Appendix B

  City of Toronto

Administrative Systems Evaluation

"Best of Breed" vs. Integrated Applications

Introduction

The new City of Toronto is working on a complex and pressing task of consolidating its administrative services and systems, a critical element of its overall amalgamation effort. The City is faced with two fundamentally different alternatives in its application system evaluation- an integrated HR/Payroll/Financials and a "best of breed" package. The "best of breed" solution is a combination of HR/Payroll and Financials. Normally, these products are developed (but not necessarily distributed) by different vendors, and are chosen for their relative strength in their respective functional areas, in this case, HR/Payroll and Finance. On the other hand, the integrated solution is a product which is comprised of tightly integrated modules with a common underlying data base and a common access tool set. The functional superiority of "best of breed" components, unquestionable a few years ago, has practically disappeared as leading ERP (enterprise resource planning) vendors have dramatically improved the functionality of their products in all areas, while maintaining their integration focus.

In this document, we review the business needs of the City and analyze the impact of the aforementioned alternatives on its business operations. We highlight the principal differences between these solutions and illustrate them with a few examples representing some typical City needs. Finally, based on this analysis, we make a recommendation.

City of Toronto Business Needs

The City has aggressive improvement targets for its administrative services with respect to both staff efficiency and quality. In order to achieve the expected results, the City should consider a holistic approach to change. While technology is a necessary and very important element of change, its alignment with business processes, organization, and culture are extremely important.

Therefore, prior to reviewing the aforementioned technology alternatives, we consider the business environment the technology solution will have to be aligned with.

The administrative services will need to reduce cost of transaction processing, and focus on value-added activities (e.g. analysis, planning). According to Gartner Group, the following are some strategic imperatives in transforming these services:

• Finance - in addition to traditional general accounting, should focus on cost and management accounting and treasury issues; its analytical capabilities should span the entire enterprise, not just focus on financial metrics.

• Procurement - in addition to processing user requests and contracting with vendors, should focus on negotiating deeper discounts, reducing transportation and other carrying costs;

influencing the vendor's R&D, yield and production capacity, and watching operational, decommissioning and disposal costs of capital goods.

• HR/Payroll - in addition to administering the organization and its employees, should focus on HR planning which is becoming increasingly complex with the proliferation of business process outsourcing/insourcing options and project-based organizations.

This shift in focus encourages capturing (with edits and controls), and ensuring quality of information at the source. Capturing information at the source also strongly suggests it should be done once. The fact of (re-)entering the same information into loosely connected systems for different purposes was not obvious before, as it was done by different administrative areas (often based on colourful multi-part documents produced by the originating department), but pushing the activities to the source has exposed the problem. Gartner Group expects 1999 investments in data capture and sharing technologies to deliver a 50 percent better return on investment than those in refreshing transaction-processing capabilities.

The strategies described above are consistent with the direction the City is taking (New City New Opportunities, Transition Team, December 1997):

• benchmarking against private sector;
• move budgets for support services to operating departments;
• responsibility for results;
• balance centralized and decentralized functions.

Integrated vs. non-integrated HR/Payroll/Financials

In this section, we discuss how these technology options would function in the business environment described above. There are several key areas of the City's business operations where the alternatives will result in a strikingly different impact on the business users.

(Copies of drawings headed Integrated Applications and "Best of Breed" Applications, are on file in the office of the City Clerk.)

Data Capture

The integrated alternative enables information capture and validation at the source while the non-integrated alternative requires either re-entry of the same information into the software components or maintenance of interfaces which would simulate this re-entry. The interfaces are normally specified and controlled by vendors and represent compromise solutions aimed at satisfying their user group needs.

 The following are a few examples of how the alternatives would impact the City's operations.

1. Create a Position

Normally, creating a new position using a HRMS (HR Management System) first requires checking if the organizational unit has sufficient budget, and, if it does, adjusting the budget upon creation of the position. The integrated alternative allows on-line real time validation, position creation and budget adjustment while the non-integrated alternative, at best, will validate the position budget against financial information captured at some point in the past (FIS-to-HRMS interface) and upon creation of the position will create a transaction to revise the budget (another interface, HRMS-to-FIS). As the validation was not real time, this transaction may be rejected and thus may trigger a manual process of reversing the creation of the position.

2. Process a Salary Increase

Processing a salary increase first requires checking to see if the G/L salary account has enough money in its free balance, and, if it does, adjusting the free balance and salary encumbrance according to the increase.

The integrated alternative allows on-line real time validation, salary increase processing and free balance adjustment, while the non-integrated alternative, at best, will validate the increase amount against financial information captured at some point in the past (FIS-to-HRMS interface) and upon increasing the salary will create a transaction to revise the free balance budget (another interface, HRMS-to-FIS). This validation will be impossible to perform in the latter case at all if the funds checking rules include both the salary budget and the bottom line budget of the organizational unit. As the validation was not real time, this transaction may be rejected and may trigger a manual process of reversing the salary increase.

