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Copyright © 2006 Accenture All Rights Reserved.
MN Digital Government Summit
The Business Case for IT:The Business Case for IT:Increasing Public Service ValueIncreasing Public Service Value
David A. WilsonAccenture
Managing Director, Finance & Administration Industry
State & Local Government Client Service GroupHigh Performance. Delivered.
2Accenture 2007: All rights reserved.
Topics
• Introduction• Public Service Value Defined• IT Benchmarking• Trends in IT Transformation• Q&A
3Accenture 2007: All rights reserved.
Government IT must change to provide more value for citizens
Demand for High Performing Governments:
•Governments are expected to hold the line on expenses and taxes•Citizen expectations and demands for improved services are rising •New technologies create an imperative to “keep up” with change•Major programs and traditional methods of service delivery are being challenged, often under the rubric of reform and consolidation•Responsibility and accountability for programs is shifting across government boundaries, with dramatic effects on funding•Transparency of information and accountability for performance is creating demand for measuring, comparing and documenting performance results•Demographic trends are requiring governments to do more with fewer employees•Implementing IT solutions to enable government services can be difficult, expensive, and often does not deliver as much value as it should
4Accenture 2007: All rights reserved.
Topics
• Introduction• Public Service Value Defined• IT Benchmarking• Trends in IT Transformation
5Accenture 2007: All rights reserved.
Shareholder Value Model
• Different combinations of Growth and Spread drive intrinsic value creation for shareholders and stakeholders
• Enterprises can map their future trajectory and take appropriate action (long term strategy and/or immediate)
Accenture’s Public Service Value Model
Spread [ROIC – WACC]
Gro
wth
Lower Performing Companies
Higher Performing Companies
• “Outcomes” are a weighted basket of societal achievements
• “Cost Effectiveness” = Outcomes / (Operating Costs + Capital Charge)
• Hypothesis: greater value is created through generating improved outcomes in a more cost effective manner
Cost Effectiveness
Ou
tco
mes
Lower Performing
Public Services
Higher Performing
Public Services
Accenture’s Public Service Value Model (PSV) applies the principles of shareholder value to the public sector, postulating that citizens value a maximum basket of outcomes generated in a cost effective manner.
6Accenture 2007: All rights reserved.
A Public Service Value focus for IT
• To create public value, organizations must translate resources into a set of real and tangible benefits, which are valued by citizens, service users and taxpayers.
• Outcomes must be balanced with cost effectiveness
• Minimizing back office costs – including IT costs - allows for more resources to be dedicated to citizen-facing activities
• Measuring and comparing IT performance is fundamental to transformation.
Cost Effectiveness
Ou
tco
mes
Lower Performing
Public Services
Higher Performing
Public Services
7Accenture 2007: All rights reserved.
Topics
• Introduction• Public Service Value Defined• IT Benchmarking• Trends in IT Transformation
8Accenture 2007: All rights reserved.
NASACT’s State Benchmarking Program
• State steering Committee formed in 2004. A state steering committee was formed with NASACT in early 2004 to explore the use of benchmarking. The Hackett-Accenture team was selected to conduct a benchmarking pilot.
• Pilot Benchmark project. Six states and selected agencies participated in the benchmark pilot (Alaska, Arizona, Nebraska, Oregon, Tennessee and Washington). Pilot results were presented at NASACT conference in November 2004.
• State RFP issued through NASACT. In April 2005 NASACT conducted a formal RFP to select a single benchmarking service provider.
• Vendor selected and tailored program for states. In June 2005 The Hackett-Accenture team was formally selected to support the NASACT benchmarking program in Finance, HR/Payroll, Procurement, and IT. Program launched at NASACT annual conference, August 2005. Contract vehicle now in place for states to select any or all benchmarks, based on their needs.
• 12 States are either in process or have completed the NASACT State benchmark to date.
9Accenture 2007: All rights reserved.
IT Benchmarking:Measuring the Public Service Value of IT programs
1. IT Performance Data - Where are we and how do we compare to other states and as well as world-class organizations. Helps to establish project priorities.
2. Baseline and future measurement for technology investments - Provides a baseline, supporting a “before and after” comparisons when undertaking an improvement project (such as data center consolidation).
3. Foundation for Business Case - Provides performance insights and quantitative measures into process areas for improvement that will be the starting point for a transformation business case.
