State of Texas

Briefing on Value Pocket Survey

Survey

September 2 & 3, 2008

Agenda

• Introductions
• Overview of Business Case Methodology

• Value Pocket Concepts

• Value Pocket Data Collection
• Questions

Page 1
Overview of Business Case
Methodology
Primary Components of STA’s Business Case Analysis Methodology

ERP Costs ERP Benefits/Avoided Costs

– Software Avoided Systems Costs
1 2
– Hardware – Replacing current systems
– Implementation – Not implementing planned systems
– Not performing planned/anticipated
– Upgrades vs. enhancements/upgrades to existing
– Ongoing Maint. & Mgmt. and planned/anticipated systems
– Training once implemented
Process Improvement Benefits 3
– Value Pocket benefits

Page 2
Value Pocket Concepts
What are Value Pockets©

• Value Pockets (VPs) are the most likely sources of significant value
(i.e., cost savings and other process-improvement benefits) to be
found in each process/functional area within the scope of the ERP
implementation
• VPs must result from the ERP implementation – not able to realize
without implementing ERP
• STA’s proprietary formulas and calculations are used to quantify
process improvement benefits obtained through the implementation of
a statewide ERP System

Page 3
Value Pocket Concepts
Primary Sources of ERP VPs

• VPs primarily come from two (2) sources:

1. Having “true” system-wide integration that is built and maintained by the
ERP vendor
2. Introducing new technology/functionality available in a new ERP system
• VPs can be:
– Dollar-Quantifiable (tangible items)
• Reduce the amount of time required to perform a process (and
associated comp.)
• Non-FTE-related benefits
– Non-Dollar-Quantifiable (intangible items)
• Reduced cycle times
• In support of strategic initiative(s)
• Increased accuracy
• Improved usefulness of information

Page 4
Value Pocket Concepts
Two Basic Types of VPs

• Reduced Cost of Process Execution (efficiency). For example,

reassign/reduce headcount (FTEs) by:
– Reduce the time required to enter data into systems:
• Avoid entering the same data/transactions into multiple systems
• Avoid entering data on a form that is then entered into a system (instead of
entering into system directly)
– Reduce the amount of time required to generate needed information by no
longer being required to obtain and consolidate data from multiple sources
(also results in faster and better decision making)
– Reduce the amount of time required to reconcile data among multiple systems
– Reduce the amount of time required to track transactions spread over multiple
systems (e.g., avoid keeping tracking data in spreadsheets, using paper logs, etc.)
• Improved Process Outcomes/Results (effectiveness), for example:
– Decreased cost of goods and services
– Decreased inventory carrying costs

Page 5
Value Pocket Concepts
VP Examples

PROCUREMENT

HR / PAYROLL • Solicitations (RFx)

• Catalog Procurement CORE FINANCIAL
• Position Control • Reverse Auctions • General Ledger
• Basic Employee Data • Warehousing & Inventory • Budgetary Control
• Personnel Management Management • Accounts Payable /
• Training • Commodity Management Travel
• Payroll • Vendor Management • Accounts Receivable
• Employee Relations & & Cash Receipts
Performance Appraisal
• Cash Management
• Recruitment and • Cost Accounting
PROCUREMENT
Applicant Tracking VALUE POCKETS
• Grant Accounting
• • Reduce
Benefits cost of goods Common
Administration and services • Project Accounting
• Compensation Database
• Reduce cost of conducting solicitations • Cost Allocation
• Time Reporting
•
• Reduce cost to maintain vendor file
Leave Accounting
• Asset Management
• Reduce inventory carrying costs
• Reduce inventoryBUDGET
reorder cost
DEVELOPMENT
• Appropriation Budget
• Operating Budget
• Performance Based
Budget
Page 6

Value Pocket Concepts

VPs Commonly Related to Lack of Integration

Look for the following process inefficiencies when

“true” integration does not exist between systems:

1. Researching, troubleshooting, and reconciling transactions across

multiple systems. These processing tasks include:
– Investigating failed interface transactions
– Reconciling balance discrepancies between systems
– Making adjustments in the appropriate system(s)
– etc.
2. Generating ad hoc and standard management reports that require
retrieving data from multiple sources, including tracking procedures
using spreadsheets, paper logs, etc. These processing tasks include:
– Extracting data from multiple sources
– Compiling and reviewing data
– Formatting data into the reports
– Distributing the reports
– etc.
Page 7
Value Pocket Concepts
VPs Commonly Related to Lack of Integration (cont.)

