Mr. Hegarty’s Shared Services pilot: reality check

UT’s chief financial officer Mr. Hegarty has argued that a pilot should be run in order to assess the feasibility of shared services on campus. Given the professed goals of shared services this is either a deeply flawed proposal or a misleading description of the central administration’s actual plan. A pilot typically refers to a small-scale study done in order to assess the feasibility of and work out details in implementing a larger scale project or study.

Shared services gain efficiencies through economies of scale. The effectiveness of efficiency gains by such means can only be assessed through implementation on a fairly mass scale. According to a guide on shared services for management (Essentials of Shared Services by Bryan Bergeron, 2003)”There’s a minimum company size and revenue stream, below which the shared services model doesn’t make sense.” [1].

Furthermore, a drawback of shared services is high start-up costs, similar to starting a new company (one of the negatives of the model compared to outsourcing according to its advocates) [2].

Literally piloting shared services for a business would thus be a pointless and costly financial endeavor. One would have high-startup costs, and it would be impossible to assess the actual efficiency gains, since these are achieved through economies of scale.

It is likely, therefore, that the “pilot” is just a euphemism for initiation of the plan. Central UT administration has not spelt out any circumstances that would lead them to not follow through with the shared services plan in its entirety anyway. When Mr. Hegarty was asked about how the data from the pilot would be collected and how much this research would cost at the GSA on October 30th, he said he did not know. There appears to be no plan to assess the pilot, let alone assess it independently. Even if there was, it is unclear what these data would demonstrate because of how efficiencies are gained in shared services models.

These considerations make it understandable why UT central administration has made the pilot meetings for shared services closed to the public and campus at large.

[1] Bergeron, Bryan. 2003. Essentials of Shared Services. John Wiley & Sons.

[2] ibid

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Shared Services at UT: The Accenture-Workday plan

Hegarty and Rohleder
(Steven Rohleder, COO of Accenture (left), Kevin Hegarty CFO of UT (middle)

The plan to implement Shared Services at UT was introduced by Stephen Rohleder, an executive of Accenture, in an op-ed piece in the Statesman [1]. Rohleder was appointed chair of the Committee on Business Productivity (henceforth CBP), which was tasked with giving recommendations to increase revenue at UT through more efficient use of its assets. This culminated in a report released January 2013, called “Smarter Systems for a Greater UT” [2]. The committee divides into three subcommittees; Asset Utilization, Technology Commercialization, and Administrative Services Transformation. It is the latter subcommittee, headed by Accenture COO Stephen James that recommends a shared Services Model that consolidates “Finance and Procurement, Human Resources, and Information Technology” for UT. These functions have typically been consolidated in the private sector. The CBP report states that its recommendation is based on research;

“The sub-committee gathered and analyzed a significant amount of data collaboratively with 27 different units within the University. This [sic] data strongly suggests [sic] that the recommendations are achievable based on the workforce distribution, the similarity of work functions, and the level of effort currently expended by individuals in each unit.”

Smarter Systems for a Greater UT, p. 19

Accenture was paid $960,000 of UT’s money in order to help the committee gather these data [3]. Key to interpreting and assessing the recommendation is how the subcommittee determined that the work functions were similar enough to make a Shared Services model feasible for UT. The campus community and its shared governance structures (Faculty Council, Staff Council, Graduate Student Assembly, Student Government) would be suited to assess this analysis since they perform and/or rely on these functions. However, the research mentioned in the quoted paragraph is still undisclosed despite multiple Open Records and FOIA requests. Skepticism regarding whether Accenture and the CBP subcommittee adequately took into account the specificity of department level functions remains.

UT released the “Shared Services Plan (Draft for Campus Discussion)” in October 2013. This draft contains estimations for costs of implementation and savings to be made through downsizing the workforce. Regarding the downsizing of the workforce the report states; “Total number of reduced positions ≈ 500 (≈4% of the total administrative workforce of ≈ 12,000 or ≈11% of the total administrative workforce of the HR, Finance, Procurement and IT workforce of ≈ 4,500) over 4 years” (Shared Services Plan: p.5).

