Creating Value through ICT in Local Government – the Cape Town experience

Name surnameCompany

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Electricity Water and Sanitation Solid Waste Roads, Stormwater and transport Public Housing Local Economic Development Social - and primary health services Emergency Services Municipal Policing Urban Planning and Environment Sport and Recreation City Administration

Local Government – the delivery arm of Government

Function & Duties Municipalities

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Population: 3.4 million

Share of National GDP: 15.9 %Share of Provincial GDP: 82 %

Area: 2461 km2

Rateable Properties: 700 000

Employees: 23 579

City of Cape Town annual budget 2009/10:

Revenue: R18,8 billion ZAR Capital: R 6,2 billion ZAR

City of Cape Town annual Income 2009/10:

From Utility Services: 53 % of total Revenue From Property Tax: 23 % of total Revenue

Demographics of Cape Town

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Transforming Local Government

Merging autonomous Organisations is complex:

“Lack of standardised financial policies and procedures”

“IT systems entrench the ‘old order’”

“Back-office systems were deemed to be outdated, functionally inadequate and not properly integrated”

“Difficulty in merging these systems was in fact hindering the merger of the administrations and undermining the objectives which motivated the creation of the Unicity”

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Creating Value in the Public Sector –

“City Leadership only get involved when they realise that – if IT fails they will fail ”

Improved EfficiencyMed. High

Result:Continue doing more of the same.

Adv

ance

Soc

ial U

plift

men

t

Financial & Organisational TransformationEnabled trough ICT

Hig

h

Advance socialupliftment

Informationtransparency

Enable Social / PoliticalConsciouspolicies

EnhanceOrganisational Performance

Improveservice delivery

Address historical backlog and service Inequality – Social UpliftmentImprove Service Del.

Long-term financial Sustainability and Improved Efficiencies

Createfinancialvalue

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Creating Value

“How can you justify spending money on computers when the business of Local Government should be all about:” Social Upliftment Service Delivery Sustainability

Improved EfficiencyMed. High

Result:Continue doing more of the same.

Adv

ance

Soc

ial U

plift

men

t

Financial & Organisational TransformationEnabled by ERPProgramme.

Hig

h

Address historical backlogand service Inequality –Social UpliftmentImprove Service Del.

Long-term financial Sustainability and Improved Efficiencies

Advance socialupliftment

Informationtransparency

Enable Social / PoliticalConsciouspolicies

EnhanceOrganisationalPerformance

Improveservice delivery

Createfinancialvalue

7

Financial VALUE

Public SectorValue Creating Measures

Quantifying only the tip of the Iceberg

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People

OrganisationStrategySTRATEGY: What must we do ?

PROCESS: How are we going to do it?

People: Who is going to do it ?

TEC

HN

OLO

GY

Process

What makes Organisations Successful?

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An ERP system offers organizations a comprehensive and integrated solution for managing services such as financial, revenue, human resources, maintenance, procurement, leasing, customer care on a single integrated IT system.

It is not so much about the technology as it is about the integration of business processes contained within the system.

An ERP system vs. so called ‘best of breed’ systems.

Our ERP Strategy – Fundamental to Organisational performance

MA

INTE

NA

NC

E P

rocesses

RE

VE

NU

E P

rocesses

PR

OC

UR

EM

EN

T Processes

AS

SE

T MA

NA

GE

ME

NT P

rocesses

PR

OJE

CT P

rocesses

CU

STO

ME

R P

rocesses

HR processes

PLANNING processes

ACCOUNTING processes

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Business Process Integration

R/3 and IS-U/CCS

FIFinancialAccounting

COControlling

AMFixed AssetsMgmt

WFWorkflow

ISIndustrySolutions

MMMaterialsMgmt.

