environments leverage 3rd party
tools (database, report writer, etc.)
Ongoing
Technology Support
Resource
Requirements
Most require multiple technology FTE
to support
Also impacted by level of integration
with other organizational systems
Requires fewer technology FTE to
support
Also impacted by level of integration
with other organizational systems
Software
Functionality
Core modules have robust functionality
May lack public sector specific features
(e.g. encumbrance rollover, GASB 34
reporting, etc.)
License costs per user typically more
expensive than Tier 2
Incrementally less robust
functionality for core components
HR/Payroll solutions are frequently
less robust as compared to Tier 1
offerings
Many vendors offer additional public
sector modules, such as fleet
management, request for service,
etc.
License costs per user typically less
expensive than Tier 1
Implementation
Services for New
Installation
Requirement for multiple full time staff
to implement
Requires significantly greater
implementation vendor resources than
Tier 2 to implement including key staff
that are full-time to the project
Software implementers are typically
integrators / channel partners
Implementation services cost ratio
comparison to license fees often many
times software cost (frequently 3:1 or
higher)
Vendor “Homework” approach has
organization responsible for many
implementation tasks
Frequently implemented with
organization resources not
dedicated to the project
Rarely requires full-time vendor staff
to implement
Software vendors also implement
their own solutions
Implementation services ratio
typically closer to 1:1. 2:1 would be
more robust services approach
Staff required for
Implementation1
15-30 FTE 3-7 FTE
Ongoing support
staff required
6-14 FTE 1-3 FTE
1 Based on Plante Moran’s experience working with other clients on ERP selection and
implementation initiatives.
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Characteristic Tier 1 Vendors Tier 2 Vendors
Cost Model for
Major Version
Upgrades
Most major upgrades include significant
license fee costs
Most major upgrades require significant
levels of vendor services to assist
License fees for version upgrades
often included with maintenance
fees
Most major upgrades require
moderate levels of vendor services
Software Support
Channel
Mixed, some direct, some through
implementer / value added reseller
channel
Primarily direct vendor support
Hosting Options Generally hosted internally, some
offering ASP. Workday is one of the
only multi-tenant web-based options.
Generally hosted internally, some
offering ASP. Few multi-tenant
web-based options.
Summary Comparison: On-Site vs. Hosted
Characteristic Advantages Disadvantages
On Premises /
Internally Hosted
Financial
Applications
Environment
City has design control of
application architecture to focus on
reliability, availability and scalability
Optimal solution for “heavy-weight”
applications (not necessarily
designed for thin-client
deployment), typical of Tier 2
solutions.
Application are generally more
customizable and more easily able
to be integrated to County best of
breed business applications
Direct data access for custom
reporting
Ongoing maintenance costs are
less substantial that with hosted
solutions
Application upgrades can be
performed and coordinated on the
City schedule incrementally more so
that with a vendor hosted solution
Leverages existing technology,
people, and contracts
System reliability, security,
maintenance, and management
will remain the responsibility of
the City
Higher capital costs –
particularly for hardware and
related operating and database
software
The time required to implement
a new City hosted environment
is typically longer than with the
vendor hosted model
Workstation replacement cycles
must be maintained to more
reasonable levels
Vendor Hosted
Environment
Shared services model will allow the
City the benefit of additional
technology and tools to enhance the
security and administration of the
environment, which otherwise may
be unaffordable
If the City’s network or Internet
service is down, then its
employees lose access to the
application.
Uptime and disaster recovery
become more critical
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Characteristic Advantages Disadvantages
Decreased technical administration
workload for City IT staff. Cost
savings associated with reduced
demands on IT personnel
Typically, there are fewer
workstation software installation
requirements potentially lengthening
workstation replacement cycles.
The ASP vendor is responsible for
installing the system and its
subsequent support. Any type of
technical issue can often be
immediately isolated to the software
client or host application providing
the software.
The City is able to predict and
control costs more accurately,
depending on the negotiated
subscription contract & fees.
Changes to meet the City’s
unique requirements may not be
possible. The City may have to
adapt certain system
administration processes to be
consistent with vendor
processes.
Database or information security
risks increase with the ASP
model. Distributed
responsibilities for security
practices make for a more
complex environment.
Integration to City hosted best of
breed business applications
becomes more complex
While reducing City technical
support effort, will require City IT
managers to increase effort with
maintaining the vendor
relationship. The City would
need to manage a Service Level
Agreement on an ongoing basis
and specifically during periods
of contract discussions or
consulting during customization.
Volatility of future costs: ASP is
a subscription service and fees
are paid over a period of time.
The City can negotiate an initial
purchase price and annual fees,
but has less control over
subsequent subscription fees
and is subject to rate hikes after
the predetermined contract
period ends.
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4 Options Analysis
Consistent with project objectives and based on the evaluation of the current functional and the
technology environment, the City has three primary options in regard to the strategic direction of a
future applications environment, with variations/alternatives within multiple options. These are defined
at high level in the table below and analyzed in additional detail throughout this section of the report.
Key assumptions were necessary in preparing these estimates and these are represented in the
Detailed Cost of Ownership Details and Assumptions Section located in Appendix D.
Option Summary of Options/Alternatives
Option 1: Status
Quo with
Investment
Do Not Change the Current Application Environment. Remain on
the current version of SAP and retain existing best of breed systems.
Option 2: Upgrade
SAP
Upgrade SAP and pursue one of the alternatives below:
Upgrade all existing modules and retain existing best of
breed systems.
Upgrade only SAP Core Financials/HR/Payroll modules,
retain existing Best-of-Breed systems and procure a new
‘Best of Breed’ Utility Billing Solution to replace SAP Utility
Billing.
Option 3: New
ERP Environment
Replace Current Systems with an Integrated Public Sector
Focused ERP System and pursue one of the alternatives below:
Replace SAP and current best of breed solutions with a fully
integrated public sector focused ERP solution and procure a
separate utility billing best-of-breed solution
Replace remaining SAP functionality with a fully integrated
financials/hr solution, retain the current best of breed
systems and procure a utility billing best of breed.
Further details are described within each option analysis including their advantages and
disadvantages and other key factors for the City’s consideration.
4.1 OPTION 1: STATUS QUO WITH INVESTMENT
OVERVIEW
The City always has the option to remain with the ‘status quo’ environment and remain on its current
version of SAP and additional best-of-breed systems. This option represents the City’s current
investment position with the resources currently in place supporting the SAP environment on premise
today. It also represents the existing mix of best of breed or third party applications interfaced with
SAP supporting the budgeting, fixed asset / asset management, human resources, purchasing,
revenue collection, treasury, and utilities management. The City is paying a premium for the addition
of best of breed solutions when core SAP functionality exists but cannot be fully realized.
ADVANTAGES
Included below is a list of the most significant advantages to continuing with the status quo at the City:
1. Focus on existing enhancement requests: The City could focus on completing the existing
SAP enhancement requests in the queue
2. Limited Operational Impact: This option would not impact the financial and human resources
functions which have a broader internal user base.
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DISADVANTAGES
Included below is a listing of the most significant disadvantages to continuing with the status quo at
the City:
1. Product ‘Sunset’: The City is currently reaching the end of SAP’s ECC 6.0 support in
December 2015 and will be charged a premium for support beginning in 2016.
2. Staffing Challenges: The City’s SAP support team is not adequately staffed in number or
sufficient expertise to keep pace with the level of service demanded by the City’s business
units. The delays in supporting the core system environment are driving staff to pursue best of
breed solutions replicating the capabilities within the SAP core and extended modules.
3. High Costs: The City’s investment in supporting its ERP environment is significantly higher
than the vast majority of peer communities Plante Moran evaluates as it conducts its needs
assessments in terms of employees, operational complexity, and ERP requirements
represented by the City and inventoried in this evaluation.
4. Interface Complexity: The number of interfaces the City requires demands a system
architecture that facilities data exchange and the present, legacy environment is not optimized
in this manner.
OPPORTUNITIES
1. Training and Support: Identify staff training requirements and reporting needs within all
business units to support the systems administration for the next three years. Seek to provide
tactical training options to the City’s team especially in the areas of reporting and analysis.
OPTION 1: COST ESTIMATES AND SUMMARY
Based on Plante Moran’s experience with projects of similar scope, we have estimated internal and
external cost projections for the City to remain in its existing environment/status quo as represented
below. Key assumptions were necessary in preparing these estimates and these are represented in
the Detailed Cost of Ownership Details and Assumptions Section located in Appendix D.
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For several reasons, Palo Alto does not appear to have the luxury of maintaining the status quo and
continuing to use the existing SAP system ‘as- is’ for several more years. As noted in the Gap
Assessment section of this report, a number of functions work poorly at best. The support for the SAP
Utility Billing is challenged and this area is especially strategic for the City because of its importance
as a revenue source. Lastly, the SAP release the City is currently running is nearing the end of its
lifecycle, and the City will have increased difficulty in obtaining support for this software if it does not
upgrade.
Option 1
ON PREMISE
Status Quo
with Investment
EXTERNAL COSTS
One-Time Cost Summary
Software License Fees -$
Additional Hardware Costs N/A
Consulting Implementation / Data Conversion / Interface Development -$
Training N/A
System Selection & Implementation Planning Fees N/A
Total External One-Time Costs -$
Reoccurring Cost Summary
Annual Software Licensing & Solution Support 667,910$
Consulting Support Services 250,000$
Cloud (includes Licensing, Support, Interfaces & Consulting Services)-$
Training 112,500$
Total External Recurring Costs 1,030,410$
INTERNAL COSTS
Reoccurring Cost Summary
Current Support FTE 2,073,000$
Additional Support FTE'S -$
Total Internal Recurring Costs 2,073,000$
Year #1 Grand Total Cost 4,133,820$
FIVE YEAR ESTIMATES
Five-Year Estimate *17,138,248.00$
Cost Category
* Estimate includes one-time and reoccurring costs during year one, annual software licensing and solution support for planned
application purchases in year one are assumed to incurred in years 2-5 only, and the future value of investments has been adjusted
for years 2-5 to account for a 3% annual rate for inflation.
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4.2 OPTION 2: UPGRADE SAP
OVERVIEW
The City could decide to increase its current SAP investment and pursue a number of upgrade options.
This choice represents the City upgrading its current SAP investment and pursuing one of the
alternatives below:
1. Option 2, Alternative A: Upgrade all existing SAP modules and retain existing best of breed
systems.
2. Option 2, Alternative B: Upgrade only SAP Core Financials/HR/Payroll modules, retain
existing Best-of-Breed systems and procure a new Best of Breed Utility Billing Solution to
replace SAP Utility Billing Functionality.
4.3 OPTION 2, ALTERNATIVE A
Upgrade SAP and Retain Existing Best-of-Breeds.
