Municipality of Anchorage
ERP Strategy Final Report
May 2006
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Table of Contents
Methodology …………………………………………………………………………….
Executive Summary ……………………………………………………………………
2
4
ERP Options Analysis ………………………………………………………………… 18
MOA Current Situation ……………………………………………………………….. 20
Cost Benefits Analyses ………………………………………………………………
Vendor Options Analysis ……………………………………………………………..
ERP Options Analysis …………………………………………………………………
ERP Strategy Recommendations ……………………………………………………
Reengineering Project Charter ………………………………………………………
Appendices
22
35
46
53
56
…………………………………………………..………………………
 B. MOA Current Situation Interview Notes
…………………………………………..……………
60
62
 A. Interview Participants
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Page 1
Gartner’s Methodology
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Methodology
Gartner was retained by the Municipality of Anchorage (MOA)
to develop an updated Enterprise Resource Planning (ERP)
strategy for the Municipality. MOA’s internal analysis was
focused solely on PeopleSoft and was not completed. The
primary objective of the ERP strategy project was to develop a
new cost benefit analysis that included additional vendors, to
examine the short and long-term direction for MOA, and to
make recommendations for moving MOA towards a more
efficient and contemporary environment.
Gartner used the following approach:
 Conducted interviews with departmental representatives
and summarized the issues identified by interviewees
 Developed alternative scenarios for ERP system replacement
 Develop Cost Benefit Models for each alternative scenario
 Conducted high-level ERP options analysis focusing on
Public Sector vendors
 Developed Project Charter for Reengineering initiative
 Developed system replacement strategy recommendations
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Page 3
Current Situation
Analysis
Cost Benefits
Analysis
ERP Options
Analysis
ERP Strategy
Recommendations
Executive Summary
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Executive Summary Outline
The Executive Summary will cover the following key issue areas:
 ERP Best Practices
……………………………………………………………
6
 Current Situation Assessment
 Key Observations and Findings
……………………………………………………………
……………………………………………………………
7
9
 Options Analysis
 Comparative Net Present Values
……………………………………………………………
……………………………………………………………
13
15
 ERP Strategy Recommendations ……………………………………………………………
 Planning and Implementation Timetable ………………………………………………………
16
17
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Executive Summary
ERP Best Practices
Introduction
The Municipality of Anchorage (MOA) is currently utilizing PeopleSoft v7.5 as its Enterprise
Resource Planning (ERP) software application in support of financial management, budgeting,
purchasing, human resource management and payroll. The PeopleSoft system was implemented
on 1 January 1999, primarily to address Y2K gaps in the systems in use at the time.
ERP Best Practices
The industry best practice and preferred approach to implementing ERP software is to avoid
modifying the software package and to change the way an organization does business to take
advantage of the features of the software.
Another best practice is to plan and budget for software upgrades at various intervals (three to five
years) in order to remain current with the evolution of the software and to maintain support from
the software vendor.
ERP software was introduced into the business marketplace in the late 1980s and since that time,
the software vendors have incorporated many best practices for business processes and user
interfaces to the extent that, today, they support much more of an organization’s business
functions than they did 10 or 15 years ago.
At the same time, the skills and competencies for supporting and developing ERP applications
have become much more readily available than they were in the past.
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Executive Summary
Current Situation Assessment
Gartner’s assessment of the situation has revealed the following key issues with
the current business and systems environment:
1. Due to the necessity of resolving Y2K issues, the MOA elected to change their processes
to match the delivered software, and modified the software where delivered functionality
did not work or was not delivered.
2. Because this approach was taken originally by MOA, and due to the lack of delivered
functionality, the PeopleSoft system has been significantly customized and today it
contains a considerable amount of specific modifications which can not be supported by
PeopleSoft and make it very difficult to upgrade to new releases;
3. The version of PeopleSoft which has been implemented at MOA lacks some key
functionality, consequently certain modules and features were never fully implemented.
This is true, specifically in the case of budgeting, purchasing and some of the human
resources functions.
4. Training and depth of understanding of the PeopleSoft product varies depending on the
user community, therefore there is an inconsistent level of capability between various
departments. The reporting and analysis capability appears to be stronger in human
resources as compared to finance.
5. Web Reporting—Bolt-ons (web front-ends) were developed by MOA and are utilized
throughout the enterprise. Not all MOA employees were given access to PeopleSoft due to
cost, however, web reporting extended the functionality to additional employees that did
not have a user ID.
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Executive Summary
Current Situation Assessment (Cont)
6. MOA did not originally budget for on-going upgrades. PeopleSoft ended the 7.5 maintenance
in 2003. This represented a major risk for the MOA. However, MOA took steps to mitigate the
risk by contracting with Tomorrow Now for some PeopleSoft upgrades.
7. MOA has an unamortized capital asset and outstanding loan balance (used to procure
PeopleSoft several years ago) that will need to be considered for any future discussions
regarding a replacement ERP application.
8. PeopleSoft has recently been acquired by Oracle Corporation, who are now undertaking to
re-write the application and support the products in the future. While Oracle has committed to
supporting PeopleSoft software for at least the next seven years (2013), PeopleSoft clients
will have the opportunity to migrate to the new Oracle platform (Fusion) in three-five years
from now.
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Executive Summary
Key Observations and Findings
Some of the key observations and findings identified during the assessment
include:
 Manual processes/Automation—Several participants indicated that business processes
continued to be significantly manual and time consuming. Any future solution would need to
be automated and aligned with MOA’s business practices, policies, and procedures.
 Integration—There is a lack of integration across some PeopleSoft modules as well as
integration with other standalone applications (budget, CAMA, and other billing systems).
 Training—The level of training that had taken place and what was available to key users and
employees was inconsistent. Several felt that the training was sufficient, while others
expressed a need for additional training.
 Queries and Reporting—Many respondents felt that the query and reporting capabilities were
sufficient while others perceived that there were more queries and reports that could be
accessed. However, they did not know how to access these reports or it was cumbersome to
run certain queries to develop the desired reports. Employees are seeking a
standardized/streamlined reporting tool that is user friendly with intuitive reports and menus,
similar to the Web Reporting that is available to employees today.
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Executive Summary
Key Findings and Observations (Cont)
 Archiving—The current version of PeopleSoft does not support archiving and, as a result, the
volumes of data and the storage capacity requirements are significantly impacting system
performance.
 Security and Access Control—The current application lacks the capability to prohibit access to
certain fields and data entry points. MOA currently limits access control via Profiles set-up.
MOA also has two separate Finance and HR icons which further limits access. The exposure
for MOA is at the screen-access level. Once an employee has write-access to a particular
screen, that employee has access to everything on the field. This has caused the MOA to take
additional measures to preserve the confidentiality and integrity of data.
 Audit Trails and Edits—The current system has some audit tracking capability. However, this
functionality was not implemented due to severe resource usage and system performance
degradation when the audit function is used. While this functionality is turned off, MOA has
limited audit capability to determine who entered data, and when they entered it.
 Application Functionality—The current version of PeopleSoft and the functionality of available
modules meets some of MOA’s business and technical requirements (GL, Payroll, AR, AP, and
PC). However, other modules and their functionality do not meet MOA’s business and
technical requirements (Procurement, Grants tracking, Budget).
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Executive Summary
Key Findings and Observations (Cont)
 Shadow Systems and Front End Bolt-ons—MOA has developed several front-end bolt-ons
that improve and/or enhance the current PeopleSoft functionality. There are a considerable
number of “shadow” systems in Microsoft Excel and Access. These bolt-ons and shadow
systems represent work-arounds that require additional staff time and investment. While the
end result is status-quo or enhancing productivity, the means to get to this level diminishes
productivity and efficiencies.
 Implementation—Certain modules were fully implemented while others were partially or not
implemented at all. For any future implementation or upgrade, it will be important to ensure
significant alignment of the application’s functionality with MOA’s functional requirements.
Further, the implementation plan should ensure proper set-up (budget codes, uniform chart of
accounts, divisions) and reengineering of business process to ensure that technology and
MOA’s business process are working hand in hand.
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Executive Summary
Key Findings and Observations (Cont)
 Licensing and maintenance—MOA licensed PeopleSoft software and capitalized the
acquisition cost when acquired. MOA has continued to depreciate this asset since the original
acquisition and there remains a residual value of approximately $5m which will be reached in
2007. The MOA discontinued paying annual maintenance fees required to keep the software
current and to receive support from the vendor, PeopleSoft. As a result, the Municipality,
today, may need to pay a significant amount in defaulted annual maintenance fees to be in a
position to upgrade the software to the current version from PeopleSoft. Oracle
representatives have indicated if MOA were to “re-license” to a new version, then there would
be no need to bring the defaulted maintenance fees up to date.
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Executive Summary
Options Analysis
Three options were considered and assessed:
1. Current State/Status Quo
2. Upgrade
3. New ERP
These options were assessed from a cost/benefits perspective using the Gartner
Cost Benefits Analysis model. They were also compared to the defined
requirements gathered from the interview and consultation process.
