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A Plan for the Implementation of Enterprise Resource Planning (ERP) for the State of Texas

Exhibit B: Independent Business Case Study Executive Summary

© Salvaggio, Teal & Associates

Summary Recommendations

The following are the key recommendations for the Comptroller and the ERP Advisory Council to consider when evaluating future ERP plans for Texas State government and higher education.

Recommended Business Case Alternative

STA recommends that the Comptroller implement the BCA 3: Hub Model scenario as its solution for addressing statewide ERP system needs. Under BCA 3:

  • State agencies (with the exception of the Health and Human Services agencies) would migrate to a new Statewide ERP platform operated by the Comptroller’s ASP service;
  • Health and Human Services agencies and the Higher Education Systems would operate as reporting Hubs and interface directly into the Statewide Data Warehouse;
  • Existing statewide legacy administrative systems (USAS, USPS, SPA, HRIS, SPRS, TINS) would be replaced by the Statewide ERP system that would provide all functionality identified in HB 3106;
  • Each Hub would be able to operate its own platform with the only restriction being that the Hub reporting capability conforms to the statewide data standards and standard business processes required for statewide reporting; and
  • The Statewide ERP baseline code would be made available to every Hub and would be patched and maintained according to the ERP vendor’s recommended schedule. Our BCA 3 recommendation is based upon the following reasons:
  • The State achieves business process standardization based on best practices, economies of scale and efficiency gains through the implementation of a single, unified platform for almost all State agencies
  • Provides for a statewide procurement system that will be fully-integrated with the financial accounting, asset management, and inventory management modules, as well as the Comptroller’s Online Ordering System currently in development. A statewide procurement function would provide numerous benefits to the State, including increased competition for the State’s business, lower inventory carrying costs, reduced printing and mailing costs, reduced procurement cycle times, reduced “maverick” spending, and a level “playing field” for small/ disadvantaged businesses. Additionally, the State should obtain the spend intelligence necessary to make effective strategic sourcing decisions at the statewide level.
  • Addresses HB 3106 requirements and the Comptroller’s Rider 16 regarding fleet management.
  • Complies with the ERP Advisory Council’s guiding principle of “not throwing out what works” by leveraging the considerable work done to date by Higher Education and the Health and Human Services agencies in implementing their own ERP systems.
  • Allows the State to significantly upgrade the functionality and reporting capabilities of its statewide administrative systems and resolves the fragmentation associated with the State’s existing administrative systems environment.
  • BCA 3 total project implementation costs are considerably less than the costs associated with BCA2 and are only $35.4 million more than BCA1 over the 11-year planning timeframe of this BCA. For an additional $35.4 million, the State could address numerous deficiencies with their existing systems – the State will need to spend approximately $121 million in “rewrites” of the existing administrative systems, which will do nothing more than “pave the cow path.” In addition, BCA 3 is a proven model that is most often utilized by other states and would result in lower overall project risk.
  • Establishes a common language for reporting expenditures and provides for significantly enhanced statewide reporting which will facilitate a “single source of the truth” and taxpayer transparency.
  • Allows the State to comply with recent data privacy, accessibility and information security mandates.
  • Provides for better tracking of the State’s $104 billion in assets, thus helping agencies and the Legislature in budget planning by identifying replacement costs and schedules.
  • Allows for the Hubs to address ERP consolidations through an evolutionary process as their existing systems reach the end of their useful lives.

Recommended Deployment Approach

Only the State agencies (excluding the Health and Human Services agencies and higher education) would be deployed under this model. The participating agencies would be logically organized into deployment groups or waves. All functional modules would be deployed for all agencies within a specific group or wave. The first deployment phase would include the development of a prototype deployment model that would become the “blueprint” for deploying all functionality among the remaining agency deployment waves upon the successful deployment for the initial agency wave. Each deployment phase would be executed sequentially until all agencies have been deployed on the statewide ERP system.

For cost estimating purposes, STA and the Comptroller Project Team developed a detailed deployment schedule for State agencies under BCA 3. This planning schedule will be made available to the Comptroller as part of project close-out activities. The schedule was used solely for the purposes of developing our estimates and the Comptroller has not made any decisions or plans regarding the deployment schedule should an actual ERP project be funded by the Legislature. Additionally, ITCHE members and HHSC representatives assisted us in determining the years in which the Hub data warehouses would be placed into production.

PeopleSoft as the Statewide ERP Baseline

Should the State acquire funding to pursue the acquisition of a new ERP system and associated implementation services, several procurement strategy decisions will be required, including a decision as to whether to acquire ERP software through a competitive bid process or seek to continue its investment already made in Oracle’s PeopleSoft Enterprise Financial Management, Enterprise Supplier Relationship Management, and Human Capital Management software. STA recognizes that unique benefits exist should the State continue to utilize the PeopleSoft ERP software suite as the baseline software for the new Statewide ERP System. In fact, STA’s recommendation of BCA 3 and the associated estimated costs for BCA 3 are based on the Comptroller continuing the relationship with PeopleSoft. STA estimates that there is up to a 30% reduction in total implementation costs as a direct result of “reuse” value of PeopleSoft. These “reuse” benefits include (but are not limited to):

  • The PeopleSoft software has already been implemented by some of the large and most complex agencies and institutions of higher education in the State of Texas. This experience provides considerable documentation and lessons learned from these implementation experiences that cannot be replaced. Additionally, this experience considerably reduces overall project risk.
  • The Health and Human Services, University of North Texas System and University of Houston Systems use PeopleSoft to address their administrative system needs within their component organizations. Additionally, the University of Texas System has made a significant investment in PeopleSoft software as well. This should streamline the statewide interfacing and reporting effort required of these Hub organizations.
  • The Comptroller’s technical resources have considerable experience with the PeopleTools proprietary toolset to support software configuration, customization, establishing security, and ongoing administration of the system, therefore, reducing the burden of training and retaining these resources.
  • The Comptroller’s functional resources have considerable experience with the PeopleSoft product to support the set-up and configuration as well as comprehensive training documentation and experience, which will help facilitate the training effort.
  • Some of the State’s requirements that were gaps have been incorporated into the statewide baseline, which will reduce the amount of time spent modifying the product for State of Texas needs.
  • Some standard reports and queries have been created that can be leveraged for all State agencies, which will reduce the amount of time and dollars spent during the implementation.

The following states have implemented or are in the process of implementing the PeopleSoft financial management and human resources/payroll applications in a statewide environment: Connecticut, Delaware, Georgia, Indiana, Montana, New Mexico, New York, North Dakota, Ohio, Oklahoma, Tennessee, and Vermont.

Additionally, the following states have implemented or are in the process of implementing the PeopleSoft human resources/payroll applications only in a statewide environment: Hawaii, Kansas, Massachusetts, and Minnesota.

In consideration of expanding the use of the PeopleSoft ERP platform, STA also recommends that the State renegotiate the following issues with Oracle:

  • The State should seek to obtain reduced rates for annual maintenance and future increases in maintenance fees should be based on reasonable parameters (e.g., lower of 3% of the previous year’s maintenance fees or the increase in the Consumer Price Index).
  • The State should only pay for software licenses based upon the agency deployment schedule and that annual maintenance should be calculated based upon only those agencies that have been deployed and for modules in use during the period.
  • New functionality that arrives in the form of repackaging the PeopleSoft application suite (e.g., e-applications including eSettlement and eBill Payment) should be included in the negotiated licensing agreements with the State for the Statewide ERP platform.