Financial Management Line of Business FM LOB Market Study February 4, 2004

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Financial Management Line of Business FM LOB
Market StudyFebruary 4, 2004
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Agenda

• Purpose of Market Study
• Approach and Methodology
• Resources
• Themes
• Lessons Learned
• Opportunities for FM LOB

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Purpose of this Market Study

• Present information from similar project,
  vendors, and market researchers
• Provide lessons learned from large system
  migrations
• Hosts and Migrating Agencies
• External and Internal sources

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Common goals of similar projects

• IT consolidations
• Cost Savings also typical for Federal projects
• Integration of systems also typical for Federal
  projects
• Outsourcing Not as typical for Federal projects
• Structural changes within government IT
• Creation of CIOs
• Centralized reporting
• Great external oversight

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Approach and Methodology
Objective Identify quick hits and long term
opportunities for large scale migrations based on
lessons learned, research, and analysis of
federal government IT trends
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Research breakdown
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Interviews
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Industry Best Practices, Case Studies, Success
Stories

• Market Research
• Aberdeen Group e) IDC
• Best in Class.com f) MarketResearch.com
• Forrester g) Washington Technology
• Gartner h) The Yankee Group
• Vendors/Integrators
• Accenture b) Oracle, PeopleSoft, AMS, SAP
• Government Research Groups
• CFO Councils Systems/E-Government Committee
• CGI-AMS
• CIO Council (www.cio.gov)
• Federal Computer Week (www.fcw.com)
• General Services Administration
• Government Computer News (GCN)
• Joint Financial Management Improvement Program
  (www.jfmip.gov)
• Federal Accounting Standards Advisory Board
  (FASAB)
• Financial Management Service (FMS)
  www.fms.treas.gov
• Internal Touchstone Knowledge Capital
• E-Travel c) HR LOB

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Themes of Analysis

• Strategy
• Order of magnitude reductions in cycle-time
• Significant cost savings
• One-stop integrated FM services for Federal
  employees
• People
• Cultural change Think outside the agency in
  planning and obtaining FM information systems and
  functionality
• Process
• Streamlined, simplified, and standardized FM
  process yield increased effectiveness and
  efficiency
• Technology
• FM systems/applications can be COTS, and JFMIP
  approved by
• establishing a governance structure
• standardizing FM policies and procedures
• establishing FM enterprise architecture in
  coordination with emerging OMB guidelines
• identifying and implementing a FM service
  delivery consolidation strategy

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Strategy General

• Manage multi-agency structure and cooperation
  closely.
• Achieving consensus on requirements has proven
  difficult in projects crossing many functional
  areas/separate agencies.
• At any point, government agencies will be in
  different positions in the EA lifecycle/planning.
  Decisions made on COTS products may impact COE
  selection.
• Initiatives the magnitude of FM LOB can fail due
  to
• lack of senior management support at project
  initiation.
• declining support during final years of a long
  term project.
• Recognize the implicit danger of focusing on one
  segment of the process, rather than implementing
  an end-to-endsolution.
• Stakeholders may dictate specific IT/process
  changes that are inconsistent with the strategic
  approach.
• Support agency-specific legal and regulatory
  provisions.
• With respect to acquisition, implementation,
  migration, configuration, and testing beware of
  
• schedules that are overly aggressive.
• inability to resolve issues in a timely manner.

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Strategy COEs

• Plan an aggressive marketing strategy.
• Marketing the product line to agencies may be
  difficult.
• Encourage vendor competition for product
  selection, integration, infrastructure
  operations, and back-end support.
• Enable significant accountability for service
  levels, standards, framework, and architecture.
• Estimated costs increase due to developmental
  delays and vendor revisions to COTS products.
  Costs typically differ due to
• Not accounting for operating costs in years after
  the system is fully developed and deployed.
• Underestimating the effort required to
  implementFM COTS product
• Database, hardware, and end user equipment needs
• Lack of maturity of the FM COTS products
• Technical programming staff charges and billing
  rates higher than for older technologysystems

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Strategy Migrating Agencies

• Avoid milestone lag, typically due to
• unanticipated need for additional testing
• approval delays
• lack of maturity in the product relative to
  federal needs
• lack of skilled resources and decisions to use
  only internal staff
• union negotiations/agreements,
• cultural changes,
• additional development/testing to achieve sizing
  and workload requirements,
• seamless integration of all COTS and
  custom-designed applications.
• Recognize other risk factors include
• Cost overruns that may arise from
• unanticipated expenditures for extended
  development timeframes
• additional shared service center equipment
• additional marketing and contractor services
• upgrades to primary FM vendor software
• Longer times required to realize FTE savings due
  to overall extended timelines

