HomeMy WebLinkAboutFCS-12-176 - Customer Information System (CIS) Replacement InitREPORT TO:Finance and Corporate Services Committee
DATE OF MEETING:
November 5, 2012
SUBMITTED BY: Dan Chapman, Deputy CAO and City Treasurer
PREPARED BY:
Alex Ahkoon, Manager, ERP Business Transformation
WARD(S) INVOLVED:
All
DATE OF REPORT:
October 31, 2012
REPORT NO.:
FCS-12-176
SUBJECT:
Customer Information System (CIS) Replacement Initiative
Update
RECOMMENDATION:
THAT final approval to proceed with the acquisition and implementation of an SAP
Customer Relationship & Billing (CR&B) solution to replace the Customer Information
System (CIS) be referred to the 2014 budget process;
AND FURTHER THAT that staff be directed to undertake the following additional due
diligence prior to Council's consideration of the 2014 budget:
a) Continue to monitor the City of Toronto’s initiative to acquire and implement
SAP CR&B to replace its property tax and utility billing systems;
b) Develop funding options for a future SAP CR&B implementation;
c) Evaluate in further detail the option to re-architect CIS as identified in the 2010
CIS Assessment; and
d) Investigate the implications and feasibility of outsourcing the City’s utility
billing functions
BACKGROUND:
The Customer Information System (CIS) is a critical application used at the City of Kitchener
(the City) to manage and bill over $525 million of revenue annually in property tax and utilities,
including gas, water, sewer, stormwater and rental water heater.
In accordance with the recommendation of a CIS Assessment study performed by the firm Prior
& Prior in 2010 and approved by Council in September 2010, staff has been investigating the
acquisition and implementation of the SAP Customer Relationship & Billing (SAP CR&B)
software to replace CIS.
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In March 2012, after further research into SAP CR&B’s ability to meet the City’s requirements
and the estimated costs of implementing SAP CR&B, staff presented report FCS-12-040
(Customer Information System Replacement) to Council and made two recommendations which
Council approved:
That staff be directed to continue to pursue the acquisition of the SAP Customer
Relationship & Billing (CR&B) solution to replace CIS; and further
That staff be directed to issue an Expression of Interest for a business requirements
discovery and solution scoping engagement to deliver a detailed business design
document and the technical specifications of an SAP CR&B solution that meets the
City’s requirements, and to establish a detailed budget for implementation.
In May 2012, Sparta Consulting (Sparta) was awarded the contract by Council to perform the
business requirements discovery and solution scoping work. The SAP CR&B Blueprint project
was launched at the end of June 2012 and key City resources from the business areas and from
IT were assigned to work with Sparta on the project.
This report presents the findings of the SAP CR&B Blueprint project.
REPORT:
Sparta conducted a series of workshops with City resources from Revenue, Utilities,
Engineering, and IT over a 5-week period in June and July 2012 to understand and map the
City’s requirements against the SAP CR&B delivered functionality and processes.
The City’s business processes as they would be performed in the SAP CR&B application were
documented and the configuration and development work required to enable these processes
were assessed. The SAP software components and the hardware infrastructure to support the
SAP CR&B solution were also determined.
A live proof-of-concept demonstration was conducted to demonstrate to staff how some of the
City’s key end-to-end business processes would occur in SAP CR&B.
Findings
The blueprinting workshops revealed a good degree of fit between the City’s requirements and
SAP CR&B’s functionality. Few critical gaps were identified and Sparta confirmed that SAP
CR&B’s utility-focused data model could accommodate the property tax data structure
requirements with no extensive work-arounds.
However, there were areas which were estimated to require a higher level of effort than would
normally be encountered in an average SAP CR&B implementation. These include:
Development work to support the Property Tax requirements
Configuration to meet the regulated business requirements for a gas distributor (GDAR –
Gas Distribution Access Rules)
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Reports and customer letters development
There are over 350 reports and customer letters currently available in CIS. According to
Sparta, the number of reports developed in an SAP CR&B implementation typically ranges
from 50 to 100. The City is advised to thoroughly re-assess its reporting requirements and
eliminate or consolidate as many reports and letters as possible.
Historical data conversion
The amount of historical data expected to be brought over to SAP CR&B, both in terms of
pieces of information and number of years of history, is substantially higher than average.
The City should explore alternative ways to retain this historical information and make it
readily and easily accessible outside of SAP CR&B.
Project Duration
Based on the scope of the work that needs to be undertaken and a standard SAP
implementation methodology, Sparta estimated the project to be 17 months in duration including
a 2-month post go-live support.
Months 1234567891011121314151617
Project Preparation
Blueprint
Realization
Final Preparation
Go-Live & Support
Project Resources
An SAP CR&B implementation project will be a significant undertaking which will require
significant effort and involvement from City staff.
