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Case Study


Digital Transformation Leads the State of Illinois to Build a Smarter IT Infrastructure in the Cloud

Consolidating Over 400 Disparate Applications to One SAP Instance for Better Transparency and Decision Making at Lower Costs

by Lauren Bonneau, Senior Editor, SAPinsider | SAPinsider, Volume 20, Issue 1

November 7, 2018

State of Illinois opening image

The disruptive nature of technology innovation is not limited to business: The public sector must also consider the impact of digital transformation. The State of Illinois recognized a need for improved technology and functionality across its growing responsibilities, and in 2016 began a digital transformation that aimed to replace 420 systems across 58 agencies in 30 months. The state selected SAP HANA Enterprise Cloud to deploy SAP ERP and SAP HANA technology across its organization. Learn how it leveraged SAP solutions to achieve better decision making on improved data analysis as well as better spend tracking and hiring processes — and how the gains are causing other agencies across the state to ask how they can benefit.

Caption: Statue of Illinois statesman Stephen Douglas, nicknamed “Little Giant,” in front of east steps of State Capitol building in Springfield, Illinois

Approximately 20 years from now — according to an analysis of 2016 US Census Bureau population projections — half the US population will live in eight states: California, Florida, Georgia, New York, North Carolina, Pennsylvania, Texas, and Illinois.1 This expectation puts an incredible amount of pressure on these states to make sure they can serve their growing base of citizens — and scale their technology environments to keep up with the growth. 

The State of Illinois, for instance, has made massive efforts over the past several years to improve its application and systems landscape and to up its standing as a “smart state.” Every two years, the Center for Digital Government conducts a survey that evaluates each US state on its IT practices and assigns a grade based on quantifiable results of how the state is using technology to improve service delivery, increase capacity, streamline operations, and reach policy goals.2 In 2014, Illinois was given a C+ rating (in the 25th percentile), and by the next digital states survey in 2016, Illinois had improved to a B+ and the 80th percentile.

To achieve this success in under two years, the state underwent a digital transformation to completely overhaul its IT infrastructure and build a smarter technology platform. The first step was launching the Department of Innovation and Technology, which is responsible for consolidating systems, establishing more collaboration among agencies, and cutting IT costs. Initial tasks for this department were creating an Internet of Things (IoT) center of excellence to identify IoT strategies and projects and implementing a cloud-first strategy. “Our overarching plan to digitize the state will be complete when we hit the 90th percentile and beyond — achieved by entering into the technology that supports all-around customer enablement and satisfaction,” says Kevin O’Toole, Chief of Transformation and Digital Innovation at the Department of Innovation and Technology for the State of Illinois. “That’s what we are trying to drive each and every day — and that’s where we know we are going into the future.”

Entering the SAP Ecosystem

As with most government organizations, the State of Illinois had historically been heavily paper-based with manual processes and workflows, requiring official paper copies and ink signatures. The system landscape was composed of hundreds of legacy applications across a large spectrum of technology, including various user-based spreadsheets and databases, numerous accounting, budgeting, procurement, and grants systems, multiple mainframe systems — some that were purchased and implemented and others that sat as unused shelf-ware — as well as some third-party components. “The ‘before’ picture was a completely federated model where each agency operated individually with an enormous mix of applications and multiple system redundancies across all the agencies,” says O’Toole. “This non-integrated, non-automated technology suite was extremely dated, diverse, and definitely not enterprise envisioned.”

Kevin O'Toole, State of Illinois

Not only did we deliver on time, on budget, and with the functionality that we promised, but we also were able to save costs, retire old systems, and bring in the new. Additionally, we improved processes, efficiencies, and time to change, And through all that, we managed to bring in a positive net present value.

— Kevin O’Toole, Chief of Transformation and Digital Innovation at the Department of Innovation and Technology, State of Illinois

Prior to the advent of the Department of Innovation and Technology, the state had considered implementing an enterprise software suite, but due to a variety of political, budgetary, and scalability roadblocks, the project never moved forward. However, in 2016, the state received the budget to undergo a complete digital transformation, which would involve implementing an enterprise-wide ERP system as well as re-engineering and optimizing business processes to create cross-agency standardization. “These agencies have an absolute need to deliver products or services — such as providing food or other human services to a child or a family in need — and none of that can go interrupted,” says O’Toole. “Having an enterprise model and application suite that enables that continuation and provides a consolidated enterprise view was a critical next step.”

After evaluating multiple vendors in terms of integration capabilities, available functionality for financials, human capital management (HCM), and advanced analytics, and the ability to leverage additional apps in the future as part of the core component base, the state determined that SAP offered the most comprehensive package to meet its needs. “When we considered where SAP is going with SAP HANA and how the SAP HANA cockpit could drive enterprise reporting and predictive analytics across the state, SAP was the predominant winner,” O’Toole says.

