NASCIO. Improving State

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1 NASCIO 2011 Nomination Submission Improving State Operations Initiative The State of Tennessee Project Edison, State of Tennessee s ERP solution Project Manager: Stephanie Dedmon 1

2 Executive Summary The State of Tennessee was faced with the challenge of maintaining multiple, standalone, highly customized legacy mainframe systems to support its core administrative business process for HR, payroll, financials and procurement. After a comprehensive study of industry software functionality and capabilities and a cost/benefit analysis was completed, the State conducted a competitive procurement for an Enterprise Resource Planning (ERP) solution. Oracle s PeopleSoft enterprise suite was selected. A State project team was formed and the integration vendor began the project in July of The State of Tennessee s implementation of PeopleSoft and several third party solutions represents one of the most fully leveraged uses of ERP functionality in State government to date. The system, named Edison, includes significant human resource, financials and procurement functionality and delivered full integration of the modules. The ERP solution has enabled the State to implement and enforce more industry best practices in core administrative areas. While the challenge of moving from a highly customized legacy system environment to a commercial-off-the shelf solution has been challenging, the implementation provides the State with a framework to better enforce consistency, standardization and realize future benefits. One of the key benefits delivered is the ability to expand automation and bring savings to external parties such as bidders wanting to do business with the State, vendors already doing business with the State, external (non-state employee) learners such as foster care providers, and the State s non-employee covered benefit entities (152,000 local governments, higher education and local education employees). This significant population will use our Employee Self Service (ESS) module to enter annual benefits enrollments online going forward. The Edison solution has better positioned the State to support statewide, enterprise initiatives such as transparency, disaster recovery, improved efficiencies and cost savings. The integration has delivered improved data accuracy and access to more detailed information. The State is now positioned to better leverage business intelligence analytics to manage proactively, rather than reactively. Edison has reduced operational risk by providing a reliable, integrated administrative solution based on industry best practices. The State has modernized its entire technology and infrastructure and implemented improved transparency and visibility into the State s administrative performance. 2

3 Business Problem In 2005, the State of Tennessee was maintaining over 30 fragmented and siloed systems in support of its core administrative business processes. Each system was operating on aging mainframe technology and represented growing risk to operations. The payroll system alone was over 35 years old. It became increasingly difficult to find skilled resources to maintain the technology or to respond to changing business processes, to meet advancing security requirements and to support evolving transparency requirements. The legacy systems supported transactional-based processing and represented a lack of centralization and standardization. It was not an option for the State to continue to maintain these outdated and inflexible systems. The advancing demands of improved productivity, efficiency and transparency had to be delivered. A comprehensive study, including the costs and benefits, was conducted to analyze replacement options, and resulted in the decision to pursue an ERP solution. A competitive procurement process led to the selection of Oracle s PeopleSoft ERP software, including several third party solutions which enabled the replacement of multiple legacy systems. A project team comprised of key business process experts from core administrative areas and experienced industry technical specialists was formed to implement and support the statewide ERP system named Edison. The State implemented the full suite of PeopleSoft HR/Payroll and Financial Management and Procurement modules, including applications for Applicant Processing, Fleet, Facility Management, Cashiering and Bar Coding for Inventory and Asset Management. Implementation of Edison was completed in October The significant breadth of functionality and integration of the solution has enabled improvements across the board in the State s core administrative business processes. Significance to the improvement of the operation of government The significance of the State s implementation of PeopleSoft is evident in the number of legacy systems replaced, the breadth of functionality successfully implemented and the benefits of the delivered integration of the modules. The Edison system is being used by all branches of State government over 46,000 employees, as well as several external entities such as vendors and bidders. This broad implementation of PeopleSoft modules supports the State s core administrative process and delivers wrap-around functions such as imaging, workflow and significant integration. The Procurement modules and full integration to financials automates the State s requisitioning, order, contracting, approval, invoicing and payment processes, improving cycle times and saving costs. Buyers can now create online sourcing events that electronically source orders to vendors and vendor bids are submitted online. The electronic catalog enables more efficient and faster ordering. Functionality enables the reconciliation of purchase orders, receipts and invoices. Reporting functions enable improved visibility into enterprise spend analysis. In Core Accounting, the State can now use a more modern, modified accrual basis of accounting. This provides a more accurate view of the State s financial position by incorporating receivables and payables in ongoing financial operations. With Accounts Payable and the imaging solution, the State has eliminated paper voucher packets 3