The Shared Services Plan includes investment into the enterprise resource planning (ERP) software Workday (more on this later). The savings from downsizing to Shared Services are calculated as 280-320M in 10 years ($30-40M annually), with a $160-180M benefit. The investment costs are not itemized (change managers, programmers, ERP software, and other costs), but at least contain the costs of the ERP. Requests for an itemized breakdown of costs have been repeatedly denied.

The profits from the Shared Services Plan are erroneous or overstated. The plan claims that there will be a payback from the ERP implementation at Year 6. However, this calculation is based on assuming a $100M investment.  If the actual numbers are used there is no payback and we assume that 100 jobs are cut each year rather than 433 until 10 years after the beginning of the plan [4].

sharedservicesgraph1

sharedservicesgraph2

Another potential flaw with the profit projection presented in the Shared Services Plan is that it assumes that 433 jobs will be cut by December 2014. According to the plan “Attrition is expected to account for a significant percentage of the reductions”, we are not told what the significant percentage actually is.

As stated above, an Accenture COO was the chair of the subcommittee that drew up the Shared Services recommendation. Accenture was paid in order to facilitate the research on which this recommendation is based. There are three Accenture consultants on the Shared Services project team (Tim Mould, Ryan Oakes, Jamie Wills), including one ex-Accenture executive, head of IT at UT, Brad Englert [5]. The ERP Workday was bought in the summer with no campus feedback for a licensing fee of $30,000,000 [6]. Accenture conspicuously happens to be one of Workday’s most important deployment providers [7].

Thus, Accenture has acted simultaneously as consulting firm (in giving the Shared Services and possibly the ERP recommendation), and is involved and profiting from implementation of the plan (from continued consulting and programming fees). This situation has been identified as one of the primary causes of cost-overrun and poor performance in public projects. The dual-role played by the company presents a high risk of cost-escalation due to a lack of accountability in correct estimation and profit projections [8]. The faulty profit projections of the Shared Services draft Plan attest to this risk, even in the planning stages. The problem is accentuated when one considers Accenture’s history of fraud and corruption.

To conclude;

1)         Since the original data for the Shared Services recommendation have not been released and assessed by the campus it is far from proven that Shared Services is a feasible option for UT.

(2)        The profit projections have been proven to be erroneous and over-stated which either represents deceit on the part of Central UT administration or a predictable case of cost underestimation stemming from the structure of the plan itself.

(3)        The dual role of Accenture as consulting firm and as partly composing the project team runs to risk of continued cost-overrun.

In response to questions concerning the research done by the CBP on administrative services at a campus “town hall” meeting on October 30th, Mr. Hegarty claimed; “I didn’t want the committee’s information, the committee didn’t offer it and we didn’t want it.” [9] He was asked the same question at the Graduate Student Assembly and maintained that he was not interested in the data [10].

[1] http://www.statesman.com/news/news/opinion/rohleder-rethink-government-to-maximize-efficiency/nRcWk/

[2] http://www.utexas.edu/sites/default/files/files/UT_Committee_on_Business_Productivity_Final_Report_01292013.pdf

[3] http://www.utexas.edu/president/speeches/2013/smarter-systems-for-a-greater-ut

Participation by GSA officers in other campus based committees by GSA charged with taking up the recommendations of the CBP have found that this research support must have been given only to Transforming Administrative Services and Technology Commercialization subcommittees, but it is unclear how much on the money went to support each committee.

[4] Martinez, A. 2013. Should we centralize staff at UT? Presentation given to the Graduate Student Assembly, December 13th, 2013.

[5] http://www.utexas.edu/transforming-ut/committees/administrative-services/shared-services-committee

[6] http://www.utexas.edu/transforming-ut/committees/administrative-services/administrative-systems-committee

[7] http://www.accenture.com/us-en/Pages/service-acn-workday-alliance-video.aspx

[8] See Flyvbjerg,B. 2003. Megaprojects and risk: An Anatomy of Ambition. Cambridge University Press. and source cited therein.

