by David Baum
Public Service: In an era of deficit control, LOGIS delivers enterprise-caliber technology to public agencies.
Headquarters: Golden Valley, Minnesota
Industry: Local government/information technology
Revenue: US$8.2 million in 2011
Oracle products: JD Edwards EnterpriseOne Financials, JD Edwards EnterpriseOne Capital Asset Management, JD Edwards EnterpriseOne human capital management and supply chain applications
Length of tenure: 23 years
Education: BS in computer science, Colorado State University
Personal quote/mantra: “I believe in the reverse organizational pyramid; I’m at the low point, providing resources to make all others successful.”
Back in 1972, seven city finance managers gathered in a small suburb of Minneapolis to discuss their need for a new accounting system. None of them could afford to purchase the latest enterprise-caliber technology, so they decided to pool their resources. The group created Local Government Information Systems (LOGIS), an intergovernmental service bureau, to provide software applications, data processing facilities, and management information systems via a shared services environment.
During the intervening four decades, LOGIS has evolved into a cooperative partnership that serves 45 governmental entities and more than 2.1 million residents—about 40 percent of the state’s population. It includes 37 cities ranging from 10,000 to 100,000 residents, 4 counties, and several intergovernmental agencies such as the Metropolitan Airports Commission, the Northwest Community Television group, and the Minnesota Valley Transit Authority.
“Local government entities generally can’t afford world-class ERP [enterprise resource planning] solutions,” suggests Mike Garris, executive director at LOGIS. “A shared IT environment provides superior software functionality and creates a backbone for many types of back-office solutions.”
To deliver on the promise of shared services IT, LOGIS management standardized the computing platform on Oracle’s JD Edwards applications for accounting, capital asset management, human resources, and payroll. The backbone of the JD Edwards infrastructure is a private cloud that allows LOGIS to leverage economies of scale while maintaining autonomy in overall governance (see “A Private Cloud for the Public Sector”). Each member can subscribe to software functionality from Oracle and other vendors. By utilizing highly efficient cloud-based applications and services, members are free to focus on their core missions.
“Pooling resources enables better purchasing power, leading to lower costs for hardware, software, implementation, maintenance, support, backup, and disaster recovery services,” Garris says. “At a time when most local governments are starved for resources, city governments and municipal agencies in Minnesota have largely avoided these problems by teaming up to create a shared services model.”Private Sector Lessons
LOGIS operates like a private company, with a board of directors drawn from the various member organizations. Its modern IT infrastructure includes a fully functioning “hot site” located 13 miles from the main data center that includes duplicate servers, network communications, and databases for all critical applications. The application load is balanced between these two fully functioning operating environments, with automatic failover in the event of a mishap. To maximize performance and security, LOGIS created a fiber-optic network that spans hundreds of miles around the Twin Cities.
Shared service environments are becoming progressively more popular among state and local governments, many of which are struggling to do more with less and to maximize their investments in information technology. As government services move online, having nimble information systems becomes increasingly important. Upgrading is expensive, and many municipalities don’t have the budget for capital improvement projects.
We looked at all the major players. The JD Edwards applications clearly represented best practices we thought would be helpful to our users.”
“With most governments squeezed down to the last penny, it’s not like agencies can go out and shop for new software whenever they want to, let alone set up this type of network and disaster recovery operation,” says Daryl Sulander, finance manager at LOGIS. “It’s hard enough just to update your systems to stay current with all the changes in payroll regulations, taxation, and so forth.”
Previously Sulander served as finance director for New Hope, a city on the outskirts of Minneapolis with 21,000 residents that has been a LOGIS customer for 20 years. Having experienced LOGIS as both a supplier and a customer, he believes it represents a model that provides its members with the best of both worlds: local autonomy and shared costs. All members share the JD Edwards applications, yet each member has its own database instance, physically segregated from the others. Costs are allocated based on the number of modules and the amount of disk space they use, along with a variety of metrics such as full-time employee count, number of W-2s generated, and the number of financial transactions that hit the general ledger.
Sulander currently manages a staff of five people that supports the JD Edwards environment. As finance manager, he is also responsible for internal accounting, using a cost-allocation model to equitably bill for LOGIS services.
“Our JD Edwards system can accommodate very small organizations with simple needs as well as larger organizations that require much more complexity,” he says. “It has the flexibility and robustness to handle a disparate mix of users.”Technical Progress
Digital government is not just about buying and installing computers. Rather, it involves redesigning the way a government works and efficiently executing projects while actively managing change. For example, prior to deploying JD Edwards, LOGIS ran disparate systems for finance, payroll, and HR. There was little cohesion among its enterprise applications. As Garris tactfully puts it, “Working with multiple vendors created an interesting set of issues.”
