PPS INITIATIVE:
FINAL REPORT
August 2011
DRAFT
University of California
PPS Initiative: Final Report
ACKNOWLEDGEMENTS
The PPS Project Team acknowledges the following groups and their members for the tremendous engagement
and support they provided on this project.
PPS Sponsor
Group
Gretchen Bolar
Susan Carlson
Dwaine Duckett
John Meyer
Sam Morabito
Jack Powazek
Dan Sampson
Tom Vani
John Wilton
PPS Management
Workgroup
Sue Abeles (co-chair)
Mike Allred (co-chair)
Rich Andrews
Mike Baptista
David Curry
Karl Heins
Don Larson
Tom Leet
David Odato
Mike O’Neill
Patti Owen
Pat Price
Jeannine Raymond
Chuck Rowley
Dan Sampson
Paul Weiss
Peter Woon
Gabe Nwandu
Mike O’Neill
Ray Rodriguez
Shaun Ruiz
Pearl TrinidadCharfauros
PPS Functional
Requirements
Workgroup
Subject Matter
Experts
Keith Bandel
Kety Duron
Coni Edick
Steven Engen
Paula Farrington
Albert Glover
Pam Heintzleman
Irene Horgan-Thompson
Sharon Huckfeldt
Cindy Jones
Grace Little
Kelly Maheu
Terry McClain
Jennifer Damico Murphy
Roberta Nardico
Jean Nordstrom
Gayelea Allison
Marina Arseniev
Bill Brooks
Emily Bustos
Mark Cianca
Jim Corkill
Lisa Coulter
Emily Deere
Mary Doyle
Laurie Eppler
Carrie Gatlin
Esther Hamil
Shylah Hamilton
Veronica Harshbarger
Jennifer Hermann
Tricia Hiemstra
Sheryl Ireland
Bruce James
Simon Jang
Mary Anne Keenan
Penny Knutson
Rich Kogut
Ben Lastimado
Ardaan Locht
Paige Macias
Brenda Mathias
Rubi Morales
Carolyn Murry
Xiomara Noble
Lydia Oller
Pamela Peterson
Marion Randall
Pam Robbins
Dana Roode
Rose Salazar
Cynthia Seneriz
Cathy Schoenfeld
JR Schulden
Lazetta Smith
Kathy Stuhr
Nancy Tanaka
Shel Waggener
Andrew Wissmiller
Albert Wu
The project team also extends its thanks to Peter Taylor, Nathan Brostrom, and David Ernst for their
participation and excellent counsel alongside the Sponsor Group. We also acknowledge the following groups,
in both campuses and medical centers, for their very active engagement, participation and direction in this
effort:
Controllers
Chief Human Resources Officers
Academic Personnel Directors
Information Technology Leadership Council
PPS Initiative PMO Staff: Anthony Lo, Michele Maule, Kathryn Forrest
Page 1
PPS Initiative: Final Report
Table of Contents
EXECUTIVE SUMMARY ................................................................................................................................ 3
Background ........................................................................................................................................................................... 3
Future Vision .......................................................................................................................................................................... 3
Project Overview ................................................................................................................................................................. 4
Conclusions and Recommendations ................................................................................................................................... 5
Total Cost of Ownership (TCO) ......................................................................................................................................... 8
Success Factors ..................................................................................................................................................................... 9
Next Steps........................................................................................................................................................................... 10
PAYROLL PERSONNEL SYSTEM REPLACEMENT SOLUTION ...................................................................... 11
Technology Replacement Imperative ............................................................................................................................. 11
Technology Replacement Scope ..................................................................................................................................... 12
Technology Solution Recommendation ........................................................................................................................... 13
BUSINESS PROCESS AND PRACTICE STANDARDIZATION........................................................................ 15
Current State ...................................................................................................................................................................... 15
Process Standardization Opportunities ......................................................................................................................... 16
SERVICE DELIVERY APPROACH ................................................................................................................ 18
Payroll and Human Resources Service Delivery .......................................................................................................... 18
Information Technology Service Delivery ...................................................................................................................... 21
IMPLEMENTATION ..................................................................................................................................... 22
Implementation Schedule and Phasing .......................................................................................................................... 22
Early Adopters/First Wave Implementers .................................................................................................................... 23
Implementation Governance ............................................................................................................................................ 23
Implementation Success Factors....................................................................................................................................... 24
FINANCIAL ANALYSIS/TOTAL COST OF OWNERSHIP .............................................................................. 27
Phase 1 Implementation ................................................................................................................................................... 27
Phase 2 Implementation ................................................................................................................................................... 29
Page 2
PPS Initiative: Final Report
PPS Initiative: Final Report
AUGUST 2011
EXECUTIVE SUMMARY
Background
The Payroll Personnel System (PPS) used to pay the 185,000 employees of the University of California has
been in use for nearly three decades with 11 variations University-wide that have diverged over time due to
campus and medical center customizations and disparate business processes. Built with aging technology, PPS
is difficult to maintain and enhance and requires redundant data entry and manual processing. Additionally,
PPS lacks the functionality of a true Human Resource Management
System (HRMS), resulting in the development of shadow systems
Payroll and human
across the UC system that are costly to maintain and no longer
resources‐related activity in
provide timely and complete decision support data to manage UC’s
the highly complex and
large and complex workforce. Furthermore, the operational
evolving University
requirements to efficiently and effectively support payroll and
environment have surpassed
human resources related activity in the highly complex and evolving
the current capabilities of PPS.
University environment have surpassed the current capabilities of
PPS. Today there is widespread recognition that PPS is at the end of
its useful life and that there are significant opportunities to greatly improve administrative efficiencies in
payroll, human resources and academic personnel operations by standardizing and streamlining processes,
eliminating redundancies and implementing common solutions. Importantly, there is clear understanding that
failure to move forward with a new payroll system presents tremendous risks to the university. There is not the
luxury of waiting even one or two years to replace a rapidly deteriorating system that is increasingly
incapable of performing basic functions. It is the considered opinion of all participants in the PPS project
teams that we must move forward immediately with the option best available to us to prevent a future
breakdown in the existing PPS system.
In 2009, the Campus and Medical Center Controllers, Chief Human Resource Officers, and Academic
Personnel Directors completed an assessment of PPS and recommended planning for a more modern
replacement, and agreed to work toward conforming business practices. As a result of this assessment, the
University launched the PPS Initiative with the goal to:
• Pay all UC employees from a single University-wide payroll system.
• Identify and implement better approaches to UC’s payroll, human resources and academic personnel
operations.
• Satisfy the core needs of each campus and medical center while realizing the cost savings, reduced
risk and operational benefits of unified systems, common business practices and improved information.
• Provide improved tools and data for the efficient management of the University’s workforce.
Future Vision
Page 3
PPS Initiative: Final Report
The PPS Replacement Initiative is one part of the larger vision to improve administrative and operational
effectiveness throughout the University. Through the Working Smarter initiative, the University community has
created the vision of ten distinct campuses using one efficient administrative framework of common, integrated
systems, processes, and strategies to “achieve a level of administrative excellence equivalent to that of its
teaching and research enterprises.” A comprehensive PPS replacement solution aligns with this vision by
quickly targeting system and operational changes that will yield sustainable long-term cost savings and
quality and service improvement with modern technology,
standardized business processes and improved service delivery.
Achieve a level of
administrative
excellence
As a result of this initiative, UC employees will have ready access to
equivalent to that of its
information about their jobs and employment and will be able to
teaching and research
make changes to their personal data online. When an employee
enterprises.
has a question, they will generally be able to get the answer easily
online. If not, a dedicated customer support staff member will
Administrative Efficiencies
provide accurate and timely information by phone, email or chat.