It was determined that the current state/status quo option was not viable as it
was more costly over the five-year timeframe and it did not provide the
necessary support for the business requirements.
Options 2 and 3 were then compared to determine which was most
advantageous to the Municipality: to upgrade with the current vendor, Oracle, or
to replace the current application with a new ERP product. Three new products
were analyzed at a high level: SAP, Hansen, and CGI-AMS.
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Executive Summary
Options Analysis (Cont)
One significant advantage to upgrading vs. implementation of a New ERP is how
the Municipality would account for the unamortized costs of the existing
PeopleSoft asset. Under the upgrade scenario, MOA may roll forward the
outstanding debt obligation and could restructure the liability as part of the
upgrade acquisition costs. Any remaining book value of the PeopleSoft asset
could be used to offset the outstanding debt obligation. By purchasing a new
ERP package, MOA could take a one-time write down of the outstanding debt,
offset by the remaining book value of the PeopleSoft asset.
Ultimately, it was determined that each of the three products assessed could
meet the majority of the MOA’s requirements. However, to determine the degree
of fit of the solution at a detailed level will require a more formal and robust
process issuing a Request for Proposal.
Nevertheless, the results of the Cost Benefit Analyses (CBA) indicate that the
New ERP option would be more costly than the upgrade option.
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Executive Summary
Comparative NPVs (5-year timetable)
A Net Present Value (NPV) analysis is used to determine cash flows or revenue streams
over a given period of time. For purposes of this analysis and generally for public sector
agencies, the NPV analysis is a net cost analysis and reflects the cost of acquisition, the
cost of implementation, and organizational inefficiencies and other costs for a given period
of time (five years.)
For example, if MOA maintained the status quo, the cost to MOA in terms of inefficiencies
and lost productivity would impact MOA approximately $30 million. If MOA upgraded to
Oracle, then the cost of acquisition, cost of implementation, gains in productivity, and
reductions in inefficiencies would be a net cost of $14.7m to MOA over five years.
Scenario
Current State/Status Quo
Upgrade
PeopleSoft (Tier I)
Oracle (Tier I)
Oracle FIN/PS HCM (Tier I)
New ERP
Hansen (Tier II)
SAP (Tier I)
CGI-AMS (Tier II)
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NPV for 5 years (based on MOA WACC
and $ in 000's)
-29,879
-10,512
-14,705
-10,734
-15,412
-14,705
-16,406
May 2006
Page 15
Executive Summary
ERP Strategy Recommendations—Upgrade Scenario
Based on the results of the Cost Benefits Analysis and the analysis of available
options, it is recommended that the Municipality of Anchorage upgrade to a
PeopleSoft Human Capital Management (HCM) and Oracle Financial Solution.
We believe this strategy affords MOA with a viable long term solution and an
improved functional fit for its business and operational requirements. Our
recommendation is as follows:
1. Proceed with an implementation of PeopleSoft Human Capital Management (HCM)
version 8.9 upgrading from the current implementation of PeopleSoft HRMS;
2. Subject to a satisfactory demonstration of the Oracle E-Business Financials Suite
(v11i.10), proceed with an implementation of Oracle Financials, including core financials,
procurement/contracts and project accounting;
3. This initiative would be a re-licensed upgrade, as opposed to a no-cost upgrade, from the
current implementation, because of the financial liability of paying unpaid maintenance
fees;
4. Adopt a policy of implementing the software “out of the box” with no modifications to the
maximum extent practical.
5. Ensure adequate funding is available for maintenance fees in the annual budgeting
process so as to avoid having the same situation recur in the future;
6. Initiate a project to examine and reengineer the business processes and align with the
best practices inherent in the PeopleSoft and Oracle software packages;
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Executive Summary
ERP Strategy Recommendations—High-Level Timetable
Gartner’s recommendations and cost-benefit analyses are based on the
following high-level timetable. This timetable provides for sufficient depreciation
of the existing PeopleSoft asset and allows for a reasonable cost of acquisition
and implementation for a new ERP solution for MOA:
 Initial planning to be conducted in 2006
 Oracle E-Business Financials requirements assessment and vendor workshop in 2006
 Budget planning and funds allocation in 2006 for 2007 Fiscal Year (FY)
 Acquisition, procurement and implementation to begin in FY 2007
 Full implementation and use within 18–24 months
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ERP Options Analysis
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Methodology
To develop the ERP Strategy Recommendations, Gartner
used the following approach:
 Conducted interviews with departmental representatives, and
summarized the issues identified by interviewees
 Developed alternative scenarios for ERP system replacement
 Developed Cost Benefit Models for each alternative scenario
 Conducted high-level ERP options analysis focusing on Public Sector
vendors
 Developed Project Charter for Reengineering initiative
 Developed system replacement strategy recommendations
Current Situation
Analysis
Cost Benefits
Analysis
ERP Options
Analysis
ERP Strategy
Recommendations
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MOA Current Situation
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Current Situation: Key Issues and Requirements
As part of the data gathering, Gartner hosted group interviews with several key
departments and stakeholders. Participants were asked to provide their
opinions regarding the current functionality of the PeopleSoft application as
well as what their desired future functionality requirements would be.
Our summary of our key interview findings are included in the Executive
Summary. Detailed, raw interview notes are attached in the Appendix B.
The following are the key departments/stakeholders that participated in the
interview process.
 Finance
 Human Resources
 Budgeting
 Purchasing/Accounts Payable
 Utilities
 ITD
 Strategy Group
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Cost Benefit Analyses
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Cost-Benefit Model Scenarios*
Three options were considered and assessed:
Current State/Status Quo
Upgrade**
 PeopleSoft (Tier I)
 Oracle (Tier I)
New ERP
 Hansen (Tier II)
 SAP (Tier I)
 CGI-AMS (Tier II)
*The Cost-Benefit models are based on several factors and assumptions i.e. estimated pricing for
software, resource requirements for implementation, MOA outstanding debt, etc. We believe that
our assumptions are reasonable and based on information made available to our project team.
While actual costs and benefits may be higher or lower, we believe that our NPV estimates are
relevant within a range of +/- 20 percent.
**The term “Upgrade” is used throughout this analysis to distinguish this option from the New ERP
option and to describe remaining with same software vendor (PeopleSoft/Oracle). It is
recommended, however that even if MOA remains with the same vendor that the software would
be re-implemented as described herein.
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Underlying Assumptions
 Utilized Vendor High-level Pricing
 PeopleSoft and Oracle scenarios reflect pricing submitted by Oracle to MOA
 Quantified PeopleSoft IS Team and ISD Resources
 Debt Carrying Cost of three percent
 Hardware upgrade costs are already incorporated into MOA’s planning and budgeting and
were not included as implementation costs for the ERP strategy analysis
 Leveraged data from MOA Resources-PeopleSoft Long-Range Scenario Options Analysis
 PeopleSoft cost benefit analysis reflects full replacement of current modules
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Underlying Assumptions
 Oracle cost benefit analysis reflects pricing for Oracle’s E-Business Bundle
 Cost benefit analysis for an Oracle E-Business solution reflects Oracle software pricing with
implementation reflecting cost assumptions for a new ERP implementation
 Upgrade scenarios assume a re-licensed software agreement with Oracle
 Implementation timeline is lengthier for New ERP implementation, resulting in additional net
costs
 Implementation timeline for Oracle is similar to a new ERP implementation, resulting in
additional net costs
 End-user training for PeopleSoft implementation is nominal. For Oracle and New ERP
scenarios, training costs are higher
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Underlying Assumptions
All external interfaces and bolt-on applications would need to be re-done and/or
retouched.
New ERP options includes Finance/GL, Budgeting, HR, Payroll, Time and Labor,
Project Costing, Position Management, Purchasing, Employee Self Service,
Support for Grants
Unamortized costs (outstanding loan payments) were accounted for differently
in the Upgrade and New ERP Scenarios:
 For upgrades, the remaining internal loan balance may be treated as a “re-finance” and the
remaining debt obligation could be carried over and restructured with the financing of the
purchase amortized with the new version of Oracle/PeopleSoft.
 For the New ERP scenario, the unamortized costs may be treated as a one-time write-down,
with the outstanding debt obligation offset by any remaining book value of the existing
PeopleSoft asset.
