SCIENCE APPLICATIONS INTERNATIONAL CORPORATION SAIC SAN DIEGO, CALIFORNIA

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1 SANLAM SCIENCE APPLICATIONS INTERNATIONAL CORPORATION SAIC SAN DIEGO, CALIFORNIA NORTH AMERICAN EXCELLENCE AWARD: IMAGING, MERIT EXECUTIVE SUMMARY SAIC is the largest American technology corporation to be established and managed solely as an employee-owned enterprise. With corporate headquarters in San Diego, California, SAIC operates from over 150 offices worldwide. Founded in 1969, SAIC has realized a compounded annual revenue growth rate of 23 percent over the last 28 years. In 1997 SAIC and its subsidiaries grew to more than 30,000 employees and generated an estimated $4 billion in revenue. SAIC provides technology solutions in the areas of information technology, systems integration, telecommunications, national and international security, health systems and services, transportation, energy, and environmental systems and engineering. As a leading systems integrator, SAIC has designed, developed, and implemented successful information systems solutions ranging from small stand-alone applications to $1 billion fixed price integrated management systems. In 1993, SAIC s Information Systems Steering Committee (ISSC) sponsored a business process reengineering (BPR) initiative that recommended the implementation of an integrated Management Information System (MIS) to replace their legacy ITS applications. The legacy applications suffered from high maintenance costs, limited functionality, stand-alone platforms, and low levels of user satisfaction. The ISSC formulated the following recommendations for reengineering both their business processes and information technology (IT) architecture: Streamline business processes through eliminating non-value added steps, increasing the use of automation, simplifying roles and responsibilities, and capturing business information once at the time of creation with real-time accessibility. Replace their legacy ITS applications with SAP R/3, a highly integrated commercially available off the shelf (COTS) MIS capability. Utilize a phased implementation approach to Business Process and MIS reengineering to more effectively manage change, reduce risk, control cost, and leverage lessons learned from each phase. Implement imaging systems with interfaces to SAP R/3 to improve document access and retrieval, reduce cost of document storage and manual searches, and increase customer satisfaction with SAIC document management services. 237

2 EXCELLENCE IN PRACTICE Centralize the Accounts Payable function in their Corporate headquarters in San Diego, CA. SAIC Project Eagle was chartered with implementing these ISSC recommendations. In February 1995, SAIC completed Phase I that introduced the SAP R/3 system within the commercial sector of the company. This provided a small pilot experience that was easy to manage due to the limited number of management decision-makers as well as a limited set of system users requiring training and ongoing support. Project Eagle Phase II, which began in March 1995, focused on reengineering the company-wide procurement and accounts payable processes and associated MIS applications. In February 1996 Phase II delivered an enterprise-wide implementation of the re-engineered procurement and accounts payable business processes utilizing SAP R/3 for MIS transaction functions and Eastman Software Imaging Software for Accounts Payable (A/P) document management functions. The Eastman Software imaging solution was selected after a competitive bidding process which determined that Eastman Software s imaging functionality best met their requirements and that a Eastman Software-SAP R/3 interface could be technically accomplished. The Eastman Software Imaging System enables the SAIC Accounts Payable process to electronically capture all relevant documentation and create links to their respective SAP R/ 3 A/P transactions and databases. A/P personnel have the ability to immediately retrieve online any A/P documentation serving as the backup to a given A/P transaction. The benefits of imaging have proven to be significant in terms of cost reduction, shortened process cycle time, and increased customer satisfaction. The Eastman Software Imaging System has generated cost reductions by eliminating expenses associated with the manual filing and retrieval of documents and actual document storage facilities. Business process cycle time has been reduced by providing timely access to A/P documentation, enabling SAIC to more quickly verify invoices and disburse payments in compliance with more advantageous terms and conditions in their purchase orders. Customer satisfaction has risen commensurate with demonstrated use of the A/P imaging system as a single data source for complete and accurate document management access and retrieval. The Accounts Payable department processes an average of 2,500 documents a day. These documents average four pages in length, for a total scanning volume of 10,000 pages per day. Over 1.5 million pages were scanned into the system in the first year of production. Based on the original cost benefit analysis, the payback period for the investment in the Eastman Software Imaging System is one year, and the recurring annual savings total $2.5 million over a period of five years. 238

