Supported by SAP and developed by CTG, the new methodology, termed “Public ROI,” demonstrates how assessments of public value creation can extend far beyond financial savings to actually show gains in governmental integrity and transparency for a wide range of stakeholders, including constituents and politicians. The announcement was made in conjunction with the Impact of eGovernment in Europe Conference, sponsored by SAP and being held in Helsinki, Finland on September 13, 2006.
As part of this effort, SAP and CTG also announced the first results of five Public ROI case studies with federal and state government bodies, including the Commonwealth of Pennsylvania; the Government of Israel; the Federal Government of Austria; Service New Brunswick, Canada; and the State of Washington Digital Archives. SAP and CTG worked collaboratively with these organizations to examine how significant IT investments were conceived and developed, with particular attention to the role of public value in the process. An analysis of the five case studies revealed two key sources of public returns:
- Value to the public that results from improving the government itself
- Value that results from delivering benefits directly to persons, groups or the public at large through government-to-citizen and government-to-business interaction
As governments seek to operate more efficiently and transparently, public sector organizations need a way to determine return on investment (ROI) beyond the traditional benchmarks of quantifiable, financially-based outcomes such as reduced transaction costs or cost avoidance. The results and key findings of these case studies support SAP’s global initiative to help public sector organizations calculate the ROI of information technology (IT) projects.
“The main goal of the project was to introduce an assessment of public returns that is credible, persuasive and highly relevant to the investment decisions faced by governments,” said Anthony Cresswell, deputy director at the Center for Technology in Government and lead author of the white paper. “Most methods for assessing return on investment focus solely on financial or economic metrics; the approach presented in our white paper provides a broader, more diverse range of ways in which IT investments can produce results of value to citizens or to the society as a whole.”
“Since governments are non-profit organizations, applying only financial ROI measurements is limiting-and does not present the full picture of performance,” said Andrea Di Maio, research vice president, Gartner. “ROI measurements in the public sector must include both the tangible and intangible effects of government IT spending across multiple dimensions, including financial, social and political.”
Public ROI Methodology
The results of these case studies and related research are featured in a white paper written by CTG that presents a broader framework and recommendations for conducting public ROI assessments for government IT projects. Because government IT projects can range in size and complexity, the Public ROI framework itself is broad in scope, allowing for application to virtually any government IT investment-from simple Web sites to government-wide information systems. The non-proprietary framework provides an analysis process that starts with a high-level view of the IT investment and then drills down through successive steps to identify the specific measures and methods that will reveal and document returns in terms of either direct service delivery or a composite of several measures such as cost savings, increased service quality or process efficiency, and enhanced public trust.
Based on a set of benchmarks, the Public ROI framework can be used to demonstrate trustworthiness to citizens, help ensure governance in the value of operations, promote positive community programs to business constituents and boost efforts for securing public funds. Social and political returns can also help governments meet objective performance standards, reflecting the multi-dimensional benefits that organizations deliver to constituents.
The Commonwealth of Pennsylvania
From the beginning, the Commonwealth’s Integrated Enterprise System (IES) was much more than a technology project. The enterprise resource planning (ERP) software implementation has had consistent top-level executive support; eventually putting in place the technical infrastructure and enterprise standards for core administrative functions with improved public value.
In early 1999, the Commonwealth began two separate but closely related procurement processes: one to select the ERP software and a second to select a systems integrator to help state agencies manage their migration to a new ERP-based business information system. In June 2000, SAP was selected under a competitive procurement to provide its suite software and in December 2000, KPMG Consulting was selected as the system integrator to help the Commonwealth plan and execute the transition from the existing Integrated Central System to the SAP software. The three-year contract for both the software and consulting was for approximately $51 million; funding for which was included in the 2001 Commonwealth budget.
Between early 2001 and mid-2004, the ERP implementation for the five business functions was completed for 53 Commonwealth agencies including all 49 of the agencies under the Governor’s jurisdiction. Immediate returns in the form of improved government operations were realized soon after implementation and continue today. However, this infrastructure also provides the Commonwealth with capability that can be further leveraged to support additional improvements in government operations that go well beyond direct improvements in core administrative functions.
The Commonwealth has begun such efforts. The IES infrastructure provides public returns in the form of direct improvements in the efficiency and effectiveness of core administrative functions. This infrastructure also provides the basis for improvements in the back office operations of other service areas which, in turn, offer improved services to the public. The Commonwealth has recently taken steps to move in this direction by implementing the necessary institutional structures and policies to take fuller advantage of this enterprise-level asset.
The Federal Government of Austria
The Austrian Federal Budgeting and Bookkeeping System project aimed to consolidate 85 individual bookkeeping agencies, previously dispersed across four locations, into one organization. The federal government sought to integrate the electronic workflow of its budget and bookkeeping processes using mySAP ERP, SAP’s flagship enterprise resource planning solution. The bookkeeping system was part of a larger effort to leverage SAP technology throughout the Austrian Federal Government to transform, reorganize and consolidate legal and management strategies as well as to implement a modern accounting and budgeting standard across the government.
“Using the Public ROI methodology, we were able to convey the benefits of our ERP project beyond just expense reductions and efficiencies across the bookkeeping agency,” said Christian Ihle, head of the Department of Accounting and Controlling. “For instance, having better financial information can help make government budgets and expenditures more transparent and thus more legitimate and acceptable to the public. And a more efficient government can provide higher quality services. These are the ‘social’ and ‘political’ ROI factors we were able to communicate to our stakeholders.”
The Government of Israel
The Merkava Project of the Government of Israel (GOI) is part of a multi-year strategic plan, described in 2002 by Prime Minister Ariel Sharon: “The e-Government project is an expression of the government goal to provide state-of-the-art strategic systems while affecting social and economic national targets. We believe that this infrastructure constitutes a better tomorrow and that tomorrow is already here.”
The GOI is leveraging mySAP ERP to restructure the financial, logistics and human resource components of government-wide administration into a more modern standardized government operation to enhance internal operations and improve benefits and services to citizens.
“We will use the Public ROI methodology on our Merkava project to try and improve the link between the resources invested in the project and the returns it has generated,” said Yitshak Cohen, senior deputy accountant general and CIO, Ministry of Finance for the Government of Israel. “We also aim to leverage the Public ROI methodology to restate the goals of the Merkava Project and revisit our current government-wide rubric for managing the life cycle of IT projects.”
“While financial measures remain important in developing a business case, we need to take stock of the other factors that contribute to fulfilling the organizational mission of public sector agencies such as citizen service and public safety,” said Tom Shirk, president, SAP Global Public Services. “We are seeing great results thus far from our Public ROI initiative to identify and assess the real-life issues that governments are addressing through their use of technology. We look forward to helping more public sector customers prove and improve their value to customers, taxpayers, and stakeholders.”
About the Public ROI Initiative
Launched in May 2005, and spearheaded by SAP’s Global Public Services organization, the Public ROI initiative has brought together SAP customers, public sector experts and advisors from distinguished organizations around the world, to identify the key needs, challenges, research areas and approaches for developing a universally accepted method for public sector ROI analysis. The first five case studies examining how government IT investment deliver value to the public, as well as the whitepaper outlining the larger framework for assessing public returns on government IT investment, can be found at http://www.ctg.albany.edu/projects/proi.
About SAP for Public Sector
SAP for Public Sector provides comprehensive solutions to help governments and public organizations improve economic viability and increase process efficiency and transparency while better serving the needs of the public. With more than 1,320 customers in 70 countries, SAP is the leading provider of enterprise business solutions to the public sector.