May 7, 1999

To:Corporate Services Committee

From:Project Atlas Steering Committee

W. A. Liczyk, Chief Financial Officer & Treasurer

M. Rodrigues, Commissioner of Corporate Services

B. Glover, Executive Director of Human Resources

J. Andrew, Executive Director of Information & Technology

Subject:Project Atlas Update (SAP - FIS / HR / Payroll System)

Purpose:

To report on the implementation progress of the Financial, Human Resources and Payroll system project covering the period of January to April 1999.

Funding Sources, Financial Implications and Impact Statement:

Not applicable.

Recommendations:

It is recommended that this report be received for information.

Background:

Council, at its meeting of July 29, 30 and 31, 1998, adopted recommendations relating to the acquisition of Financial and Human Resources / Payroll Systems (FIS / HRIS) as follows:

• The acquisition of such systems from SAP be approved in principle.
• 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.
• Appropriate City officials be authorized to enter into contract negotiations with SAP for the supply of Financial and Human Resources / Payroll Systems.

Subsequently, extensive contract negotiations were held with SAP. The City's negotiation team consisted of representatives from Purchasing, Accounting, Information & Technology and Legal. At the same time, a scoping and planning exercise to more accurately define project scope and timetable was undertaken. The results of these activities were contained in a confidential report to Council in December 1998. Council, at its meeting of December 16, 17, 18 adopted the recommendations that:

• Appropriate City officials be authorized to enter into an agreement with SAP Canada Inc. for the acquisition and implementation of FIS and HRIS software systems based on terms and conditions set out in the report.
• Funds, up to a maximum of $3 million, from the Transition Reserve Fund, be approved on a one time basis, to cover the potential backfill of positions in Finance, HR and I&T or City departments participating on this project and ancillary Y2K projects in 1999 and 2000. Use of the funds would be subject to a report to the Budget Committee in early January on expected use of backfill in 1999 and 2000.

Discussions:

Contract

Following Council's approval, a contract was successfully executed with SAP Canada Inc. based on the terms and conditions as reported to Council. In summary, the key element of the contract is a fixed-price contract based on a defined scope with very specific deliverables and milestone dates. In order to meet these dates, both the City and the vendor must also fulfil a number of obligations on a timely basis. The City's obligations include the provision of a project office, hardware and technology infrastructure, and a number of business decisions which would affect configuration of the system. In addition, the City is also responsible for end user training, business change management and system deployment. On the other hand, SAP is obliged to deliver the software on time and provide an interim system development environment during the early part of implementation.

Delivery of the software was made by December 29, 1998. Even though an interim system development environment was provided by SAP, this was soon replaced by hardware more compatible with the City's technology environment and was ready for use by the project team starting on January 4, 1999. Up till now, all City contractual obligations have been completed on time.

Project Organization

The project is overseen by a Steering Committee comprised of the Chief Financial Officer & Treasurer (the Chair), the Commissioner of Corporate Services, the Executive Director of Human Resources and the Executive Director of Information & Technology. The Steering Committee meets at least monthly and is responsible for providing the vision of the City's long-term strategic goals and objectives to guide the implementation, and for approving any change to the project scope and financial expenditures. The Chief Financial Officer & Treasurer, as the Project Executive, provides day-to-day advice, direction and support to the project on behalf of the Steering Committee.

Everyday guidance and decision making is provided by an Advisory Committee comprised of the following members:

• Director of Accounting Services
• Director of Purchasing Services
• Director of Budget Services Director of Payroll and Benefits
• Director of Human Resource - Employment Services
• Representative of the Executive Director of Information & Technology
• A Member of the Service Integration and Support Directors
• Director of Council Services
• City Project Director
• Project Director from SAP
• Senior Account Executive from SAP.

The Advisory Committee meets weekly and is responsible for providing ongoing advice, business direction and decisions necessary to maintain project progress and focus. The project has two distinct tracks - Financial Information and Human Resources / Payroll - supported by a technology team, a training & communications team, a business change management / deployment leader and quality assurance resources.