Initiative, 2008
Payroll processing will be real-time, automated, efficient and
accurate. HR, payroll and academic personnel transactional
processes will be simplified and consistent across UC locations,
enabling staff who have struggled for years to perform administrative functions with inadequate tools to
spend more time on strategic issues and less time on basic administrative processing activities. UC managers
will be able to initiate most personnel transactions online and will have access to information for workforce
planning and decision support. These streamlining efforts and new decision support capabilities will also allow
the University to more deftly respond to changing needs in the future. Most importantly, UC will reap these
operational gains at a significantly lower cost than today.
Project Overview
The project began in the fall of 2009 with the creation of a governance structure comprising a Sponsor Group
and Management Workgroup for executive leadership and cross location/functional representation and
guidance for the project. The project launched in the beginning of 2010 with the engagement of a full-time
project director and a specialist HR/payroll consulting firm. The Functional Requirements Workgroup was
formed in early 2010 to provide campus and medical center end user and subject matter perspective.
The first stage of the project was to develop a solid understanding of the current payroll and related human
resources and academic personnel processes, practices, systems and staffing models at each UC campus and
medical center. During spring 2010, the Functional Requirements Workgroup synthesized the collected data
for appropriate action and improvement opportunities. In fall 2010, project efforts concentrated on fully
understanding and defining the functional requirements needed to replace PPS while continuing the effort to
analyze and agree on common practices to capitalize on new technology. During the first half of 2011, the
RFP for selecting a new HRMS and payroll system was developed and executed, as work continued to further
define the future state service delivery model, identify process standardization candidates, and develop the
assumptions and analysis for Total Cost of Ownership (TCO). With the second half of 2011underway, contract
negotiations and implementation planning are in progress, with campuses and medical centers engaged in
addressing organizational readiness, communication, change management, resourcing, and project
infrastructure needs. These efforts have culminated in this Final Report, detailing the activities, decisions and
recommendations for moving forward on this initiative.
Page 4
PPS Initiative: Final Report
FIGURE 1
Conclusions and Recommendations
The PPS Initiative’s Sponsor Group and Management Workgroup, along with key process stakeholders, have
agreed to the following interdependent recommendations to achieve the future state vision:
• First, replace PPS with the hosted Oracle PeopleSoft platform as a proven solution that supports the
functionality provided by PPS to pay and administer UC’s complex workforce, significantly expands
UC’s human resource management capabilities, and supports systemwide interoperability and
accessibility with a robust infrastructure and service oriented architecture.
• In addition, standardize and streamline related payroll and human resources business processes
throughout the UC system.
• Finally, use the enabling technology, along with standardization, to significantly change the delivery
of transactional payroll and human resources services to be more efficient, higher quality and less
costly.
This approach will also provide campuses and medical centers a platform upon which to adopt new and
effective business processes using online systems that are deployed “once” for the benefit of “many.”
The recommendations contained in this report represent significant changes to the current state and are
necessary to realize considerable improvements in operations, quality, service and cost and which will
require extensive change management, patience, organizational will and leadership to succeed.
Page 5
PPS Initiative: Final Report
ENABLING TECHNOLOGY
PPS is a 30-year-old, highly customized and complex application integrating payroll, human resources, and
financial functions, most of which are standard in “off-the-shelf” application suites today. Furthermore, UC’s
complex environment has compounded the technology limitations of PPS, underscoring the need for a modern
systemwide solution to serve, manage and pay UC’s employees. The recommended Oracle on Demand
PeopleSoft solution offers modern capabilities to enable and address the administrative efficiency
improvements sought by UC, as well as provides the platform to
PPS Initiative Guiding Principle #1
streamline, simplify, and standardize process complexities.
Moreover, the vendor-hosted solution leverages a robust
The project will achieve sustainable
technology infrastructure and application support. The PeopleSoft
long-term cost savings by
solution will offer:
standardizing and simplifying
• User-friendly, web-based, real-time environments;
common business processes and
• Ready access to personal and job data for employees;
technology infrastructure across the
• Improved tools to eliminate redundant data entry and
UC system.
manual processing;
• Efficient payroll processing, including automated real-time
• Alignment of business processes
computes;
under a common technology
• Improved integration and interoperability among key
architecture will result in systemic
systems;
efficiencies over the current state.
• Improved access to historical information;
• Implement common practices
• Tools for reporting and analytics; and
across the University and, where
• True HRMS capability to address the multifaceted demands
possible, industry best practices.
of the UC environment and workforce.
• Standardized interpretation and
Implementation of the Oracle PeopleSoft payroll and HR systems
implementation of policies, along
represents the first of three phases that will take place over four
with common training and tools
years. A phased implementation will enable earlier realization of
to implement them.
benefit from technology, business process, and service delivery
• The solution will involve “minimal
improvements, while mitigating risk and facilitating successful
hands” in the core payroll
transition to the future state. The technology solutions for Phase 2
(time and attendance) and Phase 3 (portal integration, full benefits
process.
and data warehouse capabilities) will be determined during the
• Common data and definitions
Phase 1 implementation.
across locations and systems.
• The project will proceed under a
BUSINESS PROCESS AND PRACTICE STANDARDIZATION
“no-exceptions” policy for
The analysis that resulted from the data gathering and current state
standardized business processes
process inventory validated that there are inefficiencies in the
University’s current payroll and related human resources and
and systems.
academic personnel operations. Also, while core payroll and human
• The new technology will require
resource needs across the University are not significantly different,
significant change to many
systems, processes and policy implementations today vary greatly
business processes.
among and within campuses and medical centers. There is
widespread agreement among all PPS stakeholder groups that
many internal processes and practices must be simplified, standardized, automated and, in some cases,
centralized in the future state. It is also recognized that policy review and changes will likely be needed to
support process standardization and simplification before moving to a new platform.
Page 6
PPS Initiative: Final Report
Work has begun to identify candidates for standardization, such as payroll calendars and pay cycles,
bargaining unit contract terms/definitions, earnings and deduction codes, leave assessments, leave of absence
administration, and benefits and payroll practices for post-doctoral students. In addition, process and practice
standardization is fundamental to implementing a single-instance technology solution systemwide, so
significant standardization and simplification efforts will take place as part of the implementation design
phase, leveraging the “best practices” business processes that underpin the technology solution and
addressing any necessary variance through the use of configuration and workflow. Key HR and payroll
policies will be identified and reviewed where appropriate to support standardization and simplification
efforts.
SERVICE DELIVERY OPTIMIZATION
Achieving the full benefits of new technology and business process
standardization requires optimizing payroll, human resources and
academic personnel services to the fullest extent possible, along
with making organizational changes that result in improved fit and
utilization of resources and service delivery. With the
implementation of the new payroll solution, many payroll processes
separately performed by staff at individual campuses today will
become largely automated transactional processes that can easily
be centralized, resulting in very high levels of process
standardization and service quality. A systemwide HRMS, coupled
with more centralized administration and customer service,
would allow for the implementation of common human
resources processes and common interpretation of HR policies
throughout the UC system.
Stakeholders have agreed that greater centralization and UC-wide
shared services will be essential to realizing the full benefits of the
new systems and common business processes. In order to realize the
maximum benefits, UC will need to aggressively pursue
standardization, while also working to identify and begin
centralizing appropriate processes as rapidly as possible. This
approach will smooth the operational and organizational transition
while shaping the most effective centralized structure and delivery
model.
Aligned with these fundamental changes to payroll and human
resources service delivery, the Information Technology Leadership
Council (ITLC) has proposed a new approach to technology
provisioning and operations with shared technology infrastructure
and services. To support such a vision, the ITLC has proposed the
creation of a new, centralized Technology Shared Services group
that will enable not only the effective deployment and support of
UC-wide payroll and human resources systems, but also future multicampus and systemwide information systems initiatives.