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Summary Cost Benefit Analysis
Status Quo
Enterprise Resource Planning Software Investment Analysis for the Municipality of Anchorage
Scenario being considered:
Current
Current Status
Status
NoNo
Change
Change
Value of SW Asset
$5,750,000
SW Asset Depreciation Schedule
$1,400,000
Outstanding Loan Balance for Peoplesoft-2007
$5,421,931
Potential Peoplesoft Maintenance Payments
Annual Peoplesoft debt payment
Debt weighted carrying cost:
Anchorage WACC
Potential Liabilities / Penalties for Inefficiency
$0
$1,300,000
3%
12%
$1,500,000
Will you hire staff in Year 1 if implementing SW? No
SW Asset Value (US$K)
ROI Summary (US$K)
Potential Savings
Potential Liabilities
Potential Costs
Total
NPV for 5 years (based on MoA WACC)
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2
Year 1
$5,750
Year 2
$4,350
Year 3
$2,950
Year 4
$1,550
Year 5
$150
Year 1
$0
-$1,500
-$4,015
-$5,515
-$29,879
Year 2
$0
-$1,500
-$7,689
-$9,189
Year 3
$0
-$1,500
-$7,699
-$9,199
Year 4
$0
-$1,500
-$7,708
-$9,208
Year 5
$0
-$1,500
-$7,717
-$9,217
May 2006
Page 27
Summary Cost Benefit Analysis
Upgrade-PeopleSoft
Enterprise Resource Planning Software Investment Analysis for the Municipality of Anchorage
Scenario being considered:
Upgrade
Upgrade
PeopleSoft
Value of SW Asset
$5,750,000
SW Asset Annual Depreciation Schedule
$1,400,000
Outstanding Loan Balance for Peoplesoft-2007
$5,421,931
Annual Peoplesoft debt payment
$1,300,000
Debt weighted carrying cost:
Anchorage WACC
Potential Liabilities / Penalties for Inefficiency
3%
12%
$0
Will you hire staff in Year 1 if implementing SW? No
SW Asset Value (US$K)
ROI Summary (US$K)
Potential Savings
Potential Liabilities
Potential Costs
Total
NPV for 5 years (based on MoA WACC)
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2
Year 1
$5,750
Year 2
$4,350
Year 3
$2,950
Year 4
$1,550
Year 5
$150
Year 1
$750
$0
-$6,750
-$6,000
-$10,512
Year 2
$5,834
$0
-$8,037
-$2,203
Year 3
$6,262
$0
-$8,037
-$1,775
Year 4
$6,262
$0
-$8,037
-$1,775
Year 5
$6,262
$0
-$8,037
-$1,775
May 2006
Page 28
Summary Cost Benefit Analysis
Upgrade-Oracle eBundle
Enterprise Resource Planning Software Investment Analysis for the Municipality of Anchorage
Scenario being considered:
Upgrade
Upgrade
E-Business Bundle
Value of SW Asset
$5,750,000
SW Asset Depreciation Schedule
$1,400,000
Outstanding Loan Balance for Peoplesoft-2007
$5,421,931
Potential Peoplesoft Maintenance Payments
Annual Peoplesoft debt payment
Debt weighted carrying cost:
Anchorage WACC
Potential Liabilities / Penalties for Inefficiency
$0
$1,300,000
3%
12%
$0
Will you hire staff in Year 1 if implementing SW? No
SW Asset Value (US$K)
ROI Summary (US$K)
Potential Savings
Potential Liabilities
Potential Costs
Total
NPV for 5 years (based on MoA WACC)
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2
Year 1
$5,750
Year 2
$4,350
Year 3
$2,950
Year 4
$1,550
Year 5
$150
Year 1
$750
$0
-$8,612
-$7,862
-$14,705
Year 2
$3,345
$0
-$9,080
-$5,735
Year 3
$6,262
$0
-$7,880
-$1,618
Year 4
$6,262
$0
-$7,889
-$1,627
Year 5
$6,262
$0
-$7,898
-$1,636
May 2006
Page 29
Summary Cost Benefit Analysis
Upgrade-Oracle Financials and PeopleSoft HCM
Enterprise Resource Planning Software Investment Analysis for the Municipality of Anchorage
Scenario being considered:
Upgrade
Upgrade
PeopleSoft HCM/Oracle FIN
Value of SW Asset
$5,750,000
SW Asset Annual Depreciation Schedule
$1,400,000
Outstanding Loan Balance for Peoplesoft-2007
$5,421,931
Annual Peoplesoft debt payment
$1,300,000
Debt weighted carrying cost:
Anchorage WACC
Potential Liabilities / Penalties for Inefficiency
3%
12%
$0
Will you hire staff in Year 1 if implementing SW? No
SW Asset Value (US$K)
ROI Summary (US$K)
Potential Savings
Potential Liabilities
Potential Costs
Total
NPV for 5 years (based on MoA WACC)
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2
Year 1
$5,750
Year 2
$4,350
Year 3
$2,950
Year 4
$1,550
Year 5
$150
Year 1
$750
$0
-$7,059
-$6,309
-$10,734
Year 2
$5,834
$0
-$8,229
-$2,395
Year 3
$6,262
$0
-$7,929
-$1,667
Year 4
$6,262
$0
-$7,929
-$1,667
Year 5
$6,262
$0
-$7,929
-$1,667
May 2006
Page 30
Summary Cost Benefit Analysis
New ERP-Hansen
Enterprise Resource Planning Software Investment Analysis for the Municipality of Anchorage
Scenario being considered:
New
New ERP
ERP
Hansen
Value of SW Asset
$5,750,000
SW Asset Depreciation Schedule
$1,400,000
Outstanding Loan Balance for Peoplesoft-2007
$5,421,931
Potential Peoplesoft Maintenance Payments
Annual Peoplesoft debt payment
Debt weighted carrying cost:
Anchorage WACC
Potential Liabilities / Penalties for Inefficiency
$0
$1,300,000
3%
12%
$0
Will you hire staff in Year 1 if implementing SW? No
SW Asset Value (US$K)
ROI Summary (US$K)
Potential Savings
Potential Liabilities
Potential Costs
Total
NPV for 5 years (based on MoA WACC)
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2
Year 1
$5,750
Year 2
$4,350
Year 3
$2,950
Year 4
$1,550
Year 5
$150
Year 1
$750
$0
-$9,130
-$8,380
-$15,412
Year 2
$3,345
$0
-$9,170
-$5,825
Year 3
$6,262
$0
-$7,970
-$1,708
Year 4
$6,262
$0
-$7,979
-$1,717
Year 5
$6,262
$0
-$7,988
-$1,726
May 2006
Page 31
Summary Cost Benefit Analysis
New ERP-CGI-AMS
Enterprise Resource Planning Software Investment Analysis for the Municipality of Anchorage
Scenario being considered:
New
New ERP
ERP
CGI-AMS
Value of SW Asset
$5,750,000
SW Asset Depreciation Schedule
$1,400,000
Outstanding Loan Balance for Peoplesoft-2007
$5,421,931
Potential Peoplesoft Maintenance Payments
Annual Peoplesoft debt payment
Debt weighted carrying cost:
Anchorage WACC
Potential Liabilities / Penalties for Inefficiency
$0
$1,300,000
3%
12%
$0
Will you hire staff in Year 1 if implementing SW? No
SW Asset Value (US$K)
ROI Summary (US$K)
Potential Savings
Potential Liabilities
Potential Costs
Total
NPV for 5 years (based on MoA WACC)
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2
Year 1
$5,750
Year 2
$4,350
Year 3
$2,950
Year 4
$1,550
Year 5
$150
Year 1
$750
$0
-$10,256
-$9,506
-$16,406
Year 2
$3,345
$0
-$9,166
-$5,821
Year 3
$6,262
$0
-$7,966
-$1,704
Year 4
$6,262
$0
-$7,975
-$1,713
Year 5
$6,262
$0
-$7,984
-$1,722
May 2006
Page 32
Summary Cost Benefit Analysis
New ERP-SAP
Enterprise Resource Planning Software Investment Analysis for the Municipality of Anchorage
Scenario being considered:
New
New ERP
ERP
SAP
Value of SW Asset
$5,750,000
SW Asset Depreciation Schedule
$1,400,000
Outstanding Loan Balance for Peoplesoft-2007
$5,421,931
Potential Peoplesoft Maintenance Payments
Annual Peoplesoft debt payment
Debt weighted carrying cost:
Anchorage WACC
Potential Liabilities / Penalties for Inefficiency
$0
$1,300,000
3%
12%
$0
Will you hire staff in Year 1 if implementing SW? No
SW Asset Value (US$K)
ROI Summary (US$K)
Potential Savings
Potential Liabilities
Potential Costs
Total
NPV for 5 years (based on MoA WACC)
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2
Year 1
$5,750
Year 2
$4,350
Year 3
$2,950
Year 4
$1,550
Year 5
$150
Year 1
$750
$0
-$8,612
-$7,862
-$14,705
Year 2
$3,345
$0
-$9,080
-$5,735
Year 3
$6,262
$0
-$7,880
-$1,618
Year 4
$6,262
$0
-$7,889
-$1,627
Year 5
$6,262
$0
-$7,898
-$1,636
May 2006
Page 33
Comparative NPVs (five-year timetable)
The cost benefit models for each identified scenario have been provided
separately to MOA in specifically labeled Excel worksheets.
