Chipping in to foot the IT systems bill

The information age is tough for small municipalities. Citizens expect convenient online services, but implementing the latest generation of software is a formidable task for municipalities with limited money and expertise.The Alberta Urban Municipalities Association (AUMA) is helping. Several years ago the AUMA, an association of city, town and village governments, started exploring how to help members get the latest financial and operations software to support improved online services and better reporting. The result was Munishare, a shared-services project to give municipal governments access to systems from software giant SAP AG, hosted for them by Telus Corp. and managed by Calgary-based SAP partner Sylogist Ltd.
John McGowan, the AUMA’s chief executive, says his organization didn’t believe it should buy computers, hire programmers and run financial systems. “We would only agree to do this if we could go to a shared model,” he says. A study focused on two municipalities — the City of Cold Lake and the Town of Beaumont — concluded a shared-services approach could bring significant efficiencies.
McGowan says the AUMA would have moved step by step, implementing for instance a general ledger system first, then payroll and so forth, but member municipalities said no, they didn’t want to hold onto legacy systems until the project was finished. It was all or nothing. A request for proposal in late 2003 brought 11 responses, and the AUMA chose SAP as the software provider. The next challenge was tailoring SAP’s software to municipalities’ needs. Paying for this could have been a stumbling block, because AUMA and SAP could not be sure of recouping their initial investment until the template was constructed and enough municipalities committed to use the software.
Building the template
McGowan turned to the provincial government, obtaining up-front funding to develop the template. That is under way now, and eight municipalities have signed contracts. “Those municipalities are leaders,” McGowan says, “and they’re helping us build what the template should be.”
Eventually, McGowan says, AUMA hopes 100 to 150 municipalities will use the system. Participants will pay three types of fees — SAP licences, implementation charges and annual maintenance — prorated on the basis of their operating expenditures. The risk is shared among the AUMA and software and services providers. “If the money doesn’t come in,” McGowan says, “then nobody gets paid.”
Larry Achtemichuk, former e-business program manager for CANARIE Inc. and an advocate of shared-services projects, calls getting vendors to assume a share of the risk a coup. One challenge for such projects, he says, is that vendors usually want to negotiate a firm price up front, leaving users or a co-ordinating body to assume the risk.
Achtemichuk says shared services are a good way to address information technology needs that exceed the capabilities of individual bodies.
A January 2005 study by consultancy Accenture Inc. titled Driving High Performance in Government: Maximizing the Value of Public-Sector Shared Services says shared services help government agencies focus resources on what has most impact rather than on routine administrative systems.
Such projects aren’t always easy, but the AUMA has an advantage because it has a track record in shared-services initiatives. McGowan says its other projects include providing insurance and employee benefits programs and electrical and gas supplies for its members.
Management challenge
That gives the AUMA a head start on what Accenture called the greatest challenge with shared-services projects — knowing how to manage them. The next biggest issue, according to Accenture, is clear leadership support, followed by meeting user expectations, establishing a governance structure and achieving co-operation among departments. Munishare’s immediate task is agreeing on what the system must deliver. McGowan is pleased with progress to date. The AUMA has brought in change managers to help in this process and to work with municipalities as they implement the new systems.
Shared-services initiatives are appearing at various levels of government in Canada, according to Alden Cuddihey, partner in Accenture’s government service practice in Ottawa. “You see it at the municipal level, you see examples sometimes in the hospital sector, you see examples sometimes in school boards, where there is a recognition that their back-office functions could easily be shared,” he says.
About 18 months ago, a group of 14 Toronto hospitals began putting together Hospital Business Services, a shared-services body that will run accounting, payroll and other financial applications for members and potentially for other hospitals in the future. Ron Buckle, chief executive of HBS, says hospitals saw that they were duplicating efforts and could not individually afford to optimize those services and keep up with new technology.
HBS recently completed a request-for-information process and will soon issue requests for proposal, says Julie Mitchell, vice-president of human resources and communications. Buckle says HBS will replace most of its members’ existing systems with common, centrally hosted systems, possibly keeping some existing software if it can do the job for everyone.
One of the greatest challenges facing HBS, Mitchell says, is working out how employees will be affected. With 14 hospitals, three unions and 28 separate collective agreements involved, she says, it will take provincial legislation to clarify the process. That will just be the beginning of a complex transition that involves, for instance, consolidating at least six different human resources systems into one, dealing with different pay dates and other headaches.
Decision-making can be cumbersome in initiatives like these. Buckle says the key is having the right governance model. In HBS’ case, the member hospitals worked together to decide what services and service levels they needed..
Achtemichuk says shared-services projects must define their scope carefully. Make the scope too narrow and the project won’t accomplish enough to be worthwhile. Try to do too much and it will bog down. The trick, he says, is to start with modest but significant initial goals, achieve them and then build on that success.