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City of Palo Alto (ID # 3947) City Council Staff Report Report Type: Consent Calendar Meeting Date: 10/7/2013 City of Palo Alto Page 1 Summary Title: SAP Maintenance Contract Extension Title: Approval of a Three Year SAP Software Maintenance Contract in the Amount of $258,260.66 per year, Not To Exceed $774,781.98 for the Support and Maintenance of SAP, Including Industry-Specific Solution for Utilities (IS- U), SAP Enterprise Central Component (ECC 6.0), Customer Relationship Management System (CRM), Business Intelligence System (BI), Utilities Customer Electronic Services (UCES), and Business Software, Inc. (BSI) U.S. Payroll Tax From: City Manager Lead Department: IT Department RECOMMENDATION Staff recommends that the Council: Motion: Approve and authorize the City Manager or his designee to execute the attached purchase order, extending for three years the software maintenance schedule (SAP Enterprise Support Schedule.pdf) with SAP Public Services Inc. in the amount not to exceed $774,781.98. The contract will be for calendar years 2013 to 2015. BACKGROUND The City’s history with SAP began in 2002, when the City selected SAP as its preferred vendor for an Enterprise Resource Planning system. The purpose was integrating various business processes within the City, which enabled Staff to move in the direction of Electronic Government. The SAP system has been running since 2003, supporting Accounting, Finance, Purchasing, Project Management, Plant Maintenance, Budgeting, Payroll, Human Resource Management, and Service Order Management. In 2009, the City completed a major upgrade and replaced the former utility billing system (Banner) with the implementation of the SAP Industry Solution Utilities (IS-U) module, Customer

CMR # 3947

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  • City of Palo Alto (ID # 3947) City Council Staff Report

    Report Type: Consent Calendar Meeting Date: 10/7/2013

    City of Palo Alto Page 1

    Summary Title: SAP Maintenance Contract Extension

    Title: Approval of a Three Year SAP Software Maintenance Contract in the Amount of $258,260.66 per year, Not To Exceed $774,781.98 for the Support and Maintenance of SAP, Including Industry-Specific Solution for Utilities (IS-U), SAP Enterprise Central Component (ECC 6.0), Customer Relationship Management System (CRM), Business Intelligence System (BI), Utilities Customer Electronic Services (UCES), and Business Software, Inc. (BSI) U.S. Payroll Tax

    From: City Manager

    Lead Department: IT Department

    RECOMMENDATION

    Staff recommends that the Council:

    Motion: Approve and authorize the City Manager or his designee to execute the attached purchase order, extending for three years the software maintenance schedule (SAP Enterprise Support Schedule.pdf) with SAP Public Services Inc. in the amount not to exceed $774,781.98. The contract will be for calendar years 2013 to 2015.

    BACKGROUND

    The Citys history with SAP began in 2002, when the City selected SAP as its preferred vendor for an Enterprise Resource Planning system. The purpose was integrating various business processes within the City, which enabled Staff to move in the direction of Electronic Government. The SAP system has been running since 2003, supporting Accounting, Finance, Purchasing, Project Management, Plant Maintenance, Budgeting, Payroll, Human Resource Management, and Service Order Management. In 2009, the City completed a major upgrade and replaced the former utility billing system (Banner) with the implementation of the SAP Industry Solution Utilities (IS-U) module, Customer

  • City of Palo Alto Page 2

    Relationship Management, Utilities Customer Electronic Services (also known as My Utilities Account customer portal), and Business Intelligence systems.

    By supporting the critical business processes in Finance, Procurement, HR, and Utilities Meter Read Billing Payment - Collection, SAP has become an integral part of the Citys business continuity.

    Examples of the value generated by SAP include:

    Manages and maintains a City budget of over half billion dollars

    Issues 11,000 A/P checks, processes 2,200 purchases documents, and issues 36,000 payroll checks each year

    Generates 370,000 utilities invoices and collects approx. $220M for 30,500 utilities accounts

    Currently, 14,000 active customers are registered to use My Utilities Account for e-bills and online payments

    Provides concise business information to support 38,000 incoming calls into the Utilities Customer Service Center

    Interfaces with City Business Partners such as Wells Fargo, Check Free, JP Morgan (procurement card services), Green Waste (refuse), Hartford, and ICMA as well as to non-SAP City systems

    The original contract with SAP was signed in July 2002. In July 2007, a new five-year contact was entered into, which expired on December 31, 2012. We are requesting approval of a contract with SAP, which has provided services on an on-going basis, though the contract term has expired because of an oversight due to staff turnover in the SAP manager position. Although the contract extension was not processed in a timely manner, SAP has agreed to continue maintenance support. Recent process improvements in the IT department have been put in place to avoid similar lapses in the future

    DISCUSSION

    SAP is a highly complex system with processes integrated between various modules. SAP requires a high degree of specialized expertise to provide effective ongoing maintenance and support.

    The current SAP contract encompasses basic SAP maintenance and support of standard software. This includes, programming defect corrections (i.e. Service Packs), functionality upgrades, and legally mandated enhancements (i.e. HR/Payroll).

  • City of Palo Alto Page 3

    The extension of the SAP maintenance contract comes at a time when Staff is conducting an assessment of our current SAP environment, business processes, support resources needs, and developing a strategic plan for the Enterprise Resource Planning systems. The assessment is one of the approved FY 2014 projects. Until the full assessment report and Enterprise Resource Planning strategic plan is ready, staff recommends extending the contract with SAP for four years to maintain current maintenance and support levels. As in previous contracts, there is an early termination clause if required.

    RESOURCE IMPACT

    With the new on-going Information Technology funding structure, funds for this project will come from the Technology Internal Service Fund. Funds for this contract are available in the current 2014 budget.

    POLICY IMPLICATIONS

    Approval of these contracts is consistent with current City policies.

    ENVIRONMENTAL REVIEW

    This is not a project under the California Environmental Quality Act (CEQA).

    Attachments:

    Attachment A: SAP Enterpirse Support Schedule (PDF)

    SAP Software Maintenance PO# C14151181 (PDF)

  • 3947 : SAP Maintenance Contract ExtensionAttachment A: SAP Enterpirse Support ScheduleSAP Software Maintenance PO# C14151181