Scenario
Current State/Status Quo
Upgrade
Peoplesoft (Tier I)
Oracle (Tier I)
Oracle FIN/PS HCM (Tier I)
New ERP
Hansen (Tier II)
SAP (Tier I)
CGI-AMS (Tier II)
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NPV for 5 years (based on MOA WACC
and $ in 000's)
-29,879
-10,512
-14,705
-10,734
-15,412
-14,705
-16,406
May 2006
Page 34
Vendor Options Analysis
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High-Level Public Sector Vendor Analysis
Gartner performed a high-level analysis of ERP vendors with significant
experience in the public sector arena. Leveraging internal and external research,
the following five vendors were selected for analysis:
BiTech (Tier 2)
Hansen (Tier 2)
CGI-AMS (Tier 2)
SAP (Tier 1)
Lawson (Tier 2)
For our analysis, we examined the base functionality for each vendor, and then
we surveyed each vendor with respect to the following requirements:
Public Sector Experience
Technology
Upgrade Frequency
Reporting
Data Archiving
Consulting Services
Enterprise Warehouse
References
Support Services
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Page 36
High-Level Public Sector Vendor Analysis
Each of the vendors reviewed in this analysis possessed the baseline
functionality desired by MOA. Further, CGI-AMS, Hansen, SAP possessed the
requisite blend of install expertise and presence in the market space to be
considered viable, alternative solutions for MOA.
Lawson and BiTech appeared to meet the baseline functionality, however, we
excluded these two vendors from a more detailed review and analysis based on
the following:
 Lawson is primarily geared towards the Healthcare industry and did not appear readily
transferable into the public sector.
 BiTech did not appear either sufficiently robust nor scalable to meet the needs of an enterprise
the size of MOA.
Should MOA decide to pursue a New ERP alternative, we would advise
performing a procurement process coupled with vendor demos and a fit
analysis to more accurately evaluate and align MOAs business and technical
functional requirements with the vendors assessed in our analysis.
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May 2006
Page 37
Considerations


















Has the vendor continued to evolve and innovate the product?
Has the vendor evolved the product specifically for your industry?
What is the view of the vendor's viability?
How new is the new version?
Has the vendor provided expected levels of service to date? How healthy is your relationship with the
vendor?
How long until the current application version reaches the end of standard support?
Is extended maintenance available from the vendor?
How long until support ends for your operating system and database version of choice?
How prevalent is the new version within the installed base?
Are proven third parties offering extended support?
How critical is the application to your business?
Who is driving the need to migrate to a new version?
Are benefits from the upgrade tangible and quantifiable?
How capable is your internal IT staff in terms of application support, development and operations?
How current have you kept your application relative to what is generally available?
How much customization have you done to the application? What portion will move forward to the new
version?
What is the complexity of application integration?
Does the upgrade project include instance consolidation or significant business process change?
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Page 38
Analysis
Consideration
Re-license
New Vendor
Analysis
Has the vendor
continued to evolve
and innovate the
product?
The product is being innovated, however the Other vendors are
functionality is being gathered from other
innovating based on their
platforms that are being consolidated. There current platform.
is no evidence that Oracle is innovating
above and beyond other vendors in the ERP
marketplace.
MOA should focus on the presence of existing
functionality as it does not require custom
functionality outside of typical local
government needs. Oracle’s changing
platform is a negative in this case. IGC
Methodology is unique to MOA and may
require some customization.
Has the vendor
evolved the product
specifically for your
industry?
Oracle has not evolved specifically in the
area of local government. The solution
provided is geared more towards the private
sector.
A portion of the other
vendors have evolved
specifically in the area of
local government. At least
one of the vendors
exclusively service the
public sector.
Other vendors serve the local/state
government sector exclusively.
What is the view of
the vendor's viability?
The vendor is very viable from a financial
and competitive standpoint. The vendor
solution, however, is not stable due to the
pending merger of PeopleSoft, JD Edwards
and Oracle solutions.
The vendors that have been
analysed are viable. The
solutions are at least as
viable, if not more viable,
than the Oracle solution.
Oracle is the most stable of the vendors.
However, all PeopleSoft customers will face
the eventual migration to Oracle and this will
cause a great deal of uncertainty in terms of
cost and application structure/functionality.
How new is the new
version?
PeopleSoft v8.9 was released in Q4, 2004.
Most new versions have
been in the marketplace for
approx. one to two years.
PeopleSoft v 8.9 is a mature product as are
the tier 1 solutions on the marketplace. Neither
option presents any undue risk.
Has the vendor
provided expected
levels of service to
date? How healthy is
your relationship with
the vendor?
The vendor has not provided a good level of
service to date. In fact, MOA is not at all
satisfied with the level of attention they have
received.
MOA does not have a
present or past relationship
with any of the short listed
vendors.
MOA would most likely receive more attention
from one of the other vendors. The present
relationship is not ideal in that the level of
service was never comprehensive and the
application is not current at this time.
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May 2006
Page 39
Analysis (Cont)
Consideration
Re-license
New Vendor
Analysis
How long until the
current application
version reaches the end
of standard support?
Full support, up to seven years (2013), at
a minimum.
The average solution requires an
upgrade every one to two years. MOA
would be supported for three to four
years at a minimum without
undergoing an upgrade.
This factor will not greatly impact
MOA’s decision. A minimum of
two years standard support
should be available to MOA in
either case.
Is extended
maintenance available
from the vendor?
Yes, at a higher cost.
Yes, at a higher cost.
This factor will not greatly impact
MOA’s decision, unless the cost
is significantly higher or lower
(using a new vendor).
How long until support
ends for your operating
system and database
version of choice?
Two to three years at a minimum
Two to three years at a minimum
Equal impact on both options.
Low risk.
How prevalent is the
new version within the
installed base?
The new version is fairly prevalent. More
data will be required. MOA would always
have the option of installing the second
most current version in order to assure
itself of minimal bugs and application
defects.
The prevalence varies. At least one of
the vendors have install bases of over
100. There is a high degree of
likelihood that the version will have
been deployed by a large number of
clients. MOA would always have the
option of installing the second most
current version in order to assure itself
of minimal bugs and application
defects.
If PeopleSoft v8.9 is fairly new
then MOA would be better off
looking at another vendor, or
implementing an earlier version
of PeopleSoft. One or more of
the other vendors had fairly
mature versions in the
marketplace.
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Page 40
Analysis (Cont)
Consideration
Re-license
Are proven third parties
offering extended
support?
Yes. There are many third party support
options available
How critical is the
application to MOA’s
business?
Who is driving the need
to migrate to a new
version?
New Vendor
Analysis
The application is mission critical.
Given the smaller size of these vendors,
the third party options are fewer than for
Oracle. Lawson would have the highest
number of vendors.
The application is mission critical.
MOA would have more
access to third parties if
Oracle were the chosen
vendor.
This factor will not impact
the decision.
The stakeholders at MOA
The stakeholders at MOA
This factor will not impact
the decision.
Are benefits from the
upgrade tangible and
quantifiable?
MOA would be current, and the immediate risk
to the organization would be lowered. MOA
may be faced with an additional upgrade in the
future in order to fully migrate to the Oracle
platform. Oracle has not provided a detailed
functional definition of the eventual solution,
which adds risk to MOA. Given the pricing
offered by Oracle for both the PeopleSoft and
Oracle upgrade, the benefits are very
quantifiable.
The benefits of a new implementation
would be a potential reduction in cost, and
a stable vendor and solution set. The
benefits are very quantifiable.
Both options would provide
similar level of benefits to
MOA.
How capable is MOA’s
internal IT staff in terms
of application support,
development and
operations?
MOA has been supporting its version of
PeopleSoft for many years and has a capable
support team in place. By upgrading to
PeopleSoft 8.9 MOA would leverage its team.
When migrating to Oracle in the future, its
team would have to be augmented.
MOA does not have technical resources
with specific knowledge about the shortlisted solutions. MOA would have to rely on
third party/full time resources and/or train
its present team.
MOA would lower
application sustainability
risk by upgrading to
PeopleSoft v8.9. If it is
likely that MOA could hire
or train qualified technical
personnel for the new
solution, this risk would be
lowered.
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May 2006
Page 41
Analysis (Cont)
Consideration
How current has MOA
kept its application
relative to what is
generally available?
Re-license
New Vendor
Analysis
The present version is extremely outdated.
MOA has lost support a number of years ago.
MOA has increased its application
sustainability risk in the short to long term by
allowing vendor support to become
unavailable.
Extensive customizations have been made to
the present version of PeopleSoft. This fact will
complicate the upgrade process. MOA will
increase implementation risk by performing the
upgrade due to the high level of custom code.
If MOA can perform business process
reengineering, or if the new version contains
added functionality, MOA may be able to
reduce the amount of customizations in the
new version and lower short to long term risk.
MOA would be current for at least three
years and would lower application
sustainability risk by adopting a new
solution.
By selecting either of these
options MOA will lower its
application sustainability
risk. This factor will not
impact MOA’s decision.
A new installation would provide MOA the
opportunity to select a vendor that provides
a solution that is more closely aligned with
MOA’s business processes. MOA could
also opt to re-engineer its business
processes in order to reduce the number of
necessary customizations to the new
solution
MOA would lower overall
application implementation
and sustainability risk by
analyzing a solution that is
geared to the public sector.
