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Truth or Consequences

Truth or Consequences

A Queensland government department discovers that the truth not only sets workers free, it empowers them"One version of the truth." One verified copy of data to be shared across the organisation. That's the goal the Queensland government's Office of Financial Management (OFM) knew it had to achieve to successfully drive a series of initiatives designed to improve the management of the government's assets and its resource allocation decision-making.

So when an initial proof of concept to test the use of the new SAP Business Information Warehouse (BW) gave BW the thumbs up, OFM was quick to adopt the product in which to build its new output management performance reporting system. In doing so, OFM not only became one of (perhaps the) first Australian organisations to adopt SAP BW version 2.0a, it also won a Gold Award at this year's Government Technology Event.

And OFM has delivered - albeit more slowly than it would have wished - a powerful decision-making tool that provides a "one stop shop" for business and management information. "One of the benefits of this particular system we've installed is that all the information is extracted from a central data warehouse, and because of that it's very clean," says project director Lyn Dengate.

"We talk about it delivering a single version of the truth. And that means it doesn't matter which way you slice the data, or whoever looks at it at whatever point in time, they're all going to see exactly the same bit of information. All the data goes through a data cleansing process that ensures it will always give the same result."

Better still, the new system integrates strongly with existing systems, thereby eliminating a range of problems that would otherwise have plagued the office into the future.

Leadership Role

Queensland Treasury provides leadership in economic and financial management across the Queensland public sector, playing an important role in preparing the state for economic and financial impacts like the GST, National Competition Policy reforms and rapid advances in technology including e-commerce and the Internet. Its Office of Financial Management performs a range of functions on behalf of the department, maximising the benefits available from the use of the Queensland government financial management system (QGFMS).

OFM is also helping to drive the government's new strategic management framework, which embraces a range of management improvements and the introduction of accrual output budgeting from 1999-2000. Collectively labelled "Managing for Outcomes", the management and budgeting initiatives were set up to improve management of the government's assets and the basis on which resource allocation decisions are made. But if Managing for Outcomes was to effectively help the government to increase the quality and efficiency of service delivery to the Queensland community, OFM - previously known as the Office of Financial Systems and Training (FST) - knew it would have some hard yards to put in first.

The Managing for Outcomes framework gives all public service managers a chance to reassess the nature of their agency's business, their management processes, and the management information systems needed for both internal management and external reporting, but none more so than OFM. That's because OFM plays a lead agency role in driving R&D in emerging technologies in financial systems on behalf of the entire Queensland government. It needed a good working model to demonstrate to the rest of Queensland government how an output management performance reporting system would operate.

OFM also needed to apply that emerging technology to its own internal business management needs. Detailed analysis of OFM's existing accounting system and the type of information managers believed would help them better manage resources highlighted some significant gaps between the current and preferred methods of data collection and information dissemination. The office would need something better if it was to meet its role of effectively monitoring and controlling costs and assigning responsibilities.

A prime aim was to give end managers the ability to do their own drill-down analysis, and tailor data into meaningful information. "When our SAP system was set up it was set up in a way that was useful for reporting financial information," Dengate says. "It wasn't set up in a way that was really useful for collecting information for internal management purposes. So while it was very good at meeting those external financial requirements it was not very useful to us in terms of being able to look at how we were managing internally."

It's a situation that's not all that unusual. OFM's research suggests few organisations have a sophisticated understanding of the differences between financial and management accounting. Dengate says organisations often address their external financial reporting needs while paying insufficient attention to their internal management needs.

But OFM found other problems in the way its existing system operated. "We have a range of databases across the place that all have little bits of information stored in them, but there wasn't anywhere that put those all together and reproduced it in a way that was meaningful to managers," Dengate says. OFM's management accounting data was held in a variety of systems including SAP R/3, SAP HR, ABC Technology's OROS activity-based costing solution and various Access databases and PC files.

A workshop with BHP-IT [acquired by CSC in June this year] identified an extensive "wish list" of information and benefits OFM wished to provide.

"In lots of ways it was a case of we didn't know what we didn't know, because we hadn't had access to this sort of information previously. We really weren't certain of all the possible uses," Dengate says. "So the wish list became our starting point, and we then scaled that back to what was feasible within our budget and within the technology that we were going to be using for the project. We also scaled back according to what we really thought we actually did need to manage our business, because a lot of what we got in that initial workshop might have been vaguely useful, but it really was just a wish list floating in space."

OFM first redesigned its SAP accounting structures to recognise the differences between its external financial accounting requirements and its broad internal management accounting needs. Then it used the integration capabilities between OROS and SAP BW as the stimulus to review its activity-based costing system. The Office found OROS to have a wide range of functions for data manipulation and management on top of its broad reporting functionality.

A tightly run proof of concept to test the use of SAP BW as a strategic accrual output performance reporting system, conducted in partnership with BHP-IT and the Department of Housing, endorsed the product, Dengate says. "There were some initial problems, largely along the lines of not understanding BW or how it worked, but there weren't any issues that couldn't be resolved - it just meant everybody had to skill up fairly quickly in the product. The decision at the end of it was it was a very useful product that warranted further investigation."

Then OFM built on the proof of concept experience to develop an operational pilot that would integrate data from a variety of sources incl- uding financial, human resources, performance measures and activity-based costing.

Benefits

OFM is extracting a range of benefits from the system, apart from being able to derive a single version of the truth. The system is far more user-friendly than anything OFM has been able to offer before, according to Dengate.

"Many managers experience difficulty using the standard reports that are in SAP and we wanted this particular system to be very easy for managers to use and for information to be presented in a way that was very readable and user friendly," she says. "Managers can just click their way through, without having any idea of how the system actually works internally. The system pumps the information out to the managers for them to analyse the variances and they can see what's happening from where they sit - they haven't got to rely on other people to interpret that information to them. So it helps them make better decisions."

