Jitze Couperus/Flickr CDCR gains real-time insight and million-dollar savings with IBM and SAP When you manage a budget of more than $9.1 billion and tens of thousands of employees across dozens of different institutions, how do you keep track of resources to ensure they are being allocated effectively? These were challenges that the California Department of Corrections and Rehabilitation (CDCR) knew all too well. To cut out inefficient administrative processes and drive new insight into operations, CDCR worked with IBM Global Business Services to integrate and streamline department-wide operations by introducing the Business Information System (BIS). Based on an extensive suite of SAP applications, BIS represents the largest enterprise resource planning (ERP) implementation in California s public sector. The transformation has delivered multi-million dollar savings in operating costs and resource reduction. CDCR can now access accurate, timely information on all its operations, helping to support more proactive and informed decision-making, and enabling the department to deliver more effective service to citizens. Improving information availability for better decision-making One of the largest state departments in the United States, CDCR operates the prison, parole and rehabilitation systems in the state of California. The department employs approximately 47,000 people at 37 different institutions, and is responsible for the safety and security of more than 125,000 inmates and juvenile wards. Overview Challenge CDCR lacked timely, accurate insight into operations and tight control over vast resources, leaving the department unable to ensure that its multi-billion dollar budget was being properly allocated. Solution CDCR partnered with IBM Global Business Services to replace several hundred standalone systems with an integrated SAP ERP solution, streamlining information access and driving new control over assets. Key benefits Provided real-time access to data that used to take up to 60 days to gather, supporting faster, more informed decision-making. Reduced late payment penalties from more than $2.6 million to $681,000. Case study
Business Challenge One of the largest state departments in the United States, CDCR manages a budget of more than $9.1 billion and tens of thousands of staff. Without clear insight into its vast operations or an efficient means of controlling spending, the department struggled to track assets and properly manage its budget subjecting CDCR to regulatory penalties and raising the threat of cost overruns. Joe Panora, Director of Enterprise Information Services at the California Department of Corrections and Rehabilitation and BIS Project Sponsor, elaborates: Each of the institutions we manage is like a small city, with its own restaurants, accommodation, transport fleet and medical centers. Keeping track of assets, accounting and personnel across all 37 of these institutions is a monumental undertaking. We have to make sure that buildings are maintained properly, supplies are allocated on time and that staff are paid and equipped with the tools they need to work effectively. In the past, there was no real integration between different parts of the department, with most offices working from several hundred unconnected databases and spreadsheets. Accessing even basic information involved making calls to dozens of different offices and the quality of the information you got was only as good as the person you spoke to. IBM Global Business Services stood out as the one organization with the breadth of experience we were looking for, both in terms of technical expertise with SAP applications and managing large-scale ERP implementations at other public sector organizations. Paul Smith BIS Program Director California Department of Corrections and Rehabilitation significant delays around accounting and reporting, and meant that by the time decision-makers received data it was already outdated and potentially inaccurate. The lack of standardization and reliance on manual processes created an extreme amount of lag time between gathering information and making it available for analysis about 60 days on average. This created The lack of integration and transparency meant that the validity, timeliness and integrity of the information CDCR executives needed for decision making was at risk. This compromised the department s ability 2
Reduced late payment penalties by 80 percent to make sound fiscal decisions and effectively coordinate many of its essential functions, subjecting CDCR to substantial audits and late invoice payment penalties. Without an efficient means of controlling spending or identifying deficiency drivers, CDCR could not guarantee that its multi-billion-dollar budget was being well spent raising the threat of cost overruns and punitive regulatory action. Choosing a winning combination with IBM and SAP CDCR knew that major changes were needed to improve information availability and accuracy, reduce operating costs and take back control over organization-wide workflows and resources. In 2005, following a rigorous three-year study to analyze existing business processes and determine possible solutions, CDCR made the decision to implement an integrated ERP system that would support more effective fiscal and operational management. The next step was to launch a RFP for the new ERP solution, and to find an integration manager to lead the transformation project. CDCR invited a number of vendors to submit proposals and after a formal contract process that stretched over a year and a half, the department selected SAP ERP as the strategic foundation for the