August 10, 1998
CORPORATE SERVICES COMMITTEE:
I am enclosing for your information and any attention deemed necessary, Clause No.1 contained in Report No.10 of The
Corporate Services Committee, headed "Project Proposal, Financial and Human Resources/Payroll Systems", which was
adopted, as amended, by the Council of the City of Toronto at its meeting held on July29, 30and31, 1998.
May I draw your attention to the amendment by Council found at the beginning of the Clause.
for City Clerk
J. A. Abrams/csb
Encl.
Clause sent to:Corporate Services Committee
Chief Administrative Officer
Chief Financial Officer and Treasurer
Commissioner of Corporate Services
Agencies, Boards and Commissions
Vice President and General Manager, PeopleSoft Canada Inc.
Mr. Tim Conroy, Computron Software, APG Solutions and Technologies Inc.
Mr. Yakov Matusevich, Management Consultant, LGS Group Inc.
Mr. Jeffrey S. Lyons, Q. C., Morrison, Brown, Sosnovitch,
Barristers and Solicitors
CITY CLERK
Clause embodied in Report No. 10 of the Corporate Services Committee, as adopted by the Council of
the City of Toronto at its meeting held on July 29, 30 and 31, 1998.
1
Project Proposal, Financial and
Human Resources/Payroll Systems
(City Council on July 29, 30and 31, 1998, amended this Clause by:
(1)adding thereto the following:
"It is further recommended that:
(a)the joint report (July 27, 1998) from the Chief Administrative Officer and the Chief Financial Officer and Treasurer,
embodying the following recommendations, be adopted:
'It is recommended that:
(1)all City Agencies, Boards and Commissions be strongly urged and requested to use the recommended City's FIS/HRIS
systems, on a timetable that is mutually agreed upon, but within five years at the latest; and
(2)on a priority basis, that City staff accommodate those Agencies, Boards and Commissions with non year 2000
compliant FIS/HRIS systems i.e., the Toronto Police Services by including their participation in the City's implementation
program.';
(b)the report (July 28, 1998) from the Chief Financial Officer and Treasurer and Chair, FIS/HRS Steering Committee,
embodying the following recommendations, be adopted;
'It is recommended that the Budget Committee and City Council:
(1)receive the attached report from Brian Dunk Consulting Services Limited; and
(2)approve the FIS/HRIS transition project, at a total cost of $26.3 million, and approve 1998 project financing of $6.1
million from the Transition Reserve Fund, with a report back in September 1998, outlining project financing requests for
1999 and 2000 based on contract terms and conditions to be negotiated with SAP that have regard to matching cashflow to
project milestones and project risk.'; and
(c)the Chief Financial Officer and Treasurer and the Chief Administrative Officer be requested to report to the Corporate
Services Committee every three months on:
(i)the progress of implementing the system; and
(ii)whether this project is on track and has achieved the expected savings; such report to also include a demonstration of
those savings."; and
(2)referring the following motion to the Corporate Services Committee; and the Commissioner of Corporate Services was
requested to report thereon to the Corporate Services Committee:
Moved by Councillor Jakobek:
"It is further recommended that:
(1)the Chief Financial Officer and Treasurer and the Commissioner of Corporate Services be requested to obtain fixed
prices and commitments for the inclusion of all Agencies, Boards and Commissions, the Toronto Transit Commission and
Fleet Management prior to signing any final agreements; and
(2)with respect to this project, if approved by City Council today, that the Chief Administrative Officer be requested to
engage independent experts to review any of the Agreements for this project prior to such Agreements being signed; and
that the necessary funds therefor be provided from the Transition Projects Reserve Fund.")
(City Council on July 8, 9 and 10, 1998, deferred consideration of this Clause to the next regular meeting of City Council to
be held on July 29, 1998.)
--------
(Clause No. 1 of Report No. 9 of the Corporate Services Committee)
The Corporate Services Committee:
(1)recommends the adoption of Recommendations Nos. (1) and (3) embodied in the joint report (June 10, 1998)
from the Chief Financial Officer and Treasurer, the Commissioner of Corporate Services and the Executive
Director of Human Resources; and
(2)reports having recommended to the Budget Committee the adoption of Recommendation No. (2) embodied in the
aforementioned report; and having requested the Budget Committee to report thereon to the meeting of Council
scheduled to be held on July 8, 1998, when this matter is being considered.
The Corporate Services Committee further reports, for the information of Council, having:
(1)referred the following motion to the City Solicitor for report thereon directly to Council for its meeting scheduled to be
held on July 8, 1998:
Moved by Councillor John Adams:
"That City Council adopt the following policy:
"(i)if any director, officer, employee, agent or other representative of a proponent/respondent, including any other parties
that may be involved in a joint venture or a consortium with the respondent, makes, from and after Council's decision on
July 8, 1998, any representation or solicitation to any elected representative or employee or agent of the City of Toronto,
with the exception of the contact person designated by the Chief Administrative Officer with respect to the respondent's
proposal or any other respondent's proposal, City Council is entitled to reject the proponent/respondent's proposal;
(ii)a representation can be considered to be anything said or written to any Member of Council, employee or agent which
provides information advancing the interests of a proposal;
(iii)this requirement does not extend to representations made to the designated official or to any public deputation made to
a Committee of City Council in accordance with the Procedural By-law;
(iv)should a respondent desire that any information be presented to Members of Council, the Respondent may request the
Designated Official to do so and that official shall distribute such information to all Members of Council and appropriate
staff;
(v)should Members of Council wish to receive information from any respondent(s), then the request shall be made through
the Designated Official, and if any Member of Council directly approaches a respondent for information, the respondent is
at jeopardy if he or she does make any representation to any Councillor in response; and
(vi)in the event of any alleged breach of the foregoing protocol, City Council shall be the arbiter of the effect of such a
breach to the process";
(2)requested the Chief Administrative Officer and the Chief Financial Officer to submit a joint report directly to Council
for its meeting scheduled to be held on July 8, 1998, providing recommendations respecting the inclusion of all Agencies,
Boards and Commissions, including the Toronto Hydro Commission, in the FIS/HRS system being proposed; and
(3)requested the Chief Financial Officer, in consultation with the outside independent consultant from LGS Inc., to submit
a written brief to all Members of Council, as quickly as possible, respecting the risks involved regarding this project and the
concerns expressed by Members of the Corporate Services Committee.
The Corporate Services Committee submits the following joint report (June 10, 1998) from the Chief Financial
Officer and Treasurer, the Commissioner of Corporate Services and the Executive Director of Human Resources:
Purpose:
To recommend the acquisition of financial and human resource systems essential to the operation of the City and the
effectiveness of amalgamation.
Recommendations:
It is recommended that:
(1)the acquisition of financial and human resource/payroll systems from SAP be approved in principle, as outlined in this
report;
(2)funds not to exceed $6.1 million be authorized for expenditure in 1998, $3.4 million in 1999, $6.5 million in 2000, $6.5
million in 2001, and $3.8 million in 2002 with total capital expenditures for the financial and human resources/payroll
systems not to exceed $26.3million for the necessary hardware, software and project implementation; and
(3)the appropriate city officials be authorized to enter into contract negotiations with SAP for the supply of financial and
human resource/payroll systems.
Funding Implications:
The 1998 requested capital expenditures of $6.1 million have been included in the ranked list of transition projects
envelope of $40 million in a separate report to the Budget Committee. Future year's requests are also included in that report
with other city transition projects. Given that the minimum required investment for financial and human resources/payroll
systems is $19 to $20 million, the total requested capital expenditure of $26 million represents the greatest financial and
operational benefit to the City.
Background Summary:
Upon amalgamation, each of the seven municipalities entering the new City had their own systems for managing financial
and human resource information and administration. Payroll, purchasing, position management, salary and benefits
administration, time and attendance reporting, payment of accounts, budgeting, staffing, collective agreement
administration and many other administrative tasks are handled by these systems. For the most part, the existing systems
are still functioning independently. In these interim months, summary financial information is being consolidated in the
former Metro system, but financial detail is only available from the systems in the previous municipalities, which continue
to require maintenance and support.
It is essential that the City's administrative systems be consolidated as soon as possible, for several reasons:
(i)it is impossible to exercise appropriate financial and staffing control when the necessary information is distributed
among several systems;
(ii)most of the existing systems are not year 2000 compliant, and will not function properly when this issue begins to arise
in 1999;
(iii)administrative efficiencies for 1999 and beyond cannot be achieved without the benefits of consolidated systems, and
savings potentially associated with amalgamation become unattainable without the necessary investment in systems; and
(iv)it is essential that a single system be in place to support activity based costing and charge-back of the costs of
administrative systems, as this capacity is required in order to achieve administrative savings
The City has also received expressions of interest in outsourcing of administrative systems, through partnership with
private-sector organizations. While these possibilities have not yet been subject to full analysis, it is clear that installation of
effective administrative systems serving all of the new City will enable the City to realize significant savings itself. Once
these immediate benefits have been realized and internal efficiencies achieved, it may be appropriate to entertain proposals
for alternate service delivery arrangements.
Movement to a single system, or set of systems, is a massive and difficult undertaking. In an organization the size of the
City, a normal time-frame for implementation of a new suite of business systems would be a minimum of two years, from
approval of the project and selection of vendors to full functionality. Because the City does not have a single set of
administrative systems in place, and consequently does not have the necessary mechanisms to support management
accountability or to achieve the available administrative efficiencies, it is necessary to move much more quickly.
In late 1997, RFIs were issued requesting information from vendors on the supply of systems to support the City's financial
and human resource requirements. Several vendors were asked to provide product demonstrations. Separate staff groups
evaluated the proposals for financial and human resource/payroll systems, using systematic criteria determined in advance.
Both the HR/Payroll and Finance groups reviewed detailed information on the functional capabilities of the various
products, and the cost structures proposed by the vendors. Extensive presentations were conducted by each of the vendors
for each of their products (when a single vendor proposed both financial and human resource/payroll products, each was
presented separately). In addition, extensive presentations by each vendor were made to City technical staff, focusing on the
technical features and support requirements for the products.