3 SCIENCE APPLICATIONS INTERNATIONAL CORPORATION THE SYSTEM APPLICATION. The goal of the Accounts Payable process is to disburse correct and timely payments for those goods and services which have been received and determined to be acceptable. The receipt of an invoice, employee expense report, or other document stating the rationale for payment request triggers the A/P process. The invoices are typically mailed to SAIC in hard copy form. These manual invoices are reconciled against SAP R/3 electronic records of the purchase order (or subcontract) and goods receipt to verify and approve the invoice for payment. Employee expense reports are received in hard copy form with attached manual receipts and other documentation related to a purchase, travel, or entertainment expense. These hardcopy expense reports are manually verified by reviewing attached receipts, reconciling against per diem requirements, and ensuring accounting policies are being followed. Once invoices and expense reports are reconciled in SAP by the Accounts staff, the 10- digit SAP document number is written in the upper right hand corner of the relevant backup documents, and these documents are forwarded to the scanning department. This department is responsible for document preparation, scanning, indexing and quality assurance of all Accounts Payable documents. Once sent to the scanning department, each document goes through the following 4-step process: 1. Document Preparation. This step consists of removing all staples and paper clips, taping down any small receipts or invoices, and verifying that source documents are legible. A 239

4 EXCELLENCE IN PRACTICE bar-code separator sheet is placed before each document indicating the number of pages in the documents. Documents are then grouped in batches of 10 documents. The barcode and batch techniques ensure that maximum scanner throughput will be achieved, and that no pages are inadvertently lost during the scanning process. 2. Scanning. During this step, batches are digitally captured using a high-speed document scanner. Each page is verified for readability, and page and document totals are verified against the bar-code values that the system has recognized. All inconsistencies in what should have been scanned and what actually was scanned are resolved before accepting the batch. When the Scanning step is completed, the batch of documents is placed in the queue for indexing. 3. Indexing. This step involves reviewing each document on screen, categorizing the document by type (expense report or vendor invoice) and keying the 10-digit SAP document number into the indexing application. An OLE lookup is performed that links the SAP database with the imaging database and displays pertinent pre-defined index field information about the document for verification (vendor name, date, amount, etc.). After each document in a batch is indexed, the batch is released from indexing and put in the queue for Archival. 4. Archival. This step is completely automated and is executed on a nightly basis. The archival capability moves the image files from temporary magnetic storage to permanent optical storage, and updates the database records in the document manager to make the documents available for retrieval. Due to Federal Government FAR regulations, all hard copy documentation still must be retained for a period of one year. After a document batch has gone through the Archival process, the hard copy documents are placed in banker boxes which are dated and sent offsite to a records retention facility. After a period of 1 year, the documents are destroyed. Prior to the imaging system SAIC maintained off site storage of all documents indefinitely. The ability to maintain the electronic archive, and destroy the paper based archive annually, has realized SAIC an annual cost avoidance of $250,000. As noted in the supporting Cost Benefit Analysis, SAIC projected approximately $1.6 million in storage costs would be deferred in the first five years of the project alone. Additionally, a back up electronic archive is maintained off site for any potential Disaster Recovery requirements. SAIC experienced a fire in the document archive room in 1979 and understands the pain and ramifications of destroyed documentation. This is particularly important given that a large portion of SAIC s customer base is in the federal government which has strict regulatory retention requirements for maintaining contract related documentation for a minimum of seven years after contract close out. 240

5 SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Document Retrieval is achieved through one of three methods: 1. SAP GUI Menu Selection. When viewing the detail pertaining to a particular transaction using the SAP GUI application, a menu option may be accessed from SAP GUI that will directly connect to the Eastman Software Open/Image Link for R/3 product, and retrieve the backup documentation for viewing or printing. This is achieved through the SAP Archive Link component, and is certified by SAP. The graphic below is an example of document retrieval via SAP GUI. 2. Non-SAP based Network Access. A user-friendly Accounts Payable Document Retrieval Application is primarily available for all users on the SAIC WAN that do not have SAP access or who need access to groups of specific documents. This application allows users to specify a variety of criteria about a transaction (i.e. vendor name, employee name, invoice number, charge number, etc.) and obtain a list of documents that meet declared criteria. Individual documents from this list may then be viewed, printed or faxed. The graphic below is an example of the Document Retrieval Application. 241

6 EXCELLENCE IN PRACTICE 3. Automated Fax-Back Server. SAIC developed this capability for users who do not have SAIC WAN access. The Fax-Back Server enables people to request documents using a touch-tone telephone. The Fax-Back Server guides the caller through a series of questions aimed at locating a document, and then prompts the user for their fax number. The document is then retrieved from optical disk and faxed to the specified user fax number. There are 10 full time members of the A/P scanning department and approximately 250 additional users of the system. The primary users of the system are the Accounts Payable and Accounts Receivable departments. The Accounts Payable staff is in a centralized location in San Diego and the Accounts Receivable function is geographically distributed across 400 SAIC locations. SAIC is frequently required to provide backup documentation with billing statements. Due to this requirement, the Accounts Receivable staff must be able to easily retrieve a large number of Accounts Payable documents. Additionally, employee expenses are reimbursed via their paychecks. If an employee has questions regarding his/her expense reimbursement, they can use the Document Retrieval Application or the Fax-Back Server to obtain a copy of their audited expense report 24 hours a day, seven days a week. In February 1997, the system was expanded to include several hundred additional users (approximately 400 planned) in an effort to minimize the number of calls the Accounts Payable department receives concerning billing issues or expense report disputes. 242