HRHumanResources

SDSales &Distribution

PMPlant Maintenance

GISAM/FM

WorkClearance*

CAD

FieldServiceSupport

PSProjectSystem

PPProductionPlanning

QMQualityManagement

EDI

SCADA*

SMServiceMgmt

IS-U /FERC

IS-RE

IS-U/CCS

- Financial Accounting

- Management Accounting

- Asset Management

- Procurement & Inventory Management

- Project Accounting

- Billing to sundry debtors

- Real Estate Management

- Industry Solution for Utilities

- Customer Care & Revenue Management

- Human Resources & Payroll

- Plant Maintenance

ERP Fact Sheet 420 end-to-end Business Processes Cost: R354mil (in 2002) Single Instance 8 250 Users > 500 SAP Sites City Wide 3,2 mil ISU contracts 1,2 mil consolidated invoices per month

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Cape Town’s ERP Strategy

“To implement a functionally rich ERP system, in a manner that will ensure integration, facilitate the merger and bring about organisational transformation.” Thereby, enabling the City to deliver on its Strategic Objectives”

Blaauwberg

Tygerberg

Oostenberg

HelderbergSouth Peninsula

CapeTown

CAPEMETROPOLITAN

AREA

City ofCape Town

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-R 200,000,000

-R 180,000,000

-R 160,000,000

-R 140,000,000

-R 120,000,000

-R 100,000,000

-R 80,000,000

-R 60,000,000

-R 40,000,000

-R 20,000,000

R 02001/2 2002/3 2003/4 2004/5

Support CostsProject Costs

Creating FINANCIAL VALUEThe City’s ERP-ROI Study:

Total Project Cost Over 3 years:

R355 mil (2001-2003)Support Cost: p/a

R 62 mil (2003)

R 0

R 50,000,000

R 100,000,000

R 150,000,000

R 200,000,000

R 250,000,000

R 300,000,000

R 350,000,000

2001/2

2002/3

2003/4

2004/5

Staff CostsRevenueInventory Benefits IT Value Opportunity

Value Creating Opportunities (VCO’s) tracked:

Support Staff Costs IT TCO Revenue Inventory

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R -300,000,000

R -200,000,000

R -100,000,000

R 0

R 100,000,000

R 200,000,000

R 300,000,000

R 400,000,000

R 500,000,000

2001/2 2002/3 2003/4 2004/5 2005/6 2006/7 2007/8 2008/9

Costs Benefits Realised Actual Case Expected Case Feb2002

City’s ERP program ROI:Payback in 36 months

Break-even in June 2005 – with only 11% of the financial value of Improved City Revenue attributed to the ERP Program.

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FINANCIAL VALUEImproved Cash Position

Cash Position - City of Cape TownJune 2002 to July 2006

0

500

1,000

1,500

2,000

2,500

Jun-

02

Dec

-02

Jun-

03

Dec

-03

Jun-

04

Dec

-04

Jun-

05

Dec

-05

Jun-

06

R '0

00 0

00

Budget Actual Cash Position

Go-live

Planned loan of R300 mil not taken up

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ICT spend in the City of Cape Town

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

2007 2008 2009 2010 2011

IS&T as % of total City Expenditure

IT investment as Percentage of City total expenditure

1.03% =R200 252 579

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

2007 2008 2009 2010 2011

IS&T as % of total City Expenditure

IT investment as Percentage of City total expenditure

The value of our IT investment can not be doubted. A relatively diminishing investment is enabling an

growing organisational capacity.

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Financial VALUE

Social VALUE

Citizen VALUE

Political VALUE

Public SectorValue Creating Measures

Quantifying only the tip of the Iceberg

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Creating: SOCIAL VALUELarge disparity in the socio-economic status of citizens Identifying citizens which can – but don’t pay; versus

Citizens which do not have the means to pay. Support the vulnerable members of society.

Examples of social responsible Policies and Tariff- structures enable via the ICT investment: Free Basic Utility Services. Grants for the Indigent Debt relief through arrangements and incentives

Free Internet access from all 100 Municipal Libraries

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Creating: CITIZEN VALUE

Convenience: Itemized Billing and Consolidated Invoicing. Pay Municipal Account at any Cash Hall across the

City, via Internet, Debit / Stop Order, 3rd party vendors etc.

Centralised Call Centre for account queries and defect reporting.

Execution of Service Request Works Management via Generic Enterprise-wide

ProcessFlexibility of Service Account available in 3 official Languages

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Creating: POLITICAL VALUE

“Good News”

“Trend Setter” Compliance: Unqualified Financial Audits Both National and International Recognition.