[9] Podcast of the Townhall meeting; Hegarty makes that exact statement at approximately 39:00.

http://mediasite.aces.utexas.edu/UTMediasite/Play/b906091f708f416db977e7…

[10] For the GSA podcast please the following link. Look for the meeting on October 30th

http://www.livestream.com/utgsa

Company advertisements are not facts: A response to the Daily Texan

On November 15th Daily Texan columnist Chris Jordan’s article appeared criticizing mine and Cloud’s guest column on the implementation of Shared Services at UT. There are a number of issues with this article, however, given that Jordan is a Daily Texan columnist I will focus on those that bear directly on issues of accuracy and journalistic integrity.

The article claims that mine and Cloud’s piece is “ill-informed” and “dangerous”. One of our criticisms was that the implementation of Shared Services lacked transparency, which is what Jordan takes issue with.

We criticized the administration for not disclosing the research in the Final Report on Business Productivity on which the Shared Services recommendation is based. Accenture was paid $960,000 of UT’s money to help produce that research and thus we think it fair that the public should have access to it and so that it can be assessed by the entire campus community.

Jordan completely misses this point, but proceeds to counter-pose our argument with what he calls “facts”. He claims that Shared Services “is a tested supply-chain optimization plan which has been successfully implemented, not only by Accenture, [sic] in many other public and private institutions, including Yale, the University of Michigan and the University of North Carolina-Chapel Hill”[1], but fails to discuss any of the results of these tests. In particular the complaints from Yale and University of Michigan are not even brought up [2]. Furthermore, the first part of the statement is practically plagiarized from an Accenture brochure and not based on independent research [3].

His two other sources for attacking the lack of transparency are quotations from the chief financial officer of UT, Kevin Hegarty, and the vice president for finance at the University of Michigan Rowan Miranda, a former executive with Accenture. Allegedly Mr. Hegarty said “I want to see the detail, I want to see what backs it up,” in response to the recommendations of the committee on Business Productivity.

But this is in direct contradiction to what Mr. Hegarty has maintained about the data at the Town Hall meeting on October 30th ; “I didn’t want the committee’s information, the committee didn’t offer it and we didn’t want it” [4]. He was asked the same question at the Graduate Student Assembly and maintained that he was not interested in the data [5].

Jordan also claims that UT has constructed focus groups to talk about Shared Services, but then fails to describe what these focus groups discuss or whether they have any meaningful input. He appears to have made no attempt to find a single UT staff member, student or faculty member that participated in one of these focus groups (I was one). The only people who are quoted are Mr. Hegarty and Mr. Miranda, a former executive for Accenture [6]. In actual fact these focus groups answered questions in the manner of the recent “town hall” meetings, but they had nothing to do with gathering data.

It is embarrassing to see that Jordan’s column was not vetted for factual accuracy and that the Daily Texan has such an Orwellian stance on what constitutes a fact. Sadly, most of the article quibbles irrelevantly with definitions (I am not convinced Jordan has any idea what is meant by “corporatization” when used by the “opposition” he derides) [7]. Plagiarized company advertisements and contradictory quotations from administrators tasked with implementing Shared Services could be called a lot things, but not “facts”, if words have meaning.

Adam J Tallman

[1] Chris Jordan, “Plan to eliminate jobs is not about corporatization”, Daily Texan http://www.dailytexanonline.com/opinion/2013/11/15/plan-to-eliminate-jobs-at-ut-isnt-about-corporatization-%E2%80%94-its-about-affordability

[2] The protests and agitation coming from Michigan are growing daily; The Michigan Daily, http://www.michigandaily.com/article/sacua-meeting, http://www.michigandaily.com/opinion/11viewpoint-share-government-shared-services18http://www.michigandaily.com/opinion/11daily-shared-services18,

Inside Higher Ed; http://www.insidehighered.com/news/2013/11/21/u-michigan-tries-save-money-staff-costs-meets-faculty-opposition#ixzz2lLF9knax,