This option represents the City’s migration to a Hybrid Cloud where the City would take advantage of
the HANA Enterprise Cloud to take advantage of hosted and managed services from SAP. The City
would assume maintenance responsibility for the non-SAP applications that would reside in this
environment and will retain ownership of these licenses.
ADVANTAGES
Included below is a listing of the most significant advantages to upgrading the current SAP
environment and retaining the existing best-of-breed portfolio:
1. Quicker Implementation: The City could accept the existing SAP proposal and move quickly
to begin work on the project. Even if the City would decide to bid the project with alternative
consulting vendors, as discussed below, the project would still move more quickly than one
requiring selection of a new ERP system.
2. Builds on Existing SAP Expertise: This alternative takes advantages of existing SAP
expertise among the general City staff and also the IT staff.
3. Builds on Existing SAP Relationship: This alternative also allows the City to build on an
existing relationship with SAP, rather than begin a new relationship with a new vendor. The
City retains ownership of its SAP licensing and has flexibility as to the environment it chooses
to manage its applications. The City will continue to pay an annual licensing fee that will
include software maintenance, migration services for SAP’s core finances, a new HR solution,
and a new utilities billing solution.
4. Utilization of Modern Cloud Technology: The City would be able to leverage the HANA
Enterprise Cloud architecture for both its business intelligence and application interface needs.
5. Improved Functionality: The SAP SRM module, enterprise asset management solution, e-
procurement solution, and an HR module are incorporated in this option.
6. Staff Optimization: Internal staff support would be reduced by 4.4 FTE’s in this new
environment for a total of 8 dedicated FTE’s. This includes seven (7) staff dedicated to
supporting SAP and one staff member dedicated to managing of the City’s Enterprise Asset
Management System.
DISADVANTAGES
Included below is a listing of the most significant disadvantages to upgrading the current SAP
environment and retaining the existing best-of-breed portfolio:
1. Mismatch of Technology to City’s Business Requirements: The City’s ERP requirements
do not appear to cross the threshold of being unique enough to require a Tier 1 ERP system
and the capabilities of Tier 1.5 and Tier 2 systems are believed to fulfill the City’s strategic
needs.
2. Proliferation of Best-of-Breed Systems: The City continues to invest in best of breed
solutions that duplicate capabilities available by the core SAP functionality available (e.g.
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e-receivables, asset management, human resources). The addition of specialized best of
breed applications increases the City’s overhead to test, manage, and coordinate the version
control for each system interface.
3. Complexity of Interface development and Support: The specialization necessary to
manage each additional best of breed application requires ongoing training that must be
coordinated between the business unit (core application stakeholders) and information
technology so institutional knowledge is retained.
4. High Cost of Ownership: Excess cost burden over five years exceeds $25 million in external
and internal funding is extreme.
5. Utility Billing Challenges: The SAP utilities billing solution proposed may require further
evaluation and has not been determined to adequately meet the requirements expected by the
Utilities Department.
4.4 OPTION 2, ALTERNATIVE B:
Upgrade SAP Core Financials/HR/Payroll Modules Only Keep Existing Best-of-Breed Systems
Obtain Best of Breed Utility Billing Solution.
This option is essentially identical to as Option 2 ’a’ above with the exception of the addition of a
utilities best of breed system. The overlap between the core SAP and best of breed solutions remains
in this option and it does not appear to offer a viable strategic alternative.
ADVANTAGES
Included below is a listing of the most significant advantages to upgrading the current SAP
financials/HR/payroll environment only, but also selecting a new non-SAP utility billing solution:
1. Appropriate Functionality: The Utilities Department has a solution that is designed to fulfill
the robust requirements servicing its water, sewer, gas, electric, and fiber billing requirements
that is compatible with its field resource application needs.
2. Utilization of Modern Cloud Technology: The City would be able to leverage the HANA
Enterprise Cloud architecture for both its business intelligence and application interface needs.
3. Builds on Existing SAP Expertise: This alternative takes advantages of existing SAP
expertise among the general City staff and also the IT staff.
4. Builds on Existing SAP Relationship: This alternative also allows the City to build on an
existing relationship with SAP, rather than begin a new relationship with a new vendor. The
City retains ownership of its SAP licensing and has flexibility as to the environment it chooses
to manage its applications. The City will continue to pay an annual licensing fee that will
include software maintenance, migration services for SAP’s core finances, a new HR solution.
5. Improved Functionality: The SAP SRM module, enterprise asset management solution, e-
procurement solution, and an HR module are incorporated in this option.
6. Staff Optimization: Internal staff support would be reduced by 4.4 FTE’s in this new
environment for a total of 8 dedicated FTE’s. This includes four (4) staff dedicated to
supporting SAP and one staff member dedicated to managing of the City’s Enterprise Asset
Management System. Three (3) staff business analysts would continue to support the best of
breed utilities system.
DISADVANTAGES
Included below is a listing of the most significant disadvantages to upgrading the current SAP
financials/HR/payroll environment only, but also selecting a new non-SAP utility billing solution:
1. Mismatch of Technology to City’s Business Requirements: The City’s ERP requirements
do not appear to cross the threshold of being unique enough to require a Tier 1 ERP system
and the capabilities of Tier 1.5 and Tier 2 systems are believed to fulfill the City’s strategic
needs.
2. Proliferation of Best-of-Breed Systems: The City continues to invest in best of breed
solutions that duplicate capabilities available by the core SAP functionality available (e.g. e-
receivables, asset management, human resources). The addition of specialized best of breed
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applications increases the City’s overhead to test, manage, and coordinate the version control
for each system interface.
3. Complexity of Interface development and Support: The specialization necessary to
manage each additional best of breed application requires ongoing training that must be
coordinated between the business unit (core application stakeholders) and information
technology so institutional knowledge is retained.
4. High Cost of Ownership: Excess cost burden over five years exceeds $25 million in external
and internal funding is extreme.
4.5 OPTION 2: COST ESTIMATES AND SUMMARY
Based on Plante Moran’s experience with projects of similar scope coupled with existing SAP upgrade
pricing information already provided to the City, we have estimated internal and external cost
projections for the City to upgrade its current SAP investment. Key assumptions were necessary in
preparing these estimates and these are represented in the Detailed Cost of Ownership Details and
Assumptions Section located in Appendix D.
Although upgrading SAP to the newest version and redeveloping the related processes as part of the
project seems viable, using this project to also upgrade Utility Billing with SAP would be difficult. If the
City decides to pursue and SAP upgrade path, we would instead suggest focusing on upgrading to
SAP while implementing a separate best-of-breed utility billing system. Based on our discussion with
City end users and knowledge of the public sector software marketplace, the City would seemingly
receive better utility billing functionality and support from either a separate best-of-breed utility system
or the utility billing abilities in a Tier II ERP system.
Option 2a Option 2b
ALL IN CLOUD
Upgrade SAP and Retain Existing
Best of Breed Systems
MIXED ENVIRONMENTS
Upgrade SAP Core Financials/HR/Payroll
Modules Only Keep Existing Best of Breed
Systems Obtain Best of Breed Utility Billing
System
EXTERNAL COSTS
One-Time Cost Summary
Software License Fees 3,628,151$ 3,391,151$
Additional Hardware Costs N/A N/A
Consulting Implementation / Data Conversion / Interface Development 589,350$ 1,009,757$
Training 566,850$ 686,850$
System Selection & Implementation Planning Fees N/A 80,000$
Total External One-Time Costs 4,784,351$ 5,167,758$
Reoccurring Cost Summary
Annual Software Licensing & Solution Support -$ 64,138$
Consulting Support Services -$ -$
Cloud (includes Licensing, Support, Interfaces & Consulting Services)3,421,439$ 2,921,439$
Training 150,000$ 165,000$
Total External Recurring Costs 3,571,439$ 3,150,577$
INTERNAL COSTS
Reoccurring Cost Summary
Current Support FTE 510,000$ 510,000$
Additional Support FTE'S 530,000$ 530,000$
Total Internal Recurring Costs 1,040,000$ 1,040,000$
Year #1 Grand Total Cost 6,267,261$ 6,650,668$
FIVE YEAR ESTIMATES
Five-Year Estimate *$25,559,803 $24,182,480
Cost Category
* Estimate includes one-time and reoccurring costs during year one, annual software licensing and solution support for planned application purchases in year one are
assumed to incurred in years 2-5 only, and the future value of investments has been adjusted for years 2-5 to account for a 3% annual rate for inflation.
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4.6 OPTION 3: NEW ERP ENVIRONMENT
OVERVIEW
Through a competitive RFP process, the City could procure and implement a fully integrated Tier 2 or
a Tier 1.5 ERP solution that includes both Core ERP and Extended ERP Modules, plus some variety
of integrations with best-of-breed solutions (e.g., Sympro). Most Tier 2 solutions are designed
specifically for the public sector so that they offer a wide variety of integrated modules versus Tier 1
solutions that are utilized by a wide variety of industries, including multi-national corporations with very
unique requirements. Tier 2 solutions typically have fewer configuration options and are tailored to
public sector organizations but require a significantly lower implementation effort and on-going internal
support. Tier 1 solutions (like SAP) typically require a much greater level of implementation,
maintenance and support resources but can provide the City with more robust functionality and greater
flexibility in order to handle very unique operational situations and business processes that are tailored
to the City’s. Given this assessment, it is likely that the a Tier 1.5 or Tier 2 solution would replace the
current SAP and best-of-breed applications and as well as the many additional spreadsheets and
other “shadow systems”
By changing systems, the City would maintain and support the current environment through the future
system selection and implementation effort. The system selection would be a competitive
procurement with stakeholder input to define requirements and measure vendor compliance in fulfilling
them. It would require a capital investment and necessitate ongoing sustained investment through
software maintenance and continued internal technical support.
Overall, in Option 3, the City would replace current systems with an Integrated Public Sector Focused
ERP System and pursue one of the alternatives below:
1. Option 3, Alternative A: Go to market for a fully integrated public sector focused ERP solution
and procure a separate utility billing best-of-breed solution.
2. Option 3, Alternative B: Go to market for a fully integrated core financials / human capital
management solution, retain the current best of breed systems and procure a utility billing best
of breed.
4.7 OPTION 3, ALTERNATIVE A:
Go to market for a fully integrated public sector focused ERP solution and procure a separate
utility billing best-of-breed solution.
This option assumes the City reinvests in a new, fully integrated ERP solution that would take
advantage of the capabilities of a Tier 1.5 or Tier 2 solution. This alternative is to select and
implement a government-oriented ERP system, which would be used for all functions, including those
supported by current best-of-breed solutions such as budget support. This alternative would also
pursue the procurement of a best of breed utility billing module for utility support. Overall, the City
would prepare an RFP for a solution that incorporates all current/required functionality in addition to
integrating with a new utilities best of breed system.