During February and March of 1998, there were extensive discussions with vendors, and a number of site visits were
conducted. Also during March, the separate financial and human resource/payroll systems projects were consolidated under
the FIS/HRP Steering Committee. The Committee reviewed the staff recommendations, and the financial impact of the
proposals. In light of the City's financial circumstances, and the need to ensure that the most cost-effective solutions to the
City's requirements be identified, the Committee directed that further review of all options be conducted.
Technology and management consultants LGS Group were retained to assist in the evaluation of options. LGS Group has
wide experience in the application of technology to the business needs of both private and public sector organizations,
including municipalities.
Subsequent analysis included detailed consideration of the financial impact of the most viable options, including estimates
of the impact of each on the staffing requirements of the City over the next few years. Reports were also obtained from the
Gartner Group, consultants specializing in analysis of technology companies and products, on the financial status and
viability of each of the "qualified" vendors, and on the strengths of each product line
The results of this extensive evaluation process are summarized in this report. A minimum investment of $19 to $20
million is required to meet the basic needs of the City. The recommended additional investment of $6 million brings the
total required investment to $26 million. This will generate additional savings of almost $6 million per annum, and will
position the City well for future reengineering and efficient operations.
What is a Financial Information System (FIS)?
A Financial Information System is the set of computerized business tools used by organizations to perform a variety of
finance-related tasks, and to track and control expenditure and revenue. It provides essential support to an organization's
operations. Even the smallest businesses make use of automated accounting systems; all large organizations require the
support of sophisticated and integrated financial systems in order to conduct business efficiently and with appropriate
financial control. At the City of Toronto, this system will track $5.6 billion of annual expenditures and revenue. The very
wide variety of FIS components has an impact on virtually all areas of the City's operations, as can be seen from the
following FIS component summary.
General Ledger (G/L):
The G/L is at the core of any financial system, and is central to all accounting operations. All revenues and expenditures are
recorded in the G/L, and the structure of its Chart of Accounts allows these to be tracked at any required level of detail. It is
through the G/L that budgets can be assigned to operating units, authority for expenditures assigned to individuals,
financial reports produced, and so on. All of the financial transactions accomplished through other modules of the FIS are
reported to the G/L, requiring that all of these be integrated with the G/L in a single system.
Budgeting:
Financial information systems provide budget development support, allowing for the systematic preparation and modelling
of budgets. Managers can model and prepare their budget proposals on a decentralized basis, and these are consolidated and
subject to analysis, with necessary amendments made prior to final submission. Once the budget is adopted, the final
figures are loaded into the G/L, allowing funds to be expended within the budget parameters.
Purchasing:
The purchasing applications provide for the specification of product requirements, the sourcing of supply, vendor
management and the preparation and management of tender processes (including the creation and management of Requests
for Information and Requests for Proposals). When goods are to be purchased or otherwise obtained, these systems provide
for requisitioning, and the subsequent issuing of purchase orders. In an effective integrated system, requisitions are created,
approved, and submitted for action electronically. Purchase orders may also be forwarded to vendors electronically. Under
normal circumstances, a requisition will not be allowed unless funds are available, and the appropriate approval obtained.
Available funds are determined by looking up the necessary information in the G/L, which will have the up-to-date
available balances (which include any previous requisitions, even if the goods have not yet been received or paid for). This
is all accomplished electronically.
Accounts Payable:
The accounts payable system is closely linked to the purchasing system. When goods have been received after a purchase
order is issued, their receipt in good order is documented electronically. Invoices are matched with the purchase order and
the receiving information, and payment scheduled to optimize the City's interests. Once payment has been made, the
expenditure is recorded in the G/L.
Accounts Receivable:
When the City provides goods or services to individuals or other organizations, payment or reimbursement is accomplished
through the A/R application. Examples include program registration, license fees, property rentals, etc. The A/R module
ensures that appropriate amounts are charged, and that the revenues get properly posted to the general ledger.
Fixed Assets:
An organization's property (including real estate, buildings, equipment and other tangible items) is tracked and managed
through the fixed assets module of an FIS. Where appropriate, depreciation is recorded, and all transactions reported to the
G/L.
Inventory:
Closely linked to fixed assets and purchasing, the inventory module of an FIS allows tracking of the current status of goods
that are stocked, for instance, in a warehouse or store-room, and to document distribution of the goods. When a critical
level is reached, re-ordering of the product is accomplished automatically. It is essential that an inventory system use
standardized coding systems, and support tools such as bar code identification. An inventory system will also be closely
linked to any future fleet and equipment maintenance system used by the City.
Project Management:
An effective project management component allows the creation of project budgets (e.g. capital), and the tracking of
expenditures over a multi-year period against the budgeted amounts. This allows the early identification of potential cost
overruns and of delays in the completion of projects. To be effective, a Project Management component requires efficient
links to the information generated by or contained in Human Resource/Payroll systems.
Cost Accounting:
In some instances, tracking costs across organizational units is necessary in order to identify program costs, where
programs involve more than one department or other organizational unit. As well, a cost accounting module provides the
mechanism through which the costs associated with an activity can be tracked, and subsequently charged to a purchasing
department or outside organization. As in Project Management, effective Cost Accounting requires an efficient link to the
HR/Payroll system.
Performance measures:
Tracking the effectiveness of an organization requires that activities be monitored and costed, and that comparisons be
made to external standards. The performance measures component of an FIS provides the mechanism through which this is
accomplished.
Fleet Management:
Fleet Management is sometimes included as part of an FIS, and provides for acquisition control, cost tracking,
maintenance, assignment and disposition of fleet assets. Although several of the vendors reviewed here can provide a Fleet
Management application, it was not included in our original specifications, and has not been explicitly evaluated.
What is a Human Resource Information and Payroll System (HR/P)?
Human resource and payroll systems are the mechanisms through which an organization's human resources are managed.
Payroll costs are by far the largest single component of the budgets of municipal organizations, and efficient allocation of
those resources, and tracking and control of payroll costs, are essential.
There are several functions within an HR/P system, which fall logically into two categories - those related to attendance
and compensation, and those related to the management of positions and employees. There are complex relationships
among the various elements of the HR/Payroll system, and between HR/Payroll and the financial systems of the
organization.
Payroll:
The payroll module collects information about employee salary rates (taking into account overtime and special rates), time
worked, sick time used, etc., and pays employees appropriately. Payroll staff throughout the organization use the payroll
system, in order to record necessary data. The system must interact with the general ledger in the finance system, in order
to post salary expenses to the appropriate chart of accounts features, in order that both total expense and detail relating to
projects and programs is reflected properly.
Pensions and Benefits:
Pension and benefits administration ensures that appropriate pension contributions are made and recorded, and that benefit
options are implemented correctly for each employee. Where there are benefit systems allowing for wide choice (e.g.
"cafeteria" or flexible arrangements), the benefit system provides the mechanism through which the choices are exercised.
Time and Attendance:
Recording work time and attendance is an essential element of the overall payroll system. It is this system which provides
data to the payroll system, triggering employee pay. It is also this system that records absences and bank balances (sick
time, vacation time, lieu time), according to the multiple variations on employment terms. Attendance management systems
rely on the time and attendance module for information on absence patterns. The Time and Attendance system is also
closely linked to project management and fleet and property maintenance systems.
Position management:
Most public sector organizations control staffing levels and expenditures through a position management system. Positions
are created, each of which has an authorized number of employees who may be assigned to it, and a salary range. Hiring
more employees into a position than the "authorized establishment" is not allowed by the system unless an exception is
approved by someone in an appropriate position of authority. The position management module provides the mechanism
through which positions are defined and created, and through which control of staffing levels is achieved.
Compensation and Salary Administration:
Job Evaluation programs allow for the description and rating of jobs according to a defined set of criteria. Salary rates have
to be administered, including provision of mass increases, stepping of employees through salary levels, etc. Together, the
compensation and salary administration functions of an HR/Payroll system support these functions.
Staffing:
The staffing module supports all the recruitment and promotion activities of the organization, and is the first point through
which information about employees enters the system. Information from résumés and applications is captured
electronically, and entered into employee or applicant databases. Movement of employees through jobs is tracked.
Grievance Tracking:
In a large organization, managing grievances, tracking each one individually and recording outcomes, is essential if the
organization is to exercise proper control. An effective HR/P allows labour relations staff to enter information and associate
the data with employees and workplaces. Pattern analysis allows problem areas to be anticipated and addressed before the
grievance problems become unmanageable.
Training and Organizational Development and Competency Management:
Training strategies are supported by HR/P systems in several ways, including scheduling of employee attendance at
courses, and the generation of information about organizational structure and operations. Employee skills and competencies
can be recorded and tracked, and the information used in the identification of individuals with skills suitable to particular
assignments.
Health/Safety/WSIB:
Every employer has statutory responsibilities with respect to the health and safety of employees, and must record and
process information about any incidents involving injury. As well, workers' compensation claims must be recorded,
processed and managed. Data can be entered initially from the field, with all follow-on events recorded as part of the same
record. The HR/P is essential to these processes.
Existing FIS and HR/P Installations (Former Municipalities):
All seven of the former Toronto municipalities have functional systems for management of financial and human
resource/payroll processes. These systems represent a wide diversity of vendors and installation types, with very little
overlap. Many of the systems would have had to be replaced in order to address problems associated with the "Year 2000"
(Y2K) issue - these systems would likely become non-functional on January 1, 2000. In other cases, the applications
provide relatively limited functionality, not appropriate for a large organization.
Table 1 shows the products in use in the various organizations, as well as the date of installation and Y2K status.
There has been concern that the recent substantial investment in business systems at the former City and Metro will all have
to be "written off". Both organizations were very large, with many complex operational needs. However, at the same time
as the new systems were installed, a great deal of technical infrastructure was also put in place. This included networks,
servers and desktop computers. The infrastructure was necessary to support the modern business systems being installed,
but was also necessary to support electronic mail, geographical information systems, etc. At the time that decisions were
made to install these business systems, the amalgamation of the seven municipalities into a new City of Toronto was not
yet even under consideration. Most of the technical infrastructure will remain in place after the business systems are
replaced, and will be utilized with any new installation, as well as the other technical requirements of the organization. It is
expected that most of the infrastructure components implemented within the last two or three years at the City and Metro
will be Y2K compliant, or readily made Y2K compliant, although final analysis has not yet been completed.