Look for the following process inefficiencies when

“true” integration does not exist between systems: (cont.)
3. Tracking the status of transactions outside the system on an ongoing
basis using spreadsheets, paper logs, etc.
4. Manually entering data into multiple systems

Page 8
Value Pocket Data Collection
VP Survey – Worksheet/Tabs

• The survey is in a Microsoft Excel

spreadsheet that has a number of
worksheets/tabs as depicted to the right Introduction

• Data entry is only required in the “Metric

Data” and “Effort-Related Data” response
worksheets/tabs Metric Data
• You can enter hours directly into the Effort-
Related Data response worksheet/tab, or use
Calc
Calc Sheets, and the Calc Sheet values will Sheet 1
be “fed” into the Effort-Related Response Effort-Related
Response Data
Data worksheet/tab
VP 1 Calc
• You can access the Calc Sheet that VP 2 Sheet 2
corresponds to a Value Pocket by: VP 3

– Clicking on the appropriate tab at the bottom Calc Sheet Calc

of the spreadsheet; OR Example Sheet 3
– Clicking on a hyperlink that is on the Value
Pocket’s row. Clicking on a hyperlink on the
Calc Sheet will return you to the Effort-
Related Data worksheet/tab
Page 9
Value Pocket Data Collection
VP Survey – Calc Sheets

• Calc Sheets are set up to apply either the Percent-of-Time Method (PoT)
or the Units-of-Work Method (UoW) of calculating the total est. annual
hrs. (and comp.) spent each year performing a VP activity
– In the PoT method, you provide the % of time spent performing a VP activity ([4])
and the total hrs. worked on a VP activity will be calculated ([6])
– In the UoW method, you provide total hrs. worked on a VP activity ([6]) and the % of
time spent performing a VP activity ([4]) will be calculated. For example, if 1,000
units are processed each year and it takes approximately 20 minutes to process
each unit, enter 333 in column [6] (333.33 = 1,000 units x 20 minutes / 60 minutes
per hour) Calc Sheet
[1] [2] [3] [4] [5] [6] [ 7] [ 8] [ 9] [10] [11]
Approx. T otal Add 30% for
Approx. % Approx. Avg.
# of H rs. Each Benefits for
Select of Tim e T otal Hours Annual Total T otal Annual T otal
Person Works State R elevant
Individual or # of Calc Spent Worked on This Com pensation Com p. for All C om p.
for the State Employees, Total Com p.
Group Peopl e Method Working on Activity Each for Each of the Those on Plus
Each Yr. (use but Add 0% Plus Benefits
(P or U) This Year Individuals on Each Row Benefits
1800 for State for
Acti vity Each Row
Employees) Contractors

Supervisor 1 P 25% 1, 800 450 60,000 60,000 30% 78,000 19,500

D ata Ent ry Clerks 3 U 74% 1, 800 4, 000 30,000 90,000 30% 117,000 86,667

C ontractors 1 U 78% 1, 536 1, 200 92,160 92,160 92,160 72,000

Analysts 2 P 50% 1, 800 1, 800 40,000 80,000 30% 104,000 52,000

0% 0 0 0 0

0% 0 0 0 0

0% 0 0 0 0

0% 0 0 0 0

0% 0 0 0 0
7, 450
[7] provide input [9] provide input $ 230, 167
Totals pulled into the “Effort-Related Data”
response worksheet/tab [8] = [7] x [2] [10] = [8] x ([1+[9]) [11] = [10] x [4]
Page 10
Value Pocket Data Collection
VP Survey – PoT Calc Sheet Example

• To calculate total hours using the PoT Method for a Calc Sheets row:
– Enter values for columns [1] and [2]
– Enter “P” in column [3]
– Enter % of time the group/individual works on the VP activity in column [4]
– Enter in column [5], the approx. total # of hrs. each person in the group works for the
State each year
– Column [6] will be calculated for you. [6] = [2] x [4] x [5]

Calc Sheet
[1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11]
Approx. T otal Add 30% for
Approx. % Approx. Avg.
# of H rs. Each Benefits for
Select of Tim e T otal Hours Annual Total T otal Annual T otal
Person Works State R elevant
Individual or # of Calc Spent Worked on This Com pensation Com p. for All C om p.
for the State Employees, Total Com p.
Group People Method Working on Activity Each for Each of the Those on Plus
Each Yr. (use but Add 0% Plus Benefits
(P or U) This Year Individuals on Each Row Benefits
1800 for State for
Activity Each Row
Employees) Contractors

