State Treasury Agency, Azerbaijan Republic Nazim Gasimzade, Chief of the Information Technology department Baku, April 11th, 2018

Re-engineering TIMS project: challenges faced and lessons learnt Country overview Project overview Key challenges and success factors Business case and actual business benefits achieved Rapid time to value and TCI/TCO Questions & answers

Azerbaijan Overview Population Capital 9 100 000 Baku Area 86 600 sq. km GDP 37,9 billion USD PPP 15 994 USD

Project Overview Project name Project scope (SAP Functionality) Treasury Information Management System Project scope (SAP Functionality) SAP Financial Accounting SAP Public Sector Collection and Disbursement SAP Materials Management SAP SEM SAP Process Integration Process coverage Budget forecasting, planning & expenditures Implementation partner SAP CIS Rollout scope 87 subsidiaries Implementation method CCPM – Critical Chain Project Management Project Go-live June 29th, 2011 April 17th, 2009 400 Users implemented 100 Additional users planned 1 200 Estimated project effort

Treasury Information Management System High Level Concept Budget assignation MOF - Budget Financial reports Taxpayers Budgets for BO Line Ministries Treasury Information Management System Exchange Interface State Treasury Agency Vendors Revenue and expenditures forecast, budget earmarking Payments Commercial Banks CBAR Single Treasury Account (STA) Payments/ Salary Cash limits, reports Revenue and expenditures forecast, budget earmarking Budgetary organizations Regional Treasury Agencies End of the day settlements Incoming payments Cash limits, reports Salary Requests for commiments, settlements and invoice approval BO Approved invoices, payments, reports 5

Key project challenges 1. Number of project participants and «influencers» 2. Project geography 3. Need to train end- users across the country The need to manage expectations from different sides National wide project Establishing training center, web-portal with courses, tests

1. Number of project participants and «influencers» Directly involved Influencing Ministry of Finance State Property Committee State Social Protection Fund Treasury Central Bank Contractors The State Oil Fund Ministry of Taxes The State Customs Committee The need to manage expectations from different sides and show transparent picture of project progress leads to specific quality management practices in project

Quality Management and Operational Readiness How we managed organizational complexity of the project Every phase of the Project was thoroughly planned, reviewed and agreed upon by each and every member of the Project Team. Every involved party (treasury agencies, budget organizations, etc.) including 3rd parties (banks, Tax Ministry, Social Protection Funds etc.) had its say in preparing requirements and laying out blueprint of the Project. Risk categorization has been put in place. Possible risks were categorized in terms of probability, impact, level and category. Taking into account that CCPM methodology was used, buffers were split into 5 categories, with 1 being an acceptable penetration and 5 flagging critical penetration. Weekly reviews were conducted, required adjustment made. Well established chain of commands and communication lines between key stakeholders and core team. It was told once and for all that integration is not just plugging technology together; it’s about people, processes and systems working together. Monthly reviews were conducted, distinguished core-team members were awarded bonuses and extra intangibles were put in place to drive success factors up.

2. Project geography 80+ regional offices connected to the system 20 000+ kilometers of network BAKU Project roll-out of the whole country

3. Need to train end-users across the country More than 400 users across the territory Not all of the users worked with computers before at all New specific functionality in new system Quality of the data from end-users is critical for project success (and state budgeting process success) Specific actions were made during the project to train end-users: training center established, tests for end-users, special trainings conducted

Quality Management and Operational Readiness Knowledge transfer and operational readiness Fully equipped separate classroom was set up to conduct trainings of the end-users. Internal core-team members went through rigorous trainings and worked side by side with integration partner in setting up system. Train the trainer programs were conducted. Most involved and showing good results end-users were transferred into trainers. Training schedules were posted on our internal web-portal well ahead of time along with training materials. Connection to the Testing system was set up at each location in order to allow end-users to start practicing even before actual trainings took place. To ensure operational readiness high number of exercises were prepared; occasional tests were held; internal team members’ responsibilities in regards to implemented modules were clearly stated; user profiles were thoroughly studied. We held a number of sessions explaining the benefits of the new system, had live presentation from a number of clients with similar system, made emphasis on flexibility of OLTP system, explained benefits, and made sure that every involved party knew that this system is designed for them and not the vice versa