BIS and chose IBM Global Business Services as project integration manager. Paul Smith, BIS Program Director, explains, When it came to choosing an ERP system, we were looking for a one-stop shop solution that covered all the functional areas that we wanted to integrate and automate, from budgeting and accounting to capital management and human resources. SAP ERP was the solution that best delivered on this requirement: it integrated all the functionality we wanted in a centralized platform. Once we had decided on an ERP system, the focus then turned to finding the right partner to manage Solution CDCR worked with IBM Global Business Services to lead the largest enterprise resource planning implementation in California s public sector, replacing thousands of standalone systems with an integrated SAP solution. The SAP applications, including SAP ERP Financials, SAP ERP Human Capital Management and SAP Supply Chain Management are currently accessed by more than 7,800 users across 37 institutions. 3
Key Solution Components Industry Government Applications SAP ERP Financials, including modules for Controlling, Funds Management and Grants Management; SAP ERP Human Capital Management; SAP Project Systems; SAP Supply Chain Management Services IBM Global Business Services the implementation. IBM Global Business Services stood out as the one organization with the breadth of experience we were looking for, both in terms of technical expertise with SAP applications and managing large-scale ERP implementations at other public sector organizations. This project was going to be a monumental change for the department, and we needed the right partner to help manage it properly. IBM Global Business Services proved that they had the expertise and experience to guide a successful implementation. Deep collaboration with IBM Global Business Services CDCR took a phased approach to the implementation, working with IBM Global Business Services consultants to roll out core functionality in waves beginning in July 2008. IBM Global Business Services maintained a very professional approach and a genuine commitment to working alongside us to make this project a success. We built up a true partnership, and the IBM team never gave up, but hung in there and fought with us right through to the end. Andrea Rohmann Deputy Director of Human Resources California Department of Corrections and Rehabilitation The Department consolidated hundreds of standalone systems to a single SAP platform, featuring SAP ERP Financials, SAP ERP Human Capital Management, SAP Project Systems and SAP Supply Chain Management. IBM Global Business Services worked hand-in-hand with CDCR project teams to manage the transition to the new platform, and keep the project on course over the multi-year deployment. Drawing on decades of successful SAP implementation experiences and leveraging its proven SAP methodology, Andrea Rohmann, Deputy Director of Human Resources at the California Department of Corrections and 4
gave up, but hung in there and fought with us right through to the end. Another critical factor in the project s success was the strong level of support provided by CDCR executives. Business Benefits Cut purchasing process lifecycle in half Rehabilitation and former BIS Project Director comments, When you are dealing with such a large transformation effort, there are bound to be ups-anddowns. To IBM s credit, they had very good state and national representatives who got engaged as needed to ensure we were receiving our expected benefits. IBM Global Business Services showed a real flexibility and willingness to re-tool its approach, which is not something that you normally get with large organizations. We went through some really tough times with this project, and throughout it all IBM Global Business Services maintained a very professional approach and a genuine commitment to working alongside us to make this project a success. We built up a true partnership, and the IBM team never Andrea Rohmann notes, We had phenomenal internal executive support, especially in the latter stages with Martin Hoshino, our executive champion, who really understood the importance of forging a strong partnership between IT and the business. He was very effective at breaking down barriers and changing the business perspective that BIS was solely an IT project success depended on getting the entire organization to work together towards this common goal. Introducing standardization and automation As the implementation progressed, CDCR standardized business processes that were previously performed in different ways at each institution. Manual operations were automated and integrated with one another, standardizing and streamlining procurement, inventory and financial reporting practices. As each functional Enabled real-time access to data that previously took as many as 60 days to collect. Accelerated year-end reporting processes, from 28 staff taking two months to complete year-end reports to five staff taking less than two weeks to complete. Reduced late payment penalties from more than $2.6 million to $681,000 a savings of 80 percent through faster reporting. Delivered $1 million savings by retiring a single accounting and reporting system. 5