PPS Initiative Guiding Principle #2
The solution will provide enhanced
service delivery with increased
efficiency and improve UC’s ability
to respond to changing business and
reporting needs.
• Eliminate redundant data entry
and paper forms as much as
possible.
• Address the critical need to
automate time and attendance
processing.
• Better support for handling the
complexities of multiple
appointments/distributions/fund
sources.
• Automate the processes for
expense transfers and retroactive
payments.
• Include reporting, analytics and
forecasting tools to allow for
data-driven decision making.
• Improve compliance with internal
and external regulatory pay
policies.
• Improve the employee and end
user experience by being easier
to use.
• Improve payroll effectiveness.
Page 7
PPS Initiative: Final Report
Total Cost of Ownership (TCO)
The project’s Phase 1 implementation includes all activities associated with the deployment of a new payroll
system and HRMS to fully replace PPS, standardize the affected business processes and deploy a UC-wide
service center. The Phase 1 financial analysis includes all related one-time acquisition, implementation and
operating costs covering the three-year implementation timeline and an additional five years of operational
costs and savings (i.e., an eight-year TCO). All changes in projected staffing requirements use the 2010
PricewaterhouseCoopers (PwC)1 analysis as a baseline for current staff levels. Current baseline staffing in
those areas most directly tied to the Phase 1 implementation is
approximately 2,700 FTEs performing benefits, payroll, IT and
PPS Initiative Guiding Principle #3
workforce management functions at a current cost of
The project must begin to show
approximately $217 million.
benefits as soon as possible.
Over this eight-year cost of ownership analysis period, total costs
are forecasted to be approximately $307 million, of which $243
• To realize benefits quickly, two
million are implementation costs, including vendor software licenses,
principal implementation
implementation support, UC implementation staffing, hardware
strategies will be employed:
and infrastructure, deployment of the shared services center and
The technology solution will
restructuring costs associated with job transitions. Of the $243
be implemented in the most
million in total implementation costs, $40 million is directly
“vanilla” state possible;
associated with payment to vendors for HRMS and payroll system
The University will leverage
software licenses and implementation consultant support, while
its best subject matter
another $111 million is associated with UC staff resources to
experts on this project and
support the project implementation. Of the UC resources needed
provide replacements for
on the project, one-third are assumed to be new or backfilled, with
their day-to-day
the remaining two-thirds assumed to be part-time or redeployed
responsibilities while they are
resources. Although only one-third of UC implementation resources
engaged in project work.
are will be new costs to UC, this TCO analysis has conservatively
included all such costs as project costs. Ongoing costs, excluding
headcount, total $56 million over eight years. These costs include new ongoing vendor hosting and software
support/maintenance costs of $4-5 million per year and shared service center infrastructure operational costs
of approximately $2 million per year. These costs exclude local staff remaining on campuses and medical
centers or staff for the new shared services center, since these costs are included in or will replace existing
staff costs.
Over the same period, total savings are approximately $752 million. 90% of these savings are attributed to
the restructuring of campus and department payroll and HR staff to a UC-wide shared services center(s)
enabled by the new technology and systemwide process standardization. The remaining savings are from a
reduction in IT staff required to support the single-instance payroll system and HRMS as well as a small
reduction in the cost of software maintenance also from consolidating to a single instance. The eight-year net
present value is approximately $230 million (at a 9% discount rate), and breakeven occurs in Year 5. Figure
2 below illustrates the project’s costs and savings throughout the project life.
All PwC references cited in this document represent results from PricewaterhouseCoopers University of California Activity
Analysis Survey, October/November 2010. Survey population included central campus payroll, human resources, and
academic personnel, as well as departmental HR coordinators, Academic Personnel Office (APO) coordinators, payroll
coordinators, and timekeepers from campuses and medical centers. Work activities consisted of 14 broad categories
comprising HR/APO, payroll and timekeeping functions.
1
Page 8
PPS Initiative: Final Report
Phase 1 Annual Costs and Savings
200
150
Millions
100
50
Costs
Savings
Net Savings
(50)
(100)
(150)
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8
FIGURE 2
The financial analysis for Phase 2 is preliminary and based on conservative assumptions for both costs and
savings. The Phase 2 savings will accrue from a reduction in staff costs with the implementation of a common
systemwide time and attendance solution for all employees. Currently, there are 572 FTEs performing
timekeeping duties at a current annual cost of almost $42 million. With full Phase 2 implementation,
employees will be able to submit time and leave information online, eliminating redundant entry and manual
processing. Phase 2 will be complete within one year of the completion of Phase 1.
Success Factors
The project stakeholders recognize that successful organizational change on this scale is difficult. It will require:
• substantial effort and support for organizational readiness
• effective decision making
• scope control
• change management, and
• active internal communication.
The cultural norms of the University have traditionally embraced the autonomy of the campuses to implement
general University policies into practices that best suit the cultural, environmental and leadership preferences
within the campus setting. This project will need to be different. Going forward, the project will rely on
collaboration and strong leadership to forge common practices that meet the needs of all locations, but will
likely be different from how many locations do things today. Campuses will be asked to compromise, and
stakeholders will be asked to make difficult decisions in order to achieve the project’s goals. It will be
necessary to agree on standardized and centralized processes prior to and throughout system implementation
in order to realize the benefits from the new technology. Significant organizational changes and employee
realignment on expectations for how payroll and HR services are delivered will be necessary to achieve the
Page 9
PPS Initiative: Final Report
proposed future state and realize the efficiencies, cost savings, and improvements to service delivery and
quality.
While these recommended changes will dramatically improve payroll and human resources service quality,
efficiency, and performance, they will also significantly impact jobs, roles, operational priorities, cultural norms
and, fundamentally, the way many employees work. Succeeding in this transformational change will require
strong discipline and leadership in order to support common policy interpretation and practice
standardization efforts. A solid implementation strategy will be needed that manages scope and change
control processes to sustain momentum and achieve the aggressive project schedule. Executive and location
leadership will need to champion and foster a comprehensive change management strategy with thoughtful
communication that conveys the imperative for this initiative and carefully considers the people impact with
proactive management and advance planning for transitions and potential job displacements, as well as
talent retention. Finally, a tremendous amount of organizational commitment and patience will be required to
guide the organization to the future state.
Next Steps
As the end of summer 2011 approaches, contract negotiations with Oracle are nearing completion and
project stakeholders are engaged in intensive implementation planning efforts. In preparation for process and
system design, key process stakeholders are continuing to identify business processes and practices to be
streamlined and standardized, as well as strong candidates for centralization and deployment via shared
services. The project infrastructure is beginning to transition into the implementation governance model, while
PMO and campus/medical center implementation staffing resources are being identified and secured for the
implementation effort. The PMO and vendor/implementation partner are working closely to prepare for
implementation launch, well on target for early September.
Once Phase 1 implementation is well underway, the project will also begin work on Phase 2 analysis and
requirements as UC addresses the critical need for a systemwide Time and Attendance solution and the
operational efficiencies and costs savings to be gained from standardization and consolidation of
timekeeping practices and work/pay rules.
Page 10
PPS Initiative: Final Report
PPS Initiative: Final Report
AUGUST 2011
PAYROLL PERSONNEL SYSTEM
STEM REPLACEMENT SOL
SOLUTION
Technology Replacement Imperative
PPS has been a reliable tool for the University for almost 30 years, but the system no longer fully meets the
needs of the operations
ns it was intended to support and has
outlived its lifecycle projections. Separate instances of PPS
for almost every location, along with diverse commercial
and homegrown HR-related
related solutions and shadow systems,
are costly to the organization. Each separate PPS instance
requires technical and functional resources to develop,
implement and maintain, with a PwC estimate of $30 million
per year at campuses for staffing alone. In addition, last
year the Chief Human Resources Officers identified $2.