10Accenture 2007: All rights reserved.
Technology Infrastructure
Application Management
Planning & Strategy
Management & Administration
Infrastructure ManagementOperations
ManagementSecurity
ManagementDisaster Recovery
Planning
End User SupportHelp DeskEnd User Training
Infrastructure DevelopmentPlanningConstruct Implement
Control & Risk Management
Accenture/Hackett’s IT benchmark framework
Application MaintenanceApplication
SupportEnhancement
DeliveryUpgrade
Execution
Application Development and ImplementationPlanningConstructImplement
Quality AssuranceChange
Management
Risk ManagementAudit and
Compliance
IT Business PlanningAlignmentProject
PrioritizationCommunication
Enterprise Architecture PlanningGovernanceStandards
Management
Emerging TechnologiesTechnology
Evaluation
Function ManagementFunction oversightPersonnel managementPolicy and procedures oversight
11Accenture 2007: All rights reserved.
World-Class is defined as top quartile performance in both efficiency and effectiveness
• Member of Executive Committee
• Reporting relationship
• Percentage of budget control
• Planning and strategy resource commitment
• Business transactions automated
• Projects meeting requirements
• Percent SLA being met (internally and externally)
• Standard adherence
• Vendor & supplier rationalization
• Simplification of information access
• Usage of self-service
• Degree of turnover
• Advanced business degrees
EFFECTIVENESSEFFICIENCY• IT cost per end-user• Process costs per end
user
• Technology Investments
• Number of FTEs
• FTEs per processing groups
• Spans of control
• Number of Help Desk Calls
• Projects meeting budget
• FTE productivity - Applications
• Projects delivered on time
• Help Desk 1st call resolution
• Number of data centers
• Number of applications
ABC Org..Peer Group
Hackett Value Grid™IT SampleIT Sample
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Excellence is no accident…. World-class organizations operate and perform very differently than their median peers
Hackett 2006 Functional Performance Data
Overall IT costper end user
Median WC
-7%
Median client spends $5.7 Million less per 10,000
end-users; less adept at leveraging IT to reduce
labor costs
8,4589,024
Overall Finance costas a % of revenue
Median WC
45%
Median client has $5.5 Million in potential finance
process cost savings per $1 Billion of revenue
1.22%
0.67%
Overall HR costper employee
Median WC
13%
Median client has $2.5 Million in potential HR
process cost savings per 10,000 employees
1,864
1,614
Overall Procurement cost as a % of spend
Median WC
25%
Median client has $2.1 Million in potential procurement
process cost savings per $1 Billion of spend
0.64%
0.85%
ITFINANCE HUMAN RESOURCES PROCUREMENT
13Accenture 2007: All rights reserved.
States Participating in Benchmarking (as of July 2007)
Program Launched at NASACT Conference in Portland in August 2005
State Benchmark Status
Tennessee FIN, HR, IT, PROC Completed
Arizona FIN Completed
Delaware FIN, PROC Completed
Colorado FIN Completed
Massachusetts FIN Completed
Mississippi FIN, HR, IT, PROC Completed
Georgia FIN, IT Completed
Alaska HR Active
Alabama FIN, HR, PROC Active
New Jersey FIN, HR, PROC Active
Ohio FIN, HR, IT, PROC Active
Oklahoma FIN Active
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Topics
• Introduction• Public Service Value Defined• IT Benchmarking• Trends in IT Transformation
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New Business Demands on IT:Requires a Different Style of Infrastructure
New technology capabilities and competitive pressures are driving businesses to become “Always On, Always Active, Always Aware”
• Being in constant contact with suppliers, partners, products and customers across value chains will increasingly be a business norm
• Significant increase in the quantities of data flowing into the enterprise; real time and offline analytics create competitive advantage
• Increasingly mobile workforce, requiring computing capabilities wherever they work
• Business processes and applications must change to be able to accommodate increasingly unpredictable demand
Applications and services are constantly available
Maintenance windows no longer exist; changes must be able to be made while “online”
Traditional security boundaries change – greater reach, granularity and federation
Virtualized storage; variable capacity networks; self-protecting data; intelligent automated processing of data to filter out ‘noise’
Seamless networking, regardless of location
Multiple device support; greater use of thin clients
Sharing of resources across applications; virtualization; integration based on standards; composite applications
Characteristic Implications on Infrastructure
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Trend Towards Shared IT Enterprise Services: Consolidation and Redesign of IT Infrastructure into Shared IT Services across agency boundaries.