The total cost of the installations at the City and Metro are shown in Table 2, along with the amounts attributable to the
business systems themselves and the amounts that represent a reusable investment.
--------
Table 1: FIS and HR/P Installations, Former Municipalities
|
Former
Municip. |
Human Resources |
Payroll |
Finance |
Annual Maint.
$ |
|
Vendor |
Y2K
1 |
Vendor |
Y2K
1 |
Vendor |
Y2K
1 |
|
Metro |
Cyborg
February 1997
|
No |
Cyborg
February 1997 |
No |
Computron
February 1997 |
Yes |
$384,949 |
Toronto |
SCT Gov't
Systems (Banner)
August 1997 |
Yes |
SCT Gov't Systems
(Banner)
August 1997 |
Yes |
SCT Gov't Systems
(Banner)
August 1997 |
Yes |
$725,000 |
Scarborough |
Peoplesoft
1992 |
Yes |
Cyborg
1992
|
No |
In-house developed
app.
1970s |
No
info |
$ 72,300 |
Etobicoke |
Organization
Metrics Inc.
(OMI)
Fall 1997 |
No |
Solutions for
Government (SFG)
January 1993 |
No |
SAP Financials
January 1997 |
Yes |
$150,000 |
North York |
American
Management
Systems (AMS)
1990 |
No |
American
Management Systems
(AMS)
1990 |
No |
Local Gov't
Financial System
1986 |
No |
$480,000 |
York |
ADP Canada
(formerly GSI)
1992 |
No |
Systems for
Government (SFG)
1992 |
No |
Systems for
Government (SFG)
1992 |
No |
$ 6,000 |
East York |
SRB International
- PRS
1984 |
Yes |
SRB International -
OPS
1984 |
Yes |
SRB International -
BAS
1984 |
Yes |
$ 50,178 |
Total Annual Maintenance Cost |
$1,868,427 |
1 "Yes" indicates existing system is already Year 2000 compliant. "No" indicates existing system requires a version upgrade
or significant rework in the case of an internally developed system to become Year 2000 compliant.
Table 2: Metro and City Total Application and Infrastructure Costs, 1995 - 1998 ($ millions)
|
|
FIS and
HR/P |
Technical
Infrastructure |
Electronic
Office |
GIS/LIS |
Total Cost |
Unrecoverable
Cost2 |
Reusable
Component Cost3 |
Metro1 |
$10.7 |
$12.9 |
$ 1.2 |
$ 0.6 |
$25.4 |
$10.2 |
$15.2 |
Toronto |
$ 7.5 |
$13.4 |
$ 0.9 |
$ 0.3 |
$22.1 |
$ 8.6 |
$13.5 |
1Metro costs are based on actuals with estimated allocation to components includes $5.3million of internal staff costs.
2"Unrecoverable Costs" are those costs directly associated with the acquisition and implementation of business software
which is to be replaced, including license fees, software training, etc. Internal staffing costs are included for Metro.
3"Reusable Component Costs" are for equipment or other expenditures, which will not be replaced but will continue to be
useful within the new City, such as networks, servers, desktop hardware, reporting tools, data warehousing, operating
system training, etc. |
Evaluation Process
The City's requirements for business systems were determined by a thorough analysis of the City's business needs and
amalgamation-support requirements. Detailed business analyses conducted by Metro, the former City of Toronto, North
York and Etobicoke were also reviewed.
Separate Requests For Information (RFIs) were issued for the FIS and HR/P software were issued in late November, 1997.
The FIS RFI was issued to seven vendors after a survey of municipalities and the financial systems in use. Four of these
vendors' financial systems are currently in use at four of the former seven municipalities. These are SAP (former
Etobicoke), Computron (former Metro), SCT Government Systems (former Toronto) and American Management Systems
(former North York). SCT and AMS declined to respond, indicating that they were not in a position to address the
requirements of the new City. Submissions were received from SAP, Computron, J. D. Edwards, PeopleSoft and Oracle.
Oracle later withdrew from the process when it could not comply with the timetable for presentations.
The HR/P RFI was issued to five vendors, three of whose systems are currently in use within the seven former
municipalities. These are Cyborg (former Metro HR/P and Scarborough payroll only), SCT Government Systems (former
Toronto) and PeopleSoft (former Scarborough HR only). SCT declined to respond. Submissions were received from SAP,
PeopleSoft and Cyborg.
Information about the responding vendors and their products is outlined in Table 3.
Evaluation teams composed of business and information technology staff were assembled, and detailed evaluation criteria
were prepared for each of the two separate (FIS and HR/P) processes. Product demonstrations were conducted by vendor
representatives during December, 1997, following demonstration scripts prepared by the evaluation teams. Follow-up
requests for information were forwarded to the vendors, and responses considered in determination of ratings. Further
discussions were held with each vendor to investigate implementation strategies and to refine software, hardware and
implementation costs.
After the formal evaluation was completed, contact was made with several client sites to assess the level of product and
vendor satisfaction. Site visits were conducted for the FIS systems by a team of accounting, information technology and
library representatives.
Company |
Product(s) considered |
Notes |
Computron |
Financial systems |
Vendor of financial systems which are noted for their
modularity (various applications can be installed
independently). Much lower market share, compared
to market leaders. Current installation at Metro. |
Cyborg |
HR/Payroll systems |
An established vendor of HR/Payroll systems.
Installed at Metro, but many HR/Payroll functions at
Metro are performed by third-party or custom
applications. An older version of the Cyborg Payroll
system is in use at Scarborough |
J. D. Edwards |
Financial systems |
A credible vendor of Financial systems. Not currently
in use in any of the amalgamated municipalities. Also
has an HR/Payroll product, but this has little
visibility in government, and was not evaluated. |
PeopleSoft |
Financial and HR/Payroll
systems (integrated) |
One of the most prominent vendors of HR/Payroll
systems to private sector and government
organizations. Recently developed financial systems,
not widely installed in Canada. HR is in use at
Scarborough, both Payroll and Human Resources are
being used by Toronto Police. |
SAP |
Financial and HR/Payroll
systems (integrated) |
The market leader in Financial systems, with many
private and public sector installations throughout the
world. Have a well-established HR/Payroll system.
Financial installation at Etobicoke. |
Functional and Technical Analysis:
Data on the current business and product status of each of the vendors was obtained from the Gartner Group, a consulting
organization that produces widely used analyses of technology companies and products.
A summary analysis of each of the products is provided in Table 4.
Table 4: Financial and HR/Payroll Systems Evaluation
|
Vendor |
Functional and Technical Evaluation |
Gartner Group Analysis |
Computron |
Financial Systems
Of the four financial packages evaluated, Computron rated
third, well behind the products from J. D. Edwards and SAP,
but ahead of PeopleSoft. Although it was rated well in some
areas (e.g., General Ledger, Accounts Payable), where it is
comparable to JDE and SAP, it fell well short of the target
standard in a number of others (e.g.,Budgeting, Purchasing,
Project Management, Cost Accounting, and module
integration). For instance, it does not have a bid document
module, which makes it necessary to prepare these outside of
the purchasing system, and it does not allow for automatic
creation of a vendor file. Stock reordering and inventory
analysis must be done through special reports or manually.
Most budget calculations are done on an external worksheet,
rather than in the budget module. In addition, the technical
evaluation, which addressed the underlying technical
architecture of the product, led to a substantially lower score
than those obtained by SAP and JDE. |
Computron has had recent financial
difficulties, although these have begun to
come under control. There continues to be
uncertainty about its future. Its product
direction is not clear. Gartner recommends
that existing users hold off on upgrading
or increasing commitment, and that
potential users consider alternatives unless
the product addresses specific business
needs. |
J. D. Edwards |
Financial Systems
The financial systems package from J. D. Edwards was rated
highly in most areas, and was given the highest overall score,
slightly higher than that assigned to SAP. In purely functional
terms, the two were almost tied, SAP having a slight advantage
on the technical side. In other areas, JDE was particularly
strong on General Ledger, Budgeting and Accounts Payable,
with relative weaknesses on Project Management and Cost
Accounting. |
J. D. Edwards is a significant vendor in
the "mid-market" area (companies up to
about $250 million in annual revenue and
expenditures), especially where an AS400
based application is required, but is not
well positioned for installations in larger
organizations where Unix-based
applications are required. It has delayed
implementation of an HR/Payroll
integrated system, although the promise of
this for the future is a positive sign. |
PeopleSoft
|
Financial Systems
Although the PeopleSoft financial product shows promise and
appears to be evolving rapidly, the evaluation suggested that
the version assessed is not yet capable of supporting the City's
requirements. It has some strengths (in particular a very strong
Purchasing module), but does not have satisfactory modules for
Project Management, Cost Accounting and Performance
Measures. In addition, the technical evaluation was that
PeopleSoft financials did not meet the City's requirements.
Human Resource Systems
The Human Resource and Payroll systems from PeopleSoft
achieved the highest rating among those evaluated, slightly
edging out SAP for top spot. Among the areas in which
PeopleSoft had particular advantages were Position
Management, Payroll and Report Production. A relatively
weaker area was Training and Organization Development.
PeopleSoft was originally rated as having somewhat greater
capacity for supporting the City's implementation.
|
The Gartner Group identifies PeopleSoft
as the market leader in HR/Payroll
software, with a strong world-wide
presence. Its strategic product direction is
clear, and it has a clear commitment to
expansion into the financial systems area,
with a fully integrated product line. No
financial issues were identified. |
SAP |
Financials
SAP has an excellent financial application, which was rated
overall as just slightly below J. D. Edwards, with some areas of
particular strength. Its Project Management and Cost
Accounting applications were seen as particularly strong
relative to those of the other vendors, and its technical score
was highest of all the vendors. Relative weaknesses were
identified in the General Ledger and Accounts Payable
modules, although these were seen as relatively minor after
follow-up dialogue with the vendor.