Garris’ organization wanted to find a modern ERP solution with tight integrations among these major applications. “We looked at all the major players,” he recalls. “The JD Edwards applications clearly represented best practices we thought would be helpful to our users.”
Since then, Oracle has continued to improve its industry-leading ERP system to add new functionality, thereby creating a robust and flexible Web-based solution.
“We’ve had no reason over the last dozen years to go looking for something else,” Garris adds. “Despite our growth, the efficiency we obtain from our cloud-based applications means that we have not had to hire additional full-time employees. Oracle’s decision to standardize on Web browsers and other IP-based technologies has enabled us to support more users with the same set of staff.”
We’ve seen impressive gains with the user interface. Oracle continues to release functionality that makes the software easier to use.”
LOGIS’s progression from a mainframe to a cloud environment is most visible in the user interface, which has evolved from a character-mode “green screen” to hosted Citrix applications to a pure Web client.
“Oracle has a good roadmap for the JD Edwards applications and has continued to add new functionality,” explains David Schleicher, JD Edwards applications supervisor and business systems analyst at LOGIS. “We’ve seen impressive gains with the user interface. Oracle continues to release functionality that makes the software easier to use.”
In addition to sharing this industry-leading technical infrastructure, all LOGIS members benefit from an ongoing exchange of ideas and best practices. Each member can choose how much or little involvement they want to have in the technical and business decisions that affect the consortium. They can be involved in technology selection and testing, in troubleshooting, and in recommending enhancements and customizations—or they can simply sit back and take advantage of all the new functionality.Rapid Ramp-Up
Onboarding a new LOGIS member within the domain of finance, HR, or payroll is typically a three- to six-month cycle. Once implemented, learning the software is relatively easy.
“Within a couple of days, you can acquire a very good understanding of the processes within the various financial modules,” Schleicher says. “The core functionality is the same throughout the system. That reduces the learning curve, since your skills readily translate from one module to another.”
Currently there are approximately 300 business users and 2,000 self-service users. Most of them see an immediate gain from a user interface and usability standpoint, according to Schleicher—such as being able to export data to Microsoft Excel with a couple of clicks and to customize inquiry and data entry forms. Productivity improvements are equally marked, thanks to the tight level of integration among the JD Edwards modules.
“All of the accounting information and the chart of accounts are set up in the general ledger and validated in payroll when time cards are entered, so there is no way you can inadvertently apply an employee’s time to business units or accounts that don’t exist,” explains Schleicher, citing one example. “Once the payroll is processed, you can easily make a pro forma journal entry to revalidate that the time cards are applied to still-valid accounts, along with the associated deductions and benefits. It’s simply a matter of posting it to the general ledger, and that component of it is completed.”
Additional integration from the payroll system to the accounts payable system makes it easy to review and post deductions and benefits for payments to vendors. “JD Edwards automates the workflow and ensures that the data is accurate from one module to the next, while minimizing rework and manual data entry,” Schleicher adds.
Procurement and inventory systems are also integrated with each other and with the general ledger. For example, once a purchase order is approved, a commitment is set up in encumbrance accounting. Later, when a receipt is entered against that purchase order, the transactional data automatically flows to the general ledger and updates the inventory balances.
Thanks to its basis in open standards, JD Edwards’ integration extends to third-party applications as well, such as to the utility billing system that many LOGIS municipalities use to charge for gas, water, sewer, and electricity. Previously members had to post monthly journal entries to record data from this billing system into the general ledger, so LOGIS created an interface that posts daily transactions to the proper fund and revenue account. LOGIS created similar interfaces for key systems used by parks and recreation departments and building departments. Members can decide how much detail they want to see in their reports.
“It’s all nicely automated, which permits accounting departments to easily review, approve, and post entries so they always have a current snapshot of their accounts,” says Sulander. “There is no longer the need to double-enter transactions, once in the departmental system and again in the accounting section. They are automatically brought in as journal entries.”
All these little bits of automation add up to big savings. Garris estimates that small cities that joined the LOGIS consortium have saved nearly US$2 million each, and large cities have saved in excess of US$6 million, allowing them to deliver more value to their citizens in the form of lower taxes and increased service levels. “We retained an independent financial consultant to compare [the cost of] LOGIS operations versus an independent city’s operations to run similar types of applications,” he says. “He determined that LOGIS can deliver solutions at 30 to 50 percent lower [cost] than if each city acquires them on their own. On average, a city that leverages our ERP functions can save from US$80,000 to US$250,000 in annual IT costs.
“Once you consider the other stuff that we’ve added over the last 10 or 15 years, such as police systems and permitting applications, we estimate that we have saved our cities more than US$100 million to date,” Garris adds.
Photography by Shutterstock