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People General

• Ensure that Change Management and Communications
  are a priority.
• To counter the initial lack of and sustained
  buy-in by agencies, create a marketing strategy
  to communicate internally and externally.
• Maintain dedicated leadership it is essential.
• A strong and clear value proposition is key.
• The project must have strong backing from senior
  career and political leadership it will need
  the support!
• First step gain a credible coalition of the
  willing federal agencies involved should
  already be in the spotlight.
• Recognize champions and channel their energy.
  Enlist people with an incentive to support the
  vision and value of the project.
• Ensure sustained Congressional support.
• Clear the path of unnecessary roadblocks.
• Identify institutional, personnel, and cultural
  barriers that may prevent successful
  implementation.
• Leadership can run interference to ensure the
  project team is not slowed by bureaucracy.
• Decide when to involve OMB and use them to the
  projects advantage.
• Reluctant participants are less likely to block
  progress when OMB is present.
• Identify a resource matrix.
• Outline the skills and GS levels necessary to
  complete the migration for communicating with
  agencies to gain FTE support.
• Choose the right project manager - Effective
  project managers are experienced, dedicated, and
  results oriented Whatever it takes attitude is
  key.

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People COE

• Need to confront agencies who are not fulfilling
  their MOU agreements.
• If possible, escalate!
• Install a strong PMO to guide project management.
• PMO should broker deals and act as a sponsor.
• Councils work well in managing governance.
• Use an FM LoB Advisory Council to manage
  governance
• Educated risk taking is necessary.
• If problems are analyzed forever, no solutions
  will be tried.
• Working cross agency is new and different, there
  should not be a standard operating procedure for
  everything.
• Depend on external SMEs when necessary.
• Demonstrate tangible results quickly.
• Exhaustive planning leads to lots of meetings and
  paperwork but few tangible results.
• Nothing garners support like tangible results.
• Changes in Federal or legislative mandates may
  require nonstandard changes in business
  requirements and processes.

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People Migrating Agencies

• Pilot system access to managers and then to
  employees.
• Increase manager satisfaction with results of
  migration/training process.
• Expect a reduction in the number of FTEs in
  finance and budget areas due to reengineering FM
  processes and implementing self-service FM
  capabilities.
• Displacement of workforce resulting from provider
  consolidation will be harmful to individual
  employees or disruptive to agency operations.
  Plan to have a redeployment strategy ready.

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Process General

• Prepare and implement an acquisition strategy and
  plan.
• Keep scope in check determine whether systems
  are appropriate for migrationand meet criteria.
• Determine when agencies will be asked to migrate.
• Use an iterative approach when working with
  agencies.
• Create and stick to an aggressive schedule.
• Start with quick wins and add on incrementally.
• Best practice example GovBenefits identified 25
  programs to transferas the first quick wins.
• Visible progress combats nonbelievers or
  non-participants.
• Enforce a governance structure to manage
  outliersunwilling to participate or help the
  cause.
• i.e., If an agency hasnt signed a MOU, they are
  not allowed to vote on LOB issues.
• Use a Fee-for-Service cost model (ex E-Payroll).
• Costs increase due to developmental delays and
  vendor revisions to the COTS products.

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Process COEs

• Ensure standardization through well-established
  EA.
• Given processing centers are usually developed at
  the bureau level rather than at the agency level,
  recognize inconsistencies may arise in types of
  authorizations used, methods for advances and
  reimbursements, and how and when FM funds are
  obligated and FM vouchers are audited.
• Bureaus within agencies abide by the same FM
  regulations but often interpret them differently.
• Identify ALL business requirements and processes.
• Manual hand offs between processes can
  severely lengthen the process.
• Data entry is redundant and duplicative
  becauseof non-interfacing systems.
• Administrative costs could potentially rise as
  data errors are corrected.
• Train employees thoroughly on new processes.
• Industry experience has shown that staff may not
  be able to adapt to significant process and
  technology change without appropriate support.
• Complete key milestones on schedule!

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Process Migrating Agencies

• Reduce overall operations and maintenance costs
  by maintaining fewer systems and reducing
  operation costs of legacy systems.
• Reduce/eliminate handoffs and reconciliation
  tasks by replacing multiple systems with one
  integrated system.
• Enable operating divisions to eliminate
  duplicative personnel systems within their
  organizations.
• Create more time for valued-added data analysis
  instead of time required for transaction
  processing.