Human Resource Systems
SAP HR/Payroll applications were evaluated as being of very
good overall quality, with scores somewhat below those for
PeopleSoft, but much better than those for Cyborg. A particular
strength was seen in Training and Organizational Development.
The biggest initial gap between SAP and PeopleSoft was seen
in the Payroll application. This was due in large part to the
absence of large fully functional payroll installations in Canada
at the time of the evaluation. Successful implementation of the
system at two large Ontario employers has subsequently
allayed these concerns. |
SAP is the market leader in Financial
software, with a very strong international
profile. It has a credible HR/Payroll
product that positions it very well for
integrated solutions. |
Cyborg
|
Human Resource Systems
The Cyborg systems did not evaluate well with respect to the
City's requirements, or relative to the other products. It
received the lowest score of the three evaluated on all criteria,
and in most cases was very inferior. Its overall score was half
that of SAP and PeopleSoft. Of particular concern was the fact
that payroll cannot support the number of "earning codes"
required by the operational and labour relations complexity of
the new City. Also of concern is the limited functionality in the
Time and Attendance and Training applications, although
overall functionality in all areas was well below the acceptable
level. Position Management could not be demonstrated at all.
From a technical point of view, Cyborg does not comply with
the City's draft IT standards, and these deficiencies will
increase implementation risk and downstream system
administration costs.
Evaluators were also very concerned about the ability of the
vendor to support an implementation of the scale required at
the City. |
Gartner was unable to provide a current
written analysis of Cyborg and its
products, as it is a small vendor with
limited distribution. However, they did
provide an "on the record" verbal report.
Cyborg is a small vendor with a single
product line, and is considered to be high
risk as integrated solutions find market
favor. It has particular weaknesses in
position control for the public sector, and
in employee self service and integrated
voice response (IVR). As well, Cyborg
does not have a substantial municipal
presence relative to the market as a whole.
|
System Integration:
There are two approaches possible to installation of Financial and HR/Payroll systems. The first is the "best of breed"
strategy, which separately identifies the best available options (all things considered) for the Finance and for the
HR/Payroll systems. Excellent functionality can be obtained, but appropriate interfaces must be built between the Financial
and the Human Resource/Payroll systems. In most cases, this means that the FIS and HR/P will come from different
vendors.
The alternative approach see the Financial and HR/Payroll systems fully integrated, and that they share data seamlessly
without the necessity for building interfaces. This can only be provided by a single vendor supplying both HR/Payroll and
Financial systems.
The initial intention was to adopt a "best of breed" strategy, and to separately evaluate and acquire the financial and human
resource/payroll systems. The original project structure reflected this intent, with separate project teams conducting
separate product evaluations.
Over time, however, it became clear that integration issues would have to be considered in the evaluation. In particular,
analysis from the Gartner Group, and from LGS Group, the consultants retained to assist the City in the decision process,
indicated that substantial benefits would accrue from an integrated system. The LGS analysis, attached as Appendix B,
concludes:
"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."
Of particular concern was the likelihood that non-integrated systems would require either cumbersome multiple-entry of
data into the financial and human resource/payroll systems, or the expense of creating and maintaining electronic interfaces
among the products. In either case, real efficiencies are difficult to achieve. Specific issues revolve around the need to
obtain financial information for certain human resource actions (e.g., funds availability for position creation), and the need
to obtain payroll information for financial transactions (e.g., time worked on a project, for billing purposes). These are more
fully documented in Appendix B.
A careful review of the issues led to the conclusion that substantial additional savings would be achieved by an integrated
solution, relative to a "best of breed" solution. These savings will come through the elimination of multiple data-entry
functions, and greater efficiency of transaction processing. While it is not possible at this stage to identify specific positions
which would be effected, we are confident that savings in the affected administrative areas will exceed 15percent relative to
non-integrated solutions, and this analysis is supported by industry experience.
Ranking and Short-Listing of Products:
All available information was reviewed in order to determine which applications or combinations of applications could
serve the City's needs, so that detailed financial and implementation analyses could be conducted. The issues were complex
and many variables entered into the analysis. Ultimately, four factors were considered in short-listing products for detailed
analysis, and in determining the ultimate recommendations:
(a)relative scores on the functional and technical evaluation, as determined by the original evaluation teams
(b)ability of the vendors to support an implementation on the scale required by the City and within the required timeframe;
(c)degree of functional integration available across financial and human resource/payroll functions; and
(d)the presence of existing installations at the City, which could provide a base for a new installation, as well as staff with
familiarity with the products.
An investment has been made in the Computron/Cyborg installation at Metro, as documented in Table2, of which
approximately 50percent is infrastructure investment necessary to support the new City and is reusable, subject to year
Y2K compliance. In any event, it is essential that future costs and benefits be a significant criteria on which the evaluation
is conducted.
It is not possible to simply add additional data or hardware to the existing Computron/Cyborg installation to support the
new organization. Entirely new financial structures must be created, a multitude of new business rules implemented, new
hardware installed and a vast amount of existing data converted to the new system from the seven existing municipalities
(including Metro, whose existing data will have to be converted to the new standard necessitated by amalgamation). As a
result, all software including both current and new modules would have to be reinstalled (or installed for the first time) and
appropriately configured. It would be necessary to treat the implementation of Computron and/or Cyborg as a new
installation, at a capital cost of $10.5 million.
Neither Computron nor Cyborg ranked high in the head-to-head evaluation. In particular, Cyborg was identified as lacking
the minimum functionality necessary to support the City's Human Resource and Payroll needs. Its Payroll module is unable
to support sufficient earnings categories to support the complex operational and labour relations realities at the City.
Position Management could not be successfully demonstrated, or otherwise evaluated, as it was still in development
without any implementations. Employee self service capacity was very limited, and the company has no apparent plan to
move toward web-enablement, which would facilitate ease of access with a standardized web browser user interface
through either the internal intranet or remotely via the internet. The Cyborg product cannot be used by the City, and was
not included in the final short-listed analysis. As a result, the minimum investment required in FIS and HR/P systems by
the City is $19 million because of the need to completely replace the HR system.
Computron did not evaluate well relative to the other products, but not quite so dramatically as Cyborg. It has been
determined that Computron could be acceptable for the City's financial systems needs, at least for the short term. Because
of the existing installation at the former Metro, and the possibility that implementation of Computron financials could be
accelerated as a result, this product was included in the final implementation and cost/benefit evaluation.
PeopleSoft provided both Financial and HR/Payroll systems for evaluation. It is clear that PeopleSoft is committed to
production of an integrated suite of business systems, and will likely be very competitive in the integrated systems market
in the future. However, our evaluation suggests that the version of the PeopleSoft financial systems product submitted for
evaluation does not yet meet the City's needs, and therefore an integrated PeopleSoft system is not possible.
However, the PeopleSoft Human Resource and Payroll applications are clearly "state-of-the-art", and provide a very good
fit relative to our needs in those areas. PeopleSoft HR/Payroll systems were included in the implementation and cost/benefit
evaluation.
Although J. D. Edwards financials were evaluated highly, the absence of either an integrated HR/Payroll system or an
existing installation at the City on which to build a new implementation were significant factors in the decision not to
pursue the JDE applications. In addition, Gartner Group analyses have identified J. D. Edwards as a niche player, with
strength in AS400-based smaller organizations, but with limited capacity to service organizations the size of the City.
Only the SAP product line provided the potential for achieving an integrated solution across the Financial and HR/Payroll
applications. Both of the SAP products were rated highly in the separate evaluations, just slightly behind the 'best of breed"
leader in each category. Because of the very good quality of the individual products, along with the integration factor, both
SAP Financials and SAP HR/Payroll were shortlisted in their respective categories.
Implementation and cost/benefit analyses have been conducted on the financial systems products from Computron and
SAP, and on the HR/Payroll products from SAP and PeopleSoft, in various combinations, as follows:
(a)SAP Integrated Systems: SAP Financials and SAP HR/Payroll, implemented together, with the Etobicoke installation of
SAP Financials as the base.
(b)Computron Financials with SAP Human Resource/Payroll: Computron Financials would be implemented by building
on the existing Metro implementation where possible, although significant reworking would be required. SAP Human
Resource/Payroll would be implemented as a new installation. If it were decided at a later date to implement SAP
financials, this would allow migration to a fully integrated solution.
(c)Computron Financials and PeopleSoft HR/Payroll: As in b) above, but with PeopleSoft HR/Payroll instead of SAP.
(d)Computron interim Financials to SAP Financials/Human Resource/Payroll: The Computron Financial system and SAP
HR/Payroll is implemented initially, to allow for reduced risk of delays in availability of the necessary financial systems.
The full suite of SAP financial products would be implemented after the initial Computron implementation was completed.
Implementation and Cost Analysis:
With the assistance of consultants LGS Group, a detailed analysis of the costs and benefits associated with each of the
options was conducted. The results of the analysis are shown in the table "Cost and Benefit Analysis, Financial/HR
Systems", attached as Appendix A.
Cost analyses are based on information provided by the vendors for licensing and implementation, and upon additional
information generated by staff.
Benefits through staffing efficiency have been calculated using conservative assumptions. All products will provide similar
levels of benefits (primarily through staff reductions) within the Finance and HR/Payroll organizations. It is anticipated that
reductions of about 80 positions can be achieved within these organizations as a function of implementation of the new
systems across the organization.
Additional savings have been identified from within the Operating organizations, primarily as a function of integration of
Finance and HR/Payroll applications. As outlined previously and in Appendix B, an integrated system will provide
significant gains in efficiency. We have calculated that about 90 positions (out of a total of about 600 positions involved in
these kinds of administrative activities) should be eliminated upon full implementation of an integrated solution. Of the
vendors with products providing acceptable functionality, only SAP is able to provide this high level of integration. These
savings are shown only in the figures for SAP implementation.
Net present value uses discount rates appropriate for the products involved. In general, discount rates are higher where risk
is higher, and lower where risk is lower. For instance, the initial discount rate for installations involving Computron is
relatively low, because the risk of being unable to implement on the projected time-frame is low. The initial discount rate
for SAP installations, on the other hand, is moderately high, because of increased on-time risk. However, the long-term
Computron risk is high, because of the uncertain future of the company and its product line, and potential associated
difficulties obtaining support and upgrades, while the corresponding SAP risk is low.
