San Diego City Schools Case

Study

Presented by:Walfridus ChaspuriZhen GuanKent IkedaJun MeiAgiimaa Tsogt

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BackgroundO In 2002, SDCS was the eighth largest

urban school district in US and the second largest in CAO Serves 142,000 students in K-12 at > 180

educational facilitiesO 25K full- and part-time employees

O 2001-2002 operating budget of $1.1BO Undergoing reform effort to improve

teaching and learning in the classroomO Desire to modernize business practices

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ERP and Education IndustryO Education industry second largest in

USO > $320B spent within K-12 segmentO According to the National Center for

Education Statistics, 81 school districts in the US served >= 50K studentsO IT spending lowO Average of 2% of revenues going to IT

budgets

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ERP in School DistrictsO Industry leaders traditionally focused on

private-sector clients now tailoring products to education marketsO SAPO PeoplesoftO Oracle

O In 2001-2002, prices charged to education clients droppedO Due to slowdown in general economyO Critical mass of districts now interested in

ERP systems

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ERP in School DistrictsO Emerging trend was new focus on education

within top-line consulting firmsO AccentureO Price Waterhouse CoopersO DeloitteO SAIC

O As consulting firms’ education practices matured, deeper understanding of unique challenges confronting school districts emergedO Firms better prepared to provide higher-quality

assistance to clients

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Persistent RisksO ERP failed to deliver what was

promised to school districtsO Districts reported low level of

satisfactionO ERP design and implementation

immensely technical and difficultO 50% of implementations failed

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ERP Project RiskO What do you think could be the risks identified for ERP Project

implementation?

O Significant portion of risk similar to any ERP deployment, includingO Scope creepO Wide-scale deploymentO Issue escalationO Organizational change

O Risks associated to education industryO NegotiationsO IT experienceO Software modifications

O SDCS school board high divided five-member board

O Would you advise the school board of these risks? Why or why not?

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Unique Problems for School Districts

O Three problems within school districts hindered successful implementation of ERP systemsO Limited budgetsO Under-qualified personnelO Changing leadership

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Problems Unique to Education Industry

O Limited CapitalO Persistent lack of fundingO Only spend about 2% O Under invest in consultants

O Spend ½ on software and ½ on consultants

O Purchase inferior solutions because of price

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Problems Unique to Education Industry

O Under-Qualified PersonnelO IT staff not professionalsO Districts over rely on consultants and

outside experts because staff members are not trained

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Problems Unique to Education Industry

O Changing LeadershipO Longest Superintendent tenure was 6

yearsO Impacts ERP implementation O Inconsistent support from top

management

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ProblemsO Scope Creep

O Increasing the desired featuresO Wide Scale Deployment

O Deploying O HardwareO SoftwareO User training

O Issue EscalationO Snowball effect

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ProblemsO Poor Negotiation

O The lack of experience when negotiation with solution providers resultsO Increased costs for softwareO Decreased benefits in service contracts

with the solution providerO Software maintenance cost increases

yearlyO Starting at around 15-20% and could be as

high as 30% of the purchase cost of the software

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Problems (SLA)O SLA – service level agreement

O Agreement between ISP and clients that definesO Estimated downtimeO Level of technical supportO Number of users that can be served

simultaneously O Help desk response timeO Support O Dial in accessO Usage statistics

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Problems (SLA)O Failure of clients to understand what level

of SLA is needed by their business processesO Results in mismatching of projected

requirements to actual requirements O Difficult to agree on what is actually needed

O Failure to O DefineO Inability to understand when to upgrade/change

agreement to server business objective

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Problems O Software Modification

O Increases cost of implementationO Increases cost of technical support O Increases cost of upgrades

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Problems O Convincing top management to

support the implementation of ERP O School board is divided

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The Ideal ERP SystemO Ideal school district ERP

system was one where full power of ERP was used to face the challenges confronting school managers

O School district’s finance, HR, food services, health services, procurement, delivery, and student tracking functions would be seamlessly integrated

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The ERP Big Picture at SDCS

O SDCS management sought to develop enterprise-wide system to help reform and modernize district’s business operations

O District staff spent 18 months planning implementation of ERP modules in areas of finance, HR, and student information system (SIS)

O SIS considered “holy grail” of ERP modulesO Initial survey reveled even the best SIS

systems offered only 50% of functionality that district required

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AlternativesO ERP Vendors

O BenefitsO Simpler integration process between software

module O Less training cost for personnel O Potentially lower cost of ownershipO Easier to support the ERP system

O DrawbacksO Potential changes in way school district does

business O Potential software functionality gap in between

modules

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AlternativesO Best-of-Breed

O Benefits O Ability to create a more organizational

specific functionally of the ERP system O The client is not locked in with one vendor O Reduced potential functionality gaps

between modules O Drawbacks

O Much more complex system to implement O Will cost much more than just hiring an ERP

vendor

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AlternativesO Implement all modules at once

O BenefitsO All IT learning occurs at once and there’s no

downtime between implementations O Reduced training costs O Reduced time between implementationsO Ideally all modules are on the current

version O Drawbacks

O Exponentially increased complexityO Increased costs

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AlternativesO Do Nothing

O Always a choice to do NothingO Benefits

O Cost savingsO Drawback

O Not accomplishing any goalsO Problems are not addressed

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AlternativesO Delaying ERP implementation

O BenefitsO More mature educational ERP systemsO Allows school district to evaluate its needsO Allows vendors to refine their software

O DrawbacksO Current problems will not be solve till the

futureO Current problems may prove to be costlyO School district may not be able to continue

operating until new system is available

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AlternativesO Wait for SOA and BPI

O BenefitsO Better integration of systemsO Many services can be standardized to reduce

redundancies in the systemO Allows for many processes to be automatedO All benefits associated with automating business

processesO Drawbacks

O Same as doing nothing and waiting for educational ERPs to mature.