7 SCIENCE APPLICATIONS INTERNATIONAL CORPORATION THE KEY MOTIVATIONS BEHIND THE SYSTEM Prior to 1996, the A/P function was de-centralized in over 100 SAIC locations worldwide. In an effort to better manage the Accounts Payable function, the BPR committee decided that it would be best to centralize this function at SAIC Corporate Headquarters in San Diego. The BPR assessment determined that the existing A/P function was riddled with excessive manual paper routing and storage, expensive and slow data retrieval, and frequently misfiled and lost documents. This finding, coupled with the extensive volumes of paper estimated to be received by this new centralized department, prompted the BPR committee to recommend imaging technology. SAIC has historically been subjected to intensive internal and government audits, which require the company to produce, backup documentation for invoicing practices and expense reimbursements. Prior to 1996, original copies of all A/P records were stored permanently in a records repository warehouse in San Diego. As with all paper-based systems, it was difficult, time consuming, and occasionally impossible to provide auditors with a complete set of required documentation. Prior to the centralization of the A/P function at SAIC Corporate Headquarters, SAIC s Oak Ridge, TN Accounts Payable office had been operating a pilot imaging system for approximately three years. This regional A/P department serviced approximately 1500 employees nationwide. During the three years the pilot imaging system was in place, the SAIC Oak Ridge facility had significantly lower operating costs and higher customer satisfaction than comparable A/P departments at other SAIC locations. This was attributed in large part to the implementation of imaging technology. The proven feasibility and success of this convinced SAIC Corporate management to implement an imaging capability at the newly formed centralized A/P department at Corporate Headquarters. However, the pilot imaging system was a Liberty Information Management System that was determined to be scaleable to only approximately 100 users. SAIC then went to competitive bid and selected Eastman Software for its scalability and ability to support multiple platforms and operating systems. THE CURRENT SYSTEM CONFIGURATION. The primary Imaging Server is a Hewlett Packard 9000 model E45 server with 128MB RAM and 6GB of mirrored magnetic disk space. This server is running the HP-UX Operating System, the Eastman Software OPEN/Image software, the Eastman Software OPEN/Image Link for R/3, and the Oracle 7 Relational Database Management System. Attached to this server is a Hewlett Packard 200T Optical Jukebox capable of storing 187 Gigabytes of information. The jukebox has four drives, a SCSI-2 Interface, and holds Write Once Read Many optical disks. The Fax-Back System includes two physical servers. The Voice Server, which is a Compaq 243

8 EXCELLENCE IN PRACTICE ProLinea Windows NT Server, has a Dialogic 41E IVR Processor, and runs an SAIC developed IVR application built with Microsoft Visual Basic and Stylus Visual Voice software. The Fax Server, which is a Compaq ProLinea Windows Server, has a GammaFax CP4 Fax Processor, and runs an SAIC developed fax application built with Microsoft Visual Basic and Stylus Visual Fax Software. The graphic below depicts the current system configuration. The Local Area Network (LAN) in the Accounts Payable facility is Microsoft Windows NT Ethernet network running on a fiber optic backbone. This LAN is connected to SAICNet, SAIC s Corporate Wide Area Network (WAN), via a dedicated T1 line. SAICNet currently has over 400 nodes in locations all over the world, connected with varying bandwidths ranging from 64KB to T3. A high-level network architecture diagram can be found in the Executive Summary. The Scanning Workstations are Compaq ProLinea running Microsoft Windows for Workgroups and the Eastman Software Batch Scan software. The two scanning workstations have Cornerstone 20/70 color monitors and ImageAccel adapters. The scanners are Bell and Howell 3338 ACE connected to the workstations with Xionics Turbo Scanner Interface adapters. The Indexing Workstations are Compaq ProLinea running Microsoft Windows 95, an SAIC-developed Batch Indexing application, Eastman Software OPEN/Image Runtime and SAP R/3. All indexing workstations have Cornerstone 20/70 color monitors and ImageAccel adapters. The Retrieval Workstations vary by location, but are typically Pentium computers running 244