Net present value and internal rate of return calculations show that installation of SAP products for the FIS and the HR/P
provide by far the best financial return over the life-cycle for product installations of this type. Even though initial capital
cost is relatively high, net present value and internal rate of return favor this combination as early as the third year.
The recommended solution, SAP Financials with SAP Human Resource and Payroll, has the most favorable bottom line
over both three and seven year terms. Total capital investment for the SAP solution will be $26.3 million, with operating
costs to 2005 of $10.7 million. Total benefits and savings to 2005 will be about $89 million, including reduced staff
requirements in the core administrative functions (finance, human resources, payroll) and about a 15percent reduction
(90positions) in staff requirements for administrative functions in the operating departments. Over the life of the average
installation (seven years), we expect an SAP installation to produce net savings of about $52million.
An installation of Computron financials with SAP human resource/payroll would have lower capital and operating costs
($19 million and $4.3 million respectively), but would also have significantly lower downstream benefits ($54.8 million) as
a consequence of the reduced efficiencies in administrative systems. The net savings over the life of a Computron/SAP
installation are expected to be about $32 million.
Figures for an installation of Computron financials with PeopleSoft human resource/payroll are similar to those for
Computron/SAP, except that costs for PeopleSoft are somewhat higher. An interim installation of Computron financials,
with SAP financials and human resource/payroll as the target installation, has significantly higher costs and somewhat
lower benefits than a "pure" SAP installation.
All analysis is predicated on an aggressive implementation schedule, which focuses on implementation of the essential
financial components by early in 1999. Supplementary financials would be fully implemented by September of 1999, as
would be the full suite of HR/Payroll products. Complete installation is required by the end of the third quarter in 1999, in
order to avoid Y2K problems in the period leading up to the millennium.
Degree of product integration has some effect on the implementation scheduling. Meeting the third quarter 1999 deadline
for complete installation is most achievable using an integrated system on an accelerated and closely vendor-coordinated
schedule. While use of an existing system such as Computron will make achievement of the financial systems target in
early 1999 more readily achievable, the creation of custom interfaces to any HR/P product will be difficult to achieve
within the target timeframes.
All vendors have undertaken to meet this schedule. Schedule definition will be an important element of the contracting
process with the selected vendor(s).
Future Partnering Issues:
It has been anticipated that many of the City's Agencies, Boards and Commissions will make use of the new business
systems to be implemented. In particular, the Toronto Police are in the process of considering options to address the
inadequacies of their existing systems relative to the Year 2000 issues. We have been advised that the Police do not believe
that Computron can adequately address their complex needs. The Police are prepared to work closely with the City,
towards a joint system, if SAP is selected.
The police have just recently implemented PeopleSoft products for their HR and Payroll needs, and will have to re-evaluate
this strategy if they partner with us on financial applications. They may choose to continue with PeopleSoft HR/Payroll for
the time being, pending an evaluation of the costs and benefits associated with migration to an SAP HR/Payroll installation,
in partnership with the City.
In addition, the Toronto School Board has recently opted to pursue a contract with SAP for installation of financial
systems. It is anticipated that synergies could be obtained through collaboration with the Board, and initial discussions have
been held. In particular, it is possible that joint training ventures could be set up, significantly reducing costs for both
parties.
It is also possible that broader administrative efficiencies could be obtained through partnership with these and other public
sector organizations jointly or with an outside agency. Such partnerships are more likely to be possible when the
organizations share a systems infrastructure. However, it is felt that such a proposal should be considered once the initial
implementation period is complete and when the City has captured the maximum savings itself.
Conclusions:
The absolute minimum financial investment required is $19 to $20 million in order to provide a basic solution for the City.
After review of the all of the data (functional evaluation, third-party assessments of the companies and applications, cost
analysis and partnering possibilities), it has been concluded that SAP applications for Financial and Human
Resource/Payroll systems, with a financial investment of $26 million, provide the greatest functionality, best cost/benefit
analysis (i.e., most opportunities for staff efficiencies) and most opportunities for partnering, and are the recommended
solution. The company is a leader in the field, and is very stable with a well-articulated vision for its product line. In
addition, affiliated organizations such as the Toronto Police and the Toronto School Board will be able to partner with the
City most effectively if SAP is implemented as the City's business systems. The additional investment of $6 to $7 million
will generate savings of almost $6million per annum on an ongoing basis.
It is therefore recommended that the City contract with SAP for supply of Financial and Human Resource/Payroll systems.
Other options have been considered, and are potentially viable. In particular, Computron financials could be implemented
more quickly than the SAP application, with a somewhat lower capital and operating cost. However, functionality and
potential returns through staff savings would be lower, and it will be more difficult to implement a non-integrated
HR/Payroll system within the target timeframe. It is also possible that this option would not allow the Police or the School
Board to partner with the City.
Either SAP or PeopleSoft HR/Payroll applications could be used in association with Computron for a cost of $19 to $20
million. Our analysis suggests that SAP implementation would provide slightly lower costs, and would allow future
consideration of an integrated solution, with the associated benefits. These options should be considered only if
medium-term net costs are the principle deciding factor.
A third option (the most expensive at $30 million) is an interim installation of Computron, with SAP Financial and
HR/Payroll systems as the target product line. The single advantage of this strategy is that it would somewhat reduce the
risk of delayed implementation of the financial applications, relative to an SAP installation. However, costs would be
significantly higher, and it is likely that the risk associated with the alternatives can be managed successfully. This option
will also preclude involvement by the Police and the School Board, at least until the SAP applications were installed. This
option should be considered only if short-term risk reduction is the principle deciding factor.
Contact Names:
Alan Deans, Ron Myhr, Al Shultz, Lana Viinamae, Stephen Wong, Ivana Zanardo
--------
Appendix A: Cost and Benefit Summary Analysis
Financial/HR Systems
Thousands of dollars |
SAP Financials and
SAP HR/P |
Computron Financials
and
SAP HR/P |
Computron Financials
and
Peoplesoft HR/P |
Computron interim
Financials to
SAP Finance/HR/P |
Costs and Benefits |
|
|
|
|
Capital Cost:
In 1998
in 1999
in 2000
in 2001
in 2002
Total Capital Cost: |
$ 6,070
$ 3,400
$ 6,500
$ 6,500
$ 3,800
$26,270 |
$ 8,350
$ 3,618
$ 3,500
$ 3,500
$ 0
$18,968 |
$ 8,350
$ 1,118
$ 2,947
$ 4,947
$ 2,948
$20,310 |
$ 8,350
$ 5,118
$ 7,282
$ 6,500
$ 2,800
$30,050 |
Total Operating Cost to
2005 |
$10,695 |
$ 4,320 |
$ 6,384 |
$ 9,900 |
Total Benefits/Savings
to 2005 |
$88,988 |
$54,750 |
$51,693 |
$82,550 |
Net Savings to 2005 |
$52,023 |
$32,002 |
$24,999 |
$42,600 |
Net Present Value to
2001 |
$ 5,692 |
($791) |
($1,550) |
($3,084) |
Internal Rate of Return
to 2001 |
52.34% |
13.81% |
4.32% |
-11.50% |
Net Present Value to
2005 |
$32,950 |
$ 8,925 |
$ 6,175 |
$24,871 |
Internal Rate of Return
to 2005 |
83.68% |
50.86% |
41.34% |
42.92% |
The figures for Net Present Value and Internal Rate of Return are indicators for how favourable an investment is - the
higher the positive numerical value, the more favourable the investment.
Assumptions:
(1) Transition plans:
(a)the business cases use either the transition strategies, plans and resource requirements provided by the software vendors
with respect to their products; or the estimates provided by the City staff for "internal" activities such as conversion,
internal training, interfaces, etc.; and
(b)the distribution of the costs and benefits for each alternative over the cost benefit period is consistent with the
corresponding transition plan for this alternative.
(2) Cost benefit period:
(a)the life cycle of administrative software is approximately seven years; and
(b)the cost benefit models demonstrate the financial impact of the transition alternatives not only after seven years (2005),
but also after three, five and nine years to demonstrate a shorter-term (capital) expenditure impact and a longer term impact
as some "target" solutions are likely to last beyond 2005.
(3)Capital costs:
(a)Capital costs can be grouped into three broad categories - hardware, software, and HR costs;
(b)HR costs include software / hardware configuration, enhancements, conversion, training, etc. The cost benefit models
assume that City staff (IT and business) be used whenever possible during the transition; and
(c)all transition costs except internal HR costs are considered capital.
(4) Hardware costs:
(a)hardware requirements are essentially the same for all alternatives; and
(b)all cost benefit models use the same transition (capital) and ongoing annual (operating) costs of $4,570,000.00 and
$75,000.00 respectively, the estimates provided by Sun Systems.
(5)Software costs:
(a)the business cases use software costs, both licensing and maintenance, as per software vendor quotations; and
(b)the software licensing costs of SAP and PeopleSoft are accrued once the software is in production, and are capitalised
over three years. These vendors have indicated that they will be flexible with respect to this issue, but there is no official
proposal from either vendor at this time.
(6) HR costs:
(a)the business cases use external consulting costs as per software vendor quotations;
(b)conversion and training costs are essentially the same for all alternatives;
(c)the estimates for conversion, training and other "internal" costs were based on analysis of the former City's SCT Banner
experience, and extrapolated to the other cost benefit models; and
(d)the business cases use the following City staff rates to calculate the operating HR costs:
(i)$1,000.00 per diem for IT staff; and
(ii)$500.00 per diem for business staff.
(7) Benefits:
(a)the business cases include only additional savings resulting from implementing the considered alternatives, but do not
include the projected amalgamation savings; and
(b)in addition to staff efficiency gains attributed to implementing any of the solutions, the business cases for the SAP
alternatives include the following "integrated solution" benefits:
(i)additional $160,000.00 per annum, or 15 percent of IT support, as per Gartner Group research; and
(ii)additional $5,400,000.00 per annum in the Operating organizations resulting from the reduction in the HR/Finance data
capture duplication and the management information preparation.
