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A Plan for the Implementation of Enterprise Resource Planning (ERP) for the State of Texas

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Exhibit B – Independent Business Case Study Executive Summary
© Salvaggio, Teal & Associates

Section 1. Executive Summary

Background and Purpose of Study

In May of 2007, the 80th Texas Legislature passed House Bill 3106 (HB 3106), which addressed the concept of Enterprise Resource Planning (ERP) for the State of Texas (State). From a practical standpoint, the term ERP for the State refers to an integrated software package that provides functionality similar to that offered in the existing statewide administrative systems (e.g., USAS, SPA, USPS, SPRS), as well as critical functionality currently provided by agency administrative systems.

The Legislation defined the organizational scope to include all State agencies and institutions of higher education, and the functional scope to include the following application areas:

  • General Ledger;
  • Accounts Payable;
  • Accounts Receivable;
  • Budgeting;
  • Inventory;
  • Asset Management;
  • Billing;
  • Payroll;
  • Projects;
  • Grants; and
  • Human Resources, including administration of performance measures, time spent on tasks and other personnel and labor issues.

Though not included in the Legislation, the following functional areas were added to the Plan scope:

  • Procurement. While not specified in HB 3106, the functionality is an integral component of an ERP system and procurement falls within the Comptroller’s authority. Procurement is the functional area that typically obtains the greatest process efficiencies and potential cost savings in the transition to an integrated ERP system.
  • Fleet Management. While not specified in HB 3106, the functionality is required in order to address Rider 16 which requires that the Texas Comptroller of Public Accounts (Comptroller or Comptroller’s Office) implement and maintain a State fleet data management system for agencies to report fleet operating expenses and uses, as required by Chapter 2171.101, Government Code. The system must be accessible through a web-based interface, provide forms for efficient entry of data required by the State Vehicle Fleet Management Plan, allow agencies to batch load relevant data from internal legacy systems, provide fiscal and managerial reports for both direct asset management and oversight needs, and be flexible enough to accommodate future agency or legislative needs.
  • Data Warehousing. While not specified in HB 3106, it is assumed that a statewide data warehouse is required in order to provide functionality necessary to meet the State’s present and future analysis and reporting requirements, and to address the Comptroller’s new standards for transparency and accountability in State spending.

In November 2007, the Comptroller’s Office developed a survey that was sent to all State agencies and institutions of higher education to capture high-level information regarding their administrative systems and expenditures related to the application scope listed in HB 3106. The purpose of the survey was to determine which systems were in place in the various State agencies and institutions of higher education, and what funding was being spent to deploy, operate and maintain these systems. Additionally, the Comptroller’s Office wanted to identify the amount of expenditures that were planned over a five-year time horizon to replace, upgrade or maintain these systems.

The survey identified the total estimated cost for annual operation and maintenance of the systems across State government at over $88 million, including:

  • Annual software maintenance at $17 million;
  • Annual hardware maintenance at $9 million; and
  • Staffing and labor performing system or application maintenance totaling $62 million and representing approximately 950 FTEs.

Anticipated system upgrades, enhancements and replacements totaled over $144 million over the six-year period, according to the survey results. This amount included the following elements:

  • Planned system or application upgrades totaling $27 million; and
  • Planned system replacement or implementation costs totaling $117 million.

Based upon a six-year time horizon, the November 2007 survey yielded total system and application costs for the applications included within the scope of HB 3106 to be $672 million or roughly $112 million on an annualized basis.

In late June 2008, the Texas Comptroller of Public Accounts (Comptroller or Comptroller’s Office) initiated a study to develop a comprehensive business case analysis (BCA) and related strategic planning associated with ERP. The purpose of the Study was to perform a series of tasks that will provide the ERP Advisory Council and the State Comptroller with the data and other information necessary for determining whether implementing a statewide ERP system is economically feasible for the State of Texas through the analysis of the following three (3) alternative scenarios:

  • Business Case Alternative 1: Status Quo (BCA 1) – The State continues on its current path whereby each agency and institution of higher education continues operating their existing administrative systems as currently planned.
  • Business Case Alternative 2: Statewide ERP Platform Deployment (BCA 2) – Replace the existing statewide legacy administrative systems (USAS, USPS, SPA, SPRS, HRIS, TINS) with a new, fully integrated, commercially-available ERP system that would provide all functionality identified in HB 3106. One (1) statewide ERP system for all agencies and all institutions of higher education (HE) would be established and operated by the Comptroller.
  • Business Case Alternative 3: Hub Model (BCA 3) – Replace the existing statewide legacy administrative systems (USAS, USPS, SPA, SPRS, HRIS, TINS) with a new, fully integrated, commercially-available ERP system that the Comptroller’s Office would operate as an Application Service Provider (ASP) for all State agencies with the exception of the Health and Human Services (HHS) agencies. The HHS agencies and institutions of higher education would operate under a decentralized processing model as data reporting “Hubs” and would be interfaced into the Statewide Data Warehouse platform and their transactional data would be interfaced into the new ERP system.

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