$2.8
million in one-time
time costs and another $2.6 million in annual
ongoing costs to support HRMS projects at five locations.
With the PPS end of life upon us,, in conjunction with the loss
of key technical and functional staff with deep PPS
expertise over the past
ast few years, the need to initiate a
replacement project at this time is urgent
urgent. To support payroll
and HR operations over the long term, UC must move to a single UC-wide payroll and HRMS solution,
supported by modern system architecture and offering robust capabilities that will leverage shared resources
and provide a foundation for operational efficiencies now and in the future
future.
Built on older technology and business architecture, PPS lacks standard payroll engine functionality that
t
the
new technology solution will provide UC. For example, PPS requires execution of the full payroll process to
model the payroll compute, and most payroll transaction
transactions rely on batch processing and do not occur in real
time. PPS does not support effective-dated
dated transactions in many situations, resulting in the development of
shadow records to process transactions accurately. In addition, PPS only supports tax calculation
calculat for
California, requiring manual tax calculations for hundreds of out
out-of-state employees. The new solution
soluti will
significantly reduce costs associated with cycle time and lack of current data due to manual processing,
projections and rework that have resulted from these and other limitations in the current system.
Because PPSS is primarily a payroll system
system, there are significant functional gaps between PPS and a true
HRMS to support human resources and academic personnel operational needs. As a consequence, campuses
and medical centers have solved for gaps with a mix of state-of-the
the art HRMS and homegrown systems,
s
including stand-alone
alone applications, spreadsheet
spreadsheets, and paper files. The variety of shadow systems has resulted
in multiple information sources and a lack of data integrity for reporting. With true workforce management
data and functionality, the need
d for shadow systems and processes will be significantly reduced.
Page 11
PPS Initiative: Final Report
Implementing a systemwide timekeeping solution will address one of the most significant operational
challenges UC is experiencing today. Currently, the vast majority of employees use labor-intensive paper
processes for tracking and reporting time worked. In the project’s Phase 2, a new solution will provide online,
integrated time tracking capability that will substantially reduce redundancies and manual processing, as well
as standardize and simplify timekeeping business practices and related work/pay rules. Moreover, an
effective time and attendance solution can yield significant efficiencies. At UCLA, for example, a time and
attendance system implemented in just 16 academic units (covering only 600 employees) reduced paper
documentation by 95% and improved supervisors’ ability to monitor and approve time. Administrative
redundancy was reduced 30-50% in some areas, resulting in estimated cost savings of $12,000 - $16,000
per year2. Expanding time and attendance coverage to all applicable UC employees will result in
commensurate efficiencies and savings.
A systemwide data warehouse and improved reporting and analytics capabilities, along with an easy-to-use,
integrated portal, implemented in Phase 3, will equip UC’s managers and leaders with data to manage
performance and facilitate metrics-based decision making. Improved information management and access will
enable UC’s human resource officers to more effectively support collective bargaining, position management,
and compliance tracking. With expansion of the HR functionality suite, to be assessed for Phase 3, UC will
gain additional tools to manage and develop the workforce, potentially to include compensation
administration, performance management, succession planning, talent management, and training
administration.
Technology Replacement Scope
The PPS replacement effort represents much more than implementing a new, single-instance payroll system for
UC. Requirements analysis for Phase 1 solution replacement demonstrated that PPS is a highly customized and
complex application integrating payroll, human resources, and financial functions (see figure 3).
FIGURE 3
2 These efficiencies were reported by representatives of UCLA’s Graduate School of Education & Information Studies in their
eTimesheet application presentation to the Time and Attendance Subgroup in July 2010 and discussed in the eTimesheet
Scope and Functionality document.
Page 12
PPS Initiative: Final Report
Therefore, the PPS replacement solution includes a single UC-wide core payroll solution and HRMS, integration
with campus financial systems, and full time and attendance functionality, as well as systemwide data
warehouse and business analytics capability to meet the need for reporting, planning and data-driven
decision making (see figure 4).
FIGURE 4
Technology Solution Recommendation
During the first half of 2011, UCOP Strategic Sourcing facilitated a thorough and transparent process to
select the PPS replacement vendor. Participants included senior managers and subject matter experts from
every location, representing a wide range of payroll, HR, academic personnel, IT and campus/medical center
operations. Vendor proposals were evaluated based on system functionality, technology, implementation
capability, vendor’s strategic vision and financial viability, and customer service and support capabilities. At
the completion of the full RFP process, UC determined that the hosted Oracle on Demand PeopleSoft offering
is the best choice to replace PPS, as a proven higher education and medical center system solution with the
platform and functionality that meet UC’s requirements for technological and operational transformation.
The Oracle on Demand solution includes Oracle’s PeopleSoft Human Capital Management suite:
• Integrated Talent Management
• Workforce Development
• Human Resources
• Benefits
• Payroll
Page 13
PPS Initiative: Final Report
The Oracle on Demand offering represents a significant expansion of capability beyond PPS today, including
automated pay compute processes (including retroactive adjustments), real-time processing and reconciliation,
and out-of-state tax calculation capability. Oracle’s solution also addresses general ledger and multiple chart
of accounts integration. The Oracle HR application suite provides the tools and capabilities for substantially
more effective human resource management than is available today systemwide. In addition, Oracle offers
robust employee and manager self-service functionality, configurable workflow, effective dated information,
and reporting and analytics.
The Oracle PeopleSoft solution was also chosen with an eye to future UC-wide administrative system
implementations, with strong emphasis on capabilities for seamless accessibility and integration with campus
and medical center identity management systems and interoperability with other campus and UC systems. In
addition, Oracle’s enterprise service bus, provided as part of the solution, will be leveraged for future UCwide applications to support intercampus interoperability.
The integrated PeopleSoft HR/payroll solution is based on a common database that will provide UC with a
single source of data to manage and pay its employees. This solution will be hosted by Oracle at its Tier 4
data center3 located in Austin, Texas, highly rated for security, data privacy, risk management, compliance,
continuity of operations, and sustainable business practices. As a hosted software solution, UC’s application
will run on its own secure instance on Oracle servers, with all infrastructure maintenance and technical support
for development and testing for upgrades and patches provided by Oracle. With a hosted solution, UC
avoids performing IT infrastructure and software maintenance work that is not UC’s core competency, freeing
up IT resources to concentrate on interoperability of systems, data transparency, intercampus collaboration,
and other value-added activities for the UC user community.
The Oracle on Demand PeopleSoft solution is an excellent choice because of its established track record as a
proven ERP platform for higher education and medical centers, but there could also be a fine line separating
stability/maturity with being past prime from a technology perspective. While this concern is not particularly
relevant today, it is a risk given that it will be three more years before the new solution can be fully
implemented across all locations of the university. Nonetheless, despite this potential “investment protection”
concern, because the PeopleSoft platform provides substantial improvement over PPS to enable significant HR
and payroll productivity gains systemwide, the Sponsor Group unanimously agreed to move forward with this
platform as the right choice for UC.
Tier 4 is the highest rating for data center infrastructure, according to TIA/EIA Standard 942, Telecommunications
Infrastructure Standard for Data Centers.
3
Page 14
PPS Initiative: Final Report
BUSINESS PROCESS AND PRACTICE STANDARDIZA
STANDARDIZATION
In order to achieve sustainable, long-term
term savings, many aspects of UC’s current business practices must be
standardized to diminish
ish the costs of differentiation and duplication across locations. The University can
realize some efficiency gains over the current state by deploying new technology, but without foundational
changes to reduce variations and complexities across UC much of the opportunity will not be achieved.