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Technology General

• Recognize financial risk associated with resource
  allocation/competing needs by providers currently
  in the midst of a modernization effort.
• Implementations of COTS products often fail when
  product changes exceed 20.
• Avoid leaving Government data vulnerable by
  ensuring security mechanisms do not fail, or
  function adequately.
• Prototypes intended for evaluation and
  proof-of-concept that are put into production can
  fail due to
• their inability to scale, lack of security, or
  other production related designs.
• The ability to change inter/intra-Government
  agency interfaces is unknown and can impact many
  processes,including scheduling.

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Technology COEs

• Standardize policies affecting FM.
• The key to driving standardization is engaging
  stakeholders and establishing a task force.
• Leverage existing modern technologies.
• Ensure the enterprise architecture is robust
  enough to provide effective management
  information.
• Ensure interoperability of information
  technology.
• Ensure a successful implementation though
  increased communication and collaboration during
  the development process.
• Example Involve all parties in developing coding
  standards.
• Conduct stress and performance testing.
• Example GovBenefits could not handle the spike
  in hitswhen first launched.
• Install an approved COOP and disaster recovery
  plan.
• Be prepared for cost and time overruns.
• Technology integration required across
  participating agencies is more difficult than
  anyone predicts.
• Determine performance metrics and adhere to them.

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TechnologyMigrating Agencies

• Coordinate with JFMIP and CFOC.
• Recognize that selected FM providers current
  systems may not meet all requirements specified
  by migrating agencies.
• Potential exists for the COE choice/vendor
  support to be protested.
• Migration strategies help keep the timeline and
  avoid disagreements.
• Involve industry throughout the process for due
  diligence.

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FM LOB Strategy Opportunities Quick Hits

• Provide for single agency points of contact that
  report to the highest levels within an agency and
  have been empowered.
• Foster a single, central legal spokesperson for
  all agencies.
• Give a change control board final approval for
  all changes.
• Define agreement with key government
  representatives on the go-forward strategies
  prior to finalization of any implementation plan
  being created or executed.
• Adopt a change management strategy that includes
  training and support.
• Use prototypes and pilots to identify human
  factor and process issues in advance of the major
  deployment.
• Set interim milestones to check progress against
  schedule and revise the schedule as warranted to
  ensure overall success of initiative.
• Phase I Select Providers that have adequate
  capabilities to acquire new customers.
• Phase II Ensure appropriate balance in
  distribution of service agencies to consolidated
  providers.
• Phase III Work closely with consolidated
  providers on migration plans.
• Develop agency specific migration project plans
  that realistically estimate the level of effort
  needed and closely track the migration process
  against milestones.
• Assign FM LOB responsibility for monitoring and
  working with providers/agencies.

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FM LOB Strategy Opportunities Longer Term

• Develop funding strategies for the period of
  consolidation primarily addressing conversions
  and migrations.
• Establishing agreement for IT funding across
  agencies is the epitome of challenging.
• Recognize that IT investments have many
  stakeholder groups who are heavily invested in
  the status quo and have little incentive to
  reallocate appropriated funds in the interest of
  cross-agency optimization or collaboration.
• Identify a compelling value proposition to
  potential partner agencies.
• Establish a service fee structure that allows
  full cost recovery plus sufficientretained
  earnings to underwrite modernization.
• Rather than approaching all agencies at once,
  target a reduced number of potential partner
  agencies for funding contributions and MOUs based
  upon
• OMBs relationship with that agency
• the likelihood of that agency getting on board
• the impact of that agency on other potential
  partners
• the degree to which that agency would realize
  immediate benefits from the investment
• the status and lifecycle stage of that agencys
  investment
• By getting a few agencies to cooperate, others
  will follow, as they dont want to be left behind
  or be perceived as uncooperative.

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FM LOB Strategy Opportunities Longer Term,
continued

• Solicit top down support as needed i.e., the
  help of political appointees, senior careerists,
  and/or OMB budget examiners.
• Example Educate your OMB Budget Examiner on
  what youre trying to do and get them on your
  side. They have the power to move money around
  via vehicles like Clinger-Cohen.
• Conduct one on one meetings in advance with the
  CIO and PM of each targeted partner to articulate
  the value proposition. 
• Take a funding calculator to demonstrate the
  financial contribution needed from each agency
  and a standard MOU to sign.
• When funding is attained, facilitate a group
  meeting with partner agencies to achieve group
  buy-in and outline next steps.
• Ensure all personnel, top-to-bottom, receive
  information regarding the system and its
  benefits.
• The senior steering committee composed of
  representatives from all agencies should provide
  guidance and conflict resolution.
• Build alignment among an inner circle that should
  withstand mounting pressures throughout the
  change process.
• A strong coalition will have to fend off
  criticism by diverseand powerful outside
  factions.