Key Challenges and Success Factors Key challenges faced Aligning TIMS Project stakeholders and resource allocations with daily operations and other ongoing projects. Effective transferring end-users from legacy system into new system Internal restructuring of departments and redefining of the roles and responsibilities to match business model Key lessons learnt Internal structure must match business model and it should be done well before project starts Resource dedication rules should be established well ahead of the Project Well-trained internal team is the key to sustaining long run of the Project after completion

Key Challenges and Success Factors Key contributors to the success of your project: Very well established chain of commands and lines of communication Single access point to address “hot” issues rather quickly Accordingly with the formal methodology used during the Project, defining “buffers” big enough to meet budget and time constraints Highly qualified group of the consultants provided by SAP CIS

Business Case and Actual Business Benefits Business objectives we initially intended to realize through the project From year 1994 till 2012 Azerbaijan together with International Monetary Fund conducted reforms of the public sector and it was essential to reflect results of those reforms in the new system. New system based on SAP platform had to lay ground for accrual and cash based accounting, for establishing accounting standards, for smooth transition to IFRS, creating total transparency and flexibility; establishing flexible system with online reporting; putting in place rules for budget forecasting and cash flow and liquidity; establishing direct communication to exchange information with 3rd parties, for online control and monitoring of available funds, for creating opportunity for external and internal audit, for controlling entire budgeting process starting with assigning funds and seeing all the way through how those budgets are used. Replacing decentralized legacy system with centralized OLTP & OLAP systems; creating transparent and flexible Single Treasury Account; establishing correct business model with clear distinction of roles and responsibilities , reducing total cost of ownership;

Business Case and Actual Business Benefits Business benefits actually achieved through the project Time required to settle payments got reduced from two days to 30 minutes; Single Treasury Account allowed for synthetic transfer of funds between different budgetary addresses, reducing time required for such transfers from several days to 30 minutes; eliminating bank fees for transferring funds between budgetary addresses brings savings over 1.5 million Euro yearly Totally transparent system of full monitoring and controlling of state finance allowing to drill-down to the last penny and how it was used in Azerbaijan.

Business Case and Actual Business Benefits Goals Result Creating opportunities for accounting and financial statements either on the cash basis or accrual basis Conducting accounting operations in accordance with national IPSAS standards Obtaining financial statements in accordance with Azerbaijan legislation and GFS & IPSAS standarts. The transition from the single treasury account to the treasury single account The possibility of external audit of public spending and revenues Auditor tracking in the documentary and user context Keeping all treasury operations in real-time Creating a database easily integrated with external systems for financial and economic planning, analysis and management The project resulted in the creation of the state budgeting system that is modern, effective and meets the needs of the rapid growth of Azerbaijan economy

Rapid Time to Value and TCI/TCO Due to using CCPM time monitoring & controlling was buffer based, where every possible effort was applied to avoid deep buffer penetrations. Steering Committee meetings were held on monthly basis, proper resource distribution were monitored on the daily basis by team-leaders, issues were prioritized, categorized and taken care accordingly. Project was completed in time but go-live date was shifted from the end of the year to the middle of the year in order to ease end-users into system. Decision was made by the Steering Committee since budget organizations have tendency to conduct most of their operations at the end of the year. All deviations and changes took place solely based on changed business requirements. Sufficient trainings paved a way to develop internal technical team that took charge of delivering required reports both in our SAP R3 system and BI system. That allowed integration partner to concentrate solely on configuration changes and reduce implementation time significantly. ECATTs have been developed to reduce testing time. Wide Involvement of key stake holders, end-users and business unit leaders; establishing single point of access to address issues in order to cut down on response time; standartization of the business model; restructuring business subsidiaries to match with new model

Q&A