Current State
In two studies ten years apart (2000 and 2010), PwC estimated that there are about 6,000 FTEs performing
payroll and human resources related work at a current cost of approximately $517
517 million. Both studies also
found that approximately 20% of payroll and HR staff time is devoted to issue resolution and rework. PwC
concluded that UC has multiple opportunities for efficiency improvement by:
• Consolidating transactional work into a shared services environm
environment;
• Making better use of available technology;
• Properly aligning
ing job activities and improving processes.
As part of its analysis, PwC
also provided several multiindustry benchmarks for payroll
and HR staffing. In Figure 5,
UC staffing for payroll and
time and attendance is shown
against the PwC benchmarks.
The ratios measure the number
of UC employees supported by
each payroll and timekeeping
FTE. To allow for the
additional complexities of a
higher education research
institution with the added
intricacies of multiple
appointments and fund
management, this analysis also
included less stringent measures
for UC to compare to the
benchmark. Even when
adjusting UC’s ratios from the
benchmark of “Total FTEs” to
“Total Employee Count” and
“Total W2s,” UC falls
significantly short of even the
10th percentile benchmark.
Clearly, UC is overinvested in
payroll and timekeeping staff
to compensate for system
2000
1800
1600
1400
1200
1000
800
600
400
200
0
1891
Employees to Payroll/Timekeeping FTE
Total FTE
Total Employee Count
908
Total W2s
135 194
326
99
UC Metrics
10th
50th
90th
PwC Benchmark Percentiles
$4,000
$3,500
FIGURE 5
$3,825
Total HR Costs Per Employee
$2,889
$3,000
UC
$2,500
$1,904
$2,000
90th
50th
$1,500
$873
10th
$1,000
$500
$UC
PwC Benchmark
Percentiles
FIGURE 6
Page 15
PPS Initiative: Final Report
shortcomings and process inefficiencies.
Similarly, UC’s HR staffing inefficiencies are apparent when compared to PwC’s multi
multi-industry
industry benchmarks as
shown in Figures 6 and 7. Figure 6 illustrates total HR cost per employee, including direct HR staff costs as
well as indirect staff costs (i.e.,
those performing HR functions
186
200
outside the HR department). The
Employee Count to HR FTE
180
benchmark figures also include
outsourcing, consulting, technology
160
UC
overhead, legal and travel costs
140
that are not included in the UC
10th
120
data. Figure 7 illustrates similar
50th
100
results against the benchmark for
78
HR staffing levels showing UC
80
90th
lagging behind the benchmark’s
47
43
60
10th percentile. These PwC HR
40
benchmark results are also similar
20
to those developed specifically for
FIGURE 7
higher education by the College
0
and University Professional
UC
PwC Benchmark
Association for Human Resources
Percentiles
(CUPA-HR). System shortcomings,
highly variable and fragmented business processes and decentralized operations clearly take their toll in the
cost of providing HR services today. There are tremendous opportunities for efficien
efficiencies
cies and real cost
reductions. Furthermore, common
on practices will reduce the need for shadow systems, eliminate many
operational redundancies and significantly reduce the amount of time spent on issue resolution and rework.
Process Standardization Opportunities
Process variation across UC is driven both by the lack of common systems as well as a deeply engrained
culture of independence
dependence among its campuses. Many variations are also the result of differences in how UC
policies are interpreted both among and within campuses. Implementation of a common HRMS and
a payroll
system will help drive process standardization, especially to the extent that the system will be implemented as
“vanilla” as possible.
To date, numerous UC processes requiring standardization have bee
been identified. A few examples include:
• Pay cycles – Today, UC employees are paid biweekly, monthly, monthly arrears, and semi-monthly.
semi
In addition, the population of employees paid under each cycle varies by campus.
• Leave administration – There are variations across locations in accrual methodologies,
methodologie thresholds, etc.
• Holiday pay calculations – There is a lack of standard definitions across campuses along with
variations in bargaining unit agreements and far too many (and different) criteria and eligibility rules.
• Intercampus transfers and one--time payments – Both are significant pain points for all campuses.
• Termination of benefits – There are practice variations in timing, retroactive adjustments and grace
periods.
Page 16
PPS Initiative: Final Report
It is expected that some of the work to standardize business process will also result in the need to change or
clarify some UC policies, particularly where multiple policy interpretations result in conflicting business
processes or work/pay rules.
Page 17
PPS Initiative: Final Report
SERVICE DELIVERY APPROACH
Payroll and Human Resources Service Delivery
While it is imperative to replace PPS with a more capable and efficient technology solution and standardize
business processes and practices, the most
significant opportunity to bring transformational
Percent of Time By Role
change and substantial cost reductions to the
University is in optimization of payroll and
human resources operations and how these
411 FTEs
737 FTEs
services are delivered in the future state.
12% 7%
Leading practices today generally include
Transactional
3384 FTEs
leveraging self-service capabilities for activities
1403 FTEs
Advisory
24%
57%
such as personal data changes, initiating and
Consultative
approving transactions,, and viewing information,
Strategic
as well as some form of shared service
services
organization to deliver services with a
centralized, more efficient organizational
FIGURE 8
design. By streamlining, standardizing and, in
many cases, centralizing
ng processes, quality of
service will improve, even as operational costs are reduced
reduced. Process variation and duplication across locations
will be reduced for highly administrative functions such as payroll, personnel transactions, and time and
attendance. Standardization
tandardization and automation will also free up resources to address strategic organizational
needs, not only in administrative services, but ultimately by re
re-directing funds back into the University’s core
competencies: teaching, research and service
service.
Results
sults from the 2010 activity analysis survey conducted by PwC concluded that approximately 80% of
payroll and human resources time is spent in transactional or advisory processes, as shown in Figure 8. PwC’s
benchmark for these activities is 50%, indicatin
indicating
g that significant UC resources are being deployed subsub
optimally and could be refocused on more value
value-added
added activities. For example, of the 805 FTEs devoted to
payroll-related activities, two-thirds
thirds of these resources are devoted to routine processing of payroll
p
transactions. Therefore, with improved
proved automation, streamlining and standardization of payroll and HR
processes,, significant productivity gains can be achieved and these personnel redeployed to assist with other
urgent needs on campuses and in medic
medical centers. To further optimize delivery efficiency and continued
standardization of these services,, payroll and HR processes will be centralized where feasible within a UCwide shared services environment.
Page 18
PPS Initiative: Final Report
FIGURE 9
SERVICE DELIVERY MODEL RECOMMENDATION
With the goal of optimizing service delivery and effectiveness in mind, a broadly representative team of
management and staff from payroll, human resources and academic personnel across campuses and medical
centers, have recommended an entirely new approach to delivering these services, with self-service access
channels and centralized transactional processing as key elements, as shown in Figure 10. For functions and
processes within the scope of the UC-wide shared services center, this more efficient approach substantially
changes how HR and payroll will operate:
• The primary access channel for payroll and HR services will be self-service (Tier 0) for all employees.
There will also be a secondary channel that utilizes call center or email inquiry capability (Tier 1).
• Face-to-face interaction with an HR or payroll team member will be focused on more complex issues
such as employee relations, terminations, discipline or other sensitive topics (Tier 3).
• Campus and medical center HR generalists, academic personnel staff or other department staff may
have secure inquiry or reporting capability within the new systems but will not have access to update
or edit existing data.
• Managers will initiate and approve individual transactions, such as promotions and appointment
changes, through self-service. Proxy access for some roles will be provided, and mass transactions will
be managed centrally with support from local HR and academic personnel resources.