ADVANTAGES
Included below is a listing of the most significant advantages to replacing the existing applications
environment with an integrated ERP at the City:
1. Streamline the City’s Technology Investment and Improve Functionality: The City
selects an integrated ERP solution that fulfills the needs currently serviced by SAP in addition
to divesting itself from a majority of the best of breed systems the City owns and is obligated
to pay licensing maintenance, invest in internal/external staff support, and train staff to
effectively utilize.
2. Least Cost: The value proposition achieved from the savings estimated over five years for
this option exceeds a range between $7 - $15 million over the comparable alternatives.
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3. Staff Optimization: Internal staff support would be reduced by 4.4 FTE’s in this new
environment for a total of 8 dedicated FTE’s. This includes four (4) staff dedicated to
supporting the new ERP and one staff member dedicated to managing of the City’s Enterprise
Asset Management System. Is also retains three (3) staff dedicated to supporting the utility
best of breed system.
4. Less Reliance on Outside Consultants: The City builds internal capacity to administer and
optimally configure its ERP environment without relying upon external contract services for on-
call support services. It can also more effectively recruit and retain staff members that do not
require the specialization or highly competitive salary expectations SAP systems demand in
the heart of Silicon Valley.
5. On Going Support Sustainability: The City’s operations have demanded increased staffing
efficiency following the reductions in force drastically impacting the organization’s ability to
manage its SAP systems. The levels of expertise and staffing continues to increase as
service level expectations increase while support personnel remain unchanged. Furthermore,
the absence of succession planning has significantly impacted the institutional memory of the
organization. A Tier 1.5 or 2 system can be maintained with fewer staff while providing more
options for staff to assume a greater role in learning to manage less complex systems.
6. Most Government-Oriented: The Tier 1.5 or Tier 2 ERP system focused on a government
market would be more responsive to structuring solutions to meet the needs of the municipal
industry best practices.
7. Less Complex ERP: A Tier 1.5 or Tier 2 ERP system would be less complex to learn,
configure.
8. Fresh Start: With the move to a new product, the excitement of a “fresh start” makes the
implementation somewhat more likely to be successful. And in this case, staff involved in utility
billing would have the additional motivation of being able to implement a public sector focused
utility billing system.
DISADVANTAGES
Included below is a listing of the most significant disadvantages to replacing the existing applications
environment with an integrated ERP at the City:
1. Change Management Challenges: This option will cause the greatest disruption to staff
within the organization as processes, procedures, and training needs would likely require the
greatest amount of re-engineering.
2. Existing Investment Lost: The investment made to interface the present SAP systems would
be lost and the third party systems would have to be re-interfaced.
3. Extended Duration of Implementation Project: Establishing a transition of this magnitude
will require staff augmentation that will increase staff support requirements in order to
complete a complete migration which will require several years to perform.
4.8 OPTION 3, ALTERNATIVE B:
Go to market for a fully integrated core financials / human capital management solution, retain
the current best of breed systems and procure a utility billing best of breed.
This option assumes the City reinvests in a limited government-oriented ERP environment where the
existing and planned best of breeds would be retained in addition acquiring a new best of breed
utilities management system.
ADVANTAGES
Included below is a listing of the most significant advantages to replacing the current SAP
financials/HR/payroll environment only, retaining the existing best-of-breed project portfolio and
selecting a new non-SAP best-of-breed utility billing solution:
1. Low Cost: The value proposition achieved from the savings estimated over five years for this
option exceeds a range between $3 - $11 million over the comparable alternatives.
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2. Staff Optimization: Internal staff support would be reduced by 4.4 FTE’s in this new
environment for a total of 8 dedicated FTE’s. This includes four (4) staff dedicated to
supporting the new ERP and one staff member dedicated to managing of the City’s Enterprise
Asset Management System. Is also retains three (3) staff dedicated to supporting the utility
best of breed system.
3. Less Reliance on Outside Consultants: The City builds internal capacity to administer and
optimally configure its ERP environment without relying upon external contract services for on-
call support services. It can also more effectively recruit and retain staff members that do not
require the specialization or highly competitive salary expectations SAP systems demand in
the heart of Silicon Valley.
4. On Going Support Sustainability: The City’s operations have demanded increased staffing
efficiency following the reductions in force drastically impacting the organization’s ability to
manage its SAP systems. The levels of expertise and staffing continues to increase as
service level expectations increase while support personnel remain unchanged. Furthermore,
the absence of succession planning has significantly impacted the institutional memory of the
organization. A Tier 1.5 or 2 system can be maintained with fewer staff while providing more
options for staff to assume a greater role in learning to manage less complex systems.
DISADVANTAGES
Included below is a listing of the most significant disadvantages to replacing the current SAP
financials/HR/payroll environment only, retaining the existing best-of-breed project portfolio and
selecting a new non-SAP best-of-breed utility billing solution:
1. Complexity of Interface development and Support: The complexity of managing the myriad
of best of breed interfaces would present a significant implementation risk to success in
addition to an obvious premium increase with respect to cost as licensing and maintenance for
each system would need to be carried forward. The cost savings benefit is considerably
diminished in this alternative in contrast to a completely integrated alternative.
2. Change Management Challenges: This option will cause significant disruption to staff within
the organization as processes, procedures, and training needs would likely require the
greatest amount of re-engineering.
3. Existing Investment Lost: The investment made to interface the present SAP systems would
be lost and the third party systems would have to be re-interfaced.
4. Extended Duration of Implementation Project: Establishing a transition of this magnitude
will require staff augmentation that will increase staff support requirements in order to
complete a complete migration which will require several years to perform.
4.9 OPTION 3: COST ESTIMATES AND SUMMARY
Based on Plante Moran’s experience with projects of similar scope coupled with past actual pricing
taken from selected Tier 1.5 and Tier 2 vendor proposals to similar sized entities as the City, we have
estimated internal and external cost projections. Key assumptions were necessary in preparing these
estimates and these are represented in the Detailed Cost of Ownership Details and Assumptions
Section located in Appendix D.
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Overall, the City may decide to continue with SAP, but in view of the total cost of ownership differential
as well as the problems that it has had in maintaining and optimizing SAP in the past, Option 3 will
allow the City to pursue a fresh start, lowering the total cost of ownership and improving functionality
for City end users.
Option 3a Option 3bNEW ERP
Go to Market for a Fully
Integrated Public Sector
Focused ERP Solution and
Procure a Separate Utility Billing
Best of Breed Solution
NEW ERP
Go to Market for a Fully Integrated Core
Financials/Human Capital Management
Solution, Retain the Current Best of
Breed Systems and Procure a Utility
Billing Best of Breed
EXTERNAL COSTS
One-Time Cost Summary
Software License Fees 1,069,984$ 1,670,133$
Additional Hardware Costs N/A N/A
Consulting Implementation / Data Conversion / Interface Development 2,142,027$ 2,338,275$
Training 120,000$ 250,850$
System Selection & Implementation Planning Fees 200,000$ 200,000$
Total External One-Time Costs 3,532,012$ 4,459,258$
Reoccurring Cost Summary
Annual Software Licensing & Solution Support 241,675$ 205,874$
Consulting Support Services 80,698$ 64,425$
Cloud (includes Licensing, Support, Interfaces & Consulting Services)-$ 646,080$
Training 75,000$ 115,000$
Total External Recurring Costs 397,373$ 1,031,379$
INTERNAL COSTS
Reoccurring Cost Summary
Current Support FTE 510,000$ 510,000$
Additional Support FTE'S 400,000$ 530,000$
Total Internal Recurring Costs 910,000$ 1,040,000$
Year #1 Grand Total Cost 4,442,012$ 5,942,168$
FIVE YEAR ESTIMATES
Five-Year Estimate *$9,911,572 $14,608,045
* Estimate includes one-time and reoccurring costs during year one, annual software licensing and solution support for planned application purchases in year
one are assumed to incurred in years 2-5 only, and the future value of investments has been adjusted for years 2-5 to account for a 3% annual rate for
inflation.
Cost Category
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4.10 PLANTE MORAN RECOMMENDATION
While many incremental improvements could be made or added to the current applications which
would mitigate the investment required by changing systems, the primary challenge with maintaining
the status quo would be the inefficiencies and lack of centralized information due to multiple systems
and shadow systems.
Should the City conclude to remain with the current financial, procurement and personnel software
applications environment via an SAP Upgrade, it would delay the complexities of the decision process.
However, it may be likely that the City would conclude to change financial and personnel application
suites in the future, and the timing of the change may be less advantageous.
Overall, remaining with the current environment does not appear feasible in the long term and
inappropriate as a future strategic direction in context of the City’s strategic goals and
concerns of the current financial, procurement and personnel applications environment.
As such, the City should direct its analysis efforts towards the consideration of evaluating the
advantages and disadvantages of changing the current environment to either further deploying and
integrating current systems or replacing them with a suite of integrated ERP modules from an ERP
provider.
While current inefficiencies were difficult for City staff to quantify, there is a common belief amongst
staff that information tracking tools and processes are inefficient, and there is a universal
acknowledgement that current information silos and the complexity of the current environment are root
causes of the issue. Given the functional and technical risks associated with interfacing the City’s
multiple standalone core financial, procurement and personnel systems, as well as the related need to
fundamentally re-implement the existing system, the City may be best served to evaluate the full range
of ERP options via a competitive bid process.
Assuming that the results of the ERP System Evaluation are considered and the recommendations for
system selection and implementation presented in the sections below are followed, we recommend
that the City pursue Option 3, Alternative A: Go to market for a fully integrated public sector
focused ERP solution and procure a separate utility billing best-of-breed solution.
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5 Recommended Next Steps
5.1 ERP SYSTEM EVALUATION APPROACH
To implement the recommendations presented herein, the following approach is recommended:
1. Review and obtain a complete understanding of the ERP System Evaluation Report.
The report and accompanying options and alternatives should be reviewed in their entirety to
gain an understanding of what is being presented and to prompt discussion and feedback on
elements of the report.
2. Garner support for the recommendations. Within the report, there are numerous
recommendations that will direct the use of staff time and other resources at the City. Support
for the recommendations will be essential in its success. This support must come from the
City leadership including City Council, Executive Steering Committee and Department
Directors.
3. Establish capital budgets and obtain funding. As part of the initial implementation of the
Plan and on an on-going basis, funding will need to be obtained to implement the initiatives in
the Plan.
4. Execute. Once approval for the project has been obtained and initial capital funding requests
initiated, the implementation of recommendations can occur. Plante Moran has recommended
teams of resources by process area to execute specific initiatives. The City will need to
assign specific resources to fulfill the roles recommended.
5. Continue with system procurement. Best practice system selection approaches and
implementation approaches should be considered in the selection of a new system to replace
current SAP and related systems.
5.2 PROJECT STRUCTURE AND GOVERNANCE
Execution of the recommendations and implementation of a new system will require a well-coordinated
and well-organized governance structure in which to operate and manage the project. For the new
system being considered by the City, many staff at the City will be impacted. Complex system
implementations are most successful at organizations with structured project governance.
