Financial Management Systems – Smoothing the Implementation Process

1. Financial Management Systems – Smoothing the Implementation Process Presented by: Dick Willett – Senior Principal, TCBA Bill Webb – Director Public Sector, Enterprise Solutions Group Lisa Fiely, Director, Grant Thornton LLP

2. Why Implement New (or Upgrade an Existing) Financial System? • Because You “Have To” • Because You “Want To”

3. Because You “Have To” • Current System Does not Meet Mandatory Requirements • Discontinued or Proposed Discontinued Vendor Support (under standard maintenance) • Requirement to Move to a Shared Services Provider

4. Because You “Want To” • Existing System or Legacy Systems Antiquated • Process Improvements Constrained by Existing System • “Aging” Workforce (Loss of Domain Area Expertise in Legacy Systems) • System not Cost Effective to Maintain • Want to Take Advantage of Newer Technology and Functionality; e.g., Business Intelligence • Need to “Keep Up with the Joneses”

5. Parameters for New System Operations • Improved Business Processes • Move from Transaction-Focused to Analysis • Compliance with Mandatory Requirements (at a minimum) • Reduced Need for “In-House” Infrastructure Support • Move Toward Single Point of Entry • More Timely Reporting and Processing (reduction in closing timeframes) • Ensuring Vendor Support Over Time

6. Assumptions for All Implementations • Gain “Quick Wins” for User Buy In • Implement Synergistic Business Flows Together • Implement in Manageable Phases to Improve Chances for Success • Minimize Customizations • Reduce Risk • Focus on “Self Sufficiency”

7. Assumptions for All Implementations • Implement “Best Practices” • Allow for Upgrades • Defer Implementing Functions that May Change Substantively

8. What Are the Headaches and Symptoms?

9. Three Major Areas of Headaches and Symptoms • Getting Started • Implementation (or Upgrade) • Operations (Sustainment)

10. Headaches in Getting Started Typical Symptoms Getting Started includes defining requirements, planning and executing the solicitation, issuing an award and beginning the project planning phase. • Requirements Continue to Change, Never Frozen • Complaints About “We Are Unique and Different from Everyone Else” • Determining Nature of the Solicitation (Software First, Services Second, or Combined) • Risk of Protest Following Award

11. Headaches During Implementation“Scope Creep” Typical Symptoms During implementation the risk of changing scope and new requirements are always present. • Costs Continue to Increase and Timelines Expand • Management Becomes Skeptical of Additional Funding Requests • Project Management and Planning Are Lost • Management Team Looses Ability to Say “No”

12. Headaches During ImplementationInability to Accept Change, Lack of User “Buy In” Typical Symptoms With any implementation of upgrade change is inevitable and many times the biggest challenge is for users to accept and adopt the new processes. • Users Will not Accept the Changes Associated with Inherent System Functionality • Users Find Mechanisms to Delay the Inevitable • Users Believe the System Is “Vapor Ware”

13. Headaches During ImplementationResource Constraints and Concerns Typical Symptoms During any implementation or upgrade effort, concerns are always prevalent regarding the availability (and affordability) of internal and external resources. • Lack of Expertise in Newer Technologies Within the Organization • Need to “Retool” Existing Skills (especially if Moving to Shared Services Provider) • Retaining Existing Staff Once “Retooled” • Ability to Manage Large and Diverse Contractor Personnel

14. Headaches During Implementation“Band Aiding” Legacy Systems to New Financial System Typical Symptoms Implementing a New Financial System also includes integrating legacy systems and other COTS products to the new system. • Difficulties with “Syncing Up” Legacy and Financial Systems (particularly during upgrades) • Difficulties Integrating Third Party or “Best of Breed” Solutions • Realization That Legacy System Data Lacks Integrity or Is not Needed. • Inherent “Turf Issues” Among Owners of Legacy Systems

15. Headaches During Operations Phase Typical Symptoms Once the Implementation or Upgrade is Completed, there are additional issues to address including how to maintain it. • Concerns Over Loss of Control if System “Outsourced” • Fear of Inability to Maintain New System Once Contractor Personnel Are Gone • Realization that Users Must Take Final Ownership of End Product • What Do We Do Now??