Reports are also available extremely fast. Dengate says while in a traditional SAP system it can take a couple of weeks for somebody to get a report in a particular format, the output management performance reporting system can make reports available in just a couple of hours to anyone familiar with the system. That lets managers take corrective action far faster.

"The particular system that we have has a provision for managers to put in reasons for variances and whether action is required and that sort of thing, so their supervisors can see that instantly. It should provide better monitoring and much faster reactions when it looks like there's a problem," she says.

Another benefit is that the system offers a very low-cost rollout via the Internet, and has the scalability of SAP. It is also highly auditable - a vital consideration for a division like OFM. Dengate says the financial information comes direct from the financial reporting system, with very clear audit trails all the way through - any important concern for most organisations involved in government reporting.

Better still, the system is fully integrated with the existing SAP R/3 financial system. "Had we selected another product, every time there was an upgrade required, or a new version of the SAP R/3 released, there would have been serious questions about the integration capabilities and it would be a continual problem in terms of upgrades and support," says Dengate. "Integration gives us another advantage - if we have a problem with the SAP BW system we know that SAP looks at it as a whole system, as part of SAP.

"And as far as SAP's future strategic direction goes, our understanding is that BW will be an integral feature of their mySAP.com, their future strategic direction for SAP. That means in order to operate your SAP system in the future you will actually require BW. That made BW seem like a good choice in the wider scheme of things."

Delays

For all the benefits, Dengate says the system took longer to deliver than originally envisioned, mainly because the work of operationalising the system began using BW Version 1.2b just before SAP released 2.0a. The decision by the project board to go with the new version created huge amounts of extra work for both the consultants and OFM, but has paid rich dividends.

"The consultants were really keen to do it because there wasn't another site in Australia working on the latest version and we were very keen to do it because we had our responsibilities as lead agency for research and development," Dengate says. "There were strong advantages in going with 2.0a, since it didn't require additional software for the front end. When development started in 1.2b, we actually had to get another product to make it look good at the desktop. So we were keen to upgrade because it meant licensing costs were kept down and questions regarding upgrades and maintenance became non issues in terms of the front end.

"On the other hand, the delay did mean we had to scale back our initial scope for the project, because we knew that there would be a number of uncertainties, and because the new product hadn't been tested and we were the first."

Lessons Learned

Apart from that hiccup, OFM learned the importance of paying careful attention to the hardware aspects of such projects. Dengate admits such issues should have been addressed far earlier in the piece than they were, with the failure to do so creating problems in organising appropriate hardware and negotiating with suppliers.

"It meant within the project that we had to make a couple of decisions that we probably would have preferred not to have made in terms of hardware. That really highlighted to us the need to address those issues up front: not only to address them but to know what is required, and to negotiate early in the piece with suppliers."

The project also reinforced the importance of aligning such projects with the organisation's strategic direction and the impossibility of simply tacking on a brand new piece of technology to existing systems. Dengate says if OFM hadn't gone through such a lengthy scoping phase and so carefully considered where it was then and where it wanted to be in future, it would have made many more mistakes. She says it highlights the importance of reviewing the organisation's strategic direction and ensuring that everything, including its business processes and method of operation, actually aligns with that strategic direction.

Long-Term Prospects

OFM is now considering rolling out the system to other agencies, possibly via a shared bureau service arrangement allowing agencies to avoid significant investments in hardware. It is also evaluating some of BW's 110 Infocubes, which store correlated data in a multidimensional model with specialised cubes for marketing, human resources, finances, controlling and so on.

"Where the information is handled in the system, hopefully the agencies will be able to use the work that we've done already and not have to go through that R&D exercise themselves, and generally we can share our learning with the other agencies as well," Dengate says. "Not all agencies may see this sort of system as necessary for them. I see our role as the lead agency to demonstrate what's available and how it can work, providing something for them to aim towards."

OFM is also looking at upgrading to the recently released version 2.0b, which contains additional functionality, and expanding the HR section of the system. "We'd also like to be able to present the SAP R/3 financial statements through this system for managers in a user-friendly presentation of those financial statements", Dengate says.

And OFM is examining the GIS functions, which may prove extremely important to a huge state like Queensland in the future.

In the meantime, OFM plans to enjoy its award-winning leading-edge technology. Dengate says there may have been much cheaper solutions available to the organisation, but she doubts any would have offered the long-term potential OFM confidently anticipates reaping from the new system.

The Hard Slog Was Worth It

According to project director Lyn Dengate, OFM's new output management performance reporting system delivers significant business benefits in the following areas:

1. The ability to meet internal management reporting requirements including:

* drill-down to trace costs through outputs, sub-outputs, activities, and tasks; * sophisticated analytical capabilities in resource management areas such as HR; and * tracking progress and monitoring the achievement of outputs.

2. The ability to meet external reporting requirements by automating the generation of correctly formatted file.

3. A central data warehouse that provides a "single version of the truth" throughout the entire agency. This then allows decision makers to produce more reliable reports, which ultimately translates into better quality decisions.

4. The high integrity of the data also means that the system is auditable.

5. The ability to roll out the system to a large number of users at low cost, that is over the Internet6. The ability to scale up the system, that is, reduced costs in system alterations as the number of users increase. The system uses the SAP BW which shares all of the scalability features of the R/3 system.

7. Managers can now be held more accountable for their areas and decisions.

8. Training costs for managers will be minimal as the system is very intuitive to operate and uses a Web browser that incorporates many features that staff are already familiar with.

9. The potential for provision of shared services for smaller agencies 10 .Direct communication between executive management and staff.

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