O Extra complexity, costs, timeO Not a proven method in the Educational industry

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AlternativesO Software Choice

O Best of Breed/Single VendorO Best of Breed – get best solutions but

no integrationO Single Vendor – great integration

however not optimal/best solution for each

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Discussion QuestionO What module was decided to be

implemented first? Why?O HR module was to be implemented

first.O District’s head of HR successfully

implemented HR module at prior assignment and had hands-on experience

O Early success of HR module would build greater buy-in among district staff for future ERP initiatives

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SDCS Human Resources ERP Module

O Current SDCS HRMS mainly composed of 30-year-old legacy mainframe code recently migrated to client/server platformO HRMS included payroll, personnel, and benefit

systemsO Other stand-alone applications purchased or

built over the past decadeO No true integration among any of the systemsO Sharing of data between systems not automaticO Each functional area responsible for data entry for

respective departmentO Resulted in duplication of data entry

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Employee BenefitsO Administration of employee benefits

was complex and required significant manual work

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PayrollO Payroll division responsible for

several areas and handled more than 28 different formsO Time and labor collectingO Paycheck processing

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PersonnelO Complex process involved

O Processed retroactive payments and credentials

O Reviewed education certification and demographics

O Handled substitute staffing

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System Implementation Timeline

O Shortest time estimates for implementing one module of an ERP system was 10-24 months, excluding post-production support

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ERP System CostsO Wiemann heard cost estimates for ERP

implementation projects ranging from $15M for small-scale (implementing one module) to > $125M for full-scale, heavily customized ERP solution

O Cost elements includedO SoftwareO Implementation/consultingO InfrastructureO TrainingO Ongoing costs

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Cost Summary of Deploying SDCS ERP HR Module

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ERP System BenefitsO Tangible cost savings

O Staff reductionsO Reduced overtime in HR and fiscal control departmentsO Reduced printing costs, processing errors, and space

costsO Productivity improvements

O Free up principals and clerical staff for crucial functions they were unable to perform

O Soft benefitsO Improved employee morale and productivityO Improved recruiting effortsO Improved management access to data

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Discussion QuestionO In order to generate ROI, length of time for analysis based on five-year

useful life of the systems once implementedO Wiemann unsure what cost of capital to useO Unsure how to quantify soft benefits

O How can you quantify soft benefits of the system and include them in a ROI analysis?

O Quantified through creative assumptionsO Assumptions can come from experiences others had when implementing similar

solutions or from drawing on similarities between other quantifiable benefitsO Other principals compared their successful implementation like receiving an

additional recruiting team, valued at $320K/yearO SDCS spent $400K/year on an internal audit team to provide access to HR data.

This team could be disbanded with the implementation of an HR solution leading to a $400k/year benefit

O Improved employee morale and productivity could be measured by a lower turnover rate, leading to lower training costs and recruitment costs, as well as higher output rates leading to lower clerical demands and improved service

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Discussion QuestionO With the info presented, what should Wiemann present and recommend at the

board meeting? Specifically, would you recommend going forward with the HR system implementation? If not, what alternatives would you suggest?

O This case focuses on the challenge of quantifying the return on investment (ROI) of a large technology project in the nonprofit environment of the San Diego City Schools

O The school district does not generate a profit so traditional revenue enhancement arguments do not work

O The system ROI is composed of two major components: cost savings from removal of legacy applications and productivity improvementsO The cost containment benefits are relatively straightforward to quantify, but do not

justify the systemO Productivity improvements are harder to quantify and many can be categorized as soft

benefitsO Many of the productivity and cost-saving benefits will not be realized without

personnel reductions, which are especially difficult in school districts and government agencies

O The case discusses the tradeoffs quantifying soft benefits and productivity improvements, best practices for management decision making, and the organizational change necessary to realize the ROI

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Decisions/OutcomeO SDCS listed assessment criteria for vendors in draft of

RFP for HR systemO Product functionality – 40%O Price – 25%O Support – 15%O Organizational strength – 10%

O Only a few vendors successfully implemented ERP systems in school districts providing K-12 education

O What was the final consideration in choosing the software vendor?O Vendor’s experience with K-12 educational market

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Decisions/OutcomesO Empower Solutions selected as

implementation partner, using PeopleSoft enterprise softwareO Completed within budget (approx $11.6M)O Live in approximately one yearO Complete understanding of K-12

processesO Good training program in placeO Built relationships with key personnel on

SDCS staff

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Decisions/OutcomeO After implementing the ERP system

O Users were satisfied with the new systemO Old laborious paper method replaced with faster,

more reliable electronic versionO Staff members able to achieve immediate results

O More productive, more accurate in their workO Less bogged down by paperwork

O School district able to slim down workforceO Employees were more productive with new system

in place, resulting in additional savings on payrollO Saved money by automating processes on the

system instead of using the old paper process