The state decided to implement SAP ERP 6.x optimized by SAP HANA to establish a baseline for its transformation. “SAP ERP is our foundational building block for everything we want to do in the future from an IT perspective — both from an application and infrastructure viewpoint — because we’re leveraging an entire suite that enables us to create an enterprise-wide view,” says O’Toole. “As part of our digital transformation roadmap, we’re utilizing SAP HANA Enterprise Cloud for all of our rollouts.”

Replacing 420 Systems Across 58 Agencies in Less Than 30 Months

The implementation plan was to roll out the new functionality in three waves in parallel — bringing the agencies live in clusters, starting in October 2016 and concluding in January 2019. “We are replacing more than 400 legacy systems and rolling this platform out across all 50,000 employees to more than 50 scheduled agencies — and then we have other agencies that have already asked to be added in,” O’Toole says.

The scope of the first wave included finance and accounting functionality for the general ledger, accounts payable, accounts receivable, project accounting, bank reconciliation, budgeting, procurement, and grants management. The clusters of rollouts were staggered so that groups of agencies would go live every several months. The pilot cluster that went live in October 2016 was rolled out to three agencies: the Department of Employment Security, the Department of Veterans Affairs, and the Environmental Protection Agency. “We selected three agencies that were very divergent in their applications and tried to blend them at the same time to capture the most change and collect an enterprise view all at once. However, we learned that it would be much more manageable to get them into the enterprise system if the rollout mechanism were based on likeness versus the disparities,” says O’Toole. “Moving forward, we will definitely base the third wave on a likeness trend so that we can leverage similarities across the agencies and consume the change much more easily.”

After the pilot concluded, the second cluster went live six months later (in April 2017) with seven additional agencies: the governor’s office, lieutenant governor’s office, customer service center, capital development board, procurement policy board, historic preservation agency, and office of management and budget. A cluster of three agencies, including the Illinois Department of Revenue, went live in July 2017, and five more agencies came on board in January 2018. July 2018 saw the largest cluster to date with 18 agencies. After two more scheduled clusters go live with the financial suite — two agencies in October 2018 and another 16 in January 2019 — the original scope of the first wave will be complete.

The second wave involves incorporating SAP HANA on top of the platform for advanced analytics and management as well as predictive reporting with the SAP HANA cockpit. “We are leveraging the SAP HANA analytics platform extensively now across our agencies that are just going live, we are retro-ing back to our prior agencies that have already gone live, and now we are aligned with the future waves as well,” says O’Toole. “The reason there was a slight delay was due to scope, scale, and resource availability. But now that we have our feet under us and the foundation rolling, we can start to really deliver on the platform with the SAP HANA enhancements coming through.”

The third wave will deliver the full suite of SAP ERP HCM functionality including hiring management, personnel administration, labor, payroll management, benefits, compensation management, time and attendance, and leave management. That implementation is currently scheduled to kick off. In keeping with the state’s cloud strategy, the longer-term plan is to eventually roll out the full SAP SuccessFactors suite of solutions.

The Team that Pulled It Off

To complete the project successfully, the implementation team had to face many bumps in the road, then hurdles, and then walls to knock down, according to O’Toole. “When you consider the scale of what we are doing — think employees, citizens, budget, and agencies — other similarly sized states that are undergoing digital transformations have 75-100 full-time employees on staff. And we have only 14 full-timers — that’s it,” he says. “With all the macro issues going on, it’s an amazing feat that the team has pulled off.”

From the state’s side, the team is made up of functional experts and a few leads — an audit lead, a functional lead, and a technical lead. Additionally, SAP consultants are helping extensively within the SAP HANA space, and two systems integrators have been enlisted for additional help with governance, implementation support, and training. The size of the implementation team varies anywhere between 30 to 50 people on shore and off shore, depending on the given stage of the project. “The team members currently wear many different hats across this project to support implementation and handle the ongoing change for the continuous waves of the finance piece,” O’Toole says. “There will be a totally separate organization for the third wave, but right now, we’ve done this with very few people who have done a fantastic job, for not only the state but for themselves and the citizens.”

Measurable Results

Now that the state’s data is consolidated in one SAP instance, users can transform, analyze, and report on the data at an exponentially faster rate with a greater level of accuracy, leading to better-informed decision making, according to O’Toole. “The automated processing is one of the new system’s advantages in minimizing resources’ time and effort,” he says. “And the strategic analysis it provides is an enormous driver of improved decision-making processes that can lead to smarter spend or to eliminate spend where it’s not needed.”

With standardized processes and the elimination of redundancies, all agencies now follow the same financial close processes, can perform dynamic day-to-day reporting, and achieve full transparency into budgeting, cash management, and revenue collection across the board — so the state knows where all agencies stand at any point in time. “From a procurement perspective, we can enable the three-way match and know precisely where we are within the spend cycle,” says O’Toole. “From a grant perspective, we know exactly what is being funded and how it’s being used, and from a general ledger perspective, we can track where financial accounts are on a daily, monthly, quarterly, and annual basis.”