Page 19
PPS Initiative: Final Report
•
•
Wherever possible, the following types of work will be centralized: Transaction processing; editing or
updating data; customer service; system, code and table maintenance; data/file storage; and security
access.
Each location will have the capability to retrieve data through standard and ad hoc reports, but the
ability to edit data will be tightly controlled.
FIGURE 10
Some of the transformational change necessary will challenge long-held models of service delivery at UC. The
University has traditionally placed a great value on high-touch service delivery, where face-to-face service is
still provided and an answer to an employee’s question is merely a walk or call across campus. Using selfservice or contacting a shared services center to have a question answered might not feel as “high touch,” but
the employee will actually receive higher quality service. In addition, employees will be able to perform more
transactions and see more of their own data online. Managers who are used to filling out paper forms for
promotions, terminations and transfers will be able to execute and approve such transactions online, or
delegate to a representative with proxy access. These kinds of changes, though challenging in the short term,
will result in real benefits, including cost savings and better service, especially over the long term.
TRANSITIONING TO A SHARED SERVICES ORGANIZATIONAL MODEL
To guide the transition to a UC-wide shared services operation, the Management Workgroup has developed
the following vision statement, recommending moving functions to a UC-wide shared services model in phases.
Move to the most efficient and effective centralized end state as quickly as possible by
• Identifying and centralizing first those functions/processes easiest to centralize, synchronized with
systems go-live; and
Page 20
PPS Initiative: Final Report
•
•
Transitioning additional functions and processes as soon as possible based on change
management and implementation success drivers, allowing “difficulty of centralization” to shape
the timing and interim service delivery structure as appropriate.
Pursuing standardization with the goal of moving toward centralization in phases.
Those functions not appropriate for centralization in the first phase will still be standardized across locations
and may be managed at the campus level at least as an interim step. As the service delivery structural model
is more fully developed, the organizational model, location(s) of the various shared services functions, and
ongoing governance will be determined. This transitional approach will provide the greatest potential for
success in managing a very large and transformational change for the University.
Information Technology Service Delivery
To support a single-instance, common payroll system and HRMS for the University, a new approach to
technology provisioning and operations is also required. A shared technology infrastructure and suite of
shared services must be created to enable not only the deployment of common payroll and human resources
systems, but also future multi-campus and systemwide information systems initiatives. A new technology shared
services environment will be a key driver for enabling efficiencies and cost savings by reducing duplication of
IT effort that currently exists within UC, both in terms of technical staffing as well as the infrastructure required
to support multiple payroll and human resources systems.
The ITLC has further agreed that, since no existing campus, medical center, or UCOP information technology
organization has the capacity or infrastructure to deploy, operate and support a UC-wide payroll and human
resource system, a new centralized shared services technology organization will be required. The ITLC has
shaped an organizational and architectural vision that includes robust governance, a flexible approach to
system interoperability, effective migration management, and a focus on usability that will support and
empower the user community. This new organization will be built for scalability and expansion to deploy and
support other multi-campus and systemwide information initiatives into the next decade.
Page 21
PPS Initiative: Final Report
IMPLEMENTATION
Implementation Schedule and Phasing
Implementation will proceed in phases (see figure 11), allowing the organization to achieve stability and
success with the new technology, business processes, and service delivery while undergoing this major
transition. Phasing allows for replacing PPS and adding must-have functionality before progressing to the
comprehensive future state, thus reducing risk and facilitating change management and organizational
readiness. Phase 1 functionality was included in the RFP executed in Spring 2011 and is estimated to take
approximately three years to implement at all campus and medical center locations. Analysis and
requirements for the Phase 2 time and attendance solution will begin in parallel with the Phase 1 rollout.
Select benefits/life events and time and attendance capabilities will be available during Phase 1, but full
capabilities in these areas will be rolled out in subsequent phases, along with fully integrated reporting and
analytics, and potential expanded HR suite capabilities such as compensation administration, performance
management, succession planning, recruitment and training administration. The full scope of the Phase 3
components will be evaluated based on ROI and time to benefit assessed during Years 2 and 3.
FIGURE 11
Phase 1: Implement HRMS, Payroll and GL integration solutions, replacing PPS “must have” functionality as
well as improving core human resources and payroll processing capabilities.
Phase 2: Implement systemwide time and attendance capability, significantly reducing business process
redundancies, shadow systems, and paper processing.
Phase 3: Achieve end-to-end integration and consolidation, with expanded HRMS functionality, a UC-wide
portal facilitating access to all systems, and a human resources/payroll data warehouse supporting
analytics and decision support.
Page 22
PPS Initiative: Final Report
With the replacement of PPS functionality in Phase 1, the University will enjoy greatly enhanced payroll and
human resources system functionality, automating many manual processes and eliminating the need for many
ancillary systems. With systemwide payroll and HR employee data, the University will have improved
capability to establish processes, maintain common practices, define and enforce business rules and develop a
systematic workflow for automated approval and notification. Phase 2 time and attendance capabilities will
further optimize business process flow and significantly reduce manual time/pay processing. By the end of
Phase 3, the University will have streamlined and standardized practices throughout the UC system and have
the ability to leverage UC-wide workforce data to facilitate organizational decision making and planning for
the future.
Phase 1is expected to take approximately three years to complete, including implementation of payroll and
HRMS solutions for all locations, standardization of business processes, and organizational restructuring to
support UC-wide shared services. While Phase 1 is in progress, Phase 2 will commence and is expected to
take between 12 and 30 months. Phase 3 is targeted to begin near the completion of the first phase and last
approximately 12 months, with all project phases completed in four years.
Early Adopters/First Wave Implementers
The systems implementation will take place throughout all UC campuses and medical centers using a wave
approach, with multiple locations grouped in each of several waves. The first wave group, known as Early
Adopters, will comprise a representative but manageable set of campus/medical center locations, selected
for their high level of motivation and potential for success based on key readiness factors including executive
sponsor engagement, resource commitment, communication and change management planning, and
infrastructure to support project activities. This approach will manage the risk of the initial deployment and
provide momentum by leveraging early adopters’ motivation and willingness to engage in potentially greater
work effort, providing a proof of concept and refinement in methodology that will enable subsequent waves
to execute more efficiently and effectively.
To ensure that UC-wide system and business process needs are met from the outset, all locations will be
involved in the design, or “blueprinting,” phase of the project. Engagement and representation from each
campus and medical center will be needed to develop UC-wide business processes and practices. In addition,
each location will need to establish a project management structure to coordinate local implementation
activities such as communication and limited early data cleanup and conversion activities, regardless of
implementation wave. Moreover, since most business process changes will be coincident with the system
implementation and system configuration will be dependent on the new business processes, very close
coordination will be required between the UC-wide process redesign and location implementation efforts.
Implementation Governance
The implementation governance structure is broadly representative, comprising executive leadership,
management, and functional and technical experts spanning locations, organizational levels, and
constituencies. The composition, reporting structure, and responsibilities of each group are designed for
inclusiveness as well as rapid decision making at all levels that will be critical to meeting the aggressive
project schedule and achieving a successful implementation. In addition to providing direction, making
decisions, and managing risk, a key responsibility of all governance group members will be to act as project
communication ambassadors to their systemwide functional peers and to their stakeholders locally.