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FM LOB People Opportunities

• Quick Hits
• Establish an FM advisory council with all
  involved parties.
• Identify and address early the potential
  barriers.
• Identify, establish, and maintain champions for
  change.
• Leverage and utilize interrelationships between
  FM LOB and other e-Gov initiatives.
• Perform a resource assessment prior to
  consolidation.
• Establish a workforce realignment process that
  maximizes opportunities for retraining, placement
  of employees in suitable positions, and provides
  outplacement services as needed.

• Longer Term
• Establish and maintain senior executive
  sponsorship and cross agency steering committee,
  working teams, interagency action teams to
  address FM LOB issues, and partner teams to
  address consolidation issues--leveraging expert
  knowledge.
• Address coordination and interrelationship
  efforts in a forum composed of senior executive
  leadership and individual e-Gov project leaders.
• Clearly communicate and demonstrate the benefits
  of FM service consolidation to agencies on a
  regular basis through an established
  communications plan.
• Work with OMB staff.
• Provide targeted briefings prior to arriving at
  key milestones.
• Develop appropriate strategies for authorizing
  and appropriation committees.
• Ensure displacement of workforce resulting from
  provider consolidation is not harmful to
  individual employees or disruptive to agency
  operations.

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FM LOB Process Opportunities

• Quick Hits
• Track changes in federal or legislative mandates
  in business requirements or processes.
• Establish a formal issue tracking and resolution
  process and perform timely logging and
  prioritization of issues.
• Longer Term
• Establish liaison with congressional staffs for
  FM policy issues.
• Develop a process that allows for stakeholder
  participation and involvement.
• Issue standard procedures for implementing new FM
  requirements.
• Establish change control process and incorporate
  technical and functional analysis in the project
  plan.

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FM LOB Technology Opportunities Quick Hits

• Perform in depth budget allocation and technology
  transfer analysis.
• Fully understand existing technologies used by
  service and provider agencies.
• Thoroughly plan integration work and integrate
  incrementally with agencies.
• Promptly communicate decisions to the concerned
  parties.
• Recognize that OMB and Agency involvement are
  essential in this analysis.
• Take advantage of economies of scale and purchase
  licenses as a whole rather than by individual
  division, thereby leveraging the Smart Buy
  program.
• Set agencies expectations with regard to
  capabilities and limitations of available
  technology.
• Focus standardization priorities on obstacles to
  consolidation to reduce the extent of
  agency-specific requirements.
• Engage affected stakeholders in negotiating
  changes in requirements to facilitate
  consolidation.
• Employ strong program management.
• Maintain both accurate documentation through
  configuration management and full tracking of
  requirements through implementation.
• Establish core data requirements that all systems
  should use.
• Although Government applications may change, the
  data transmitted and received from external
  interfaces should remain similar in format or
  should be modified to accommodate a standard
  interface.

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FM LOB Technology Opportunities Longer Term

• Utilize the worldwide web as primary access
  media.
• A single web-enabled system allows FM systems
  interfaces to be developed and maintained easily.
  
• A web-based system provides users with 24/7
  availability to all FM options.
• A web site could contain links for easy access to
  FM tools.
• A web-based system could automate many
  inconsistent procedures developed through manual
  processes at individual processing stations.
• Authorizations could be produced electronically.
  
• Significantly reduce the time to obtain approvals
  from geographically separated officials through
  electronic routing of appropriate documentation.
• This yields increased efficiency, improved access
  to and accuracy of information, and enhanced
  availability and quality of information.
• Use one source for all FM management reporting.
• Data should be gathered in minutes rather than
  days.
• Perform FM functional and technical analysis.
• Leverage experience of providers who have
  performed this type of conversion.
• Leverage agency investments in existing FM
  systems.
• Develop a system for continually monitoring
  information technology performance metrics.

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FM LOB Technology Opportunities Longer Term,
continued

• Consolidate FM systems and policies to eliminate
  multiple interpretations of regulations.
• Fully integrate FM systems using electronic
  routing of documents that requires approvals
  accompanied by email notification of required
  actions.
• When possible, use an operational prototype
  methodology.
• Prototypes should be based on the selected COTS,
  which are inherently designed for production.
• Review and test providers continuity of
  operations and disaster recovery plans.
• Conduct comprehensive test plans before fully
  converting to the new system.
• Exhaustively test design issues and user
  acceptance.
• Perform capacity planning and stress tests of the
  selected providers systems.
• Run existing systems in parallel to newly adopted
  systems until the new system is verified.
• Mitigate the failure of any single security
  mechanism and increase the ability to prevent,
  detect, respond to, and recover from any security
  incident with an in-depth security strategy.

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Points of Contact