The process and technology changes will be significant and will impact all departments. There will
also likely be policy changes that will need to be considered and implemented to receive the full
benefits.
Strong project management is also critical for deployment, and becomes increasingly important with
the new system investment. As a result, it will be critical to form a project structure that incorporates
the following:
1. Considers the needs of a variety of stakeholders
2. Provides the ability to make decisions in the most efficient and effective manner
3. Ensures that project communication is flowing to the right individuals at the right time including
those that are part of the project team and those external to the project team
4. The project team structure is empowered by management to enforce policies
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Recommended Strategies:
1. Confirm a formal governance structure to coordinate the selection of the new system using the
current ERP evaluation teams as a basis, with the intent that structure can be leveraged and
specific roles can be re-defined for future design, implementation and maintenance phases of
the system lifecycle.
2. As part of the RFP process, request information from vendors as to the optimal City staffing
structure and time commitment required for a successful system implementation including on-
going support and maintenance of the system.
3. Prior to launching the implementation phase of the project, establish expectations with the City
staff as to the time commitment that will be required for a successful implementation.
4. With the assistance and advice from the selected vendor(s), institute an implementation
governance structure that is well-staffed and supported by executive management within the
City.
5. Establish policies to sunset legacy solutions, supplemental applications and shadow systems,
in conjunction with the new system implementation so that they do not perpetuate an
environment of dual information tracking.
6. Establish data retention requirements to guide and manage the scope of required data
conversion.
5.3 REQUEST FOR PROPOSAL (RFP) TACTICS
The Request for Proposal (RFP) for a new system will encompass a number of sections including a list
of the scope of software modules to procure and a list of detailed software specifications
supplemented by other tables including interface requirements and migration paths for existing
systems. We recommend the organization of potential modules as they relate to the continued
assessment for inclusion in various phases of the project to be organized as follows:
1. Core Modules: These modules are ones whose existing legacy software resides in SAP that
are intended to be replaced as part of the project through the RFP process although their
replacement will likely occur in various stages of software implementation.
2. Expanded Modules: These modules are ones that are being considered for further evaluation
during the RFP process and may or may not be replaced as part of the project depending on a
number of factors.
3. System Interfaces Required: These modules are ones that are not within the scope of the
project but may have interfaces to the implemented new solution. At some point in the future,
the City may consider replacement of these modules or a marketplace assessment to
determine the current vendor solution set that exists for these areas.
Recommended Strategies:
The following strategies should be considered by the City as it continues through the RFP and due
diligence activities leading up to the selection of a future ERP solution:
1. Vendor clarity in RFP. Ensure that software vendors are clear as to the strategy of the
organization as it relates to the procurement of replacement software.
2. Open procurement process. Preliminary project cost estimates for Tier 1.5 vs. Tier 2
vendors vary significantly. The City should define both functional and technical requirements
as part of the RFP process and allow both tier vendors propose their respective solutions.
Then the City will be able to evaluate the solutions based on the selection criteria and
conclude on the most appropriate level of investment. The ERP Marketplace Assessment
section further details the differences between the tiers.
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3. Identify other vendor capabilities and solution scope. Within the RFP, include additional
questions pertaining to the capabilities of vendors in other areas not considered as part of the
initial scope of the project (i.e., system interface required modules) but which may be available
from the vendors.
4. Balance a strategic vendor decision with a preliminary investment. Include all modules
which the City may consider as part of a new system procurement and structure the RFP to
provide “a la carte” pricing. This will allow the City to evaluate the full scope of the vendor
solution to aid in the strategic decision of the vendor platform, however make a subsequent
conclusion on phasing the investment.
5. Progressive elaboration. As the City learns more about the work of the project, planning can
progress, becoming more elaborate, over time. Using consultant templates and expert
judgment can assist with leveraging lessons learned from other similar local public sector
organizations; however specific implementation planning requirements will be increasingly
defined throughout the project phases.
6. Evaluate financing options. As part of the RFP process, the City may wish to consider
financing options that are available from the vendor or other third party to provide a more
palatable payment stream to fund the capital cost of the project.
7. Leverage a prime vendor approach towards implementation. Regardless of the solution
set that is selected, to the extent possible the City should work to maximize contracting with a
single, prime vendor who has prime responsibility for the implementation of the entire solution
set that is purchased by the organization. It is reasonable to expect that a substantial portion
of the current manual processes and shadow systems could be incorporated within a new
system. With the prime vendor approach, the City would have the opportunity to choose
separate personnel system, financial and purchasing functions should be combined and it is
envisioned that the software marketplace offers solutions that would provide the City the
opportunity to integrate all these major functions if desired.
8. Software and services solutions. Ensure that information is gleaned from providers of new
system solutions in areas of both product and service as part of the RFP and due diligence
activities. Specifically, this would include the following:
a. Review their product offerings as requested in the RFP.
b. Identify and contact relevant references of a comparable size to the City.
c. Develop vendor demonstration agendas that are geared towards identifying how the
vendors will achieve specific the City outcomes.
For multi-product solutions, assess the degree in which these various products have operated with
each other at other clients.
5.2 PHASING
Due to the integration and data access that they can provide, many systems, particularly ERP systems,
are complex and require organizational commitment to successfully implement them. It is not
uncommon for organizations the size of the City to take between 12 to 24 months to implement such
systems. The implementation of a new system presents a number of options as to when certain
modules are deployed frequently based on when the various business cycles are executed within the
City such as:
Fiscal year-end
Calendar year-end
CAFR development
Budget development
Open enrollment
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Recommended Strategies:
Although there is no perfect answer as to when certain modules should be deployed, the following
best practices should be considered related to the implementation phasing set of activities:
1. Implement complimentary modules together. There is a natural implementation phasing of
like modules as part of the deployment of a new system. For example, core financial modules
should be implemented together. Likewise, HR/Payroll modules, to the extent incorporated,
should be implemented together as well. This is another example of factors to be considered
when determining an overall implementation approach.
2. Avoid “Big Bang Approach”. The deployment of a new system is a very significant project
requiring a large amount of staff and vendor time to implement as it will impact people,
process, policy and technology. Careful phasing of implemented modules should be
performed versus a “big-bang” approach of implementing all software at the same time to
minimize overall project risk and to ensure optimal utilization of resources. The City may wish
to consider separating core financial modules, payroll and personnel, and procurement
functions into separate phases. Integrations to other the City systems should follow, as the
system modules are implemented over time.
3. Evaluate opportunities for “Quick-Win” implementations. There are a number of
opportunities to obtain quick-win implementations of a new system that provide visible
evidence of project success and minimize the risk of bringing all modules up simultaneously.
Frequently, modules such as Debt Service Management and Investment Management are
isolated to a limited number of individuals, are relatively simple to deploy and do not have
significant interaction with the core financial system. Opportunities for these quick-wins
should be explored during the vendor selection phase of the project and more closely during
system implementation. Certain “quick-wins” may need to be initially implemented in stand-
alone mode with or without temporary bridges in place and then later integrated when the core
system is live.
4. Implement considering natural business cycles. A natural tendency is to implement the
financial components of a new system such that go-live is on a fiscal year-end to have all
transactions for a year on one system. In general, there are many cases where this is not the
ideal situation as the post go-live challenges with implementing a new system impede
significant activities that are required for year-end close. HR/Payroll solutions tend to go-live
on a quarterly basis and the City may wish to consider going live at a calendar year break due
to the processing of W-2 statements for employees. Regardless, natural business cycles
should be considered as part of the phasing of new system modules.
5.3 STAFF BACKFILL
Frequently, staff who are the most desirable to lead a new system a replacement project are also the
ones who also have the most knowledge of the legacy environment and are viewed as key in
maintaining the integrity of the existing environment. This is true at the City in certain areas such as
Finance.
Recommended Strategies:
1. Factor backfill costs in project budget. The City should consider the feasibility of
additionally factoring backfill costs into the overall project budget that is presented to the City
Council as part of the entire project budget.
2. Consider recent retirees to provide backfill. To the extent feasible, evaluate the
opportunity of using any recently retired staff to provide backfill support for the project or to
provide assistance in critical areas deemed important for the project due to their institutional
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knowledge. This may include areas such as data cleansing, where institutional knowledge is
relevant, or for addressing day to day operational responsibilities, while current the City
subject matter experts focus their attention on the new system implementation effort.
3. Consider workload sharing. Based on normal business cycles, certain City staff may
become especially busy addressing operational requirements. During these times, to the
extent that other City staff can re-focus their efforts to assist them in their operational duties, it
can mitigate the bottlenecks which can result and increase staff availability to participate on
the project. Additionally this can help with staff cross-training, and collectively “upgrade” staff
skills in each work area. To the extent that the City can proactively initiate such approaches in
advance of the new system implementation project, it can provide benefits to allow subject
matter experts to more easily transition to their project roles.
5.4 DATA CLEANSING / CONVERSION
Legacy systems frequently have data stored in a variety of formats either electronically within the
system or in hard-copy format that is deemed as critical, and has data retention requirements.
Vendors will generally provide two approaches towards the conversion of client data. In one method,
vendors will provide a template format to the City and request that all data to be converted is provided
in the requested format regardless of the number of data sources that currently house this information.
In the second method, vendors will manage both the extraction and conversion of information into the
template format. In both cases, the data conversion process will be iterative in terms of extracting,
converting, reporting and reviewing.
Likewise, cleansing of the data prior to the data conversion activity during implementation, though time
consuming, will generally make this process occur more smoothly. Regardless of the methods taken,
data conversion is considered a critical part of system implementation and one that can be a critical
risk to the project if not managed correctly. A certain amount of data cleansing can occur after data is
extracted using programming.
Recommended Strategies:
1. Data conversion requirements. Define general data conversion requirements in the RFP
and work with the tentative finalist vendor during the last stages of the selection to finalize the
scope of conversion within the Statement of Work (SOW) with the vendor.
2. Historical information. Avoid converting all historical information to the new environment.
Establish and use data retention guidelines to drive the scope of conversion. Instead,
consider the conversion of summary information as a first course of action unless detail is
needed.
3. Historical data access. Consider alternative options of accessing historical information other
than electronically. This may include printing of reports to electronic files or the creation of a
data warehouse.
4. Design conversion specifications. Develop a cross-walk between legacy and new system
data as part of the conversion process. For example, this may include development of an
interface that allows users to enter in an old account that then displays the same account in
the new structure. Likewise, an old vendor number could populate a field in the new system to
act as a cross-reference.
5. Data cleansing. Begin data cleansing activities as early as possible. For example, the City
may wish to start reviewing its existing vendor file and eliminating duplicates or vendors who
no longer exist. During the implementation phase of the project, most vendors will provide
specific instructions related to data cleansing activities.
6. Use of data warehouse. As a separate internal project, consider the use of a data
warehouse for housing of legacy data for historical reporting purposes. If this route is chosen,
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clear responsibilities for separately acquiring and implementing the data warehouse will be
required to consider both vendor and the City staff involvement.