(8) Risk Factors:
(a)the business cases consider key risk factors associated with the transition to, and the ongoing maintenance of each
alternative by applying variable rates of discount to the cash flows in the Net Present Value (NPV) calculation. Higher risks
mean higher discounts; and
(b)the following are the three risk groups and associated discount rates used in the business cases:
(i)Low - 7.5 percent;
(ii)Medium - 19 percent; and
(iii)High - 30 percent.
(9) Transition risks:
(a)the risk assessment of various transition paths is based mainly on the ability to meet successfully the transition
constrains (see Assumption 1 above), and, thus, reflects such factors as:
(i)use within the City;
(ii)availability of experienced resources; and
(iii)scalability.
(b)the following is the relative risk assessment of the transition alternatives as used by the business cases:
(i)Computron / Cyborg - Low;
(ii)Computron / PeopleSoft - Medium; and
(iii)SAP - Medium.
(10) Ongoing risks:
(a)the assessment of ongoing risks of maintaining various software products reflects such factors as:
(i)vendor's viability;
(ii)vendor's commitment to the City and to the municipal market;
(iii)product's viability;
(iv)product improvement; and
(v)availability of support.
(b)Gartner Group research suggests that:
(i)"best of breed" products are likely to lose their market share to integrated solutions;
(iii)Computron customers "watch" the vendor closely and conduct an annual re-assessment of their relationship and
potential buyers consider other alternatives;
(iv)Cyborg is a small vendor with a limited product line, and is high risk; and
(v)SAP leads the integrated solution vendor race.
(c)the following is the relative risk assessment of the ongoing maintenance of the target solutions considered in the
business cases:
(i)Cyborg / Computron - High;
(ii)PeopleSoft HR / Computron - Medium;
(iii)SAP - Low; and
(iv)SAP HR / Computron - Medium.
--------
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:
(1)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.
(2)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 and D, yield and production
capacity, and watching operational, decommissioning and disposal costs of capital goods.
(3)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):
(a)benchmarking against private sector;
(b)move budgets for support services to operating departments;
(c)responsibility for results; and
(d)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.
Integrated Applications "Best of Breed" Applications
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 and 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:
(a)ability to view departmental salary budget (maintained in FIS) and to "click" on it to view the positions (maintained in
HRMS) comprising the budget;
(b)ability to view summary payroll actuals (FIS) and to zoom into corresponding employee-by-employee payroll detail
(HRMS);
(c)ability to view overtime summary payment (FIS) and to see, employee-by-employee, what it is comprised of; and
(d)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 ¼ 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:
(a)preparation, capture and reconciliation of cross-functional information and/or information required by multiple systems
(e.g. HRMS and FIS);
(b)packaging and "massaging" the information above to support operational managers; and
(c)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 per
cent. 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.
--------
The following persons appeared before the Corporate Services Committee in connection with the foregoing matter:
-Ms. Mina Wallace, Vice President and General Manager, PeopleSoft Canada Inc., and filed a submission in regard
thereto;
-Mr. Tim Conroy, and Mr. John Nye, Computron Software, and filed a submission in regard thereto; and
-Mr. Yakov Matusevich, Management Consultant, LGS Group Inc.
The Chief Financial Officer gave an overhead presentation to the Corporate Services Committee in connection with the
foregoing matter, and filed a copy of her presentation material.
(City Council on July 8, 9 and 10, 1998, had before it, during consideration of the foregoing Clause, the following
communication (June 26, 1998) from the City Clerk:
Recommendations:
The Budget Committee on June 25, 1998, recommended that:
(1)consideration of the Project Proposal, Financial and Human Resource/Payroll Systems, be deferred to the meeting of
Council to be held on July 29, 1998;
(2)the Chief Administrative Officer, the Chief Financial Officer and Treasurer, the Chair of the Corporate Services
Committee, the Chair of the Budget Committee, and the Executive Director of Information Technology, be requested to:
(a)select a third party, who is not associated with any software-related companies, to review the financial analyses of the
total capital expenditure of $26.3 million; and
(b)report to a joint meeting of the Budget Committee and Corporate Services Committee, for a recommendation directly to
Council on July 29, 1998, together with the recommendations adopted by the Corporate Services Committee on June 22,
1998; and
(3)the Chief Administrative Officer be requested to report on the number of computer consultants that have been selected
recently, how much money the City is spending on them and whether there was any type of tendering process, including
expressions of interest.
Background:
The Budget Committee on June 25, 1998, had before it the following:
(a)Transmittal Letter (June 22, 1998) from the Corporate Services Committee;
(b)Communication (June 23, 1998) from Mr. Jeffery S. Lyons, Q.C., Morrison, Brown, Sosnovitch, Barristers and
Solicitors;
(c)Communication (June 24, 1998) from Mr. Peter J. Smith, Vice President, Sales, PeopleSoft Canada;
(d)Facsimile (June 24, 1998) from Mr. Gennaro Vendome, Vice President, Computron Software; and
(e)Communication (June 19, 1998) from Mr. Tim Conroy, Sales Manager, Computron Software.
Mr. Peter J. Smith, Vice President, Sales, PeopleSoft Canada, appeared before the Budget Committee in connection with
the foregoing matter.
(Letter of Transmittal dated June 22, 1998 addressed to the Budget Committee from the Corporate Services Committee)
Recommendation:
The Corporate Services Committee on June 22, 1998, recommended to the Budget Committee, and Council, the adoption
of Recommendation No. (2) embodied in the joint report (June 10, 1998) from the Chief Financial Officer and Treasurer,
the Commissioner of Corporate Services and the Executive Director of Human Resources; and requested the Budget
Committee to report thereon to the meeting of Council scheduled to be held on July 8, 1998, when this matter is being
considered.
The Corporate Services Committee reports, for the information of the Budget Committee, having:
(1)recommended to Council the adoption of Recommendations Nos. (1) and (3) embodied in the joint report (June 10,
1998) from the Chief Financial Officer and Treasurer, the Commissioner of Corporate Services and the Executive Director
of Human Resources;
(2)referred the following motion to the City Solicitor for report thereon directly to Council for its meeting scheduled to be
held on July 8, 1998:
Moved by Councillor John Adams:
"That City Council adopt the following policy:
"(i)if any director, officer, employee, agent or other representative of a proponent/respondent, including any other parties
that may be involved in a joint venture or a consortium with the respondent, makes, from and after Council's decision on
July 8, 1998, any representation or solicitation to any elected representative or employee or agent of the City of Toronto,
with the exception of the contact person designated by the Chief Administrative Officer with respect to the respondent's
proposal or any other respondent's proposal, City Council is entitled to reject the proponent/respondent's proposal;
(ii)a representation can be considered to be anything said or written to any Member of Council, employee or agent which
provides information advancing the interests of a proposal;
(iii)this requirement does not extend to representations made to the designated official or to any public deputation made to
a Committee of City Council in accordance with the Procedural By-law;
(iv)should a respondent desire that any information be presented to Members of Council, the Respondent may request the
Designated Official to do so and that official shall distribute such information to all Members of Council and appropriate
staff;
(v)should Members of Council wish to receive information from any respondent(s), then the request shall be made through
the Designated Official., and if any Member of Council directly approaches a respondent for information, the respondent is
at jeopardy if he or she does make any representation to any Councillor in response; and
(vi)in the event of any alleged breach of the foregoing protocol, City Council shall be the arbiter of the effect of such a
breach to the process";
(3)requested the Chief Administrative Officer and the Chief Financial Officer to submit a joint report directly to Council
for its meeting scheduled to be held on July 8, 1998, providing recommendations respecting the inclusion of all Agencies,
Boards and Commissions, including the Toronto Hydro Commission, in the FIS/HRS system being proposed; and
(4)requested the Chief Financial Officer, in consultation with the outside independent consultant from LGS Inc., to submit
a written brief to all Members of Council, as quickly as possible, respecting the risks involved regarding this project and the
concerns expressed by Members of the Corporate Services Committee.
Background:
The Corporate Services Committee on June 22, 1998, had before it a joint report (June10, 1998) from the Chief Financial
Officer and Treasurer, Commissioner of Corporate Services, and the Director of Human Resources, recommending that:
(1)the acquisition of financial and human resource/payroll systems from SAP be approved in principle, as outlined in this
report;
(2)funds not to exceed $6.1 million be authorized for expenditure in 1998, $3.4 million in 1999, $6.5 million in 2000, $6.5
million in 2001, and $3.8 million in 2002 with total capital expenditures for the financial and human resources/payroll
systems not to exceed $26.3 million for the necessary hardware, software and project implementation; and
(3)the appropriate City officials be authorized to enter into contract negotiations with SAP for the supply of financial and
human resource/payroll systems.
The following persons appeared before the Corporate Services Committee in connection with the foregoing matter:
-Ms. Mina Wallace, Vice President and General Manager, PeopleSoft Canada Inc., and filed a submission in regard
thereto;
-Mr. Tim Conroy, and Mr. John Nye, Computron Software, and filed a submission in regard thereto; and
-Mr. Yakov Matusevich, Management Consultant, LGS Group Inc.
The Chief Financial Officer gave an overhead presentation to the Corporate Services Committee in connection with the
foregoing matter, and filed a copy of her presentation material.
(Communication dated June 23, 1998 addressed toCouncillor Tom Jakobek, Chair, Budget Committee fromMr. Jeffrey S.
Lyons, Q.C., Morrison, Brown, SosnovitchBarristers and SolicitorsOne Toronto Street, P.O. Box 28, Suite 910, M5C
2V6)
I understand that the aforesaid matter is on the budget Committee Agenda for Thursday, June 25th next.
I am enclosing the response of Computron Software Inc. who made a deputation at the Corporate Services Committee on
April 22nd last.
I have been asked by Computron Software Inc. to put forward their response to the Staff Report for your consideration.
(Communication dated June 24, 1998 addressed toMr. Tom Jakobek, Chair, Budget Committee, City of Toronto fromMr.
Peter J. Smith, Vice President, Sales, PeopleSoft Canada181 Bay Street, Suite 769, M5J 2T3.)