area entered production, the legacy solutions that had supported it were retired. To bring users up to speed with the new solution, the Department led extensive training sessions, where 100 different staff members were trained each week over the course of 25 weeks. SAP ERP was the solution that best delivered on this requirement: it integrated all the functionality we wanted in a centralized platform. The training took an academy-like approach, with project staff and super users from the business leading a series of two-hour classes, each tailored to a specific end-user role. Paul Smith BIS Program Director California Department of Corrections and Rehabilitation BIS is currently deployed and fully operational in 37 institutions and accessed by more than 7,800 users, who generate thousands of transactions each day. In all, more than 500,000 purchase orders, 46 million financial accounting entries and 325,000 human resources transactions have been processed in BIS since initial go-live activities began in 2008. CDCR continues to extend and improve the new system by adding new functionality. Currently, the Department is working to introduce a time and shift scheduling application, with a target of rolling out this solution to three to four new institutions each month through to May 2014. The scheduling component of this functionality is being provided by a third-party niche product that is seamlessly integrated with the SAP time management module. When fully operational, the time and shift application will provide 24/7 tracking of some 35,000 custody and nursing staff, providing accurate staffing and overtime/leave usage reports. This will enable the Department to better identify expenditure trends, as well as ensuring that safety and security is maintained across all institutions. 6
Cut time required to access data by more than 99.99 percent Multi-million dollar savings The BIS project has already delivered substantial operational cost savings for CDCR. By retiring just one legacy accounting and reporting system, the Department has saved approximately one million dollars in system access and maintenance costs. CDCR anticipates further, ongoing savings through improved efficiencies and better financial controls. With rapid insight into organizational data, and quicker reporting, the Department can process payments and financial statements in a more timely manner, significantly reducing late payment penalties and audits. Paul Smith says, Since implementing SAP ERP, CDCR has dramatically reduced the time taken to process invoice payments, which means that we no longer miss deadlines set by the state controller s office. This has reduced our late payment penalties from more than $2.6 million in 2008 to $681,000 in 2011 an 80 percent drop in three years, and an absolutely phenomenal saving. In fact, many of our businesses can complete their invoicing so quickly that they now benefit from early payment discounts, which is helping us to drive down costs even further. Equally importantly, we can now ensure that our dollars are spent in a much smarter way. Improved insight into operations and resources means that we can make better decisions when it comes to inventory management. Instead of different institutions making separate purchasing decisions, we can centralize this and make larger, consolidated purchases and then distribute the resources as necessary. This reduces freight costs and ensures that inventory is allocated properly, so there are no shortfalls or surpluses. This is just one way in which working with IBM Global Business Services to deploy SAP ERP applications has helped us to make better financial 7
decisions and allocate our budget more effectively, so there is no longer a risk of overspending. Real-time reporting For the first time, CDCR can take advantage of real-time financial reporting with SAP ERP. While in the past, the Department suffered from as much as a 60-day lag between gathering and reporting on information, the new platform allows users to access financial data instantly. Accelerated information availability has vastly improved CDCR s ability to prepare month- and year-end financial reports in a more timely, efficient manner, saving considerable time and resources, and helping CDCR to avoid the risk of punitive action from state control agencies. Joe Panora notes, Previously, it took 28 staff two months to complete and submit the Department s year-end statements to the state controller. For the 2011 financial year, the SAP solutions enabled just five staff to complete and submit these reports in only one month, making it the first time in 10 years that our year-end statements were submitted on time. Reporting processes have been accelerated in procurement, enabling With the stable, reliable information foundation that we have built with help from IBM Global Business Services, we have a huge opportunity to gain insight that we simply did not have before. Joe Panora Director of Enterprise Information Services and BIS Project Sponsor California Department of Corrections and Rehabilitation the Department to reduce the purchasing process lifecycle, from request to purchase right through to invoice payment, from an average of 60 to 30 days. This allows CDCR to store a leaner inventory of goods, while also ensuring that materials shortages are reduced. The Department has also been able to shorten the time taken to create backup reports of procurement activities, such as purchase order creation and tracking, by more than 75 percent. 8
