Creating Value through ICT in Local
Government – the Cape Town experience
Name surname
Company
Function & Duties Municipalities
Local Government –
the delivery arm of Government
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2
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
Demographics of Cape Town
Population:
3.4 million
Share of National GDP:
Share of Provincial GDP:
15.9 %
82 %
Area:
2461 km2
Rateable Properties:
700 000
Employees:
23 579
City of Cape Town annual budget 2009/10:
Revenue:
Capital:
R18,8 billion ZAR
R 6,2 billion ZAR
City of Cape Town annual Income 2009/10:
From Utility Services:
From Property Tax:
3
53 % of total Revenue
23 % of total Revenue
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outdated, functionally inadequate and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”
4
Creating Value in the Public Sector –
Advance Social Upliftment
High
“City Leadership only get involved when they realise that –
if IT fails they will fail ”
Address
historical backlog
and service
Inequality –
Social Upliftment
Improve Service Del.
Result:
Continue
doing more of
the same.
Med.
Financial &
Organisational
Transformation
Enabled trough
ICT
Long-term
financial
Sustainability and
Improved
Efficiencies
Improved Efficiency
5
High
Create
financial
value
Advance social
upliftment
Information
transparency
Enhance
Organisational
Performance
Enable
Social / Political
Conscious
policies
Improve
service delivery
Creating Value
Create
financial
value
 “How can you justify
Enable
Social / Political
Conscious
policies
Advance social
upliftment
Information
transparency
Improve
service delivery
Advance Social Upliftment
High
Enhance
Organisational
Performance
Address
historical backlog
and service
Inequality –
Social Upliftment
Improve Service Del.
Result:
Continue
doing more of
the same.
Med.
6
Financial &
Organisational
Transformation
Enabled by ERP
Programme.
Long-term
financial
Sustainability and
Improved
Efficiencies
Improved Efficiency
High
spending money on
computers when the
business of Local
Government should be all
about:”
 Social Upliftment
 Service Delivery
 Sustainability
Public Sector
Value Creating Measures
Quantifying only the tip of the Iceberg
Financial VALUE
7
What makes Organisations Successful?
Strategy
Organisation
PROCESS:
How are we going to do it?
Process
People
8
People:
Who is going to do it ?
TECHNOLOGY
STRATEGY:
What must we do ?
Our ERP Strategy – Fundamental
to Organisational performance
CUSTOMER Processes
IT system.
HR processes
PROJECT Processes
integrated
ASSET MANAGEMENT Processes
leasing, customer care on a single
PROCUREMENT Processes
for managing services such as financial, revenue,
human resources, maintenance, procurement,
REVENUE Processes
system offers organizations a
comprehensive and integrated solution
MAINTENANCE Processes
An ERP
PLANNING processes
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.
9
ACCOUNTING processes
Business Process Integration
- Billing to sundry debtors
FI
Sales &
Distribution
Financial
Accounting
MM
- Procurement &
Inventory
Management
SCADA*
PP
Materials
Mgmt.
- Plant Maintenance
 Single Instance
PM
PS
Project
System
WF
- Asset
Management
Workflow
IS
HR
Service
Mgmt
- Human Resources &
Payroll
 8 250 Users
Plant
Maintenance
SM
- Management Accounting
Fixed Assets
Mgmt
Quality
Management
Work
Clearance*
CO
AM
R/3
 and
420 end-to-end Business
Processes
IS-U/CCS
 Cost: R354mil (in 2002)
QM
Field
Service
Support
ERP Fact Sheet
Controlling
Production
Planning
EDI
- Financial Accounting
SD
Human
Resources
 > 500 SAP Sites CityIS-RE
Wide - Project Accounting
Industry
Solutions
 3,2 mil
ISU
GIS
CAD
AM/FM
 1,2 mil
IS-U /
FERC
contracts
IS-U/
consolidated
CCS
- Real Estate
Management
invoices per month
- Industry Solution for
Utilities
- Customer Care &
Revenue Management
10
Cape Town’s ERP Strategy
Blaauwberg
CA PE
ME TROP OLITA N
AREA
Tygerberg
Oostenberg
Cape
Town
South
Penins ula
11
City of
Cape Town
Helderberg
“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”
Creating FINANCIAL VALUE
The City’s ERP-ROI Study:
R0
-R 20,000,000
2001/2
2002/3
2003/4
2004/5
Total Project Cost Over 3 years:
-R 40,000,000
R355 mil (2001-2003)
-R 60,000,000
-R 80,000,000
Support Costs
-R 100,000,000
Project Costs
-R 120,000,000
Support Cost: p/a
R 62 mil (2003)
-R 140,000,000
-R 160,000,000
-R 180,000,000
R 350,000,000
-R 200,000,000
R 300,000,000
Value Creating Opportunities
(VCO’s) tracked:
 Support Staff Costs
 IT TCO
 Revenue
 Inventory
R 250,000,000
Staff Costs
R 200,000,000
Revenue
R 150,000,000
Inventory Benefits
IT Value Opportunity
R 100,000,000
R 50,000,000
R0
2001/2
12
2002/3
2003/4
2004/5
City’s ERP program ROI:
Payback in 36 months
R 500,000,000
Break-even in June 2005 – with only 11% of the financial value of
Improved City Revenue attributed to the ERP Program.