As you know, the Year 2000 problem is the single most significant challenge facing business and government today. These
systems will be crucial to the success of your initiatives. Many businesses have solved their problems already by acting
early and minimizing their risks. your decision is being made at the last minute. They had time. You do not.
The recommendation that is before you, has the City investing its entire future in a single software system for Financial,
material management, Procurement, human Resources, Time and Attendance and Payroll. this effectively puts all of your
Year 2000 eggs in one software basket.
By investing its entire future in a single software system, the situation is analogous to an investor putting all of his/her
savings in the stock of a single company. It is a high-risk venture and an inadvisable investment strategy in any and all
circumstances, regardless the track record of the stock. No financial advisory would advance such a strategy.
Staff have recommended a higher cost, integrated Financial and Human Resources solution that they believe presents a
higher Internal Rate of Return. Your decision is not whether "integration" is better than a "best-of-breed" solution for
Financial and Human Resources/Payroll. That could have been your decision months ago and indeed, under the
circumstances, it is probably a decision to be made in a more rational environment in the months after the year 2000 has
passed.
Your decision is how to approach and move through the very small window of opportunity. Do you really want to take a
chance on a unproven payroll system? There is an axiom that says, "Go with proven technology." A beta version of
software, even a version 1.0, simply allows a vendor into the marketplace. It does not prove capability, nor does it provide
any assurance of deliverability. We were there once, many years ago.
PeopleSoft has a proven track record, with scores of public sector installations in Canada and the USA. Our Canadian
references are large Human Resources and Payroll implementations in unionized public sector environments, like you.
During the Corporate Services Committee meeting, staff referenced the recommended solution as having been implemented
AT&T Canada in 9 months. We do not believe that a non-union, private sector implementation of 2,000 employees who
have been using the system since January 1998 can be extrapolated to predict success at the City. Our Human
resources/Payroll software applications are state-of-the-art and have been in-production at our customers in Canada since
1992.. Recently PeopleSoft was proud to release
"PEOPLESOFT CANADA PAYROLL REACHES MILESTONE
More than 500,000 Canadians now paid by industry-leading payroll system
TORONTO, Ontario - (May 1st, 1998) - PeopleSoft Canada, a leading provider of enterprise application software, today
announced that more than half a million Canadian employees are now paid using PeopleSoft Payroll - making PeopleSoft
payroll the top enter prise payroll application suite in Canada. Available in Canadian-specific form since 1992, PeopleSoft
Payroll is licensed by more than 100 of Canada's largest companies and public sector institutions including bell Canada,
Canadian Airlines International, the Province of British Columbia, AlliedSignal Aerospace Canada, Metro Toronto police,
Ontario Hydro, Air Canada, CIBC Wood Gundy, Bombardier, and Bank of Montreal.
Even your staff agree that we are the industry leader. We are the only solution that can guarantee delivery on time and
within budget.
PeopleSoft suggests that the City minimize its risk by "risk averaging" much as an investor would dollar average an
investment. We recommend that the City utilize the very best, proven technology available for Human Resources and
Payroll.
Getting over the Year 2000 obstacles is the issue. you have two different, core systems, so use two equally capable,
stat-of-the-art applications to solve the problem. Make the decision on integration at a point after the problem has been
solved. We have many customers who are successfully running combined PeopleSoft and SAP systems such as the City of
Mississauga, the City of Edmonton, the Canadian Federal Government and Bell Canada.
PeopleSoft has innovative ways to allow you to do this, including "Catalyst", our year 2000 postpone option, which allows
you to rent a solution for 3 years and the make a long term strategic decision that is right for the City.
At the outset of this project you issued for two separate RFP's to help solve your financial problems and human
resource/payroll problems. Integration does not solve any of your problems; indeed, if an unproven product line fails to
deliver then an integrated solution may cause even more problems.
Select the very best technology on the market at the very best prices.
Select PeopleSoft to be your Human Resource/Payroll system partner.
Attached to above letter:
PEOPLESOFT CANADA LTD. LAUNCHES NEW SOLUTION TOBRIDGE YEAR 2000 CHALLENGE
PeopleSoft Catalyst delivers rapidly implemented, low-risk alternative for organizations to replace legacy computer
systems and build future competitiveness
TORONTO, Ontario - (January 13, 19998) - PeopleSoft Canada Ltd., a leader in enterprise business management software,
today announced an innovative strategy for companies that have not begun to replace legacy computer systems in time for
the year 2000 deadline. Available immediately, PeopleSoft Catalyst features a complete bundle of software, hardware and
services in an IT outsourced environment that will allow organizations to postpone the decision of full replacement while
solving year 2000 issues quickly. PeopleSoft Catalyst lowers the business risk of the decision -- organizations avoid
incurring high up-front financial costs, don't have to compete in the market for scarce technical resources, and do not pay
until the software is ready for use.)
(City Council also had before it, during consideration of the foregoing Clause, the following report (July 7, 1998) from the
Chief Financial Officer and Treasurer:
Purpose:
To respond to the request from the June 22, 1998 meeting of the Corporate Services Committee that a written brief be
submitted to Council regarding the risk assessment performed by the external consultants LGS Group and other questions
raised by members of the Committee.
Financial Implications:
N/A
Recommendation:
It is recommended that this report and the attachments be received as information.
Background:
First, as a matter of context, the Steering Committee feels that it is important to state that the recommended solution meets
three objectives: (1) it allows for the benefits of an integrated solution without sacrificing the functionality of a "best of
breed" solution; (2) it is implementable within the required time frames for the FIS and HRIS system i.e., by the year 2000;
and (3) it will serve as the foundation for the efficient operation of the City's financial and human resources administration
for the future.
Discussion:
In March 1998, when the separate Financial and Human Resources/Payroll projects were merged into a single project, the
City requested quotations from several consulting companies to provide assistance in completing the evaluation process.
LGS Group, an independent consulting firm with no alliance with any of the software vendors under consideration, was
selected. Their role in the process is described in detail in Attachment A titled "On LGS Role".
The Project Steering Committee and the staff evaluation team considered the various options, determined the best solution,
and made the recommendations in the report to the Corporate Services Committee. LGS provided research and analytical
assistance. They tested our recommendations and also reached an independent opinion that an integrated SAP Financial and
Human Resources/Payroll solution is the best solution for the City (see Conclusion in Attachment A). This as well, formed
part of staff's analysis and final recommendations.
Risk assessment was an integral part of our analysis in formulating the business case. AttachmentB titled "Risk
Assessment" is a detailed discussion of the analysis done by LGS Group for the various options considered.
In order to mitigate risks associated with the tight implementation timeframe, a formal risk management methodology is
being incorporated into the overall project management. The recommended solution is feature rich. Implementation of the
features will be prioritized and phased-in as necessary and possible. It is however, intended to fully utilize all applicable
features as quickly as possible to achieve the noted benefits.
On the FIS side, the City's projected implementation date is April 1999. The City, in the meantime, will be reducing the
number of operational FIS systems over the next 6 months, being in a position of having year 2000 compliant system left
for final conversion. It is important to note that in implementing the SAP FIS that we are building on an already
successfully implemented FIS in the former City of Etobicoke. The final cutover to SAP would not occur until adequate
testing of operations is complete.
On the HRIS side, the City's projected implementation date is September 1999. The City, in the meantime, is reducing the
number of HRIS systems in operation for many reasons, not the least being, maintaining good internal controls. Already,
there are only 5 systems operating today. The shut-down of two systems occurred over the period of one month. Planning is
underway to reduce the City's risk of project implementation by continuing to reduce the number of HRIS system by year
end. Since none of the existing systems is year 2000 compliant, the HRIS implementation will require significant resources
- regardless of which product is chosen. Having the vendor as the prime implementer, and taking responsibility directly, as
SAP is prepared to do, is critical to the City's success.
As noted, significant to minimizing the risk in the recommended solution is the "prime" or "lead" role that the vendor SAP
is prepared to take with the City. Generally the vendors considered by the City in all the business cases only sell their
software and then "contract out" the project implementation to third party consultants - some who are certified by the
vendor and others who are not. SAP has agreed to mutually share the risk associated with our implementation by taking
responsibility for project implementation. They will put together the necessary team to deliver results as expected by the
City. SAP, the recommended vendor and the City will therefore jointly manage implementation risks. A separate document
has been prepared to address issues associated with the recommended vendor and its solution.
Conclusion:
Staff have completed an intensive and extensive evaluation process. The independent analysis supported staff's own
recommendations (and extensive findings of the external consultant who assisted in the process.) It is essential that project
approval be expedited to maximize the available time for implementation before the Year 2000, to achieve appropriate
financial and staffing control, and to attain administrative efficiencies associated with amalgamation. I am confident that
based on the work performed to date by staff, the work of the independent consultant, the vendor, it products and track
record, that the recommended solution of a SAP Financial and Human Resources/Payroll System will not only assist the
City in achieving these goals but will also position the City well for future re-engineering efforts and efficient operations.
The staff resources from all the former municipalities are dedicated to implementing the recommended solution on time and
within budget and bring a significant track record of successful implementation skills.
Contact Name:
Stephen Wong,
Phone: 394-8135.
(A copy of Attachments A and B, referred to in the foregoing report, is on file in the office of the City Clerk.)
(City Council on July 8, 9 and 10, 1998, also had before it, during consideration of the foregoing Clause, the following
report (July 7, 1998) from the City Solicitor:
Purpose:
The purpose of this report is to comment on the motion by Councillor Adams pertaining to adoption of a policy pertaining
to lobbying by proponents in the above-noted proposal call.
Funding Sources, Financial Implications and Impact Statement:
N/A
Recommendation:
It is recommended that this report be received for information.
Council Reference/Background/History:
At its meeting on June 22, 1998, the Corporate Services Committee, in consideration of the matter of the acquisition of
financial and human resource/payroll systems, referred a motion by Councillor Adams (set out in Appendix 1 to this report)
to the City Solicitor for a report directly to Council for its meeting scheduled on July 8, 1998 (see Clause No. 1 of Report
No. 9 of The Corporate Services Committee).