MOA should also assess
how many of the
customizations will become
redundant in the new
version of the PeopleSoft
solution.
What is the complexity of
application integration?
The complexity of the integration is moderate.
There is a high probability that the
complexity of the integration would be
moderate, assuming that the identical
interfaces would exist to other applications.
Does the upgrade project
include instance
consolidation or
significant business
process change?
Business process change is possible. The
upgrade would involve a moderate to high
amount of customization assessment and
business process analysis. It would, therefore,
be closer to an implementation than an
upgrade, given the age/version of the existing
solution. It is possible for MOA to reduce
customization conversion by process
reengineering.
Business process change is possible.
Instance consolidation would not be likely.
This factor will not impact
MOA’s decision because
interfaces will have to be
updated/created in either
case.
MOA could lower
application complexity and
project risk by incorporating
business process
reengineering in both
cases. This factor will not
greatly impact the decision.
How much customization
have you done to the
application? What portion
will move forward to the
new version?
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Page 42
Summary Vendor Analysis
Requirements
Hansen
CGI-AMS
SAP
450 install base
install base of 192
21 state wide implementations
Yes. Details available after
direct discussions with vendor
Does not run AS400
SQL and Oracle are supported
The solution is verified to run on
Oracle 10G, and every version
before that. Certified on
Windows. Many clients on Sun,
Unix, Windows boxes, HP, Dell.
A strong solution was not
communicated
Year end archiving is typical and
supported in the app
Data archiving is supported
Full/Partial Consulting Services
offered
Full/Partial Consulting Services
offered
Full Consulting Services offered
In-house support offered
BPO support is offered.
Full in-house support is offered
In the next 12 months, three
major releases are planned for
Hansen v8
Yearly Upgrades
Approximately three years.
Crystal reports are included
Business Objects is delivered
solution
Integrated database and
reporting tools
Enterprise Warehouse
Shared database among
solution modules.
Business Objects is delivered
warehouse product
Business Warehouse.
References
Available after direct
discussions with vendor
192 state and local licensed
clients, Commonwealth of
Virginia, State of Iowa, City of
Dallas
Available after direct
discussions with vendor
Public Sector Experience
Technology
Data Archiving
Consulting Services
Support Services
Upgrade Frequency
Reporting
Hansen v7.7 and v8.05 both run
on Oracle.
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May 2006
Page 43
List Prices by Vendor
Functional
Areas
PeopleSoft
Oracle
Hansen
CGI-AMS
SAP
Pricing type
Enterprise
Licenses
Enterprise Licenses
Enterprise
Licenses
Enterprise Licenses
Enterprise
license/business
process
Finance/GL
$896,311 (includes
AR, AP, Asset
Mgmt, etc.)
$427, 465
(Finance Bundle)
-
$1,900,000
Budgeting
$93,002
-
$462,000
HR
$190,709
$37,450
-
$1,600,000
Payroll
$168,915
$42,800
-
Incl in HR
Time and Labour
Incl in HR
$37,450
-
Incl in HR
Position
Management
Incl in HR
Incl in HR
-
Incl in HR
$17,849
Incl in Finance
-
$485,000
Incl in HR
Incl in HR
-
Incl in HR
Incl
Incl in Finance
-
Incl in Finance/GL
Purchasing
Employee Self
Service
Support for Grants
$681,365
Total
$1,366,786
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$681,365
$1,200,000
May 2006
Page 44
$4,670,000
Assumed pricing
similar to Oracle
Maintenance/Support Fees by Vendor
PeopleSoft
Oracle
Hansen
CGI-AMS
SAP
Pricing type
Enterprise
Licenses
Enterprise
Licenses
Enterprise
Licenses
Enterprise
Licenses
Enterprise
License/Business
process
Maintenance Fees
(as a percentage of list prices)
As quoted
As quoted
20%
14%
17%
$653,800
$149,900
Assumed pricing
similar to Oracle
Maintenance Fees (in USD)
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$300,693
$149,900
May 2006
Page 45
$240,000
ERP Options Analysis
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Page 46
ERP Options Analysis
Upgrade vs. New ERP
Cost Benefit Analyses
The Cost Benefit Analyses examining each of the alternative scenarios of Upgrade vs.
New ERP are compelling. Based on the pricing information provided to date, there is
approximately a $4.2m difference between the two upgrade scenarios. This difference
is primarily due to the assumption that a PeopleSoft upgrade would require less time
and resources (internal resources, consultant time, data conversion, training, etc.)
than an Oracle upgrade. For implementation purposes, upgrading to Oracle would
require additional time and resources because it should be treated as a new ERP
implementation; only the acquisition costs reflect an upgrade scenario.
The difference between the lowest upgrade scenario-PeopleSoft, and our
recommendation is approximately $220k. We have assumed full implementation costs
for the PeopleSoft HCM/Oracle Financials recommendation.
There is also a significant difference between the lowest upgrade scenario
(PeopleSoft) and the lowest viable New ERP option (SAP)—approximately $4.2m over
a five-year period.
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Page 47
ERP Options Analysis
Upgrade vs. New ERP
Vendor Analyses
The Vendor Analyses yields some guidance for consideration between the Upgrade
and New ERP options. For the most part, the base functionality across all solutions
(Upgrade vs. New ERP) are comparatively similar. However, the distinguishing
characteristics between Upgrade and New ERP are sufficient for Gartner to
recommend the Upgrade alternative for MOA.
Further, the core functionality and the maturity of both the PeopleSoft HRMS modules
and the Oracle Financial modules compel a hybrid recommendation of PeopleSoft and
Oracle.
The following slides provide additional documentation in support of our
recommendation.
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Page 48
ERP Options Analysis
Upgrade vs. New ERP
Pros
 Data conversion would be easier and would take advantage of the Oracle/PeopleSoft lab at a
relatively low cost
 Added functionality would most likely satisfy MOA’s business and functional requirements
 Users are familiar with PeopleSoft user interface and navigation
 Strong knowledge base of PeopleSoft product enhancing end-user support
 Potentially lower license fees due to existing relationship
 Minimize/restructure take down of remaining capitalization costs of PeopleSoft software
 Support staff in place and familiar with PeopleSoft
 Strong functionality for the HR/Payroll modules
 Better budgeting functionality
 Strong projects/work management functionality
 Strong asset management functionality
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Page 49
ERP Options Analysis
Upgrade vs. New ERP
Pros
Cons
 Better Purchasing functionality than what MOA has
now in PeopleSoft
 Improved grants tracking functionality
 Potentially easier implementation
 Motivated sales and organization staff to retain
MOA as an account
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 Current version of PeopleSoft is highly customized
and this would not carry forward
 Significant frustration from previous PeopleSoft
implementation
 Upgrade would not take advantage of MOA’s
growing relationship with Hansen
May 2006
Page 50
ERP Options Analysis
Upgrade vs. Upgrade (PeopleSoft vs. Oracle)
PeopleSoft Pros
PeopleSoft Cons
 Strong HR/Payroll functionality
 Leverage existing PeopleSoft knowledge and
resources
 Track record in Anchorage
 Change management issues may be difficult to
overcome
 Public Sector expertise has increased significantly
since previous implementation
 Commitment by Oracle that they would support
PeopleSoft until 2013
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May 2006
Page 51
ERP Options Analysis
Upgrade vs. Upgrade (PeopleSoft vs. Oracle)
Oracle Pros
Oracle Cons
 Strong Finance, projects, asset management
functionality
 Public Sector expertise has grown; however,
commercial clients are primary focus
 Implementation risk would be similar to new ERP
implementation
 New user interface and training requirements
 Company has invested in innovation of its product
line
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May 2006
Page 52
ERP Strategy Recommendations
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Page 53
ERP Strategy Recommendations
Based on the results of the Cost Benefits Analysis and the analysis of available
options, it is recommended that the Municipality of Anchorage upgrade as
follows:
 Proceed with an implementation of PeopleSoft Human Capital Management (HCM) version
8.9 upgrading from the current implementation of PeopleSoft HRMS
 Subject to a satisfactory demonstration of Oracle Financials, proceed with an implementation
of Oracle Financials, including core financials, purchasing and project accounting
 This initiative would be a re-licensed upgrade, as opposed to a no-cost upgrade, from the
current implementation of PeopleSoft HRMS, because of the financial liability of paying unpaid
maintenance fees
 Adopt a policy of implementing the software “out of the box” with no modifications, unless
required by current legislation
 Ensure adequate funding is available for maintenance fees in the annual budgeting process
so as to avoid having the same situation recur in the future
 Initiate a project to examine and reengineer the business processes and align with the best
practices inherent in the PeopleSoft software packages
For internal use of Municipality of Anchorage only.
Engagement: 220857460
© 2006 Gartner, Inc. and/or its affiliates. All rights reserved.