R 400,000,000
R 300,000,000
R 200,000,000
R 100,000,000
R0
2001/2
2002/3
2003/4
2004/5
2005/6
2006/7
2007/8
R -100,000,000
R -200,000,000
R -300,000,000
Costs
13
Benefits Realised
Actual Case
Expected Case Feb2002
2008/9
FINANCIAL VALUE
Improved Cash Position
Cash Position - City of Cape Town
June 2002 to July 2006
2,000
1,500
Go-live
1,000
Planned loan of
R300 mil not
taken up
500
Budget
14
Actual Cash Position
Jun-06
Dec-05
Jun-05
Dec-04
Jun-04
Dec-03
Jun-03
Dec-02
0
Jun-02
R '000 000
2,500
ICT spend in the City of Cape Town
IS&T as % of total City Expenditure
3.50%
3.00%
2.50%
2.00%
1.03% =
R200 252 579
1.50%
1.00%
0.50%
The value of our IT investment can not be doubted.
A relatively diminishing investment is enabling an
growing organisational capacity.
0.00%
2007
2008
2009
2010
IT investment as Percentage of City total expenditure
15
2011
Public Sector
Value Creating Measures
Quantifying only the tip of the Iceberg
Political VALUE
Citizen VALUE
Social VALUE
Financial VALUE
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Creating: SOCIAL VALUE
Large 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 Tariffstructures 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
Process
Flexibility 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:
Go-live
Jan 2003
19
Sept 2003
Oct 2003
Value Creation demands Ongoing
Investment
2001
2002
2003
2004
2005
2006
2007
2008
2009
ERP Story: 2001-2010 – it’s a journey
1
6
HCM
Benefit
Realisation
Business
Warehouse
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PSRM
4.7 Upgrade
Corporate
Performance
Management
Flexible
RE
ERP6 Upgrade
2010
City of Cape Town System Capability
Financial
Perspective
Corporate
Performance
Management
Business Warehouse
R/3 and IS-U
Logistics
Human Resources
Real Estate and Land
Revenue Management
Finance
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Customer
Perspective
Vision and
Strategy
Innovation &
Learning
Perspective
Internal Business
Process
Perspective
Service Delivery:
The core business of Local Government
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
The Notification Process
Managing Service Delivery through the Corporate
Works Management Process.
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Spatial Reporting: Service Delivery
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The City’s Dashboard
and Reporting Tools
The Value of up-to-date Management Information –
presented via dashboards
City of Cape Town a Systems View
Financial
Perspective
Corporate
Performance
Management
Business Warehouse
R/3 and IS-U
Logistics
Human Resources
Real Estate
Revenue Management
Finance
25
Customer
Perspective
Vision and
Strategy
Innovation &
Learning
Perspective
Internal Business
Process
Perspective
“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 –
Operational
Reports
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Tactical
Reports
Strategic
Reports
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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The Role of IT Systems in Value Creation
IT Systems allow organisations to align and enforce:
Strategy
Organisation
PROCESS:
How are we going to do it?
Process
People
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People:
Who is going to do it ?
TECHNOLOGY
STRATEGY:
What must we do ?
The Systems Approach has created
Value through being:
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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.
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Thank You
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