With transparency at an enterprise view, citizens of Illinois can track and trace the state’s spend and how funds are being allocated. “Citizens can see where money’s spent, what it was spent on, when it was spent, by whom, and arguably why,” says O’Toole. “The ability to enable agencies to be that transparent provides citizens with assurances and accountability. And then from a security perspective, everything is auditable so we can more easily meet the demands, needs, and asks of the office of the auditor general.”

State of Illinois image

From an employee’s point of view, having a common, consistent, and centralized application and operational base helps current state employees drive efficiencies as well as develop transferable skills to more easily move up the ranks between different agencies. Prospective employees also will have a quicker and easier time engaging with the state. “If people from out of state want to apply to a state job, they don’t have to fill out multiple paper forms, send them to different people, and hope they find the right queue,” O’Toole says. “The new hiring and recruiting process will be much more streamlined and inviting to prospective hires. For example, rather than wasting time making phone calls and getting physical paper sent to us, a process that previously could take weeks, the automated system will electronically transfer any resumes and relevant data that comes in to the appropriate hiring agencies.”

According to O’Toole, considering prior failures, the current environment, the delivery execution, and the value-add the state now provides citizens, the SAP project was an enormous achievement. “Not only did we deliver on time, on budget, and with the functionality that we promised, but we also were able to save costs, retire old systems, and bring in the new,” he says. “Additionally, we improved processes, efficiencies, and time to change And through all that, we managed to bring in a positive net present value.”

Digital Enhancements to Build a Smarter Technology Platform

The state has already begun building on its SAP system foundation and leveraging some of the latest technology trends, such as mobile apps, robotic process automation (RPA), machine learning, and artificial intelligence. Currently the state has enacted two RPA pilot use cases built within SAP ERP (and eight additional use cases that are currently being evaluated). “All of these use cases are designed to make our employees jobs quicker, better, faster, and more efficient, and to enable them to transact smarter, make more strategic decisions, and provide guidance that will trickle throughout the system,” says O’Toole.

The state first rolled out an RPA pilot that focused on speeding the post-load data validation process during implementations. Instead of having people break down rows and rows of data to look for mistakes or idiosyncrasies, the automation runs various checks on data loaded into the SAP ERP system so the need for human review is isolated only to potential errors that are identified. “We have removed hours of manual work on these data loads so that agencies can process and remove errors very quickly, which helps them speed production and start to trust the process even more,” O’Toole says. “We have a groundswell of people who are impressed with how well the process automation works and are already asking where else we can apply RPA and machine learning.”

The second pilot aimed to improve the accounts receivable (AR) reconciliation process so business users can spend more time analyzing financial data. In the previous days of multiple systems and paper-based processes, reconciling AR data was a cumbersome and laborious process, according to O’Toole. “With the state-wide move to one SAP system, we are automating, isolating, and correcting AR data, and strategically moving forward into better and faster decision-making processes, versus wasting valuable time trying to figure out where and why reconciliations or systems were off.”

Another effort in the goal of building a smarter technology platform included delivering data-driven mobile applications to be more digitally enabled with Illinois citizens. “We created a series of quick-to-launch applications that are built upon common business structures and business rules that we can personalize according to the agency that’s rolling it out,” says O’Toole. “We can analyze that mobile application data to see particular trends, such as where people are traveling and spending their money or what type of licenses are being bought, renewed, or cancelled.”

This information can improve marketing and advertising within certain communities of the state and provide opportunities to transcend into the next layer of smart enablement. For example, first-time visitors to a city in Illinois might go to a digital kiosk that suggests certain museums or restaurants to visit. Then suddenly they receive a coupon to that museum or restaurant right to their phones that’s available when they walk in the door. “Mobile technology like this helps us complete our customers’ experience by digitally enabling transactions in a way that they trust,” says O’Toole. “But more importantly, it captures their attention and interest, and enables an upward trend of customer appreciation and satisfaction from all levels.”

Secret to Success

O’Toole credits the success of the program to his core team members, who presented a united front in their passion and drive for undergoing the large-scale digital transformation project. “They knew the state needed change and that citizens would derive value from those changes,” he says. “Operating as a collective unit each day, they worked together to deliver a viable product that would transfer sustainable, clear benefits to the organization. What the team pulled off is incredible, and they succeeded because they believed in the product and the process improvements it could bring, and they believed in themselves.”

State of Illinois

Statehouse: Springfield, Illinois

Industry: Government

Employees: 50,000+ across 50+ agencies (5,000+ SAP users)

Budget: Approximately $70 billion

Details: Completed statewide design within 7 months, rolled out SAP ERP across 3 pilot agencies within 6 months and another 35 in under 2 years, and dispersed over $3 billion to date through the new system

SAP solutions: SAP ERP, SAP HANA, and SAP HANA Enterprise Cloud

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