Page 23
PPS Initiative: Final Report
Key governance groups include:
•
Executive Project Champion/Sponsor - providing leadership and guidance to the project on
overarching goals, objectives and strategy; has final accountability to ensure that project scope and
budget are achieved and maintained
•
Executive Steering Team – advising and supporting the Executive Sponsor and made up of VC-level
leadership from each location; responsible for providing strategic leadership, direction setting, and
executive support to project stakeholders
•
Project Management Office - reporting to the Executive Steering Team and responsible for strategy
and execution of project activities; lead by the Project Director, who has frontline responsibility to
manage achievement of defined project objectives, which include controlling scope creep and
expenses to achieve overall project schedule and budget
•
Management Workgroup - reporting to the Executive Steering Team; responsible for providing
operational leadership and guidance to the project
•
Change Control Board - chaired by the Project Director and made up of functional and technical
experts; responsible for scope management, system functionality decisions and enhancement requests
•
Practices Review Board - chaired by the Management Workgroup Chair, and representing each
functional area (Payroll, HR, and APO); responsible for managing and enforcing common policy
interpretation and process streamlining
•
Shared Technology Service Group - reporting to the UC CIO and guided by the ITLC, with operational
responsibility for technical architecture, operations, and migrations
Implementation Success Factors
ORGANIZATIONAL READINESS AND WILLINGNESS TO CHANGE
The PPS Replacement Initiative represents one of the most complex and transformative propositions ever
undertaken at the university. While the new technology, standardization and service delivery solutions will
improve payroll and human resources service quality and efficiency, these changes will also significantly
impact organizational roles, operational priorities, cultural norms and the way employees work. With service
delivery more centralized, customer support for inquiries and transaction requests will be delivered by online
self-service and by telephone-based customer service. A substantial amount of customer support will no longer
be provided by someone down the hall or by someone that employees know, but instead by a specialist in a
shared services center dedicated to HR and payroll support functions. This will be a significant change for
many campuses and medical centers, which may be accustomed to a more high-touch approach. Manager
self-service technology, including proxy designations, workflows, online checklists and notifications, will replace
paper forms and manual processing and enable supervisors to execute personnel transactions more
efficiently, but at the same time it will likely be a challenge to shift all staff and faculty to an online approach.
To succeed in this transformation, the organization must be prepared to meet the challenges with strong
discipline and leadership to support the transition to the future state. Campuses and medical centers must be
ready to take a collaborative approach to adopting systemwide changes to policies and/or practices to
simplify and streamline processes. Executive level commitment at campuses, medical centers and UCOP will be
critical to supporting and reinforcing the concept of common practices as well as location openness to policy,
business process, and service delivery reviews and changes to achieve project goals. A tremendous amount of
organizational commitment and patience will be required to guide the organization to the future state.
Page 24
PPS Initiative: Final Report
SCOPE MANAGEMENT
Implementing enterprise systems for multiple entities represents significant effort and risk to the University, so
managing scope and priorities will be critical to ensure that the project is successful. Decisions regarding
modifications to agreed-upon project and Phase 1 scope or system functionality will need to be made
collaboratively and sparingly. Such decisions must be made in light of UC-wide needs and with a view
toward maintaining and sustaining viable systems for the long term so they are not encumbered by
customizations which add to total cost of ownership. During the implementation, new internal programs that
could impact the system implementation must be vetted and final decisions made with careful consideration of
project tradeoffs and implications.
SPEED OF DECISION MAKING
A project of this length and magnitude must achieve and sustain significant momentum in order to be
successful. For locations to stay engaged with the project while also continuing to meet ongoing business needs,
the project must continue moving forward at an aggressive pace and move issues through to conclusion in the
most efficient and effective manner possible. For this reason, rapid decision making will be absolutely critical
to achieve success on this project. While consultation and input from constituencies will clearly be needed and
sought, committee consensus with broad representation and extended deliberation will tend to hinder the
process, and may not be possible on a regular basis during the course of this project.
It will be extremely important to foster an environment in which constituencies’ understanding of whether they
are informed/consulted or responsible/accountable is clearly understood and supported. Decision rights and
escalation paths for disagreements will be designed into the process, but it will be important to adhere to
defined procedures and not circumvent or make exceptions without due process. Project as well as location
leadership will need to support and reinforce these imperatives.
COMMUNICATION AND CHANGE MANAGEMENT
Proactive change management, planning and communication will be required to ensure successful adoption of
the new technology and service delivery solutions and transition to the future state. The Working Smarter
initiative website will continue to be indispensable as a vehicle for communicating information, announcements,
and progress on roll-out. News stories and media releases highlighting major milestones and key decisions will
be produced and provided to campus and medical center communications contacts for publication. Projectspecific materials will be developed for campus use to communicate project objectives and status.
The importance of leadership’s role in ensuring understanding of project goals, benefits, and expectations
cannot be overstated. In addition to project communication efforts, campuses and medical centers will need to
develop a local communication infrastructure that will execute communication and change management
activities and events that engage local constituencies and provide updates, transition information and Q&A
opportunities. Campuses and medical centers already engaged in local efforts towards business practice
standardization, centralization and shared services can help leverage their communication and change
management experiences by contributing to systemwide communication and change management strategy
and planning.
The communication and change management strategy will need to both convey the imperative for this
initiative and also carefully address the people impact for job transitions and potential displacements. Beyond
replacing an aging and inadequate system, this initiative represents a response to the current budgetary
environment and an effort to achieve real savings through more efficient and effective operations and
common systems. Since the new technology and service delivery approaches involve consolidating systems and
Page 25
PPS Initiative: Final Report
streamlining work, it is expected that fewer positions will be required University-wide. UC intends to minimize
reductions through attrition (retirements), re-training and realignment of responsibilities, to the extent feasible.
For directly affected staff, there may be opportunities to learn new skills or take on new roles as the nature
of the work becomes more strategic and less transactional, enabling greater focus on more value-added
activities. Once these activities have been defined, staff will require training and preparation to understand
how to be effective and successful in the new model. Project and location leadership must work proactively to
manage impacts on personnel and to help supervisors and employees stay informed about the project and
prepare for transition. Commitment and execution to coordinated communication and consistent messaging in
that regard will be critical moving forward.
VENDOR RELATIONSHIP
UC will need to foster a very close partnership with Oracle, who will play a leadership role in implementation
activities including mapping redesigned business processes to system processes, system configuration, system
development, data conversion, interface development, testing and launch. However, all of these activities are
fundamentally dependent on UC’s ability to rapidly redesign business processes, quickly reach consensus on
decisions, provide the necessary resources, navigate jurisdictional issues and manage scope. Vendor
management will be a critical skill in the new model and adequate emphasis must be placed on the
importance of relationship management, financial and contract management, service quality and issue
management, especially since the software will reside outside UC premises.
Page 26
PPS Initiative: Final Report
FINANCIAL ANALYSIS/TOTAL COST OF OWNERSHIP
Phase 1 Implementation
The Total Cost of Ownership (TCO) analysis for Phase 1 includes
all costs and savings associated with implementation of Oracle’s
HRMS and payroll system, standardization of payroll and HR
processes and deployment of a UC-wide service center for
transactional payroll, HR and benefits processes. Using the PwC
staffing data collected in 2010 and shown at right in Figure 12
current staffing in the functional areas that are part of the Phase
1 implementation is approximately 2,700 FTEs costing
approximately $217 million per year. These functional areas are
shown highlighted in green. The analysis covers an initial threeyear implementation period plus an additional five years of
operations. Over this eight-year period, total project costs are
forecasted to be approximately $307 million with total savings
of approximately $752 million. The Phase 1 implementation
break even occurs in Year 5 and has a net present value of
approximately $230 million (at 9% discount/hurdle rate). Costs,
savings and assumptions are more fully described in the sections
that follow.
ONE-TIME IMPLEMENTATION COSTS
The project’s Phase 1 implementation includes the Oracle HRMS,
with benefits administration, payroll system, GL integration tool
and the UC shared services center. One-time implementation costs
are shown in Figure 13 below and total $243 million. 90% of
these costs are incurred during the first four years of the project
implementation. Thereafter, Year 5 includes a wrap up of the
restructuring costs and Year 6 includes replacement of hardware
for the UC-wide shared services center.