A petition has been made at the University of Michigan to remove the very ex-Accenture executive that Chris Jordan relies on as his primary source, due to conflict of interest http://studentunionofmichigan.wordpress.com/2013/11/20/the-university-of-michigan-accenture-and-shared-servicesast/

Yale Daily News http://yaledailynews.com/blog/2012/02/24/shared-services-creates-conflict/

http://yaledailynews.com/blog/2012/02/08/shared-services-under-fire/

[3] Achieving High Performance in the Energy Industry, Accenture p. 8

http://www.accenture.com/SiteCollectionDocuments/PDF/Accenture-Services-Achieving-High-Performance-Energy.pdf

[4] Podcast of the Townhall meeting; Hegarty makes that exact statement at approximately 39:00

http://mediasite.aces.utexas.edu/UTMediasite/Play/b906091f708f416db977e79d79e4957d1d

[5] For the GSA podcast please the following link. Look for the meeting on October 30th

http://www.livestream.com/utgsa

[6] http://www.finance.umich.edu/about/elt/rowan-Miranda

[7] Jordan makes a big deal out of the “opposition”‘s conflation of outsourcing with insourcing (Shared Services). The conflation was never made in mine and Dana’s article. Students protested outsourcing in response to the Final Report of the Committee for Business Productivity which does mention outsourcing as an option multiple times, however this is a different issue. Jordan should do a better job trying to understand the actual position of the groups he critiques before making such incorrect and sweeping claims. Just as well, he cites no literature from the opposition and takes up none of their arguments.

UT Capital metro cuts and the exclusion of a student voice

pols_naked-28526

On September 23, the Capital Metro board of directors voted unanimously to cut two UT shuttle routes. Under this plan, beginning in spring 2014, the Wickersham Lane shuttle will be eliminated and the Cameron Road shuttle coverage will be reduced and ultimately phased out completely. Those students who want to keep using these shuttles are then faced with an important question: who is responsible for maintaining these shuttles and, broadly, valuable student services like them?

Capital Metro held public meetings in early September to discuss the possibility of the shuttle cuts. However, Graduate Student Assembly president Columbia Mishra told The Daily Texan in early October that UT and CapMetro did not allow students to become informed about the issue. [1]. She said the cuts were discussed over the summer when students were not at school, and that the public forums on the issue were held off campus, both of which made it difficult for students to participate in the conversation.

Mishra’s organization unanimously passed a resolution on October 8 aimed at reversing the shuttle closures and requesting a dialogue with Capital Metro that would actually include a student voice. The GSA has rightly noted that these graduate students are, numerically, the most hurt by the Cameron and Wickersham closures. GSA also noted that many of these students have already made housing decisions based on the availability of these shuttle routes, and may now be locked into leases without access to that transportation. Unfortunately, their arguments were dismissed. It now looks like shuttle closures will continue.

CapMetro spokeswoman Melissa Ayala said that the student shuttle bus committee approved cutting the Pickle Research Campus shuttle for mid-2014, though a service change proposal has not officially been made. Funding for these shuttle routes is split between Capital Metro and UT. But as UT Parking and Transportation Services (PTS) spokeswoman Blanca Juarez explained, “as [transportation] costs increase, we will either have to receive additional funding or make adjustments to service.” [2]

As Juarez explained, the UT portion of the funding comes from its Student Services Budget Committee (SSBC). For the 2013-2014 fiscal year, PTS requested an additional $275,000 a year (on top of recurring funds) to “maintain the normal weekly busing hours.” The SSBC denied this request. It did approve some additional funds, such as $57,928 of bubble funds per year for the next 3 years, and from a separate account $150,000 per year for the next 2 years. That separate account is the SSBC Shuttle Bus Reserve, and it was created from surplus that PTS had in the fiscal years of 2006-2007 and 2008-2009 [3].

There is $800,000 in the Shuttle Bus Reserve, so it would have been sufficient to fulfill PTS’s request for the additional $275,000. The SSBC was aware that the lesser amount they granted would lead to cuts, and they provided two recommendations on the issue. The first was to cut “West Campus routes as opposed to routes further away from campus.” The second was to “take a serious look into advertising … to increase revenue.” This means that UT knowingly allowed cuts to happen. The SSBC even told PTS to generate more money rather than use its own surplus [4].