5.5 INTERFACE DEVELOPMENT
Interfaces related to the deployment of a new system can exist in various forms as follows:
1. Standard imports or exports provided by the vendor’s solution with entities and systems
outside of the City (e.g., benefit providers, other governmental entities, etc.).
2. Interfaces between the vendor’s solution and applications that are not being considered for
replacement as part of the project.
3. Interfaces between the vendor’s solution and applications that are being considered for
replacement as part of the project that may or may not be provided by the prime vendor.
Decisions as to who will develop and provide on-going support for system interfaces are another
important factor to consider. Certain vendors will provide toolsets that assist in the development and
management of system interfaces.
Recommended Strategies:
1. Identify interface requirements early. Define potentially needed interfaces between the
new system and external entities in the RFP. This would include existing as well as desired
new interfaces that would be populated in the Application Interface Table of the RFP.
2. Define full scope of interfaces. Define potentially needed interfaces between the new
system and other City systems not being replaced in the RFP. This would include existing as
well as desired new interfaces that would be populated in the Application Interface Table of
the RFP. Identify other candidate interfaces in the RFP with systems that may or may not be
replaced.
3. Prime vendor and interfaces. Ensure that the prime vendor is responsible for the delivery of
all system interfaces during implementation.
4. Shadow support staff. City staff should shadow vendor staff during system implementation
to develop an understanding of their conversion tools such that the City can maintain those
interfaces designated for the City support going forward.
5. Leverage existing interfaces. Consider allowing the software vendors to maintain interfaces
that exist between their product and entities outside of the City (e.g. benefit providers, IRS,
etc.) and, as an option, other systems not being considered for replacement by the City.
6. Process redesign consideration of interfaces. In conjunction and as a result of the
implementation’s business process redesign activities, perform the necessary work to further
inventory the system interface requirements, develop an system interface plan, design and
develop the system interfaces, test and accept the interfaces and implement them in
conjunction with the “out of the box” system implementation.
5.6 REPORT DEVELOPMENT
Although the selected vendor will likely provide a significant number of reports and queries through
their base system there will be a need for the City to have existing reports customized and to have
additional reports developed that are not available as part of the core set of reports. The skill sets
required for report development include not only the report development tools but also an
understanding of the database and/or views which the reporting tools access. Likewise, if the City
pursues the use of a separate data mart / data warehouse in order to perform more complex analysis,
additional skill sets will be needed.
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When software vendors demonstrate their solutions, the expectation of users being able to perform
ad-hoc reporting themselves is heightened as the vendors will present the process as simply involving
the point and click of a few buttons to generate the desired results. In reality, the process of using the
tool and developing an understanding of the database/view takes a period of time.
Recommended Strategies:
1. Establish expectations around reporting. Reset staff expectations that traditional reporting
should not necessarily be the first or most appropriate method towards obtaining the financial,
procurement or HR information that they seek. Instead, as part of the overall training
approach, ensure that staff understand the self service, inquiry and portal functions available
in the system, and when to use them. Reset staff expectations that not all reports will be
available at the go-live transition and that all users will be able to generate ad-hoc reports.
2. Ad-hoc reporting tools team. Identify a joint team of process owners and technical support
staff to be trained on the ad-hoc reporting tools during the implementation. These staff will
likely be generating custom-developed reports for some time after the go-live period.
3. Assess ad-hoc reporting tools. Obtain a clear understanding during the selection process
as to the reporting options available with each vendor solution and, for each reporting option,
who typically is using the tool.
4. Custom reports. Work with the software vendor during the implementation phase of the
project to develop a select set of custom reports, with their assistance, to improve knowledge
transfer as to both the product and database structure.
5.7 CHANGE MANAGEMENT
Project success comes from having a very clear idea of how management would like to run the City,
and then using redesigned processes and a new system to facilitate the way the City has envisioned it.
When process and software implementations do not meet expectations it is often due to people issues,
and not necessarily the technology. Research indicates a correlation between the success of a
change initiative and how well the people side is managed throughout the change. That is why
applying a change management methodology is critical to the success of such an initiative. A rigorous
change management methodology is critical to supporting the successful launch of new processes
and systems. The purchase and implementation of a new system and related technology is done to
assist in meeting organizational objectives and improving performance. Organizational performance
is also impacted by the people of an organization and the processes used to complete work.
Throughout the project, the goal is to balance these components, as illustrated:
People
Process
Technology
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5.8 COMMUNICATION PLANNING
As part of the first steps of change management planning, the City should develop communications
plans intended to guide project communications from process redesign through post-implementation.
By its nature, the project will affect many staff across the City.
Acknowledging the diverse City audiences that will be involved and impacted by this project, a
Communication Plan should be developed to create awareness and make the project relevant by
effectively communicating the impacts to both internal and external stakeholders. Sample objectives
for a Communication Plan may include:
1. Accurately distribute information in a timely manner concerning important project benchmarks
and progress to employees.
2. Use various media to provide multiple sources from which information concerning the project
can be accessible.
3. Ensure all information available is updated and accurate.
4. Reduce confusion among employees by providing a sole directive and source from which all
project information originates.
5. Provide clear channels of communication within which City project staff can operate to lead to
an expedited solution to issues that arise during the selection and implementation and after its
completion.
6. Encourage feedback from employees across the City
Recommended Strategies:
1. Assign a communication coordinator. The City should assign a communications
coordinator to the project management office to maintain and execute the communications
plan.
2. Identify and empower change agents. A Communications and Change Management Team
should recommend the appointment of key “change agents” within each Department to nurture
'buy in' and get Department staff committed to taking relevant actions. Such team members
will be involved in educating Department staff about the impacts and benefits of the project
and be “inspiration agents” by helping Department staff find ways to discover their potential,
overcome barriers, and celebrate successes. These staff should monitor "what is working",
"what isn't working" and "what do we need to change" – and provide regular feedback on
progress to Department staff.
5.9 PROCESS RE-DESIGN
The ERP System evaluation activities that were conducted surfaced several opportunities for
improvements in the management and execution of existing processes. Through the course of
conducting process owner process user review sessions, process-specific as well as the City-wide
issues and opportunities were surfaced. The City should re-engineer appropriate business processes
in conjunction with the implementation of the new ERP, as part of a successful change management
approach.
The mapping of “to be” business processes and certain high level process redesign can be performed
in advance of the implementation, either prior to or during the time that the City is facilitating a RFP
process. Along with process redesign, the City should select key performance indicators (KPIs) that
will be used to measure the City’s performance along with targets that are based on best practices.
Ideally, the City will measure performance according to selected KPIs prior to implementation, six
months after implementation, one year after implementation and quarterly thereafter (some
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organizations evolve to monthly, especially once business intelligence and dashboard solutions are
implemented).
The City should keep in mind the following:
1. The earlier process redesign is performed in the selection process, the more information the
City will have about the “to be” process which can serve as a basis for selection, along with
other factors such as cost, functionality, technology, implementation timeframe, etc.
2. If performed early in the process (e.g., prior to selection), management at the City will likely
face trade-offs in terms of cost versus ability to support “to be” processes.
3. The City will need to remain flexible in terms of which parts of the “to be” process are actually
implementable, given the new system capabilities. In fact, the vendor solution may provide
features resulting in a better, more efficient “to be” process.
During the implementation phase of the project, there may be significant levels of review conducted by
the selected vendor(s) to understand existing City processes and how their software can be used to
improve the efficiency and effectiveness of these processes. While vendors may offer additional
optional services to provide enhanced levels of implementation support to their customers, it is
generally considered the responsibility of the client to develop the actual procedural documentation
that defines exactly how these processes will operate with the selected system for use by process
owning and process end-user staff.
5.10 5ERP SYSTEM TRAINING
The City should develop appropriate training plans in conjunction with the implementation of the new
system. The City does not currently have a formalized enterprise wide training program for existing
financial, procurement and human resources systems.
The process of providing training to on the new system should occur in in conjunction with the
implementation of the new system. Training should be both functional and technical. Functional
training should be for both process owners and process end users. It will also be critical to provide the
necessary technical training to the City IT and departmental “power user” staff.
Recommended Strategies:
1. Establish training expectations. During the RFP development and due diligence activities
associated with reviewing vendor responses, ensure that any specific training expectations
are articulated to the vendors. As part of the due diligence phase with the finalist ERP
vendors obtain a clear understanding as to the level of training activities they will conduct
during the implementation phase of the project and the specific training materials.
2. Training team. During the implementation of the new system, formulate a Training Team
which will focus both on the implementation training requirements on the development of an
ongoing internal training program for continued exploitation of the capabilities of the new
system over time. Consider the use of a “train the trainer” approach, whereby the City would
save on vendor implementation expense, as well as encourage process owners to become
knowledgeable about the key aspects of the system.
3. Budget for future training. In future budget cycles, consider including an ongoing training
budget specific to the system, to assist in maximizing the ongoing leveraging of the City’s
investment.
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6 Appendices
6.1 APPENDIX A: PROJECT CHARTER
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Enterprise Resource Planning
Evaluation
Project Charter (Amended)
Project Number #46
Project Manager: Michael Tsao
Date: September 23, 2013
Version: 2
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A.1 Version History
ID Changes Date Created Author
Initial 09/25/2013 Mtsao
Modify contends 10/24/2013 mtsao
Add Appendix A 11/12/2013 Mtsao
SAP team diagram 06/18/2014 Mtsao
A.2 Background
The City’s history with SAP began in 2002 when the City selected SAP as its preferred vendor for an
Enterprise Resource Planning system with the purpose of integrating various business processes
within the City and to pave the path for the City to moving toward the direction of electronic
Government. In fiscal year 2003, the implementation of the SAP Enterprise Central Component (ECC
6.0), SAP core modules were completed and the SAP system has been running in the City since 2003,
supporting Accounting, Finance, Purchasing, Project Management, Plant Maintenance, Budgeting,
Payroll, Human Resource Management, and Service Order management. In 2009, the City completed
a major upgrade to the SAP ERP system and , which also replaced the former utility billing system
(Banner) with the implementation of the SAP IS-U module, Customer Relationship Management
(CRM), Utilities Customer Electronic Services (also known as My Utilities Account customer portal) and
Business Intelligence systems (BI). Both business and technology needs have changed dramatically
since the current ERP solution was selected and implemented. Therefore, City desires to conduct a
comprehensive evaluation to determine a solution to reduce IT application and infrastructure support
costs, improve flexibility, increase user friendliness and intuitiveness of system, facilitate further
automation of business processes, improve quality and reliability of information for decision making.
A.3 Project Description
ERP consultant to perform an analysis of City’s current SAP environment, business processes and our
strategy; evaluate the ERP market place; and help the City determine a refreshed vision for our ERP
needs. Utilities billing and a Human Resources Information System is included in scope of this project.