9 SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Microsoft Windows for Workgroups, Windows 95, or Windows NT. All Accounts Payable staff has 17 color monitors, while other users have monitors that range from 14 to 21. These stations have the SAIC-developed Document Retrieval application with Eastman Software OPEN/Image Runtime and/or Eastman Software OPEN/Image Link for R/3 client software. The Printers in the Accounts Payable facility are HP LaserJet 4SI with Xionics XIP Print cards installed to facilitate rapid image printing. Printers in remote locations vary, but are typically at least HP LaserJet 3 or equivalents. THE IMPACT TO THE COMPANY: COST SAVINGS Based on the results of the first year of production, SAIC estimates that the five-year savings due to the Imaging System will exceed $2.5 million. This estimate is based on labor and facility cost savings within the Accounts Payable department, as well as Accounts Receivable departments that access these documents. PRODUCTIVITY IMPROVEMENTS All A/P department staff has instantaneous on-line access to required documents from their desktops. This is a productivity enhancement to this department, particularly with the cycle type related to responding to vendors who call with questions regarding payments. 30,000 employees in 150 offices have direct access to audited expense reports via the Fax-Back Server or the Document Retrieval Application, 7-day/24 hour accessibility. This reduces, by a factor of ten, the time spent by the A/P department resolving issues regarding expense reimbursements. Internal auditors have direct system access to A/P documentation from their desktops, which enables higher efficiencies, and a reduction in A/P department time responding to auditor request to locate backup documentation. What used to take hours in document location, now is accomplished in a matter of seconds. Multiple contentions for a single document have been eliminated. The imaging system enables multiple users to view the same document simultaneously, precluding time wasted waiting for someone to finish with a document, or with the expense of photocopying the document. SAIC no longer suffers from lost or misfiled documents when undergoing audits or providing backup documentation to government customers. 245

10 AFFECT ON BUSINESS WORKFLOW EXCELLENCE IN PRACTICE The number of Full Time Employees (FTEs) required to support the current process has been reduced. Centralization would not have been possible without the use of imaging technology. The shift from a decentralized, local to office to a centralized A/P environment required considerable planning and the integration of technologies not offered by imaging vendors for the Fax Back solution. Numerous briefings and demonstrations of the technology and new approach with Project Eagle were conducted at headquarters and in field locations. This was done in order to minimize the vocal concern of access and control of the accounts payable process that has major impact within each operational unit. The project staff was very sensitive to the fact that change within any large organization is difficult and that they were fundamentally changing both the process and the technology. There it was important to communicate the benefits of the changed process to field personnel where the largest changes would be required. Other forms of impact: The disaster recovery plan now includes a more reliable process than what was available with the legacy paper based system. The implemented Imaging System has duplicate optical disks and magnetic tape backups of all database information stored at an off-site location, providing for total data recovery from a natural disaster. SAIC estimated $250,000 in costs in 1995 for Corporate long term records retention of A/P documentation. The financial cost trend for this retention has seen a 10 percent increase per year, as the number of documents continued to grow commensurate with the business revenue growth. The implementation of the Eastman Software Imaging system and the need to store hard copies for only 1 year has led to significant cost reduction for records retention, an estimated $1.6 million in the first five years. THE IMPLEMENTATION PROCESS AND METHODOLOGY SAIC utilizes the Common Approach, a tailored software development methodology that provides defined, repeatable steps for building enterprise-wide software solutions. SAIC s approach to system/software development and maintenance ensures that quality and efficiency are elements of all life cycle phases leading to the end-product. The Common Approach provides the basis for SAIC s Software Engineering Institute (SEI) Level 3 software development practices, as well as the methodology for systems integration projects such as workflow and document imaging systems. The basic elements of the Common Approach that were utilized on this project included: 246

11 SCIENCE APPLICATIONS INTERNATIONAL CORPORATION 1. Requirements Analysis: Extensive meetings with the BPR committee members, corporate managers, and end users of the new system to define functional requirements. 2. System Design: Definition of the system hardware and software architecture which most cost effectively satisfy the functional requirements. 3. System Implementation: Assembly of all system components, the development of all custom software modules, the staging and testing of the system in SAIC s Oak Ridge Imaging Integration Laboratory, and documentation of the as-built system configuration. 4. Installation and Acceptance Testing: On site installation and testing of all aspects of the system, including functional and performance design specifications. 5. On Going System Maintenance and Support: Support for system problem resolution, as well as development of any new functional requirements identified by the user community over time. The Project Team consisted of a Technical Project Manager and 3 Systems Engineers. During the Installation and Acceptance Testing phases, the Project Team worked very closely with the A/P staff to ensure an accurate understanding of requirements and a successful implementation of the Imaging System solution. 247

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