The project team comprises of dedicated staff and consultants. City staff are either appointed to the project by the business units or seconded through an internal posting process. Through working closely with the consultants, significant knowledge transfer is envisioned in order for the City to be reasonably self-sufficient in maintaining and supporting the system on an ongoing basis. Much of project team technical training was completed in January and February 1999. A summarized project organization chart is attached as Appendix A.

The project team proposed and the Steering Committee endorsed "Project Atlas" as the project name. Atlas, with its dual meaning, was selected to capture the essence of the implementation of SAP in the new City. Atlas is a set of maps or charts. Project Atlas will provide the map for the future direction of finance, human resources and payroll management in the new City. Also Atlas is the mythical giant who holds up the universe. Project Atlas provides one system for management of the critical functions of finance, human resources and payroll in support of amalgamation.

Project Office

Since December 1998, a project office was established in the Board of Education building at 5050 Yonge Street adjacent to the North York Civic Centre. This provides the project team a home base to work from as a dedicated group, to foster ideas exchange and learning, to deal with both inter- and intra-team issues, and to remain focused without undue interruptions. The central location also provides convenient access to the key business users for consultation. Much work was done in a very short period of time to quickly equip the project office to accommodate both the City and SAP team members as they were assembled. By the end of January, there were about 60 people working at the project office and almost 100 at present - approximately 2/3 are City staff.

Hardware

An RFP for the required hardware to support the implementation was completed in December 1998. Subsequent to Council's approval to proceed with project implementation, Sun Microsystems of Canada Inc. was selected as the hardware supplier. An interim system development environment was in place in January 1999 while preparation was being made to deliver a permanent system development environment in February 1999. The production system hardware, including high availability components to support a 24x7 operation, was completed on March 29, ahead of schedule. The hardware had been tested to confirm Y2K compliance in accordance with established procedures. The hardware availability dates are contractually bound to support the milestone delivery dates specified in the contract. All system hardware delivery dates were completed on or ahead of schedule.

Desktop PC's, replaced or remediated to be Y2K compliant, will be deployed with a standard configuration and system management software to support delivery of SAP functionality to the users.

Milestones

The contract with SAP is structured on delivery of various milestones within the scope of the project at a fixed price established for each milestone delivery. Both the City and SAP are responsible to perform in order to achieve the specified delivery dates. Within the scope of the current project, there are two stages for Financial (FIS) and three stages for Human Resources / Payroll (HR/P) as recommended in the December 1999 report.

FIS Stage 1 will provide fundamental functionalities to support the migration to a single financial management system for the City and Stage 2 will deliver enhanced functionalities and further deploy the system to the larger user base in all departments. The scheduled go-live date for FIS Stage 1 is May 31, 1999 based on a single cut-over approach. As of the end of April, the first five milestones within FIS Stage 1 were completed on schedule. The next scheduled milestone is system go-live. While some clean-up work for system integration testing is being completed, work to prepare for system go-live has started on time.

HR/P Stage 1 will consolidate the current 4 payroll systems into one single system while providing fundamental human resources functionalities. There are 4 staggered go-live dates as each legacy payroll system is replaced. The first go-live date for HR/P Stage 1 is scheduled for August 1999. Stage 2 and 3 are scheduled for start and completion in year 2000. At the end of April, all 4 scheduled milestones for HR/P Stage 1 were completed on time.

Deployment - System Roll-Out

Even though the technical implementation in configuring the new financial system for use has progressed well, issues have been identified regarding readiness of the organization on May 31 to utilized the delivered capabilities of the new system with an appropriate level of user knowledge and operational control.

As noted, the original strategy is for a single cut-over approach to system go-live where the entire organization will switch to the new system at the same time. This approach works best when there is a stable organization. However, amalgamation activities are still ongoing today, presenting an added level of complexity. We are not just switching over from one legacy system, but rather from four major ones. We are not changing just one way of handling an existing work process, but potentially consolidating as many as seven in some instances. Significant time and effort would be required to adequately deal with such complexities. There are resource issues as well. Many of the critical staff resources needed to support deployment are often needed to support the parallel Y2K remediation work for existing systems, either as a necessary system fix or rationalization or as part of contingency.