PwC Activity Analysis Results
Category
FTEs
Total Cost
Benefits
427 $34,175,902
Change and
Communication
142
$15,396,270
524
$52,166,500
382
$38,060,758
281
$25,395,447
387
805
$40,489,107
$56,527,532
Recruiting and
Staffing
683
$62,067,886
Special
Projects
115
$12,312,478
Talent
Management
107
$12,265,809
Technology
275
$30,005,141
Time and
Attendance
572
$41,644,602
Compensation
Labor
Relations
Learning and
Development
Organizational
Development
Payroll
Workforce
Management
Total
1,236 $96,727,037
5,935 $517,234,472
FIGURE 12
Page 27
PPS Initiative: Final Report
Implementation staffing includes
all UC functional staff resources
Implementation Costs
required for central and campus
and medical center project
Vendor Costs
execution as well as the IT staff
necessary to implement the new
40,528,000
73,184,000
Implementation Staffing
technology and the new IT
shared services operation. The
111,239,000
implementation effort is
Hardware/Infrastructure
projected to require
approximately 500 FTEs over
Shared Services Center
the three-year implementation
16,825,000
Deployment
period or an average of
1,663,000
Restructuring Costs
approximately 170 FTEs each
year. Implementation staff
FIGURE 13
levels will vary over the course
of the project driven by the implementation activities underway at any point in time. Resources will be needed
centrally for overall project management and to lead various project tracks systemwide, such as planning and
process design,
esign, system configuration, testin
testing and data conversion and cleanup. Dedicated local resources will
be necessary for campus and medical center projec
project management and coordination. Additional part-time
part
resources will be needed from all campuses and medical centers from the beginning for key activities such as
the systemwide process design
gn and standardization effort. Other part-time
time or dedicated campus/medical
center resources will be needed at the appropriate times to participate in campus implementation activities
ac
(e.g., interface development,
evelopment, testing and data cleanup)
up) with timing dependent on the implementation schedule
and the location’s position in the implementation sequence. This analysis assumes that one-third
one
of
implementation staff costs are new or backfilled resources and two
two-thirds
thirds of staff costs are part-time
part
(with
some full-time) redeployments
oyments of existing resources. However, the TCO analysis includes all costs for these
resources.
The single largest component of implementation costs are the res
restructuring
tructuring charges due to job and role
changes and the implementation of the shared services center. At $73 million, these restructuring charges
include conservative estimates of severance costs associated with a net reduction in HR, payroll and IT staff
levels
evels as services are automated, provided via employee and manager self
self-service
service and consolidated UCUC
wide within
in the shared services center. Excluding the restructuring charges, the total Phase 1 implementation
costs are approximately $170 million.
The shared
ed services center deployment is projected to ccost approximately $17 million. The analysis assumes
the implementation of enabling technology within the shared services center, including case management and
knowledge management software. The full cost of UC resources for central project management and
organizational design, with HR and payroll representation from all campuses and medical centers, is included
in this cost estimate, even though a significant part of this work will likely be performed by existing
existi resources.
NEW ONGOING COSTS
New ongoing costs for the project are expected to be approximately $
$63 million over the eight-year
eight
TCO
and include vendor fees for software and hosting services and software support and maintenance of
approximately $45 million. New ongoing costs also include approximately $18 million in non-labor
non
costs
associated with the operation of the shared services center such as facility maintenance and equipment.
Page 28
PPS Initiative: Final Report
Millions
Because shared services center
staffing costs are not new to the
8‐Year TCO: Annual Cost Reduction
University (i.e., they will replace
existing costs), they are not
180
included in the TCO calculation. Of
160
the approximately 2700 FTEs
FIGURE140
14
highlighted in Figure 12 above,
120
between 600 and 700 are
100
forecasted for continued local
80
support of campus and medical
60
center operations, while another
40
approximately 600 staff will be
20
redeployed within the shared
services center operation. There
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8
are no new IT staff costs as a result
of the IT portion of the shared
services center, since this staff will include redeployed existing IT resources.
COST REDUCTION
Over eight years, $752 million in cost reductions result from technology efficiency gains, self-service, process
standardization and the transition of transactional processing activities to the UC-wide shared services center.
There is also a small savings from a reduction in software licensing and support costs. Staff cost savings are
projected to begin in Year 2 and scale rapidly through Years 4 and 5. Savings continue to accrue at a slower
rate thereafter. 90% of the $752 million in savings are attributable directly to centralization of work within
the shared services center, process standardization and automation. The remaining savings are derived from
the consolidation of IT staff to support multiple instances of PPS and campus-based HRMS solutions into a
single UC-wide instance. Adjustments to the strategies for any of the interdependent drivers of cost savings
(shared services center, process standardization and automation) will impact the University’s ability to realize
these cost reductions. The majority of staff cost reductions will not come from central campus organizations but
from the consolidation of work performed by many partial FTEs in departments. Harvesting this savings will
entail significant organizational resolve and purposeful budget management and communication.
Phase 2 Implementation
The project’s Phase 2 implementation includes the deployment of one or, most likely, multiple time and
attendance applications systemwide. Time and attendance applications will provide an accurate and efficient
means to capture employee time and leave data as input to the payroll system. When Phase 2 is fully
implemented, every employee needing to enter time and leave data will enter the information online. This
information will be automatically routed for approval under pre-defined workflow configurations. There will
not be a need for time and leave data to be entered elsewhere significantly reducing staff costs associated
with timekeeping, which today total 572 FTEs at a cost of almost $42 million per year. With alignment and
standardization of overtime and other work and pay rules and fully automated time and attendance capture,
UC will also lower its risk for regulatory or negotiated non-compliance related to time and attendance by
ensuring that standard work and pay rules and approval processing are applied consistently throughout the
University.
Page 29
PPS Initiative: Final Report
The financial analysis of the Phase 2 implementation is preliminary because the future time and attendance
applications have not yet been evaluated or selected. Phase 2 is scheduled to begin implementation
immediately after each location’s Phase 1 completion.
PHASE 2 ONE-TIME AND ONGOING COSTS
It is likely that UC will require a mix of time and attendance solutions to meet the different needs of campus
and medical center employee populations. The actual Phase 2 implementation costs will be dependent on the
number and type of common applications selected and the extent to which more sophisticated scheduling
capability is necessary (e.g., at medical centers). A range of vendor costs were estimated by evaluating
potential scenarios for acquiring UC-wide time and attendance applications and additional scheduling
capability for certain employee populations. For the purposes of this preliminary analysis, the highest vendor
cost estimate was used and then scaled up by one-third to model a realistic range of costs for UC-wide time
and attendance. In total, estimated implementation costs over the eight year TCO range from $43 to $48
million.
Ongoing costs include maintenance and support on both software licenses and hardware. Ongoing costs for a
UC-wide time and attendance solution will almost certainly be less than the ongoing costs for the numerous
solutions in use today.
REDUCTIONS IN COSTS
For most UC employees today, capturing time and attendance information is a heavily manual process. There
are currently some locations where collection of time and attendance information is automated and yet the
resulting data must be manually keyed into PPS. With appropriate and common technology and standardized
time and attendance processes, UC could gain efficiencies by reducing redundant systems activities, manual
entry of data, redundant data entry, manual calculations for accruals, retroactive processing, and issue
resolution. UC could conservatively recoup approximately 160 FTEs worth of work effort from a total of 572
FTEs today performing timekeeping duties, representing an annual savings of $14 million per year after full
implementation.
Page 30