Project Objectives
By the end of FY14, an ERP consultant will present a comprehensive evaluation report to the City with
the following information:
Gap analysis of current application capability against business and technology needs and best
practices.
o Identify present and future needs
o Identify wins and successes (strengths)
o Identify pain-points and challenges (weaknesses)
o What are the risks and opportunities
Identify areas where the current application is capable of meeting needs.
o Identify the pros and cons of using the current application to fulfill these needs
o Estimate the time and costs to implement and support
o Compare these costs to alternatives
Conduct an overall evaluation to determine if the City should solicit proposals from other ERP
solution providers.
o Benchmark support and maintenance costs (i.e. to similar sized cities and municipalities.)
o Determine if the current application allows the ability to respond quickly and cost-
effectively to changing business and technical needs
A.4 Project Scope & Deliverables
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In Scope
Selecting an ERP evaluation consulting firm.
Perform an analysis of our current SAP environment.
Perform gap analysis of current application.
Deliver a comprehensive evaluation report.
Out of Scope
Selecting a new ERP solution for the City.
A.5 Flexibility Matrix
Most Flexible Moderately Flexible Least Flexible
Scope X
Schedule X
Cost X
A.6 Milestones
Milestone Description
Charter (this document)
Kickoff Meeting
RFP
Contract with Vendor
Business Impact Assessment (BIA)
Project Management Plan
Assessment Report and Recommendation
A.7 Deliverables
Deliverable Description
Gap analysis of current application capability against business and technology needs and best
practices.
o Identify present and future needs
o Identify wins and successes (strengths)
o Identify pain-points and challenges (weaknesses)
o What are the risks and opportunities
Identify areas where the current application is capable of meeting needs.
o Identify the pros and cons of using the current application to fulfill these needs
o Estimate the time and costs to implement and support
o Compare these costs to alternatives
Conduct an overall evaluation to determine if the City should solicit proposals from other ERP
solution providers.
o Benchmark support and maintenance costs (i.e. to similar sized cities and municipalities.)
o Determine if the current application allows the ability to respond quickly and cost-effectively
to changing business and technical needs
A.8 Success Criteria
Completion of the ERP evaluation before June 2014.
The ability for City leaders to determine the ERP strategy going forward.
Initial Assumptions and Constraints
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ID Type2 Description
1 A Consultant can provide clear path to the appropriate solution
2 A Identified consultant is within budget
3 C CoPA personnel are available when needed
4 A Consultant performs analysis as expected and within allowed time
A.9 Initial Risks and Issues
ID Type3 Description Owner Importance4
1 R Consultant is unable to identify current application
gap against business and technology needs
Michael 4
2 R Consultant knowledge not at expected level Michael 4
3 R Overall project costs are higher than budgeted Michael 2
4 I Consultant is unable to deliver the final evaluation
report on time
Michael 3
A.10 Sponsor Communication
A.11 Initial Communication Plan
Communication Description Frequency Format Recipients
Technology & The
Connected City
Committee
High Level Project
Overview
Once Regular
Scheduled
Meeting
Committee members
GRB Committee High Level Project
Overview
Once Regular
Scheduled
Meeting
Committee members
Information
Security Steering
Committee
High Level Project
Overview
Once Regular
Scheduled
Meeting
Committee members
GIS Steering
Committee
High Level Project
Overview
Once Regular
Scheduled
Meeting
Committee members
Utility Technology
Committee
High Level Project
Overview
Once Regular
Scheduled
Meeting
Committee members
A.12 Team and Communication
Initial Communication Plan
Communication Description Frequency Format Recipients
Kick-off Meeting Initial project
meeting
Once Meeting PM
Sponsor
SAP Core team
SAP Steering Committee
SAP PMO Team
Stakeholder/Liaisons
Status Updates Project Status,
Risk Status,
Milestone, Issue
Review, etc.
Weekly Email PM
Sponsor
SAP PMO Team
2 A: assumption; C: constraint
3 R: risk; I: issue
4 4: critical; 3: high; 2: medium; 1: low
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Consultant
Meeting
Regular meeting
for status and
review
Weekly Meeting PM
SAP PMO Team
Consultant
Project Team
Meeting
Regular meeting
for status and
review
Monthly Meeting PM
Sponsor
SAP PMO Team
Consultant
SAP End Users: See Appendix A
A.13 Project Authority
Title Resources Needed (Names)
Sponsor: Jonathan Reichental
Project manager: Michael Tsao
PMO Governance: PM, Sponsor, SAP Steering Committee
Business Process Owner: Finance: Laura Kuryk, Walter Rossmann, Greg Pustelnik,
Scott O’Neill;
Revenue Collection: Josie Stokes;
HR: Grace Castor;
Utilities CS: Anthony Enerio, Raveen Maan, Dave Yuan;
PW Refuse: Matt Krupp, Matt Raschke;
Project System: Sharon Macway, Anna Vuong;
Sales and Distribution and Plant Maintenance : Anna
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Vuong;
Steering committee PM, Sponsor, SAP Steering Committee
Core Team PM, TBD
Extended Team Plante & Moran, PLLC.
A.14 Purchase Request Information
Budget (First Year) $ 150,000
CIP or Cost Center: G/L number: 30050002-
31290
Multi-year yes/no NO
Procurement Method: RFP
SAP End Users by Department
Administrative Services
Accounting
Laura Kuryk
Budget
Christine Paras
Purchasing
Greg Pustelnik
Store
Scott O’Neill
Revenue Collection
Nichol Banks
Rick Claeys
City Attorney
Stacy Lavelle
City Auditor
Deniz Tunc
City Clerk
Beth Minor
City Manager
Katie Whitley
Danille Rice
Community Services
Budget/Position
Rob De Geus
Rhyena Halpern
Daren Anderson
Procurement
Sally Camozzi
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Marieke Gaboury
Catherine Bourquin
Time Entry
Erin Perez
Amy Johnson
Fire
Jeany Clattenburg
Information Technology
Sherri Wong
Library
Karol Gallucci
People Strategy & Operations
Elizabeth Egli
Planning & Community Environment
Budget/CIP
Alicia Spotwood
Robin Ellner
Procurement
Lisa Green
Rosemary Morse
Time Entry
Zariah Betten
Aline Eskandari
Police
Dana Lamberson
Barb Teixeira
Public Works
Karen Mitchell
Tatiana Pham
Utilities
Billing Management
Lissa Rendon – Customer Service Specialist - Lead
Eric Keniston – Resource Planner
Customer Service and Customer Relationship Management
Renee Ruiz – Customer Service Representative
Device Management
Barclay Rush - Customer Service Specialist - Lead
Financial Contract Accounts
Leon Timmons- Utilities Credit and Collections Specialists
Lissa Rendon - Customer Service Specialist - Lead
Utilities Customer Electronic Services
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Preet Maan - Customer Service Specialist
Work Management
Kelly Haruta – Coordinator Utilities Project
Melissa Smart – Coordinator Utilities Project
Business Intelligence
Lissa Rendon - Customer Service Specialist – Lead
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6.2 APPENDIX B: APPLICATION INVENTORY
As part of the Enterprise application analysis, an inventory of all key current software systems has been developed to support the areas in scope
for the project, as defined in the project charter. For each current system, the analysis categorizes the level of availability of that software from
other ERP vendors which sell their products to similar size governments. Additionally the analysis identifies a recommended preliminary migration
plan for the current application based on all factors. .
*Application Availability in the ERP Market
Legend Code Description
G Generally
Available
The module is generally available from most / many providers of ERP solutions to similar size entities
B Best of
Breed
The module is not generally available from most / many providers of ERP solutions to similar size entities and is typically
selected and implemented as a separate best of breed system, then later integrated to ERP, as feasible, based on
available funding and skills.
E Expanded
ERP
The module is available from certain, select providers of ERP solutions to similar size entities and if not selected and
implemented as part of the integrated ERP system, would need to be obtained by the City from a separate best of breed
system, then later integrated to ERP, as feasible, based on available funding and skills.
#
Current ERP
Application Application Notes-Description Functional Area(s)
Supported
ERP
Availability in
Marketplace
Expected ERP Module
1 SAP – BI Business Intelligence for reporting Utilities
Management G Ad-Hoc Reporting Tool
2 SAP FI-AA Asset Accounting (FI-AA) Asset Management G Fixed/Capital Assets
3 SAP –PS Project Systems (PS) Project
Management G Project Accounting
Contract Accounting
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#
Current ERP
Application Application Notes-Description Functional Area(s)
Supported
ERP
Availability in
Marketplace
Expected ERP Module
4 SAP PSM-FM
Funds Management Integration
(PSM-FM)
Integration of Project/Contract
Accounting with Funds Management
(Budgeting) and General Ledger to
match actuals vs. costs and keep
track of budgets and spending
Project Accounting
General Ledger
Budgeting
G
General Ledger
Budgeting
Project Accounting
5 SAP-FI
Financial Accounting (FI)
General Ledger (FI-GL)
Accounts Receivable (FI-AR)
Accounts Payable (FI-AP)
Bank Accounting (FI-BL)
Special Ledger (FI-SL)
Cost Controlling (CO)
General Ledger
Cost Accounting
Financial Reporting
G
General Ledger
Miscellaneous Billing and
Accounts Receivable
Account Payable
Project Accounting
6 SAP-FIN Financial Supply Chain Mgmt (FIN-
FSCM) Treasury G Purchasing
Contracts Management
7 SAP-HR
Human Resource Management (HR)
Active Directory (HR-AD)
Organizational Management (HR-
OM)
Benefits (HR-BEN)
Time Management (HR-TM)
Payroll (HR-PY)
Talent Management (HR-COM)
PSO and Payroll G
Human Resources
Payroll
Time and Attendance
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#
Current ERP
Application Application Notes-Description Functional Area(s)
Supported
ERP
Availability in
Marketplace
Expected ERP Module
8 SAP-IS-U/CCS
Utility Billing (CCS-BM)
Device Management (CCS-DM)
Customer Service (CCS-CS)
Financial Contracts Accounting
(CCS-FICA)
Customer E-Services (SAP-UCES)
Customer Relationship Mgmt (CRM-
CS)
Web Portal Interface (IC Web)
Utilities Customers E-Services
(UCES)
My Utilities Account (MUA)
Utilities
Management B Utilities Management
9 SAP-MM Logistics Materials Management Inventory
Management G Inventory Management
10 SAP-PM Plant Maintenance
Maintenance &
Inspections
Management
G & B
11 SAP-SD
Sales and Distribution
Price/Rates Calculation; Prod or
Service Availability Check; Customer
Credit Management; Material
Determination; Tax Determination;
etc.
Sales and
Distribution B Utility Billing
12 Accela Permits and inspection data Permits and
Inspections B N/A
13 Advanced Micro
Solutions (AMS)
1099-ETC software for generating
1099's Accounts Payable G Accounts Payable
14 Autodesk Utility Design
(AUD)
Estimating software used by Electric
Engineering.