The core project team is expected to consist of the following full-time internal and external
resources:
City of Systems
Kitchener Integrator
Project Management 31
Functional / Business 88
Technical - Development 910
Technical - Infrastructure 33
Technical - Offshore 13
Testing41
Change Management 3
Total3036
In addition, up to 14 subject matter experts (SME’s) from the various business areas that use
CIS are expected to assist during the design and testing phases on a part-time basis.
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Implementation Cost Estimates
The total cost to implement SAP CR&B was estimated at $22.78 million broken down as follows:
Total
Systems Integrator Costs 11,310,660
Systems Integrator Expenses (16% of Costs) 1,809,706
Systems Integrator Total 13,120,366
City of Kitchener Staff * 1,479,120
Staff Overtime 105,353
Contracting Costs 1,231,125
Contracting Expenses (16% of Costs) 196,980
SAP Software Licenses 1,874,355
Hardware293,583
SAP Training 150,000
Solution Design QA (SAP) 50,000
Communications (External & Internal) 10,000
Training Material 5,000
Team Recognition 5,000
Computers16,714
Phones21,077
Legal Costs 80,000
Other Miscellaneous Charges 50,000
Total Estimates before Contingency 18,688,673
Contingency (20%) 3,737,735
Total Estimates with Contingency 22,426,408
HST net of rebate 351,074
Total Implementation Cost Estimates 22,777,482
*The City staff cost does not include staff who are already fully assigned to the support of CIS
as their permanent role
This amount represents an increase of approximately $6.38 million over the previous estimate
of $16.4 million. The following cost components experienced the larger variances:
SpartaPrevious
EstimateEstimateVarianceExplanation
Systems 13,120,366 11,790,4261,329,940
Technical resources added due to
Integrator Costs
higher development effort estimates
Total
$559K increase due to higher
offshore resources rates
City Staff Costs 1,584,473 600,000984,473
Two business resources added to
ensure coverage of all functional
areas on project team
Higher average rates used after
review of potential team members
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SpartaPrevious
EstimateEstimateVarianceExplanation
Overtime costs added
Costs added to cover backfilling of
up to fourteen business resources
assisting with design and testing on
a part-time basis
Contracting Costs 1,428,105 612,480815,625
Three Change Management
Total
resources added for communication
and training development and
delivery work
SAP Software 1,874,355 675,0001,199,355
Additional components included
Licenses
Lower level of discount used
Contingency 3,737,735 2,099,1311,638,604
$934K increase due to higher %
used - (20% vs. 15%)
A detailed variance breakdown by cost component is included in Appendix A.
Possible Cost Reductions
It is likely that a competitive bid process would result in lower Systems Integrator resource rates
being proposed. This could reduce the overall Systems Integrator costs by about 10% or
approximately $1.3 million.
It is also reasonable to expect a higher level of discount on the SAP software licenses which
could result in software costs reduction of over $500,000.
In addition, a very conservative contingency rate was used in estimating the implementation
costs. Unused contingency could reduce the overall costs appreciably.
Comparison of costs as a percentage of revenue
As a result of the increased implementation costs, the “cost as a percentage of revenue” metric
now falls just outside the 3:00% - 4.00% band previously noted in staff report FCS-12-040 (CIS
Replacement).
Impl. Costs Annual Rev.% of
($ Million) ($ Million) Revenue
City of Kitchener (previous estimate) 16.4525.03.12%
City of Kitchener (Sparta) 22.8525.04.34%
Enbridge120.02,900.04.14%
London Hydro 10.0337.02.97%
EnWin (after blueprint) 16.0400.04.00%
Hydro One 180.05,124.03.51%
Proposed Next Steps
Previous research had established that, from a functionality perspective, the SAP CR&B
solution was best able to meet the City’s requirements for an integrated property tax and utility
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billing application. No major changes have occurred recently in either the Property Tax or Utility
Billing software landscape and staff still believes SAP CR&B represents the preferred solution.
However, given the sizeable increase in estimated implementation costs over initial estimates,
staff also believes that further due diligence should be performed to ensure alternatives have
been fully vetted. These alternatives include:
a) Evaluating in further detail the option to re-architect CIS as identified in the 2010 CIS
Assessment study, and
b) Investigating the implications and feasibility of outsourcing the City’s utility billing functions
Staff proposes that the final approval to proceed with the acquisition and implementation of SAP
CR&B be referred to the 2014 budget process so that the tasks mentioned above can be
undertaken.
At the same time, staff should continue to monitor the City of Toronto’s own initiative to acquire
and implement SAP CR&B to replace its existing property tax and utility billing systems, and
identify any opportunity to collaborate to reduce costs.