But putting aside whether or not UT should have fully funded PTS, the SSBC’s second recommendation to not cut far routes is worth considering. Certainly, students who live further from campus are most affected by the closure of a UT shuttle route. The Capital Metro board was made aware of this at a public hearing on September 16, as students who were able to attend voiced that argument. The complaint was heard, as board member Frank Fernandez said afterwards that the board may amend or even reject the Cameron Road shuttle cut due to students’ concerns [5].  Of course, the cuts ultimately did pass (unanimously), and the justification was that the Cameron Road and Wickersham Lane routes have low ridership. The same justification is given for the potential cut of the Pickle Research Campus shuttle. All three of these shuttles serve areas miles from campus – the areas that SSBC specifically said not to cut.

Some students have even questioned Capital Metro’s conclusion that these routes have low ridership. GSA communications director David Villareal said that shuttle’s reflectors, which are used to count riders, are only on the front door and not the rear. According to him, students who enter through the rear entrance are left uncounted. But even if they are, the measure of ridership may be unfair, as Sociology graduate student Chelsea Smith made the point that Capital Metro’s method counts rides, not riders. A student may take the West Campus bus multiple times a day to and from campus, but she says that students who live farther away typically only take their shuttle in and out once a day. Smith says this results in graduate students (and others who take far shuttles like Cameron and Wickersham) being counted less [6].

The past few years have seen stories of budget cuts and austerity throughout the country, so students shouldn’t be shocked by those menaces coming to the University. We should, however, be very critical of how they unfold. It is shocking that the University has not made a public statement on the cuts yet, especially given that the SSBC was aware they would happen. Moreover, the SSBC could have prevented these cuts with the Shuttle Bus Reserve funds. But even moving past that, there was no serious attempt by Capital Metro to have a dialogue with students about the cuts. The attitude now seems to be that students who have concerns have to find their own avenues to voice them, rather than being given timely consideration (as Mishra described). We paid for these services, and the institutions receiving our money (the University and Capital Metro) are responsible for including us in the conversation.

Mukund Rathi

[1]http://www.dailytexanonline.com/2013/10/08/graduate-student-assembly-resolution-aims-to-reverse-capital-metro-route-cuts

[2]http://www.dailytexanonline.com/2013/10/08/shuttle-routes-may-continue-to-close

[3] http://www.utexas.edu/tuition/ssbc/docs/2013-14_SSBC_Report.pdf

[4] Ibid.

[5]http://www.masstransitmag.com/news/11175317/cap-metro-mulls-fare-increase-service-cuts

[6]http://www.dailytexanonline.com/opinion/2013/09/23/students-should-continue-to-question-wickersham-and-cameron-road-shuttle-closures

Shared Services at UT Austin: The actual issues

Smarter Systems and Shared Services

On the 29th of January 2013 President Powers gave a speech called “Smarter Systems for a Greater UT” which inaugurated a report written by 13 business leaders about how to increase revenue. The recommendations ranged from increasing food and parking costs, to layoffs and down-sizing by attrition, meaning staff that quit would not be replaced.

One part of the Smarter Systems plan was recently released in a document entitled “UT Shared Services Plan”. UT, in collaboration with the management consulting firm Accenture, plans to spend 160-180 million dollars of UT’s money to eliminate 500 jobs in IT, HR and finance procurement over the next five years with a projected net benefit of $120-140 million.

Accenture was paid $960,000 to help the Committee on Business Productivity to produce a report that relies on research that has not been released to the public [1]. The committee was chaired by Steven Rohdeler, who is a member of the executive of Accenture, the same company that has been tasked with implementing the plan. A bidding process for private-public partnerships should be transparent, but Accenture seems to have been handed a contract with the University. No information about how much money Accenture takes as its cut is available.