Utilities
Management B N/A
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#
Current ERP
Application Application Notes-Description Functional Area(s)
Supported
ERP
Availability in
Marketplace
Expected ERP Module
15 BMI
Document management vendor for
planning and purchasing (contract
management)
Purchasing B Document Management
16 Checkfree Online Payments for Utilities Utilities
Management B N/A
17 Civica IT Web Development Toolset IT B Purchasing
18 CLASS Parks and Rec system Parks and Rec B N/A
19 Commerce bank e-Payables Accounts Payable G N/A
20 CORE (Ipay) Web based parking citation payment
and collection. Revenue Collections B Cash Receipting
22 Doc1/e2Vault Bill print extract module Utilities
Management B Utility Billing
23 Docusign Used to approve activities Purchasing B Purchasing
24 GIS Geodesy GIS mapping Utilities
Management B N/A
25 GoldMine CRM & Contact Management
Reporting
Utilities
Management G CRM
26 InTime/ISELINK Police Scheduling Software Payroll/Time Entry G & B
Human Resources
Payroll
Time & Attendance
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#
Current ERP
Application Application Notes-Description Functional Area(s)
Supported
ERP
Availability in
Marketplace
Expected ERP Module
27 I-Tron / MVRS
Collects move-in, move-out and
check reads for meters installed on
designated AMR meter reading
routes that fall under the fixed
network. Interface between SAP and
meter reading hand held device to
record meter reads.
Utilities
Management B N/A
28 JP Morgan Chase
Smart Data P-card system Accounts Payable G N/A
29 Maintenance
Connection Enterprise Asset Management Fixed Assets B Asset Management
30 MS Access Imports SAP data into Access for
reporting and analysis purposes
Utilities
Management G Utility Billing
31 MS Excel
Bid List - Vendor listing for
notification of competitive
solicitations
Purchasing G Purchasing
32 MS Excel IT Vendor File (shadow system) Purchasing G Purchasing
33 MS Excel
IT and Fire Department Contract
Tracking/Management (shadow
system)
Contract
Management G Contract Management
34 MS Excel
LOA absence tracking
Payment Calculations for leave
Workers compensation Claims
Budget Changes
Tracking incoming PAF's
PSO G
Human Resources
Payroll
Time & Attendance
35 MS Excel Calculate holdback percentages
Sales tax capture spreadsheet Accounts Payable G Accounts Payable
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#
Current ERP
Application Application Notes-Description Functional Area(s)
Supported
ERP
Availability in
Marketplace
Expected ERP Module
36 MS Excel - Meter
Reading Calendar
Provides the work plan for the meter
reading group and shows which
meter reading routes will be read and
when.
Utilities
Management B Utility Billing
37 MS Excel - Meter
Testing Results Meter testing/proofing results Utilities
Management B Utility Billing
38 MS Excel - Rate
Modeling Used for refuse rate modeling Utilities
Management B Utility Billing
39 MS Excel - Refuse
Notes
All customer account notes for refuse
billing
Utilities
Management B Utility Billing
40 MS Project Project Management/Task Tracking Project Accounting B N/A
41 NeoGov Recruitment and hire PSO B N/A
42 OpenGov Transparency/Dashboard Tool Financial Reporting B N/A
43 Outage Management Tracks power outages Utilities
Management B N/A
44 PatternStream Budget Publications Budgeting G Budgeting
45 Pitney Bowes Prints and archives bills (utilities) Utilities
Management B Utility Billing
46 Questica Budget system Budgeting B
47 Quick Serve
Will be used to process payments
once the City gets the application to
work.
Revenue Collections Cash Receipting
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#
Current ERP
Application Application Notes-Description Functional Area(s)
Supported
ERP
Availability in
Marketplace
Expected ERP Module
47 Sales tax shadow
system
Calculates sales tax for P-Card
purchases Accounts Payable G Accounts Payable
48
Segal Waters
Compensation
Database
Salary and benefit survey information
(rollout in August 2014) PSO B N/A
49 SharePoint
Logs of customer service,
grievances, discipline, project
documents, purchasing approval
documents
Various B N/A
50 Skillsoft eLearning system (rollout in July
2014) PSO B N/A
51 Spinifex
Payroll and HR reporting tool for the
state controllers report from SAP
data
PSO G Human Resources
52 SymPro Used to manage investments Treasury B N/A
53 Topobase GIS and mapping software used by
Engineering
Utilities
Management B N/A
54 Training database Home-grown, used to sign up for
classes PSO G
Human Resources
Payroll
Time & Attendance
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6.3 APPENDIX C: RESPONSE SUMMARY FROM CITY-WIDE USER SURVEY
8
Key Report Findings
and
End-User Survey Results
9
Key Findings
Inefficiencies Exist Due to Redundant Data
Entry, Manual Processes and Unused
Functionality
Workflow within SAP is Not Fully Utilized
Unrealized Benefits from Current City SAP
Investments
Substantial Risk / Overhead/Effort Involved to
Support an Increasing Number of Interfaces
10
Survey Results
442%
17%
33%
8%
HOW WOULD YOU CLASSIFY YOUR USE OF SAP?
Standard End-User Approver Super User Functional/Technical Owner
11
Survey Results
443%
19%
35%
3%
EXISTING FUNCTIONALITY MEETS MY NEEDS EFFECTIVELY TO
COMPLETE MY DAILY TASKS
Agree Neither Agree nor Disagree Disagree Unknown/Not Applicable
12
Key Findings
Heavy Reliance on IT and Outside Consultants
for SAP Enhancement Requests
Limited Reporting Capabilities
Lack of an intuitive user interface
Limited use of some ‘best practices’ as per
technology limitations/loss of institutional
knowledge
Limited ongoing training available
13
Survey Results
229%
13%
45%
13%
REPORTING CAPABILITIES SUFFICIENTLY ALLOW ME TO
PERFORM MY JOB
Agree Neither Agree nor Disagree Disagree Unknown/Not Applicable
14
Survey Results
119%
21%51%
9%
SAP TRAINING IS SUFFICIENTLY AVAILABLE WITHIN MY
DEPARTMENT
Agree Neither Agree nor Disagree Disagree Unknown/Not Applicable
15
Key Findings
SAP complexities frustrate users and
discourage use of current systems to satisfy
business needs
Lack of Self Service Functionality
Loss of SAP institutional knowledge
HIGH cost of ownership
16
Survey Results
221%
17%
38%
24%
SAP SUFFICIENTLY HANDLES THE CITY'S CURRENT BUSINESS
NEEDS
Agree Neither Agree nor Disagree Disagree Unknown/Not Applicable
17
Survey Results
111%
20%
42%
27%
SAP SUFFICIENTLY HANDLES THE CIT Y'S FUTURE BUSINESS
NEEDS
Agree Neither Agree nor Disagree Disagree Unknown/Not Applicable
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The ERP Assessment Survey tabulated by Vovici EFM includes further statistical analysis from
respondents completing the survey during the period 9/09/2014 – 9/16/2014. If you are interested in
obtaining a complete copy of the survey results and analysis report please contact the City of Palo Alto
Information Technology Department.
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6.4 APPENDIX D: TOTAL COST OF OWNERSHIP DETAILS AND ASSUMPTIONS
Option 1 Option 2a Option 2b Option 3a Option 3b
Cost Category Assumptions
ON PREMISE
Status Quo
with Investment
ALL IN CLOUD
Upgrade SAP and
Retain Existing Best of
Breed Systems
MIXED ENVIRONMENTS
Upgrade SAP Core
Financials/HR/Payroll
Modules Only Keep Existing
Best of Breed Systems Obtain
Best of Breed Utility Billing
System
NEW ERP
Go to Market for a Fully
Integrated Public Sector
Focused ERP Solution and
Procure a Separate Utility
Billing Best of Breed Solution
NEW ERP
Go to Market for a Fully Integrated
Core Financials/Human Capital
Management Solution, Retain the
Current Best of Breed Systems and
Procure a Utility Billing Best of
Breed
All SAP Modules 8, 23 -$ 2,750,000$ 2,250,000$ N/A N/A
Other Existing Software
Licenses and Support -$ -$ -$ N/A -$
Planned Software Licenses
and Support 3 N/A 878,151$ 878,151$ N/A 762,880$
Utility Best of Breed 24 N/A N/A 263,000$ 263,000$ 263,000$
All ERP Modules 30 N/A N/A N/A 806,984$ N/A
Core Modules 35 N/A N/A N/A N/A 644,253$
Additional Hardware Costs 1 N/A N/A N/A N/A N/A
All SAP Modules 8 N/A -$ -$ N/A N/A
Other Existing Software 9 N/A 160,000.00$ 160,000$ N/A N/A
Planned Software 10, 44 N/A 429,350$ 429,350$ N/A 398,478$
Utility Best of Breed 25 N/A N/A 420,407$ 420,407$ 420,407$
All ERP Modules 31 N/A N/A N/A 1,721,620$ N/A
Core Modules 36 N/A N/A N/A N/A 1,519,390$
New System Implementation
Training 11, 26, 46, 45 N/A 566,850.00$ 686,850$ 120,000$ 250,850$
System Selection &
Implementation Planning Fees 20 N/A N/A 80,000$ 200,000$ 200,000$
Subtotal for External One-Time Costs -$ 4,784,351$ 5,167,758$ 3,532,012$ 4,459,258$
All SAP Modules 2 250,000$ N/A N/A N/A N/A
Other Existing Software
Support 13 417,910$ N/A N/A N/A N/A
Other Planned Software
Support N/A N/A N/A N/A N/A
Utility Best of Breed 28 N/A N/A 64,138$ 64,138$ 64,138$
All ERP Modules 32 N/A N/A N/A 177,537$ N/A
Core Modules 37 N/A N/A N/A N/A 141,736$
Consulting (if On-Premise)
Support Services
All SAP Modules 27 250,000$ N/A N/A N/A N/A
Other Existing Software
Support 3 -$ N/A N/A N/A -$
Other Planned Software
Support 38 N/A N/A N/A N/A -$
Utility Best of Breed 29 N/A N/A -$ -$ -$
All ERP Modules 33 N/A N/A N/A 80,698$ N/A
Core Modules 40 N/A N/A N/A N/A 64,425$
Training
Utility Best of Breed 21 N/A N/A 15,000$ 25,000$ 25,000$
All ERP Modules 34 N/A N/A N/A 50,000$ N/A
Core Modules 41 N/A N/A N/A N/A 40,000$
All SAP Modules 8, 23 N/A 2,750,000$ 2,250,000$ N/A N/A
Other Existing Software
Support 13 N/A 417,910$ 417,910$ N/A 417,910$
Other Planned Software
Support 14 N/A 253,529$ 253,529$ N/A 228,170$
Utility Best of Breed N/A N/A Cost not available Cost not available Cost not available
All ERP Modules N/A N/A N/A Cost not available N/A
Core Modules N/A N/A N/A N/A Cost not available
Training
All SAP Modules 4, 15 100,000$ 100,000$ 100,000$ N/A N/A
Existing Software Support 5, 16 12,500$ 25,000$ 25,000$ N/A 25,000$
Planned Software Support 5, 17 N/A 25,000$ 25,000$ N/A 25,000$
Subtotal for External Recurring Costs 1,030,410$ 3,571,439$ 3,071,439$ 322,373$ 966,379$
Current (If On-Premise)
Support FTE's 6, 42, 43 2,073,000$ N/A N/A 510,000$ 510,000$
Additional (If On-Premise)
Support FTE's
All SAP Modules N/A N/A N/A N/A N/A
Existing Software Support N/A N/A N/A N/A N/A
Planned Software Support N/A N/A N/A N/A N/A
Utility Best of Breed 22 N/A 400,000$ 400,000$ 400,000$ 400,000$
All ERP Modules N/A N/A N/A N/A N/A
Core Modules N/A N/A N/A N/A N/A
Current (if Cloud) ERP and
Existing Software Support 12 N/A 510,000$ 510,000$ -$ -$
All SAP Modules N/A N/A N/A N/A N/A
Existing Software Support N/A N/A N/A N/A N/A
Planned Software Support 18 N/A 130,000$ 130,000$ N/A 130,000$
Utility Best of Breed N/A N/A N/A N/A N/A
All ERP Modules N/A N/A N/A N/A N/A
Core Modules N/A N/A N/A N/A N/A
Internal Costs 2,073,000$ 1,040,000$ 1,040,000$ 910,000$ 1,040,000$
EXTERNAL COSTS
One-Time Cost Summary (External)
Software License Fees
Consulting Implementation (Configuration / Data Conversion / Interface Development)
Additional (if Cloud) Support FTEs
Recurring Cost Summary (Internal)
Recurring Cost Summary (External)
Annual Software License and Solution Support (if On-Premise)
INTERNAL COSTS
Includes Licensing, Support & Consulting Services (if Cloud)
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Assumptions Option 1
1
2
3
4
5
6
7
13
27
Assumptions Option 2a
8
9
10
11
12
13
14
15
16
17
18
22
44
Assumptions Option 2b
8
9
10
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
28
29
Assumptions Option 3a
20
21
22
24
25
28
29
30
31
32
33
34
42
46
Assumptions Option 3b
3
9
10
13
14
16
17
18
20
21
22
24
25
28
29
35
36
37
38
40
41
43
45
Average Tier 1.5 (Infor) and Tier 2 (Tyler) ERP systems core financial recurring training fees
Average Tier 1.5 (Infor) and Tier 2 (Tyler) ERP systems core financial recurring consulting fees at 10% of license fees
Assumed to retain the following positions for Tier 1.5 or Tier 2 ERP core financial applications : 2 SAP Technical at $250,000 / per year and 2 SAP Functional at
$260,000 / per year.
