1. - 1- Just enough. Just in time. Just for you March 24, 2011 Building a solid foundation: A new approach to ERP acquisition March 24, 2011 Mike Reyna Project Director FI$Cal Project 916-576-4848 Michael.reyna@fiscal.ca.gov Graeme Finley Director Grant Thornton LLP 916-339-4991 Graeme.finley@us.gt.com

2. - 2- Just enough. Just in time. Just for you Agenda The importance of procurement Issues with traditional procurement approaches FI$Cal overview The FI$Cal procurement approach

3. - 3- Just enough. Just in time. Just for you The importance of procurement For most government organizations, implementing a complex business solution requires planning and executing a significant IT software and services acquisition. In many cases, the success or failure of a large IT project can be traced back to the way in which the acquisition for the project was conducted.

4. - 4- Just enough. Just in time. Just for you The traditional procurement Issue Request For Proposal Receive vendor proposals Conduct negotiations (sometimes) Issue contract award Issue contract modification etc….

5. - 5- Just enough. Just in time. Just for you The problem of requirements A key objective of the acquisition process is to obtain responsive, realistic proposals from vendors. The likelihood of receiving good vendor proposals is greatly increased when: o Vendors have a sound understanding of the governments business needs o The government has a sound understanding of the information needed by the vendor community to develop an effective response Too often, System Integrators' (SIs) only learn the nature and complexity of the states needs after a contract has been signed, a price has been negotiated, and a vendor team is on the ground. The Oh, thats what you meant! moment should be before, not after, the contract is signed. All too often it is not.

6. - 6- Just enough. Just in time. Just for you Issues with traditional procurement approaches Typical consequences of an imperfect understanding of government needs and requirements: Unrealistic timelines or budgets, causing cost and schedule overruns, and disagreements between the government and vendors over scope, cost and timeline; Gaps in necessary government and vendor staff experience, reducing the likelihood that project cost, schedule and quality commitments will be met; Solutions that do not meet user business needs, causing user dissatisfaction with the delivered product and reducing the benefits gained from the final system; and Ineffective project management, which increases the likelihood of cost, schedule and/or quality problems.

7. - 7- Just enough. Just in time. Just for you How can we address this issue?

8. - 8- Just enough. Just in time. Just for you FI$Cal overview The Financial Information System for California (FI$Cal) Project is a statewide business transformation project that will significantly reengineer the states financial management business processes using the inherent best practices embodied in a Commercial-Off-The-Shelf (COTS) Enterprise Resource Planning (ERP) tool. FI$Cal will enable the state to operate as a single financial enterprise, for the first time in California history.

9. - 9- Just enough. Just in time. Just for you Why is FI$Cal necessary? The state uses outdated systems, technologies, and applications which are expensive to maintain. Current systems lack functionality, which require many state agencies to maintain auxiliary systems and spreadsheets. Existing systems are not integrated, which results in countless hours manually entering, reentering, and reconciling data to ensure accuracy and reliability. Non-standard and complex business processes result in inefficiencies as well as a lack of financial management effectiveness and transparency.

10. - 10- Just enough. Just in time. Just for you The FI$Cal approach To view the State of California as a single financial enterprise requires a partnership of the key financial management authorities: o Department of Finance o State Controllers Office o State Treasurers Office o Department of General Services o The Partnership also includes the collective participation of all departments.

11. - 11- Just enough. Just in time. Just for you FI$Cal scope Accounting Budgeting Cash Management Procurement Vendor Management FI $ Cal

12. - 12- Just enough. Just in time. Just for you The FI$Cal vision Information in a single system Statewide and department functions connect in a single system Work flows between electronically departments

13. - 13- Just enough. Just in time. Just for you The FI$Cal approach Mitigate procurement and implementation risks by: o Leveraging the inherent best practices embodied in COTS software, rather than trying to reinvent the wheel. o Phasing in functionality and departments over time, rather than all at once so that lessons learned from past challenges can be applied to future phases. o Engaging state departments and staff early and often to seek their input and prepare them for change. o Using a two-stage procurement strategy to get the right vendor with the right solution at the right price.

14. - 14- Just enough. Just in time. Just for you The FI$Cal procurement approach Two-Stage Procurement: Publish a single RFP with content for both phases. Stage 1: Awards contracts to three Fit-Gap bidders to participate in the Fit-Gap phase. Stage 2: Awards a single contract to one of the three fit-gap contractors to implement the FI$Cal system.

15. - 15- Just enough. Just in time. Just for you What is the Fit-Gap and why is it important? The Fit Gap is Stage One of the two-stage procurement process, during which three vendors are paid a fixed price to identify gaps between their COTS software solution and the states business and technical requirements. Each vendor will use the information developed during Fit Gap to estimate the effort required to fit their solution to the needs of the state and submit a Stage Two bid proposal with a detailed implementation plan and all costs required to carry it out. Five deliverables from each vendor: o Functional Architecture o Technical Architecture o Business Process Reengineering Opportunities o Implementation Plan o Pilot demonstration of COTS

16. - 16- Just enough. Just in time. Just for you Benefits of the FI$Cal procurement approach Fit Gap addresses a major source of IT project overruns (i.e., extensive and expensive work order changes) caused by bidders misunderstanding of business and data conversion requirements, existing processes and systems, and the impact of the new solution on the organization. A two-way flow of information: o Bidders gain a deeper understanding of state business processes and functional and technical requirements o State gains a fuller understanding of the capabilities (and limitations) of the software Fit Gap deliverables become property of the state, regardless of contract award decision Fit Gap process also includes advance negotiation of contract terms and conditions

17. - 17- Just enough. Just in time. Just for you FI$Cal procurement status Awarded the Stage One Fit Gap contracts to three vendors in June 2010: o Accenture (PeopleSoft) o CGI (CGI-AMS) o IBM (SAP) Fit Gap presentations and requirements review complete Four of five Fit Gap deliverables complete Deliverable five (software pilots) will be complete by March 25 th 2011

18. - 18- Just enough. Just in time. Just for you The FI$Cal procurement next steps Stage Two proposals due from Fit Gap vendors in June 2011. Contract award scheduled no later than April 2012.

19. - 19- Just enough. Just in time. Just for you Questions