4 reducing paper, time and effort associated with assembly and storage. The solution provides online access to scanned copy of invoices. Workflow approvals have streamlined payment approvals. The solution enables the State to send remittance information to vendors electronically with payments, improving vendor s access to information. Over time, the State will continue to reduce payment cycle times and potentially increase early payment discounts which will lead to improved bargaining position with vendors to lower prices. The Travel and Expense module has improved the expense time to payment from 21 days to less than six. This approach enforces time and expense policies resulting in improved productivity and fewer errors. The Accounts Receivable (AR)/Billing/Collections modules enable us to accrue revenue (as opposed to only being able to record revenue on receipt of cash). The Billing system is integrated with Grants and Project modules automating the Federal grant reimbursement process. Through the implementation of cashiering and its integration to PeopleSoft, the State now has a consistent and transparent cash receipt process. Using the NeoGov solution for Applicant Services to better automate the recruitment of applicants, the State has significantly streamlined the recruiting process for attracting and selecting new employees. The solution is fully integrated to PeopleSoft and provides position-based recruiting functionality and enhanced targeting of applicants. This has resulted in a significant reduction in postage costs with hiring managers now communicating electronically with applicants. The State was able to discontinue its previous application process resulting in an annual savings and a payback of less than one year. Additionally, the solution delivers improved quality of applicants due to increased reach into the national job market. With Benefits, the self-service enrollment and visibility to enrollment records resulted in reduced support to process annual and new hire enrollments. Changing employee deductions has been streamlined from six weeks to one week since employees enter changes online in ESS. The functionality has provided greater flexibility in implementing periodic insurance provider plan changes and delivered improved reporting. With Time and Labor functionality and user-intuitive data entry screens, employees enter time and leave online resulting in reduced paper, fewer keying errors and the redeployment of timekeepers that no longer enter time. Within ESS, there is improved agency, manager and employee visibility into time and leave data and ability to make corrections on the front end, resulting in improved data. The integration from the Time and Labor module to Financials enables the State to report actual labor hours and costs to Federal funding organizations online, significantly saving time and reducing errors. The State was at risk of failure to pay employees due to the antiquated legacy payroll system. With delivered Payroll functionality, the State can now better comply with court ordered deductions reducing administrative overhead to manually calculate and administer deductions. The State has moved to electronic pay advices, saving an estimated $500,000 per year in paper and mailing costs. We are now able to review payroll results and make corrections much earlier in the process. ESS provides 4

5 improved employee visibility into paycheck details. Payroll data and reports are available to agency payroll staff in real time providing more accurate and timely payroll results. We have achieved a dramatic improvement in the timeliness of regulatory tax reporting and the delivery of W2 forms to employees. The Enterprise Learning Management (ELM) module provides enrollment and visibility to training records reducing administrative support. ELM improves course administration and provides the ability to move employee training records between agencies when employees transfer. ELM has enabled several of our agencies to extend their learning requirements to external learners, such as foster care providers, in some cases to meet Federally mandated requirements in a no-cost delivery model. The PeopleSoft Portal enables single sign-on capability saving time and reducing employee frustration of managing multiple user IDs/passwords to siloed systems. The Portal enables a single access point to deliver communications, procedures, notification and alerts. The solution s reporting functionality provides a framework to leverage improved analytical tools for improved management decisions. The portal provides access to hundreds of standard reports on demand thru secure and standardized interface. Delivered security capabilities provides encrypted data communications exchange to employee s desktop and provides encrypted exchange of file transmission to vendor partners. Edison brought greater monitoring, audit and control of sensitive and regulated data and there is now an opportunity to provide a high level of security and accountability uniformly across Edison, therefore minimizing risks to the State. The statistics below show the functionality implemented, the scope of business processes supported and the data volume being effectively managed with Edison. Key Annual Statistics Volume # State Employees (ESS Access) 46,000 # Core HR Users 12,000 # Core Financial & Procurement Users 5,000 # Benefits Headcount (Non-State Employees) 152,000 # W2s Processed 52,527 # Annual Paychecks 1,075,336 # Expense Claims 215,000 # Purchase Orders Issued 3,240,000 # Vouchers Paid 1,050,000 # Vendors 138,000 # esuppliers 5,300 Total # HR Page Transactions 26,000,000 Total # Financial Page Transactions 28,000,000 Total Expense Claims Paid $54,000,000 Total Annual Net Pay $1,300,000,000 Total Spend $28,000,000,000 5