Plus Utilities Best of Breed System training at $120,000 + Planned Applications Training ($130,850)
Assumed NO Best of Breed Utilities system recurring consulting fees between NorthStar, Cogsdale and Advanced Utility Systems (CO)
Average Tier 1.5 (Infor) and Tier 2 (Tyler) ERP systems core financial licenses and support
Average Tier 1.5 (Infor) and Tier 2 (Tyler) ERP systems core financial consulting implementation fees
Average Tier 1.5 (Infor) and Tier 2 (Tyler) ERP systems core financial recurring license fees
Other Planned Software recurring consulting fees
Assumed 15 users/year for 10h at $ 1000 / user trained by rotation for Utilities Best of Breed application
Assumed 3 Utilities Business Analysts at $400,000/year for Best of Breed Utilities system
Utilities Best of Breed average license costs between NorthStar, Cogsdale and Advanced Utility Systems (CO)
Utilities Best of Breed average consulting costs between NorthStar, Cogsdale and Advanced Utility Systems (CO)
Average Best of Breed Utilities system recurring license and maintenance fees between NorthStar, Cogsdale and Advanced Utility Systems (CO)
Estimated annual maintenance cost for other planned applications per third party vendor quotes
Assumed 25 users/year for 10h at $ 1000 / user trained by rotation for other existing applications
Assumed 25 users/year for 10h at $ 1000 / user trained by rotation for other planned applications
Per EAMS project recommendation to add 1 Asset Management Program Managers @ $130,000/year
Plante Moran estimated fees for system selection projects for Utilities Best of Breed software
Plus Utilities Best of Breed System training at $120,000
Assumed to be supported by a combination of external services (for hosted applications) and City's IT staff only for on-premise applications
Integrations with the planned applications including the AUD, Maintenance Connect, Core, NeoGov, etc. are assumed to require 100 hrs each at $400 per hour
Consulting Implementation with the planned applications including the E-Procurement Solution, Asset Management, SAP SRM; 50k for E procurement ; See
Maintenance Connect and SRM tabs
As per City provided annual maintenance cost for other existing applications
Average Tier 1.5 (Infor) and Tier 2 (Tyler) ERP systems implementation consulting costs
Average Tier 1.5 (Infor) and Tier 2 (Tyler) ERP systems recurring license and maintenance fees
Average Tier 1.5 (Infor) and Tier 2 (Tyler) ERP systems recurring consulting fees
Assumed average trained costs for Tier 1.5 (Infor) and Tier 2 (Tyler) ERP systems
Assumed to retain the following positions for Tier 1.5 or Tier 2 ERP applications: 2 SAP Technical at $250,000 / per year and 2 SAP Functional at $260,000 / per
Utilities Best of Breed average license costs between NorthStar, Cogsdale and Advanced Utility Systems (CO)
Utilities Best of Breed average consulting costs between NorthStar, Cogsdale and Advanced Utility Systems (CO)
Average Best of Breed Utilities system recurring license and maintenance fees between NorthStar, Cogsdale and Advanced Utility Systems (CO)
Assumed NO Best of Breed Utilities system recurring consulting fees between NorthStar, Cogsdale and Advanced Utility Systems (CO)
Average Tier 1.5 (Infor) and Tier 2 (Tyler) ERP systems licenses and support
Average Best of Breed Utilities system recurring license and maintenance fees between NorthStar, Cogsdale and Advanced Utility Systems (CO)
Assumed NO Best of Breed Utilities system recurring consulting fees between NorthStar, Cogsdale and Advanced Utility Systems (CO)
Plante Moran estimated fees for system selection projects for Utilities Best of Breed software
Assumed 15 users/year for 10h at $ 1000 / user trained by rotation for Utilities Best of Breed application
Assumed 3 Utilities Business Analysts at $400,000/year for Best of Breed Utilities system
Assumed 3 Utilities Business Analysts at $400,000/year for Best of Breed Utilities system
SAP upgrade excluding Utilities Modules cost, which was assumed to be approximately $500,000
Utilities Best of Breed average license costs between NorthStar, Cogsdale and Advanced Utility Systems (CO)
Utilities Best of Breed average consulting costs between NorthStar, Cogsdale and Advanced Utility Systems (CO)
Users and admins training for SAP Upgrade and HANA Platform hybrid cloud plus Planned Software. Assumed 50 people for 40 hours at $200/hr. Plus Utilities
Assumed 25 users/year for 10h at $ 1000 / user trained by rotation for other planned applications
Per EAMS project recommendation to add 1 Asset Management Program Managers @ $130,000/year
Users and admins training for Utilities Best of Breed at implementation time Assumed 15 people for 40 hours at $200/hr
Plante Moran estimated fees for system selection projects for Utilities Best of Breed software
Assumed 15 users/year for 10h at $ 1000 / user trained by rotation for Utilities Best of Breed application
Assumed to retain the following positions if maintaining a core ERP applications in a Tier #1 hosted environment with complete support services. 2 SAP
As per City provided annual maintenance cost for other existing applications
Estimated annual maintenance cost for other planned applications per third party vendor quotes
Assumed 50 users/year for 20h at $ 2,000 / user trained by rotation for ERP modules
Assumed 25 users/year for 10h at $ 1000 / user trained by rotation for other existing applications
Assumed 3 Utilities Business Analysts at $400,000/year for Best of Breed Utilities system
Estimated implementation costs for planned software (HR, E-Procurement, Maintenance Connection)
Per SAP presentation on April 2014 it is assumed that HANA Enterprise Cloud with hybrid hosting and management between SAP and the City will be the chosen
solution
Integrations with the planned applications including the AUD, Maintenance Connect, Core, NeoGov, etc. are assumed to require 100 hrs each at $400 per hour
Consulting Implementation with the planned applications including the E-Procurement Solution, Asset Management, SAP SRM; 50k for E-procurement ; See
Estimated annual maintenance cost for other planned applications per third party vendor quotes
Assumed 50 users/year for 20h at $ 2,000 / user trained by rotation for ERP modules
Assumed 25 users/year for 10h at $ 1000 / user trained by rotation for other existing applications
Assumed 25 users/year for 10h at $ 1000 / user trained by rotation for other planned applications
Per EAMS project recommendation to add 1 Asset Management Program Managers @ $130,000/year
Integrations with the planned applications including the AUD, Maintenance Connect, Core, NeoGov, etc. are assumed to require 100 hrs each at $400 per hour
Consulting Implementation with the planned applications including the E-Procurement Solution, Asset Management, SAP SRM; 50k for E procurement ; See
Users and admins training for SAP Upgrade and HANA Platform hybrid cloud plus Planned Software. Assumed 50 people for 40 hours at $200/hr for HANA
Assumed to retain the following positions if maintaining a core ERP applications in a Tier #1 hosted environment with complete support services including: 2 SAP
Technical at $250, 000 / per year and 2 SAP Functional at $260,000 / per year.
As per City provided annual maintenance cost for other existing applications
2014 Fully Loaded Salaries for 12.5 FTEs in the City's SAP Support team
Assumed the City will not move to the Cloud services in the Option 1
As per City provided annual maintenance cost for other existing applications
Sierra Infosis annual consulting fees, as per City provided contract
Per SAP presentation on April 2014 it is assumed that HANA Enterprise Cloud with hybrid hosting and management between SAP and the City will be the chosen
solution
Additional Hardware Costs* - Materially insignificant for this analysis - Based upon our environmental assessment the City has plenty of capacity.
SAP Enterprise Support Contract - As provided by the City of Palo Alto, CA July 22, 2002 and updated for the calendar years 2013-2015
Assumed to be supported by a combination of external services (for hosted applications) and City's IT staff only for on-premise applications
Assumed 50 users/year for 20h at $ 2,000 / user trained by rotation for ERP modules
Assumed 25 users/year for 10h at $ 1000 / user trained by rotation for other existing applications
{Thank You!}
For more information contact:
Adam Rujan, Partner
248-223-3328
adam.rujan@plantemoran.com
plantemoran.com