Supervisor 1 P 25% 1,800 450 60,000 60,000 30% 78,000 19,500

D ata Entry Clerks 3 U 74% 1,800 4,000 30,000 90,000 30% 117,000 86,667

C ontractors 1 U 78% 1,536 1,200 92,160 92,160 92,160 72,000

Analysts 2 P 50% 1,800 1,800 40,000 80,000 30% 104,000 52,000

0% 0 0 0 0

0% 0 0 0 0

0% 0 0 0 0

0% 0 0 0 0
0% 0 0 0 0
7,450 [7] provide input [9] provide input $ 230,167

[8] = [7] x [2] [10] = [8] x ([1+[9]) [11] = [10] x [4]

Page 11
Value Pocket Data Collection
VP Survey – PoT Calc Sheet Example (cont.)

• Suggested ways to calculate % of time spent:

– If spends about 2 hrs. each day, use 2 hours / 8 hours per day = 25%
– If spends about 2 days each week, use 2 days / 5 days per week = 40%
– If spends about 3 days each month, use 3 days / 21 business days =
14%
– If spends about half of his/her time during only two months out of the
year, use 50% x 2 months / 12 months = 8.3%

Page 12
Value Pocket Data Collection
VP Survey – Calc Sheet Example (UoW)
• To calculate total hours using the UoW Method for a Calc Sheets row:
– Enter values for columns [1] and [2]
– Enter “U” in column [3]
– Column [4] will be calculated for you after values have been entered for columns
[2], [5] and [6]. [4] = [6] / ([2] x [5])
– Enter in column [5], the approx. total # of hrs. each person in the group works for
the State each Year
– Enter in column [6]: (# Units processed each year) x (# hrs. ea. Unit is
processed). For example, if 1,000 units are processed each yr. by the group and
it takes 20 min. to process each Unit, enter (excluding quotation marks)
“=1000*20/60” Calc Sheet
[1] [2] [3] [4] [5] [6] [ 7] [ 8] [ 9] [10] [11]
Approx. T otal Add 30% for
Approx. % Approx. Avg.
# of H rs. Each Benefits for
Select of Tim e T otal Hours Annual Total T otal Annual T otal
Person Works State R elevant
Individual or # of Calc Spent Worked on This Com pensation Com p. for All C om p.
for the State Employees, Total Com p.
Group Peopl e Method Working on Activity Each for Each of the Those on Plus
Each Yr. (use but Add 0% Plus Benefits
(P or U) This Year Individuals on Each Row Benefits
1800 for State for
Acti vity Each Row
Employees) Contractors

Supervisor 1 P 25% 1, 800 450 60,000 60,000 30% 78,000 19,500

D ata Ent ry Clerks 3 U 74% 1, 800 4, 000 30,000 90,000 30% 117,000 86,667

C ontractors 1 U 78% 1, 536 1, 200 92,160 92,160 92,160 72,000

Analysts 2 P 50% 1, 800 1, 800 40,000 80,000 30% 104,000 52,000

0% 0 0 0 0

0% 0 0 0 0

0% 0 0 0 0

0% 0 0 0 0

0% 0 0 0 0
7, 450 $ 230, 167

Page 13
Value Pocket Data Collection
Things to keep in mind…

• Calc Sheets are essentially “scratchpads” that can be used to

calculate hours for the “Effort-Related Data” response
worksheet/tab using the PoT method OR the UoW method. Use
whatever method you feel comfortable using just as long as you
develop for each Value Pocket activity on the “Effort-Related Data”
response worksheet/tab a reasonable estimate for:
– Total number of hours spent annually performing the VP activity, and
– Total amount of compensation paid for those hours
• You can enter hours and compensation amounts directly into the
“Effort-Related Data” response worksheet/tab, instead of using Calc
Sheets

And please keep in mind that what we need are reasonably good
estimates, not exact numbers

Page 14
Let’s take a look at the

Value Pocket Survey

Page 15

Value Pocket Data Collection

VP Survey – Contact Information and Due Date

Please complete and return the survey via e-mail

attachment no later than the close of business on
Friday September 12, 2008 to:
• Chip Julian
– Mobile: 281.794.1391
– chip.julian@cpa.state.tx.us

If you have any questions whatsoever regarding this

survey, please do not hesitate to contact Chip

Page 16
Questions

Page 17