May 2006
Page 54
Oracle Contract Negotiations Strategy
When negotiating a license agreement with Oracle, it is recommended that the
Municipality of Anchorage:
 To avoid unwarranted increases in license fees, include a generic description of the
functionality purchased, avoiding Oracle/PeopleSoft product names, and if possible a
description of the processes that Oracle is suggesting it will automate.
 Incorporate a clause stating that if Oracle subsequently renames, rebundles or relicenses any
of the functionality or business processes listed, or anything substantially similar, MOA will be
entitled to it at no additional fee, as part of its license and maintenance agreement.
 Include a clause in the contract which states that MOA can continue to license under the
defined licensing metrics (e.g. named user) for as long as they like, irrespective of the
software version they are running. This would also include the right to add users or modules
as well as maintain the existing portfolio.
 Include the right to get a full 100 percent credit for licenses bought, together with the ability to
convert based on a net-to-net price conversion, with the same discount being offered on the
converted licenses as was offered on the original licenses.
 Involve MOA’s legal organization more closely in the terms and conditions of the contract that
relate to intellectual property ownership of new process flows by your organization.
For internal use of Municipality of Anchorage only.
Engagement: 220857460
© 2006 Gartner, Inc. and/or its affiliates. All rights reserved.
May 2006
Page 55
Reengineering Project Charter
For internal use of Municipality of Anchorage only.
Engagement: 220857460
© 2006 Gartner, Inc. and/or its affiliates. All rights reserved.
May 2006
Page 56
Purpose of Project Charter
The Project Charter is a “living document” and is the definitive and up-to-date
record of the scope of the engagement. Once the Project Charter has been
accepted by both Municipality of Anchorage and Consultant, it supersedes the
scope section of the proposal and becomes the definitive definition of the
engagement. It will be used as the basis for engagement-related project
management, for reference to any engagement-related agreements (on changes,
additional work, etc.) made during the course of the engagement, and as the
primary reference for resolution of any engagement-related disputes. The
Project Charter contains details of the agreed project deliverables and of all
engagement-related processes that will be adhered to (by MOA and Consultant)
in delivery of the engagement.
For internal use of Municipality of Anchorage only.
Engagement: 220857460
© 2006 Gartner, Inc. and/or its affiliates. All rights reserved.
May 2006
Page 57
Sample Draft Design Team Charter
Team Goals
 Optimize efficiency and cost effectiveness of XXXX finance functions
 Maintain/increase customer satisfaction
 Establish financial accountability and responsibility at operating units
Cost Savings
Target
TBD by DayMonthYear
Key Activities
 Collect and analyze baseline finance function information including current functions, FTEs, G/L, and time
studies
 Compare XXX finance function to other organizations through best practices, benchmarking, and surveys
 Evaluate review and approval related finance activities by XXXX departments, etc.to determine necessity of
oversight
 Develop recommendations to:





Outline decentralized and centralized finance functions that support XXX leadership vision, are cost-effective and are
customer-service oriented
Maximize finance efficiencies between operating units and XXX and within MOA departments
Simplify tasks and streamline processes
Eliminate non-value added activities
Realign finance organization structure around defined functions to achieve appropriate span of control, synergy of efforts, and
management levels
Major Focus Areas





Constraints
 Established financial ground rules for system-wide design teams
 Mayor, Assembly, and CFO requirements
 Applicable laws and regulations
Budgeting and Financial Reporting
Financial Analysis
Cost/Data Accounting and Reporting
Program Reimbursement
MOA Expense Management
For internal use of Municipality of Anchorage only.
Engagement: 220857460
© 2006 Gartner, Inc. and/or its affiliates. All rights reserved.
May 2006
Sample Department Charter
 Assess MOA’s organizational structure to achieve the following:
Charge Statement
(what we expect to
accomplish as a
result of our work)

Identify and achieve consensus on strategic administrative functions
Define MOA’s customers
 Identify opportunities for increased process efficiency and improved customer service
 Develop recommendations for a redesigned MOA structure that is aligned with the strategic mission and vision of MOA and
deploys staff and resources for optimal efficiency

 Reduction in Assembly transactions as a result of increased delegated authority
Quality and Service
 Streamlined and decentralized decisionmaking evidenced by reduced MOA overhead charges to
Goals (measurable
facilities/customers
indicators)
 Enhanced facility/customer management accountability
Cost Opportunity
 $3 million with $10 million as a stretch target identified by December 2007
Major Activities
(how will we meet
our charge)
 Administer 360 Leadership Survey to Department executives and second tier facility managers
 Clarify vision for MOA regarding the areas of strategy, skills/capabilities, shared values, structure, style
(organizational), systems and staff
 Identify customer needs/expectations
 Redesign work processes to meet customer needs and to increase efficiency
 Realign MOA around redesigned processes


Output
(what we will deliver) 

Major Areas of

Focus
Constraints

Consensus generated core administrative functions and responsibilities
Realigned organizational structure
Approved design and implementation plans for new processes in MOA
MOA Customers
Established Financial and team groundrules for systemwide design teams.
Other Municipal Departments, i.e.. Finance, HR, CIO, etc.
For internal use of Municipality of Anchorage only.
Engagement: 220857460
© 2006 Gartner, Inc. and/or its affiliates. All rights reserved.
May 2006
Appendix A
For internal use of Municipality of Anchorage only.
Engagement: 220857460
© 2006 Gartner, Inc. and/or its affiliates. All rights reserved.
May 2006
Page 60
MOA Participants-MOA Departments
Jeff Sinz, CFO-MOA
Troy Swanson, CIO-ITD
Regina Alatervo, Budget Analyst
Toni Prockish, Payroll-Supervisor
Michael Jones, Manager-PeopleSoft
Sharon Weddleton, AWWU-Finance
Barbara Stallone, Labor Director-HR
Becky Rosh, AR-Supervisor
Dave Otto, Director-HR
Karen Moore, Deputy Director-HR
Catherine Gettler, Grant Accounting
Robert Moore, PME-GL-Project Costing
David Richards, Controller-MOA
Glenda Gibson, Assistant Controller
Elizabeth Zib, Financial Analyst-ML&P
Dave Wilks, Accounting Supervisor-AWWU
Rick Miller, ML&P-Finance
Terry Daniels, ITD-CTO
Linda Culver, Functional Analyst
Linda Larsen, Functional Analyst
Bart Mauldin, Director-Purchasing
Fred Kaltenbach, Deputy DirectorPurchasing
Scott Von Gemmingen, Functional Analyst
Dave Olewiler, Technical Analyst
Melanie Wood, Technical Analyst
Dave Hertrich, AP-Supervisor
Janell Perkins, Administrative Officer-OMB
For internal use of Municipality of Anchorage only.
Engagement: 220857460
© 2006 Gartner, Inc. and/or its affiliates. All rights reserved.
May 2006
Appendix B
For internal use of Municipality of Anchorage only.
Engagement: 220857460
© 2006 Gartner, Inc. and/or its affiliates. All rights reserved.
May 2006
Page 62
MOA Current Situation
For internal use of Municipality of Anchorage only.
Engagement: 220857460
© 2006 Gartner, Inc. and/or its affiliates. All rights reserved.
May 2006
Page 63
Overview of Key Stakeholder Issues and Requirements
Finance
Human Resources
Budgeting
Purchasing/Accounts Payable
Utilities
ITD
Strategy Group
For internal use of Municipality of Anchorage only.
Engagement: 220857460
© 2006 Gartner, Inc. and/or its affiliates. All rights reserved.
May 2006
Page 64
Finance—Current Situation
“Code mandated” required customization of PeopleSoft
Lack of integration







Revenue and Expenses
Cash registers
Overpayments are problematic
Over the counter payments not generated by AR system result in over-payments
Need coordination between field and downtown
Extensive workaround (four entries) to process a refund
Customer refund module not working
In-house developed Cash front end
 Interface with AR
 Concurrent users results in system lock-up and/or significant performance degradation
Accounts payable very manual process
 No Lockbox
 Not using Receiving
Many manual adjustments
 Manual JV’s
For internal use of Municipality of Anchorage only.
Engagement: 220857460
© 2006 Gartner, Inc. and/or its affiliates. All rights reserved.
May 2006
Page 65
Finance—Current Situation
Cumbersome Chart of Accounts
 Multiple COA due to different operating units
 Not well supported by PeopleSoft
 Subsidiary ledgers not well integrated due to mismatch of chart fields; ledger fixes don’t
necessarily flow up to GL
 Extensive number of inactive accounts that were imported over from legacy system
 Lack of good combo edits
Financial Statements and consolidated reports prepared external to the
PeopleSoft system
 Significant reporting through Excel and Envision
 In Query is not user friendly-need to know specific drill down tables
 Use of reporting tools not optimized due to lack of end-user training
 Muniverse front-end developed to ease/simplify reporting
System performance is sub-par
 Budget checks lock all the tables
 Wait lags between screens; long process to go from screen to screen
 Budget table is over 11 million lines long
For internal use of Municipality of Anchorage only.