6 Benefit of the Project The breadth and depth of the Edison PeopleSoft solution have enabled the State of Tennessee to realize financial and non-financial benefits for employees, vendors and the State. Benefits to Employees The integration across modules improves the efficiency and provides a more easy-touse solution for employees. The Edison system is delivered via the Internet, providing 24x7 access from anywhere; this has led to increased productivity and has enabled work continuation at any time. This benefit was never more evident than during the flood impacting middle Tennessee during May of The ability for employees to continue to be productive conducting the business of the State from home or other work locations during that time was simply not possible in the legacy environment. The ESS module provides employees greater flexibility in maintaining their own personal information such as name, address and emergency contacts. Employees have the ability to quickly implement changes to their benefits enrollment, update or change dependent information, view current or historical paychecks, enter time and leave requests, view leave balances, maintain up to three bank accounts and change deposit information by amount or percentage of pay, enter travel requests, expense claims and view status of expense claims, view a learning catalog, enter training requests and view training approvals or the employee s training history. The ability to access and manage this information online in a timelier manner has led to increased employee morale. In addition to access to improved information, the system has reduced expense reimbursement timeframes from average of 21 days to six, further increasing employee morale and satisfaction with the Edison system and its capabilities. Benefits to Vendors Edison s esupplier Portal provides online access to bidders and vendors wishing to do business with the State of Tennessee. This vendor self service model provides realtime visibility to status of payment and ability to maintain accurate vendor information. Strategic Sourcing and eprocurement capabilities have enabled electronic access to bid opportunities and provided more efficient mechanism for bidding and contracting with the State, resulting in reduced postage and communication costs and improved productivity for the vendor community. The solution enables the State to provide vendors with more timely information via ACH remittance addenda records. Electronic accounts payable approvals have reduced payment timeframes to vendors. Benefits to the State While there are many benefits in terms of cost reduction and improved productivity, the Edison solution has provided the foundation that enables increased standardization and consistency of business processes well into the future. The benefits demonstrate those realized since go-live and describe future benefits to the State and its citizens. 6

7 Cost Reduction We have realized an annual reduction of recruiting costs of $250,000 due to elimination of the legacy application; payback of investment was achieved in the first year. The integrated solution streamlined the procure to pay process with electronic workflow for approvals reducing payment timeframes, resulting in increased payment discounts and decreased late payment fees. The estimated annual savings is $84,000. A significant reduction in paper has resulted in reduced costs for supplies, storage costs, printing and maintenance with online time and leave entry, online paystub access, online contract documentation, online procure to pay process, electronic bid packets and online employee performance assessments. A significant reduction in postage costs due to broad use of electronic vendor communications and bid packets, electronic purchase orders to vendors, reduced mailings for job postings, online applicant communications and electronic employee pay advices. The total annual estimated savings for postage is over $900,000. Improved collections reporting and improved view of customer receivables has resulted in faster recovery of Federal funds for grants reimbursements and increased revenue, therefore improving cash flow. Improved efficiency and productivity The imaging solution has improved efficiencies in eliminating time to make copies, maintain files, route documentation and has reduced risk associated with paper files in the event of a disaster. Estimated annual savings is over $600,000. Electronic workflow has results in reduced cycle time for approvals and has improved compliance in multiple areas, such as contract compliance, purchase order to receipt to invoice matching and travel and expense claim compliance. The delivered, integrated functionality has reduced administrative support needed in multiple areas. These include reduced staff needed for annual employee benefits enrollment due to ESS enabling employees to handle their own enrollment, reduced IT staff needed due to delivered Federal tax updates, fewer vendor interface files for benefits (from 100 to 20), ease of implementing regulatory changes due to table driven rules, automation with wireless bar coding inventory, elimination of the need to do legal interpretation of tax updates due to delivered software updates for Federal changes, reduced support to process and manage training enrollments and record keeping and a reduction in timekeepers with ESS enabling employees to enter their own time. Significant insurance plan changes in 2010 required that all covered entities (46,000 state employees and 152,000 higher education, local government and local school district covered entities) to re-enroll for benefits. The configuration, testing and implementation of the new benefit plans were accomplished in four months; this effort would have required more than twelve months to implement in the legacy system. While the amount of change to the benefit plans will not be this significant annually, it is estimated that the speed of delivery for these particular changes saved the State $140,000. Further administrative, paper and postage savings will be realized going forward as we enable ESS access to the 152,000 non-state employee population for annual benefits enrollment. 7

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