3. Time and Activity Reporting

An employee working on a project /program(s), reports his/her Time & Activity information to his/her project manager as well as to HR/Payroll for payroll, vacation, benefit and other purposes.

The integrated alternative allows on-line real time validation and updates both the project/program information and HRMS. On the other hand, very few project management systems have interfaces with HR/Payroll systems and vice versa. Therefore, this example is likely to result in duplication of data entry (following with reconciliation).

Operational Management Information

The integrated alternative provides an integrated information view and allows the end-user relatively easy access to up-to-date cross-modular (e.g. HR and Financials) operational management information. The non-integrated alternative requires development and maintenance of a data warehouse which would serve as a repository for gathering and synchronizing information from various software components, e.g. HRMS and Financials, for reporting and analytical purposes. This information is historical and may not be current enough for tactical purposes. This data warehouse would likely be a product from a niche vendor, and would have a tool set different from the tools supplied by the main software products.

The following are examples of enquiries which could be satisfied by an integrated solution, but not by a non-integrated one:

• Ability to view departmental salary budget (maintained in FIS) and to "click" on it to view the positions (maintained in HRMS) comprising the budget;

• Ability to view summary payroll actuals (FIS) and to zoom into corresponding employee-by-employee payroll detail (HRMS);

• Ability to view overtime summary payment (FIS) and to see, employee-by-employee, what it is comprised of;

• Ability to view project/program information (FIS-Project Management) and to view HR costs (regular salaries, overtime, benefits) for the project/program or, with proper access clearance, by project member (HRMS);

• The previous example is just an indicator of the value of the integrated project/program and HR information. HR planning (skills, training, competencies) can be driven by project plans, schedules and required skills; and, conversely, employee competency always includes his/her project experiences.

Workflow

Workflow plays a critical role in implementing business processes by gluing operational units and administrative services together. While workflow permeates all functions by enabling employee self-service, routing purchase requisitions, purchase orders and other electronic objects for approval and further processing in all business areas, workflow roles are driven by organizational structure maintained in HR. According to Gartner Group, "If HR is integrated, common workflow definitions … should be part of the integrated design. To reach the same level of functionality, best-of-breed HR implementations must create interfaces to share and manage responsibility information beyond the HR application, across workflow for applications in other business areas. Few HR vendors have made provisions for exporting this information. Conversely, few outside workflow systems (particularly those produced by enterprise application vendors)

have facilities for importing such information. This makes interfaces difficult and often leads to dual data entry and maintenance with no reconciliation of differences in organization structure representations in competing systems. The more cross-business-area-workflow is a requirement, the greater the appeal of an integrated system."

Further Integration Opportunities

Selecting the integrated HRMS/Payroll/FIS/Project Management alternative now will pave the way for further integration. If in the future the City chooses to acquire software to support its fleet and equipment maintenance operations, and implements the modules of the integrated solution that are designed for this purpose, the City will reap further benefits of integration. Imagine preventative maintenance programs triggering automatic ordering of parts, work order information concurrently affecting equipment records and mechanics' HR/Payroll, resource planning capabilities, etc. This list can go on and on. Clearly, the more encompassing the integration is, the more beneficial it becomes, the more interface maintenance and dual data entry headaches can be avoided.

City Staff Efficiency Gains

In addition to the qualitative benefits described above, selecting the integrated HRMS/Payroll/FIS/Project Management alternative should result in significant staff efficiency gains in various areas of the City. The single most important benefit in this area is the virtual disappearance of the role of "information broker". This role does not easily translate into a position or positions, full- or part-time, on the City's organizational chart. The role includes everyone who is presently involved in:

• preparation, capture and reconciliation of cross-functional information and/or information required by multiple systems (e.g. HRMS and FIS);
• packaging and "massaging" the information above to support operational managers;
• maintaining system interfaces described above.

This change should affect HR, Finance, IT and especially operational departments.

Moreover, IT staff complement dedicated to multi-vendor systems (support and help desk) is expected to be 15 - 20 % higher than for an integrated solution.

Conclusion

We have reviewed a number of advantages, both short-term and longer-term, of proceeding with the integrated alternative. Based on this analysis, our understanding of the City's circumstances and business needs, our experience in the application of technology to the business needs of private and public organizations, we strongly recommend that the City pursue the integrated alternative as the target solution for the City's administrative system. This path will help the City maximize the benefits of amalgamation, transform its administrative operations and provide the City with a solution flexible to sustain future business improvements and technology advances.