Sca
le &
Eff
icie
ncy
Service & Perceived Responsiveness
DistributedModel
SharedIT Enterprise
Services
CentralizedModel
Focus on both increased efficiency and increased service levels within the IT infrastructure
Advent of Client/Server and ERP technologies
Ability to reengineer processes to:
Optimize degree of sharing to achieve scale
Incorporate best practices Maintain end-to-end process
integrity and control Early adoption in the U.S.
private sector demonstrated potential
Targeting 15 - 30% productivity improvements
The objective of these IT Common Services is to deliver the optimum in cost-effective, high quality services.
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Shared Enterprise IT Services Model
Definition
• Shared IT enterprise services are any infrastructure offerings within an enterprise that have a separate set of dedicated resources (e.g. people, assets) managed through a single, centralized organization that serves more than one business unit.
Objectives
• Consolidate and redesign infrastructure, staff and support functions to deliver the most cost effective and high quality services possible
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Building the Enterprise IT Service Model: IT Enterprise Services Trends in Government Organizations
Deployment of
innovative technology solutions
Creation of innovative partnerships with the
private sector
Shared computing
environments and lower operating
costs
Reduced overall cost of technology to
States and their agencies
Improved agency
operations and citizen services
Providing cost effective and
enhanced services through public-
private partnerships
Consolidation of
facilities, hardware,
and software
Implementation of
significant cost-savings
initiatives
Realignment and
possible relocation of IT staff
Best utilization of skill-sets and
labor requirements
across the state
Continuing budget pressures, demands for more better services and a more secure environment, are driving
IT enterprise initiatives.
19Accenture 2007: All rights reserved.
*Savings may be recognized in other areas of IT†Savings may be much higher in terms of loss prevention
Application Enabling Infrastructure
• Component Reuse• Development/Training Costs• Development Infrastructure
Example Components
Sample Cost Reduction
Opportunities
Typical % IT Cost
Reduction
Enterprise Enabling Infrastructure
Platforms
Operations Management
Infrastructure Layer
• License/maintenance fees• Eliminate duplicate services• Corporate data architecture
• Data Center Consolidation• Server/Storage Consolidation• Outsourcing/Out-tasking
• Contractor Rationalization• Outsourcing/Out-tasking• Reduced outages/downtime• Automation
10 - 20
20 - 35
20 – 35*
15 – 25*
5 – 10†
15 – 30*
Total
• Component Frameworks• Application Server• Dev. Env’t. and Tools
• Email Consolidation• Intranet/KM• Middleware/EAI• Database
• Data Center• Legacy Systems• Intel/Unix Servers• Desktop
• Performance Planning• High Availability• Service Level Mgmt
Security • Reduced Outages• Loss Prevention• Single Sign-on
• Risk Assessment• Security Architecture• Enterprise Security• Managed Services
15 – 30%
Network • WAN Migration to IP-VPN’s• Voice/Video/Data Convergence• Carrier Renegotiation/RFP• Use of Managed Services
• LAN/WAN• Voice/Video• Remote/Internet
Industry Sample Consolidation Savings
20Accenture 2007: All rights reserved.
IT Investment Benefits
Significant increase in business value
Gross savings in IT spend
Enhanced IT capabilities
Moderate initial investment
IT Transformation
Optimized IT spending mix
Enhanced business capabilities
Benefits:Benefits:• 15-40% improvement in cost of
IT (depending on IT organisation and systems maturity - and level of courage)
• Moderate initial investment can drive significant stakeholder value returns
• A way to get “bold” change across all of a government IT organization capabilities
• Strengthens long-term relationships at the top level between IT organization and government executive leadership
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AdministrativeShared Services
Financial
Purchasing
Human Resources
CommonEnterprise
Service
Shared ITInfrastructure
Citizen View of Government: Focused on Outcomes…. Not Programs, Systems and IT
Transformed Government
Common Citizen Services
Case Management
BusinessRegulations.
Persons
TransactionManagement
Agencies
Policy
Single Entry to Government Services
Tax Payments
Departments
Technology
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Wrap-Up
Q & A