Engagement: 220857460
© 2006 Gartner, Inc. and/or its affiliates. All rights reserved.
May 2006
Page 66
Finance—Current Situation
Disparate billing systems with different customer IDs across the enterprise;
Grants billing processed through Excel
 AWWU
 ML&P
 CAMA
 Fire
 Development Services
Utilities have their own customer billing systems; MOA posts some payments
Customer maintenance-correction mode is problematic. Need to examine
process and access control/security.
Project Costing-extensive manual processes for third party billing. Currently
one FTE is required to support the process.
 Limited edits/data checks
Numerous shadow systems, Access and Excel workarounds
For internal use of Municipality of Anchorage only.
Engagement: 220857460
© 2006 Gartner, Inc. and/or its affiliates. All rights reserved.
May 2006
Page 67
Finance—Desired Functionality
Standard workflow throughout the enterprise that aligns functionality with
business processes
Integrate AP with AR
 Link cash front end with AR—bolt-on custom written front end for processing cash receipts.
Enhanced interfaces
 Direct interface to GL from Payroll, and Project Costing from Payroll.
 Review multiple projects at a time with a summary of all projects. More timely information from
Time and Labor to Projects and GL.
 Daily to real-time interface between CAMA and GL
Automated processes
 Payment processes are completely manual
 Third party billing from the Project Costing Module.
 Ability to load project costing data into AR.
Consolidated billing system
 Multiple users working simultaneously
 Ability to assess late fees
For internal use of Municipality of Anchorage only.
Engagement: 220857460
© 2006 Gartner, Inc. and/or its affiliates. All rights reserved.
May 2006
Page 68
Finance—Desired Functionality
Flexible Chart of Accounts able to support multiple entities
 Consolidate financial reporting directly on-line
Standardized/streamlined reporting
 User friendly reporting tool
 Intuitive reports and menus
Budget based controls between the different levels of budget—Department
level-appropriation, revenue estimated, etc.
 Controls at DeptID level and down to the project level.
 Budget periods
 Project costing
 Integration with other applications/modules
 Budget reconciliation between systems and budget years
 Query tools and ability to retrieve subsidiary data
Budget preparation system integrated with Finance and HR
Grant management system to track life cycles of grants. Grants billing as part of
the process instead of in excel. Grants invoices need to have special data inputs
as part of the invoice—grant budget, invoice, grant number, etc.
For internal use of Municipality of Anchorage only.
Engagement: 220857460
© 2006 Gartner, Inc. and/or its affiliates. All rights reserved.
May 2006
Page 69
Finance—Desired Functionality
Built-in data/edit checks
 Error messages when data is not saved or incomplete
Security/access control for specific fields
Timely updates from CAMA system
Timely allocation of Intergovernmental Charges (IGCs) (currently a three-day
process)
Asset Management
 Bar Code reader for inventory purposes
For internal use of Municipality of Anchorage only.
Engagement: 220857460
© 2006 Gartner, Inc. and/or its affiliates. All rights reserved.
May 2006
Page 70
HR and Payroll—Current Situation
Payroll side is disconnected from the Time and Labor side. Interface/front-end is
only one way.
 Off-cycle check payment is very laborious.
Lacking a labor distribution interface between HR and GL. Need it at the
employee level and not the summary level. Labor distribution model in
PeopleSoft summarizes the information
 Automate GL and payroll; currently labor distribution is very laborious.
Significant amount of manual work involved for labor distribution. Impacts
several different people.
PeopleSoft has huge functionality, so many panels that are terribly complex.
If you miss any steps, then it’s processed incorrectly.
 Employee service could be turned on now, but the web front end requires modification so it
makes sense to the employee—to decode all of the codes.
Applicant tracking is currently maintained in a separate Microsoft Access
database
MOA rolling out a bolt-on/shadow application system
For internal use of Municipality of Anchorage only.
Engagement: 220857460
© 2006 Gartner, Inc. and/or its affiliates. All rights reserved.
May 2006
Page 71
HR and Payroll—Current Situation
Payroll clerks can change pay rates (can override existing pay rates) and can’t
audit this currently.
Currently can’t accurately track personnel changes, payroll controls
 Need audit trail for changes, edits, revisions
No confidence in Risk Management module
 Return to work
 Benefits
 TPA is for drug testing, not worker’s compensation
Current query tool is simple and effective
Online payroll calculation tool is simple and of critical importance. System
automatically brings in benefits and calculates the tax obligation
For internal use of Municipality of Anchorage only.
Engagement: 220857460
© 2006 Gartner, Inc. and/or its affiliates. All rights reserved.
May 2006
Page 72
HR Payroll—Desired Functionality
On-line open enrollment for benefits
 On line viewing of employee information for personal use
Employee Self service-access to payroll information and Supervisors and
managers to be able to access HR data for their direct reports
Applicant tracking (maintain a separate Access database for tracking applicants).
Rolling out an on-line application system (bolt-on/shadow system).
Automated timecard-paper timecards
 Tool for tracking hours for part-time staff
Automated job appraisal, pre-define job requirements, goals and objectives,
allowing manager to easily rate and conduct evaluations
More robust labor tracking, grievance tracking-discipline. More robust FMLA,
COBRA, COBRA administration, “Leave” tracking in general. Tool for tracking
hours for part time people.
Better workflow system.
 Currently haven’t even looked at it from the HR/Payroll side
For internal use of Municipality of Anchorage only.
Engagement: 220857460
© 2006 Gartner, Inc. and/or its affiliates. All rights reserved.
May 2006
Page 73
HR Payroll—Desired Functionality
Professional development module
 360’s-forwardlooking performance appraisal/management tools
 Career management, skills assessment
 Tool for tracking professional certifications that could impact pay grades and collective
bargaining agreements
Contemporary OSHA product
 Direct data entry
 Summary reporting
Audit functionality and controls
 Tracking personnel changes
 Payroll Controls
Automated garnishment system
 Child Support
 Student loans
 IRS
For internal use of Municipality of Anchorage only.
Engagement: 220857460
© 2006 Gartner, Inc. and/or its affiliates. All rights reserved.
May 2006
Page 74
HR Payroll—Desired Functionality
Alignment of Payroll with Benefits-payroll increases can be prorated, benefits
pro-rating must be done manually
MOA needs improved/good application documentation
Standardized organization chart tool
Time and Labor integrated with payroll
For internal use of Municipality of Anchorage only.
Engagement: 220857460
© 2006 Gartner, Inc. and/or its affiliates. All rights reserved.
May 2006
Page 75
Budgeting—Current Situation
PeopleSoft budgeting (v7.5) never worked for MOA; inoperability acknowledged
by PeopleSoft—consequently MOA was required to continue use of the legacy
system
Budget preparation
 using legacy budget system then upload budget into PeopleSoft; develop a crosswalk
(translation table) to align both applications
 Primarily paper based
 Time consuming (3 days; 2-5 FTEs)
 Budget is loaded from the finance side, GL
 Salaries are not loaded into the HR side
 Shadow file is produced to validate paper budget with loaded PeopleSoft budget
 Shadow excel manipulation and manual work-arounds to build the budget
 Preparation of budget book for Assembly is sufficient
 AWWU and ML&P load their budgets themselves
 Budget coding system is legacy; finance is the caretaker for account codes
For internal use of Municipality of Anchorage only.
Engagement: 220857460
© 2006 Gartner, Inc. and/or its affiliates. All rights reserved.
May 2006
Page 76
Budgeting—Current Situation
Budget tracking
 In-house developed web based reporting tool
 Provides good view into data for tracking
 Not integrated with PeopleSoft
Budget queries and reporting
 Queries are challenging to initiate and write
 Difficult to model various scenarios for mayor and key MOA executives
 Need additional training and understanding of available queries
 Little to no confidence in queries; staff rely on legacy Budget Prep system for queries and
reporting
Prior-year budgets are kept open for several years.
Need process to close budget cycles. Utilities and enterprise funds close budget
cycle at fiscal year end and roll over commitments into the next fiscal year.
Processing of allocations and development of Intergovernmental costs is
cumbersome and time consuming.
For internal use of Municipality of Anchorage only.
Engagement: 220857460
© 2006 Gartner, Inc. and/or its affiliates. All rights reserved.
May 2006
Page 77
Budgeting—Desired Functionality
Integrated budget system with Finance and HR applications (MOA could move
from maintenance mode to a management, oversight mode.)
 Position based budgeting, by bargaining units (11 total; 9 union, 2 non-union)
 More flexibility
 Improved budgeting and forecasting tools
Biennial budgeting
Simple, efficient internal chargebacks and calculation table
Scenario building, budget modeling; What if? Analyses
Security and access control
 Limit ability to make budget modifications
Effective tool/functionality to manage departmental reorganizations (MOA
understands that this functionality is not in a budgeting module, but in an HR
module-realigns HR to budget for the new organization and maps back to prior
years.)