But, its actually all about what the newspapers are saying – as demonstrated via the following sequence of newspaper articles:

Jan 2003 Sept 2003 Oct 2003

Go-live

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ERP Story: 2001-2010 – it’s a journey

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4.7 UpgradeBenefit Realisation

ERP6 Upgrade

HCM

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

CorporatePerformanceManagementBusiness

Warehouse

FlexibleRE

PSRM

Value Creation demands Ongoing Investment

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Logistics

Human Resources

Real Estate and Land

Revenue Management

Finance

R/3 and IS-U

R/3 and IS-U/CCS

FIFinancial

Accounting

COControlling

AMFixed Assets

Mgmt

MMMaterials

Mgmt.

HRHuman

Resources

SDSales &

Distribution

PMPlant

Maintenance

GISAM/FMCAD

PSProjectSystem

PPProductionPlanning

QMQuality

Management

EDI

SMServiceMgmt

IS-U /FERC

IS-RE

IS-U/CCS

R/3 and IS-U/CCS

FIFinancial

Accounting

COControlling

AMFixed Assets

Mgmt

MMMaterials

Mgmt.

HRHuman

Resources

SDSales &

Distribution

PMPlant

Maintenance

GISAM/FMCAD

PSProjectSystem

PPProductionPlanning

QMQuality

Management

EDI

SMServiceMgmt

IS-U /FERC

IS-RE

IS-U/CCS

City of Cape Town System Capability

Business Warehouse

Corporate Performance

Management

Customer Perspective

Internal Business Process

Perspective

Financial Perspective

Innovation & Learning

Perspective

Vision and Strategy

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All Services / Works Request in the City could follow the same process to overcome the challenge of initiating and tracking the diversity of services we are responsible for:

Receive Execute Report

Assign

AssignClos

e

Close

Service Delivery: The core business of Local Government

The Notification Process

Managing Service Delivery through the Corporate Works Management Process.

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Spatial Reporting: Service Delivery

The City’s Dashboard and Reporting Tools

The Value of up-to-date Management Information – presented via dashboards

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Logistics

Human Resources

Real Estate

Revenue Management

Finance

R/3 and IS-U

R/3 and IS-U/CCS

FIFinancial

Accounting

COControlling

AMFixed Assets

Mgmt

MMMaterials

Mgmt.

HRHuman

Resources

SDSales &

Distribution

PMPlant

Maintenance

GISAM/FMCAD

PSProjectSystem

PPProductionPlanning

QMQuality

Management

EDI

SMServiceMgmt

IS-U /FERC

IS-RE

IS-U/CCS

R/3 and IS-U/CCS

FIFinancial

Accounting

COControlling

AMFixed Assets

Mgmt

MMMaterials

Mgmt.

HRHuman

Resources

SDSales &

Distribution

PMPlant

Maintenance

GISAM/FMCAD

PSProjectSystem

PPProductionPlanning

QMQuality

Management

EDI

SMServiceMgmt

IS-U /FERC

IS-RE

IS-U/CCS

City of Cape Town a Systems View

Business Warehouse

Corporate Performance

ManagementCustomer

Perspective

Internal Business Process

Perspective

Financial Perspective

Innovation & Learning

Perspective

Vision and Strategy

Transactional Systems enabling

Local Government Business Process

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“Analytical and Reporting Tools”

Only once you have well defined automated Business Processes you can extract

Valuable Management Information.

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Reporting and Dash boarding –

OperationalReports

TacticalReports

StrategicReports

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2010 Event Tracking Dashboard

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SDBIP’s – City’s delivery Management

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Organisational Performance Management

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People

OrganisationStrategySTRATEGY: What must we do ?

PROCESS: How are we going to do it?

People: Who is going to do it ?

TEC

HN

OLO

GY

Process

The Role of IT Systems in Value Creation

IT Systems allow organisations to align and enforce:

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The Systems Approach has created Value through being: TRANSFORMATIONAL : Helped to align the operational activities of the

organisation to its strategic imperatives

A CREATOR OF CAPACITY: Provided a robust technical platform to integrate and standardise business processes across the organisation

Significantly impacted the city’s operating model, organisational structure and human performance considerations - Services closer to the People.

COMPLIANCE: Provides effective management reporting capabilities, encouraging fairness, accountability, responsibility and transparency

CREATOR OF BENEFITS: Both Financial and non-financial benefits

Provides a Powerful Platform which we believe will continue to create additional value.

Thank You