Since February 1999, emphasis and focus have been directed to business change management and deployment activities. To-date, work in formulating and communicating new uniform policies and procedures, training and educating users in system usage, building interfaces to existing systems, dealing with subsystems (some are obscure until recently) that are interfaced to legacy systems, and cleaning up existing data for conversion would need more time to completed. Therefore, the original FIS Stage 1 go-live date of May 30 has been reconsidered.

In early March, general information sessions were held with departmental staff and the initial deployment strategy was presented to the Service Integration and Support Directors. A process was established for departmental impact analyses. In late March and early April, meetings were held with all departments to assess the operational impacts and to discuss solutions and/or workarounds. It should be noted that many issues have now been identified which were not previously evident due to complexities resulting from amalgamation. We now have a much better understanding of the scale of the impact in various operational areas and the necessary work to be done.

It is very clear that enhanced communication with all departments is key to a smooth and successful deployment. Even though periodic updates has been made since last December, regular updates are now scheduled. As a result of these considerations, the Steering Committee has endorsed a modified deployment strategy and recommended that FIS Stage 1 go-live date be extended to June 30, 1999.

The modified deployment strategy has the following key elements:

• At first go-live on June 30, the existing Etobicoke SAP system and the LGFS system for the York's and Scarborough will be shut down completely.
• New capital projects will be managed in the new SAP system.
• The existing Metro Computron and former Toronto Banner systems will continue temporarily to process all current transactions and pass through updates to the new SAP system via interfaces.
• On August 30, the Metro Computron and former Toronto Banner systems will cut over to the new SAP system to complete Stage 1.

The advantages of a staged roll-out in the modified deployment strategy are:

• The non-Y2K compliant LGFS system will be eliminated by mid-1999.
• Even though two existing systems are kept on temporarily at first go-live, this still achieves the consolidation of overall financial information into a single system, and at the same time minimizes the initial impact on the largest number of users residing on these two existing systems. More time is provided to resolve operational and logistical impacts, to build new interfaces, and to communicate change associated with system deployment on such a large scale.
• Delivery of end-user training will be better coordinated and managed.
• As a two-stage go-live, the time between the two cut-overs will be utilize to "pilot" the new work procedures and system processes within a smaller group of users in the organization. After such "fine-tuning", the deployment to the remainder of the organization should become smoother and more controllable.
• Opportunity exists to roll in some Stage 2 deliverables for the August 30 cut-over. For example, distributed procurement can be delivered to those business units that are organized and ready, rather than having procurement first centralized as originally envisioned and then distributed several months later in Stage 2.
• Other scheduled go-live dates will not be impacted.
• Ernst & Young, the City's external auditors, have been engaged to perform quarterly quality assurance review of the project progress. Their first review is completed and identifies several issues regarding FIS Stage 1. These issues and the corresponding actions undertaken to address them are listed in Appendix B. Their findings support the concerns expressed by the Steering Committee, and in the context of quality assurance review, indicate that an alternate strategy is needed to provide more time in mitigating the risks associated with insufficient deployment preparation.

Conclusion

The technical implementation in configuring the new Financial and Human Resources & Payroll system has progressed on schedule. To-date, the FIS Stage 1 and HR/P Stage 1 milestones have been delivered on time. However, due to complexities associated with amalgamation, deployment activities for FIS Stage 1 system go-live require additional time to complete. This is supported in part by the observations of the external quality assurance consultant. In order to mitigate this risk, a modified deployment strategy has been devised to phase in two cut-overs - on June 30 for Etobicoke SAP and LGFS for the York's and Scarborough, and on August 30 for Metro Computron and former Toronto Banner systems. More time will be available to ensure sufficient work is completed in formulating and communicating new uniform policies and procedures, training and educating users in system usage, building interfaces to existing systems, dealing with subsystems (some are obscure until recently) which are interfaced to legacy systems, and cleaning up existing data for conversion. The Steering Committee has recommend approval and implementation of the modified deployment strategy and the associated new go-live dates to ensure the successful delivery of Stage 1 of the financial system.

Contact Name and Telephone Number:

Stephen Wong

FIS & HR/Payroll Project Director(416) 397-9175

W. A. LiczykM. Rodrigues

Chief Financial Officer & TreasurerCommissioner of Corporate Services

B. GloverJ. Andrew

Executive Director, Human ResourcesExecutive Director, Information & Technology