16. How Can We Reduce Headaches?

17. Reducing Headaches: Getting Started Cures • Delineate Clear Lines of Responsibility as Part of Initial Planning • Document Responsibilities for Agency, Integrator and Shared Services Provider • Consider Implementing Incentives in Personnel Performance Plans • Clearly State What WILL Happen, No Exceptions (“Big Bang” vs. Phased Approach)

18. Reducing Headaches: Getting Started Cures • Consider Decommissioning Oldest Systems First • Consider Outsourcing Non-Mission Critical Functions • Avoid “Best of Breed” if at All Possible

19. Current State of IT 83% spent managing existing systems, 17% innovating Source: Gartner, 2002 IT Spend Survey

20. ERP vs. “Best of Breed”The Integration Dilemma Source: Aberdeen Group, June 2001

21. Reducing Headaches: Implementation Cures • View New Implementation as a Way to Implement New Processes and Still “Save Face” • Do not Simply Replicate Old Processes, Consider Implementing Standard Business “Flows” • Do not “Clutter New System with Historical (Particularly Closed) Data • Rely on “Iterative” Prototyping (Allows Users to “Digest” Future Business Models Early)

22. Business Flow “Accelerator” Approach Characteristics • Relies on Pre-Defined Integrated Business Flows Based on Industry and Public Sector Best Practices • Focuses on Processes Not Modules • Eliminates Extensive Requirements Gathering, Vetting and Approval • Provides Application Prototype Very Early in Project (e.g., first 30 days)

23. PR1180 Manage Non Production Requisition PR0128 Authorize Requisitions PR1182 Issue A Purchase Order PR0129 Authorize Purchase Order • Federal Agency needs new monitors for their desk tops. • A Requestor creates a requisition defining the needs. • The department manager approves the requisition. • Check funds, create commitment • The buyer approves the requisition. • Release commitment, create obligation • The buyer creates a purchase order for the selected supplier of the monitors. PR1935 Receive Non Production Goods & Services PR1010 Manage Supplier Invoice • The non-production goods arrive at the requisitioner/ receiver’s desk. • Two-Way or Three-Way Matching. • The AP Clerk receives the invoice. • The invoice is matched against the purchase order. • The invoice is approved for payment. Requisitions (PRS03) Approvals (PRS05) Purchase Orders (PRS04) Approvals (PRS05) Non-Production Receiving (PRS06) Supplier Invoices (PRS07) Send to external payment system Roles • Ability to control Receiving Routings. • Receive using express transactions for fast data entry. Requestor Purchase Agent Purchase Manager Accountant Accounting Transactions to Financial Reports Flow

24. Timebox Standard Business Flows Using Agency Business Rules Standard Pre-Defined Business Flows CRP Iteration 1 PRIORITIZED Requirements “Fit” Analysis Timebox Production Ready CRP Iteration 2 Flows Accelerator ApproachRapid Prototyping with Defined Deliverables

25. Reducing Headaches: Implementation Cures • Implement Business Case Process for Evaluating “Required” vs. “Nice to Have” Functionality • Learn to Say “NO” • Develop Strong Relationship with the Product Vendor (“They Can Be Your Best Friend”)

26. Reducing Headaches: Operations Cures • Make Sure Contractor Has Included Post Implementation Support as Part of Plan • Ensure Service Level Agreements Are in Place and Understood • Never Consider the Project Done • Begin Planning for Next Large Initiative (e.g., Upcoming Upgrade)

27. Lessons Learned from the Implementation Process

28. U.S. Department of Education Federal Civilian Financials • Highlights • Replace 53 disparate systems & comply with OMB ground rules • Process disbursements and receivables from providers estimated at approximately 3+ Million per day. • Solution • Oracle Federal Financials • Oracle Hyperion Planning and Budgeting • Results • First Cabinet Level agency to “Green” in financial management • Three unqualified audit opinions • 92% of Department’s funds have no cash differences • Eliminated use of over 2,000 legacy systems • Automating budget execution processing

29. Q & A

30. Lisa Fiely703.373.8720lisa.fiely@gt.comBill Webb703.623.1046wwebb@e-s-g.comDick Willett202.778.3434dwillett@tcba.com