trustworthy, central repository of information that allows staff across all institutions to access a single version of the truth. The new system supports fast, accurate operational insight, allowing the Department to better manage its valuable financial and human resources. Saved $1 million by retiring a single system The benefits of the new SAP ERP applications stretch far beyond finance and procurement, with nearly every area of the organization seeing considerable improvements to reporting processes. For example, CDCR is required to report certain small business and disabled veteran business purchases on an annual basis. Prior to implementation of SAP ERP, it took approximately 45 days to compile the information; in 2012, it took one person four hours to create the same report. In another instance, the Department has cut the time taken to process travel expense claims by 25 percent. One source of truth, better decision-making With BIS, CDCR has gained a Paul Smith remarks, By partnering with IBM Global Business Services on this SAP ERP implementation, we have gone from working with considerably outdated data to real-time information. Executives gain greater transparency across the department, and with accurate, up-to-date information at their fingertips, they can make timely, informed decisions about how to best run our billion-dollar operations. With a solid, standardized platform for managing assets and financial resources in place, CDCR is taking steps to unlock the power of its new wealth of enterprise information. The Department expects to drive further efficiencies and smarter ways of working by analyzing the data from its SAP applications in new ways. Joe Panora explains, With the stable, reliable information foundation that we have built with help from IBM Global Business Services, we have a huge 9
opportunity to gain insight that we simply did not have before. We will be able to tap into our SAP data and use it to ask questions around the cost of maintaining an inmate, the outcomes of a particular program or the effectiveness of our operations. This will give us a completely new way of looking at things, and one that will ultimately help us to provide a better service to the State of California. Driving deep organizational change With a state-of-the-art SAP ERP platform now in place, CDCR can access consistent, real-time information that it needs to effectively coordinate its diverse resources and properly manage its multi-billion dollar budget to ensure that assets are allocated to the right places. By partnering with IBM Global Business Services to lead this immense transformation effort, CDCR has succeeded in bringing about profound changes to processes and people across the organization. Joe Panora comments, Altogether, we manage more than 47,000 employees and 500,000 assets across 50 different organizations. One of the biggest successes of this project has been taking that diverse set of resources and ways of working and bringing them all together in one enterprise system. Working with IBM Global Business Services, we have done much more than just implement an ERP system; we have driven a real process and culture change that has helped us become a much leaner, more efficient organization. Martin Hoshino, BIS Executive Champion, concludes, When it comes to a project of this size and significance, it takes more than good ideas and a need to change. At the end of the day, this was much more than a business transformation it was an end-to-end reformation of how we operate as a department, and one that has changed the dependencies between every part of the organization. The most critical part of success comes down to the people in the organization and how well they are able to work together and embrace the change dynamic. Everyone from IBM Global Business Services to the CDCR project team, executives and employees was fully engaged and participating as a team. Collaborative spirit combined with great software from SAP and skilled consultants from IBM Global Business Services drove us towards the success that we are experiencing today. IBM Deutschland GmbH D-71137 Ehningen ibm.com/solutions/sap IBM, the IBM logo, ibm.com and Global Business Services are trademarks of International Business Machines Corporation, registered in many jurisdictions worldwide. A current list of other IBM trademarks is available on the Web at Copyright and trademark information at http://www.ibm. com/legal/copytrade.shtml Other company, product or service names may be trademarks, or service marks of others. This case study illustrates how one IBM customer uses IBM and/or IBM Business Partner technologies/services. Many factors have contributed to the results and benefits described. IBM does not guarantee comparable results. All information contained herein was provided by the featured customer and/or IBM Business Partner. IBM does not attest to its accuracy. All customer examples cited represent how some customers have used IBM products and the results they may have achieved. Actual environmental costs and performance characteristics will vary depending on individual customer configurations and conditions. This publication is for general guidance only. Photographs may show design models. Copyright IBM Corp. 2013. 2013 SAP AG. All rights reserved. SAP, R/3, SAP NetWeaver, Duet, PartnerEdge, ByDesign, SAP BusinessObjects Explorer, StreamWork, SAP HANA, and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP AG in Germany and other countries. Data contained in this document serves informational purposes only. National product specifications may vary. These materials are subject to change without notice. These materials are provided by SAP AG and its affiliated companies ( SAP Group ) for informational purposes only, without representation or warranty of any kind, and SAP Group shall not be liable for errors or omissions with respect to the materials. The only warranties for SAP Group products and services are those that are set forth in the express warranty statements accompanying such products and services, if any. Nothing herein should be construed as constituting an additional warranty. SPC03469-WWEN-00 (November 2013)