Archiving capability; availability of historical data
Revenue trend analysis-past actuals against budgeted forecasts
Facilitate budgeting of interdepartmental expenses
For internal use of Municipality of Anchorage only.
Engagement: 220857460
© 2006 Gartner, Inc. and/or its affiliates. All rights reserved.
May 2006
Page 78
Purchasing—Current Situation
Purchasing functionality not well supported nor functionally useful
Manual processes and significant number of workarounds
Order placed by user, product is delivered, invoices generated by vendor.
Majority of the invoices are centrally routed to PO Box. Invoices are sorted by
department, manual process to review, research invoices to ensure routed to
correct department.
Department receives invoice, and reviewed by appropriate approver. GL
payment code entered either by clerk or approver.
AP is decentralized out to the departments
3-4 different means to purchase/procure goods
Budget check is done reactively, not up front, on external sources
Pre-encumbrances (budget/accounting checks and edits) are time consuming
Voucher approvals are conducted manually
MOA business processes provide for early payment of invoices. PeopleSoft
functionality for payment of invoice on payment due date is not utilized
For internal use of Municipality of Anchorage only.
Engagement: 220857460
© 2006 Gartner, Inc. and/or its affiliates. All rights reserved.
May 2006
Page 79
Purchasing—Current Situation
Functionality exists for EFT, but all payments are performed via MOA check
Manual checks are prevalent in the process
Vendor/customer database are neither integrated nor contemporary
Employees are loaded as vendors; employees are reimbursed for travel through
AP
MOA does not have the capability to transfer funds to IRS
RFP process and procurement process are all manual
Vendor/Bidder pool is extensive (35k discrete vendors)
PeopleSoft is a commodity based system; services drives a different type of AP
function;
Progress payments, partial payments are not handled effectively
Baseline payment support and functionality is OK, however huge void between
requisition and payment
 Processing of change-orders consists of several work-arounds from existing system
functionality
For internal use of Municipality of Anchorage only.
Engagement: 220857460
© 2006 Gartner, Inc. and/or its affiliates. All rights reserved.
May 2006
Page 80
Purchasing—Desired Functionality
Single vendor database. AP can add new vendors and so can Purchasing. Some
folks have access to the database in the field, but do not update the database.
Ability to manage year-to-year transactions
Ability to track authorized contract dollar amounts
Contract management-differentiate between commodities and services; RFP
generation and management
Online bidding; automated RFP and procurement processes; charge vendors to
use the system
Blended procurement system with a functional web system
Audit checks to prevent billing a closed PO
Web interfaces to allow for vendor self service, updates, profile maintenance
1099 desired functionality; generate a 1099 INT form
Generate 1042-S payments to foreign vendors
Use of product codes to identify vendor capabilities
System must incorporate functionality for services and construction
For internal use of Municipality of Anchorage only.
Engagement: 220857460
© 2006 Gartner, Inc. and/or its affiliates. All rights reserved.
May 2006
Page 81
Purchasing—Desired Functionality
Electronic mailing would be useful
Automated workflow for requisitions
Report writing and query capability
For internal use of Municipality of Anchorage only.
Engagement: 220857460
© 2006 Gartner, Inc. and/or its affiliates. All rights reserved.
May 2006
Page 82
Utilities—Current Situation
Utilities have similar business processes; basic processing needs are all the
same
Regulated utilities require some flexibility for chart rules
Utilities are project oriented and need more emphasis on asset management
 Depreciating accounts are a major expense
AWWU manages three systems that cover their asset management needs
AWWU desires a Capital Improvement Program integrated with asset
management
ML&P is looking to replace its homegrown (legacy) asset management system
Archiving-transaction tables are huge
For internal use of Municipality of Anchorage only.
Engagement: 220857460
© 2006 Gartner, Inc. and/or its affiliates. All rights reserved.
May 2006
Page 83
Utilities—Current Situation
Procurement processes are manual with significant workarounds
Reporting-AWWU uses a web based reporting-system with a browser front end
for end-user access to financial data
 Envision is an expensive and cumbersome reporting tool. Takes over 8 hours to run monthly
reports
 AWWU finance gets a minimum level of reports. Could use more reporting but reluctant to ask
for more due to impact on other outside responsibilities
 Queries are not easily developed
 Transactional data available, but tool is not efficient
 ML&P lacking a solid budget variance report and some ad hoc end user queries
ML&P is the only agency that utilizes the inventory module. Would like to have
integration with Purchasing.
For internal use of Municipality of Anchorage only.
Engagement: 220857460
© 2006 Gartner, Inc. and/or its affiliates. All rights reserved.
May 2006
Page 84
Utilities—Current Situation
Project management tools are lacking-AWWU separately developed custom
designed system to track requisitions and other critical project management
tools. (There are better stand-alone tools for project management and this
functionality doesn’t necessarily have to be included in the ERP solution.)
For internal use of Municipality of Anchorage only.
Engagement: 220857460
© 2006 Gartner, Inc. and/or its affiliates. All rights reserved.
May 2006
Page 85
Utilities—Desired Functionality
Ability to interface with third party asset management packages
Archiving capability
Project management tools to track budget expended to date, and other PM tools
Query and Reporting
Workflow-comprehensive workflow within the modules
 Requisition to Pay
 Automated/electronic billing
Imaging
Cash-receiving/cash front-end
Travel and expense tracking
Standard management tools, i.e. Key Performance Indicators (KPIs), activity
based costing, administrative overhead calculations
Utilities do have different functional requirements than the rest of MOAappropriate solution for general government may not meet the needs of the
utilities.
For internal use of Municipality of Anchorage only.
Engagement: 220857460
© 2006 Gartner, Inc. and/or its affiliates. All rights reserved.
May 2006
Page 86
ITD—Current Situation
Moving to Z box
Operating to expectations
Lack of archiving capability is impacting performance as some processes are
slowing down
Purge or retain data? HR still dependent on legacy data
 Active data for years 1-3, but need access to years 4-7
Continuous changes to system and its interfaces (add-ons and bolt-ons)
Data is accessed through web reporting; no impacts to the production data base
Number of printed reports is declining as access to additional real-time data and
reports is increasing
Utilizing multiple copies of the database; not impacting system performance but
requires significant amount of disk space
 Database refresh takes one month to six weeks
 Current database is DB2
For internal use of Municipality of Anchorage only.
Engagement: 220857460
© 2006 Gartner, Inc. and/or its affiliates. All rights reserved.
May 2006
Page 87
ITD—Current Situation
No centralized mechanism to drive reports and to query the system. End users
are investing their own time to develop the queries and analyzing the data
 Need to develop an index or catalog of available queries and what the queries do
Multiple layer security for access to PeopleSoft
Workflow is implemented for GL and on a limited basis in Purchasing. Would
like to implement workflow in AP
Geographic dispersion of MOA facilities increases complexity. Fat client
requires higher bandwidth requirements
Daily refresh of the datamart but there are growing concerns whether this is
sustainable due to continuing archiving issues
For internal use of Municipality of Anchorage only.
Engagement: 220857460
© 2006 Gartner, Inc. and/or its affiliates. All rights reserved.
May 2006
Page 88
ITD—Desired Functionality/Technical Requirements
Distributed system/shared services between departments and business units
Proven in the government environment
Need budget environment
Need Intergovernmental charges/chargeback (IGCs) system
Web interface instead of the client
Secure database
Ad hoc reporting
Imaging
For internal use of Municipality of Anchorage only.
Engagement: 220857460
© 2006 Gartner, Inc. and/or its affiliates. All rights reserved.
May 2006
Page 89
Strategy—Issues and Concerns
Cost is a big issue-unamortized capital cost and resulting write-down impacts
the decision-making process
Participation of enterprise departments impacts economies of scale and
downstream decision-making
Is MOA ready to be a better customer? Can MOA sustain the upgrades,
maintenance, and ongoing changes?
How does MOA work through the PeopleSoft/Oracle issue?
 Improving the brand and image of PeopleSoft before the Assembly and the workforce
Balance short term pain for longer term stability
Should MOA be more basic? Tier 2? Vanilla product?
Need to do the Business Process Re-engineering (BPR)
What is the right fit for MOA? What system functionality is required and what is
the appropriate level of municipal commitment?
For internal use of Municipality of Anchorage only.
Engagement: 220857460
© 2006 Gartner, Inc. and/or its affiliates. All rights reserved.
May 2006
Page 90
Strategy—Technical Requirements/Desired Functionality
Robust financial and HR package
Budget module
Improved purchasing module
For internal use of Municipality of Anchorage only.
Engagement: 220857460
© 2006 Gartner, Inc. and/or its affiliates. All rights reserved.
May 2006
Page 91
Contact Information
Client Contact Information
Gartner Contact Information
Michael Jones
Municipality of Anchorage
Telephone: +1-907-343-7176
Email: JonesM@ci.anchorage.ak.us
Phil Ferguson
Gartner Consulting
Telephone: +1-619-542-4823
Email: Phillip.Ferguson@gartner.com