Comments and/or Discussion and/or Justification:
The motion would adopt a policy to prevent (given the potential consequences to a proponent) the lobbying of Councillors
and staff and would require that the "flow" of information to and from proponents and Councillors, including staff, occur
through a designated staff person or in public by deputations to Committee. Failure to adhere to the process would result in
the discretion of Council to reject a proponent's proposal.
The policy is in effect a repetition of the policy that was adopted for the Proposal Call issued in 1995 by the former
Metropolitan Toronto for disposal of Metro's residual solid waste (the "SWRFP"). That policy was in turn modelled on that
contained in the proposal call for the National Trade Centre (the "NT RFP").
In the prior processes, the policy was incorporated within the issued SW RFP and NT RFP and the instructions to
proponents. In particular, the fact that a proposal could be rejected based on contravention of this "anti-lobbying clause"
was set out in the calls together with other relevant grounds for rejection and the criteria that would be used in
recommending the successful proponent. As an example, the relevant clause used in the SW RFP is set out in Appendix 2.
This was in keeping with essential principles of tendering law that the bidding rules for rejection and award, including
evaluation, be set out for the bidders in the bid documents and be adhered to.
Should Councillor Adams' motion be adopted, there is a concern that this could be considered the adoption of other criteria
(in so far as rejection of a proposal is concerned) not initially disclosed to bidders.
Conclusions:
Adoption of the motion would initiate a process for the distribution of information not contemplated in the information
given to respondents at the time proposals were requested. Given that the adoption of the policy at this stage in the process
could result in the rejection of a proponent's proposal and was not shown as a basis of rejection in the proposal call, I
would recommend against its adoption in this case. Any provision against lobbying should be undertaken in the context of
explicit instructions to bidders in the bid call, if deemed appropriate for that call, or in the context of an overall policy
adopted by City Council on lobbying.
Contact Name:
J. Anderson392-8059
--------
Appendix 1
Motion by Councillor Adams:
"That City Council adopt the following policy:
(i)if any director, officer, employee, agent or other representative of a proponent/respondent, including any other parties
that may be involved in a joint venture or a consortium with the respondent, makes, from and after Council's decision on
July 8, 1998, any representation or solicitation to any elected representative or employee or agent of the City of Toronto,
with the exception of the contact person designated by the Chief Administrative Officer with respect to the respondent's
proposal or any other respondent's proposal, City Council is entitled to reject the proponent/respondent's proposal;
(ii)a representation can be considered to be anything said or written to any Member of Council, employee or agent which
provides information advancing the interests of a proposal;
(iii)this requirement does not extend to representations made to the designated official or to any public deputation made to
a Committee of City Council in accordance with the Procedural By-law;
(iv)should a respondent desire that any information be presented to Members of Council, the Respondent may request the
Designated Official to do so and that official shall distribute such information to all Members of Council and appropriate
staff;
(v)should Members of Council wish to receive information from any respondent(s), then the request shall be made through
the Designated Official, and if any Member of Council directly approaches a respondent for information, the respondent is
at jeopardy if he or she does make any representation to any Councillor in response; and
(vi)in the event of any alleged breach of the foregoing protocol, City Council shall be the arbiter of the effect of such a
breach to the process."
Appendix 2
Clause contained in Metro's Request for Proposals for the Disposal of Residual Solid Waste
"Solicitation:
If any director, officer, employee, agent or other representative of a respondent, including any other parties that may be
involved in a joint venture or a consortium with the respondent, makes, from and after November 10, 1995 (the Closing
Date of the RFP), any representation or solicitation to any elected representative or employee or agent of Metro or the
media, with the exception of Mr.ShaunHewitt of Metro Treasury or his designate, with respect to the Respondent's
Proposal, Metropolitan Council will be entitled to reject or not accept the Respondent's Proposal. This requirement does not
extend to any public deputations that may be made to any Metro committee in accordance with Metro's Procedural
By-law.")
(City Council also had before it, during consideration of the foregoing Clause, a communication (July3, 1998) from the
Vice-President, Sales, PeopleSoft Canada Co., providing an outline of issues with respect to the Financial and Human
Resource/Payroll systems project proposal and enclosing background material in this regard.)
(City Council on July 29, 30 and 31, 1998, had before it, during consideration of the foregoing Clause, the following joint
report (July 27, 1998) from the Chief Administrative Officer and the Chief Financial Officer and Treasurer:
Purpose:
To respond to a request from the Corporate Services Committee at its meeting of June 22, 1998 to provide
recommendations respecting the inclusion of all Agencies, Boards and Commissions, including the Toronto Hydro
Commission in the FIS/HRIS system being proposed.
Financial Implications:
Consolidating all City Agencies, Boards and Commissions into the City's FIS/HRIS systems will create an efficient
mechanism for various administrative functions including financial reporting, internal controls and data management.
Capital and operating costs for the acquisition of FIS/HRIS systems for the Agencies, Boards and Commissions would be
reduced if not eliminated.
Recommendations:
It is recommended that:
(1)all City Agencies, Boards and Commissions be strongly urged and requested to use the recommended City's FIS/HRIS
systems, on a timetable that is mutually agreed upon, but within five years at the latest; and
(2)on a priority basis, that City staff accommodate those Agencies, Boards and Commissions with non year 2000
compliant FIS/HRIS systems, i.e., the Toronto Police Services by including their participation in the City's implementation
program.
Discussion:
As a general vision, all of the City's department, Agencies, Boards and Commissions should be using the same FIS and
HRIS systems. The vision promotes efficient recordkeeping, efficient database management, efficient and accurate
reporting and analysis of financial information and consistent financial controls. Adequate security exists within FIS/HRIS
systems to ensure that each department, agency, board and commission's detailed financial information is kept
confidential.
One FIS and HRIS system for all departments, Agencies, Boards and Commissions would reduce the cost of auditing the
internal controls once fully implemented since the review of the systems which produce the financial statements of all
entities would only need to be done once. Similarly, any requests for financial analysis including variance reporting can be
done on a much more timely basis with one system.
The City currently has 214 Agencies, Boards and Commissions that are under review by a Task Force on Agencies, Boards
and Commissions. The largest of the consolidated Agencies, Boards and Commissions includes:
The Toronto Police Services Board
The Toronto Public Library Board
The Toronto Transit Commission
The Toronto Public Health Board
The Toronto Public Library and Toronto Public Health have generally previously operated within the City's financial and
human resources systems with some exceptions. Discussions have been held with the Library and Public Health. These
services have agreed to use the City's FIS and HRIS systems.
The Toronto Police Services are in need of a new FIS system for the year 2000. A request at Budget Committee on July 28,
1998 for $200,000 to modify their existing FIS to be year compliant was not recommended by the Budget Committee but
rather that the City's own FIS/HRIS implementation schedule be inclusive of Police staff on the project teams from day
one. With respect to the HRIS, the Police have been in the process of implementing a different HRIS than recommended by
City staff. It is not inconceivable that in the future that the Police could join the City's HRIS in order to achieve the
administrative efficiencies possible with the integrated SAP solution.
The TTC currently has FIS and HRIS systems that are year 2000 compliant. Hence their current focus for technology
upgrades are focussing on year 2000 compliance in their operational systems. Discussions with TTC staff indicate that they
are certainly open to using the City's new systems if their business requirements can be met but not until the year 2000
issues in their operational systems are dealt with.
The largest non-consolidated Boards and Commissions include Toronto Hydro and the Toronto District School Board. We
have been advised that at this time that Toronto Hydro will be proceeding to use Oracle Financials currently used by the
two of the former PUC's across all six former enterprises. With respect to the School Boards as reported in the original
report, the Toronto District School Board has chosen SAP Financials and is yet to make a decision on its HRIS system.
Conclusion:
The efforts to date by City staff to bring in the City's Agencies, Boards and Commissions that are consolidated into the
City's financial statements need to continue. We are confident that we can include those ABC's that need year 2000
compliant systems in the current City implementation schedule and that with our success at implementing the new
FIS/HRIS for the City that the remaining ABC's can be brought in within the next three to five years. Given the robustness
and diversity of clients served by SAP for its FIS/HRIS products, it is anticipated that the needs of all the ABC's can be
accommodated in the recommended solution.)
(City Council also had before it, during consideration of the foregoing Clause, the following transmittal letter (July 29
1998) from the City Clerk:
Recommendation:
The Strategic Policies and Priorities Committee submits the transmittal letter (July 29, 1998) from the Budget Committee
to Council without recommendation.
Background:
At its meeting on July 29, 1998, the Strategic Policies and Priorities Committee had before it a transmittal letter (July 29,
1998) from the Budget Committee recommending that the report (July28, 1998) from the Chief Financial Officer and
Treasurer and Chair, FIS/HRIS Steering Committee, recommending that the report from Brian Dunk Consulting Services
Limited be received and the FIS/HRIS transition project at a total cost of $26.3 million with approval of the 1998 project
financing of $6.1 million from the Transition Reserve Fund with a report back in September 1998 outlining project
financing requests for 199 and 2000 based on contract terms and conditions to be negotiated with SAP that have regard to
matching cashflow to project milestones and project risk be approved, be forwarded to Council, without recommendation.
(Report dated July 28, 1998 addressed tothe Budget Committee from theChief Financial Officer and Treasurer and
Chair,FIS/HRIS Steering Committee)
Purpose:
To respond to the Budget Committee request with respect to the project's risk assessment.
Financial Implications:
The 1998 requested capital expenditures of $6.1 million and the total project cost and financing of $26 million have been
included in the ranked list of transition projects envelope in a separate report previously submitted to the Budget
Committee.
Recommendations:
(1)Receive the attached report from Brian Dunk Consulting Services Limited;
(2)approve the FIS/HRIS transition project at a total cost of $26.3 million; and
(3)approve 1998 project financing of $6.1 million from the Transition Reserve Fund with a report back in September 1998
outlining project financing requests for 1999 and 2000 based on contract terms and conditions to be negotiated with SAP
that have regard to matching cashflow to project milestones and project risk.
Discussion:
The Budget Committee, at its meeting of June 25, 1998, considered Clause No. 1 of Report No.9 of The Corporate Services
Committee dated June 26, 1998, respecting project financing approval of $26.3 million.
At its meeting, the Budget Committee adopted the following recommendation:
"¼