Staff should also take advantage of this one-year period to identify and execute tasks that will
better prepare the City for a future SAP CR&B implementation. These include:
Cleansing the CIS data that would need to be converted, such as eliminating duplicate
customers
Documenting key requirements and processes, especially the ones that may be unique to
the City or that may not be commonly encountered, such as CIS’ dependency on the
Amanda Building Permit application to receive building data that enable the setup of
services in CIS
Re-assessing the reporting needs of the user community to reduce the more than 350
reports and customer letters currently available in CIS
Reviewing and updating technical documentation, such as systems interface documents for
applications that will continue to exchange data with SAP CR&B instead of CIS
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ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN:
Strategic Directions Alignment
Financial Management
Invest and manage assets strategically
Provide a robust system for the next 15 to 20
years that will enable the City to reliably bill and
manage over $525 million in annual revenue
Align with the City’s corporate technology
direction to buy technology solutions rather than
build internal systems
Capitalize on the investment the City has
already made in SAP
Maximize value through cost effective
Implement cost effective optimized business
service delivery
processes by automating inefficient manual
processes
Information Technology
Utilize leading edge technology to
Provide the foundation to deliver e-services to
provide reliable and convenient access
our customers and implement mobile computing
to city services, information and
functionality for field staff
business processes through a full range
of access points
Maximize technology to support timely,
Shorten the time to delivery of new and
relevant and accurate information
enhanced system functionality
Implement ad-hoc user query and report
generation capability
Optimize technology solutions that will
Implement flexible message printing capability
enhance the city’s ability to interact and
on property tax and utility bills to provide timely
communicate more effectively with our
and relevant information to our customers
internal and external clients
Develop an enabled and
Increase understanding of current and future
knowledgeable workforce
system capabilities and industry trends by
becoming part of a large forum of users and
implementers that share their knowledge of the
solution and the industry
Customer Service
Ensure service is delivered in an
Implement optimized business processes by
effective and cost efficient manner
automating inefficient manual processes and
leveraging best practices inherent in a
purchased solution
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FINANCIAL IMPLICATIONS:
Following the business requirements discovery and solution scoping work undertaken by Sparta
in June and July 2012, the estimated costs to implement an SAP CR&B solution that satisfies
the City’s requirements have increased to $22.78 million from a previous estimate of $16.4
million.
Should SAP CR&B be validated as the preferred option following further due diligence review of
the alternatives, funding options will be developed in advance of the 2014 budget process.
These may include a substantial draw on capital reserve funds over the next several years.
COMMUNITY ENGAGEMENT:
Not Applicable
CONCLUSION:
The SAP CR&B Blueprint project revealed a good degree of fit between the City’s requirements
and SAP CR&B’s functionality.
However, the estimated implementation cost increased by $6.38 million over initial estimates to
a total of $22.78 million. Although the increase is sizeable, the total implementation costs
expressed as a percentage of revenue, at 4.34%, remains close to the 3.00% - 4.00% range
noted during previous research into recent SAP CR&B implementations at other Canadian utility
companies.
While staff believes that an SAP CR&B solution still represents the preferred solution for the
City, it also recognizes that further due diligence work must be undertaken to ensure that other
alternatives have been fully vetted.
Staff therefore proposes that the final approval to proceed with the acquisition and
implementation of an SAP CR&B solution be referred to the 2014 budget process to allow for
this due diligence work to occur.
ACKNOWLEDGED BY:
Dan Chapman, Deputy CAO and City Treasurer
Finance and Corporate Services Department
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Appendix A – Cost Variance Breakdown
SpartaPrevious
Estimate Estimate Variance
Systems Integrator Costs 11,310,660 10,164,160 1,146,500
Systems Integrator Expenses (16% of Costs) 1,809,706 1,626,266 183,440
Systems Integrator Total 13,120,366 11,790,426 1,329,940
City of Kitchener Staff 1,479,120600,000 879,120
Staff Overtime 105,353105,353
Staff Total 1,584,473600,000 984,473
Contracting Costs 1,231,125528,000 703,125
Contracting Expenses (16% of Costs) 196,98084,480112,500
Contracting Total 1,428,105612,480 815,625
SAP Software Licenses 1,874,355675,0001,199,355
Hardware293,583160,000 133,583
SAP Training 150,000130,00020,000
Solution Design QA (SAP) 50,00050,000
Communications (External & Internal) 10,0005,0005,000
Training Material 5,0005,050-50
Team Recognition 5,0006,250-1,250
Computers 16,71416,714
Phones 21,07721,077
Legal Costs 80,00080,000
Other Miscellaneous Charges 50,00010,00040,000
Total Estimates before Contingency 18,688,67313,994,206 4,694,468
Contingency 3,737,7352,099,131 1,638,604
Total Estimates with Contingency 22,426,40816,093,337 6,333,071
HST net of rebate 351,074283,243 67,831
Total Implementation Cost Estimates 22,777,48216,376,580 6,400,902
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