The credibility of Accenture

We should review Accenture’s credentials. In 2005, Texas awarded the company $899,000,000 to operate the state’s food stamp authorization system. The secretary of Food, Services and Consumer services found that this failed privatization scheme resulted in a “five-year slide” in processing food stamp applicants. With a massive cost to tax payers, the state had to then take over the processing of food-stamp applicants. The scheme left thousands of people without benefits.[2] In 2011, Accenture was sued for false claims in providing the federal government with technology services wasting millions of tax payer dollars in the process.[3] In 2000, Accenture was sued in a joint venture for “purposely underestimat[ing] the cost of [its] enterprise resource planning (ERP) software system”.[4]

Enterprise Resource Planning

The Shared Services Plan for UT requires a $160-180 million investment to implement a cloud-based enterprise resource planning (ERP) system over ten years with Accenture. The plan expects to start paying back after 6 years, with a net increase of $120-140 million over 10 years. The Shared Services draft presents no confidence intervals, no significance scores, and no estimations of probability of success. A review of literature on ERP systems reveals that their implementation is a risky endeavor and that vendors often fail to properly account for indirect costs.[5, 6] A transparent and earnest discussion of these the risks involved in the implementation of the ERP on UT is desperately needed.

What happened at Yale

A minimum requirement for credibility would be to assess the implementation of Shared Services at another University. Accenture recently helped implement Shared Services at Yale and what we know does not paint a pretty picture. The Yale Daily News reported one professor as saying that “Everything takes about two times as long. We resent the down-skilling of departmental administrative personnel”. The chair of the classics department, Christina Kraus, reported that one of the results of the plan was a doubling in her administrative work. It seems that cost saving has been achieved through down-grading and deskilling, while non-department administration spending has increased [7, 8].

Kevin Hegarty and the Daily Texan misrepresent the issues

In a Q&A with Kevin Hegarty published by the Daily Texan, Mr. Hegarty claimed that the Union’s  problem with the Shared Services plan was that it simply implies that less people will be doing more work when the Shared Services plan will attempt to alleviate this problem [9]. The critique is much broader than this. UT administration has refused to release the data that justify their claims from the Committee on Business Productivity concerning Shared Services or anything else from the report. They have implicated a company (Accenture) in the process that has a history of lying and botching projects at great public expense. UT has also not seriously considered reducing costs in other areas such as upper administration salaries. Furthermore, implementation of Shared Services at another University was problematic. One should not be convinced that Accenture’s Shared Services Plan will reduce costs, let alone reducing costs justifiably in relation to services.

James Woodsworth

[1] http://www.utexas.edu/president/speeches/smarter_systems_powers_efficiency_01292013.html

[2] Rahamatulla, Altaf. Texas Again Demonstrates the Pitfalls of Privatization. Progressive States Network, March 18, 2010, http://www.progressivestates.org/news/dispatch/texas-again-demonstrates-the-pitfalls-privatization

[3] Department of Justice, Office of Public Affairs. Accenture Pays U.S. $63.675 Million to Settle False Claims Act Allegations. September 12, 2011. http://www.justice.gov/opa/pr/2011/September/11-civ-1167.html

[4] http://spectrum.ieee.org/riskfactor/computing/it/another-year-another-erp-lawsuit-accenturemicrosoft-jointventure-sued-for-baitandswitch-tactics

[5] Elragal, A. & Haddara, M. The Future of ERP Systems: look backward before moving forward. Procedia Technology 5. 26.

[6] Faker, Parwiz & Fesak, Alexander. 2012. Benefits and Drawbacks of Cloud-based versus traditional ERP systems. Proceedings of the 2012-2013, course on Advanced Resource Planning. W.J.H. van Groenendaal, ed.

[7] Gideon, Gavin & Antonia Woodford. Shared Services under fire. Yale Daily News February 8, 2012. http://yaledailynews.com/blog/2012/02/08/shared-services-under-fire/

[8] Gideon, Gavan. Shared services creates conflicts. Yale Daily News. February 24th 2012.

http://yaledailynews.com/blog/2012/02/24/shared-services-creates-conflict/

[9] Op-ed. Q&A: Kevin Hegarty on Shared Services and UT’s declining funding. The Daily Texan, October 21, 2013.