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Impact Investing

IPE special report May 2018

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The electronic route to success

Implementing new computer systems can be a fraught business. There are many horror stories across all industries of organisations large and small running into difficulties when installing systems and ending up way over schedule and budget, if not having to abandon projects altogether. So pension funds best be cautious when approaching the implementation of new applications.
One of the biggest dangers is that a pension fund hopes that a new system will somehow solve all its current problems, and purchases a system without clear objectives of what it wants to achieve with the system and a plan of how it will get there, says Lorraine Harper, director of people services division of global consultancy KPMG. The selection of a system is in many ways a part of the implementation process and can determine the implementation process, so it is important to look at the two together when planning for a new system.
And don’t rush the planning, says Farrukh Qayyum, director of operations for New Jersey-based portfolio management and accounting system supplier Princeton Financial Systems. It’s critical to get the architecture - the overall design of the system and associated processes - right at the beginning, because it can be very difficult and time consuming to change the architecture once implementation has begun. Dirk Bacon, project manager at Merchant Navy Pensions Administrators (MNPA), England, says that it is essential to assess the impact on the organisation's operations of implementing a new system, and to make appropriate preparations.
“To ensure a successful transition, additional appropriately skilled resources are likely to be required, and the investment to establish these resources needs to be recognised,” says Bacon. When MNPA recently implemented the Universal Pensions Management (UPM) system from the UK-based Comino, it recruited additional staff to cover the transition period, and imposed a moratorium on gaining new business.
Organisations must also look carefully at the workflow processes that the new system will automate, or effect, in some way, says Harper. The fund needs to map out its existing processes, identifying those that will be automated, as well as where processes can be redesigned and improved because of the new system. There are simple and cheap software tools that will help in this task, such as Visio, part of Microsoft’s Office business software package. It is the improvements in workflow that will really deliver cost savings to the organisation, says Harper.
Data is a key issue in any system’s implementation and operation. Data must be accurate, complete and timely, otherwise the computing adage ‘garbage in, garbage out’ will apply. With a new system, data will have to be either input into a computer format for the first time, or reformatted, and here Qayyum warns that organisations can find that the integrity of the data in their old systems, such as spreadsheets, can turn out to be not up to the standard they thought. Therefore it is important to set aside sufficient time for the cleaning and reformatting of data. It is also important that the organisation takes ownership and responsibility for the data, and does not leave it solely to the system supplier, he says.
Another time consuming aspect of system’s implementation is testing, and this must also be carefully planned, and carried out with rigour. Organisationss must prepare test programmes and data for each phase of the project, and in the final phase run the new system in parallel with the old, or run it in what is known as a dummy or model office, where the organisation's functions are replicated to allow for a complete system’s check before ‘going live’.
MNPA used the model office when installing its UPM system. “Well before reaching the model office phase, each area of the system was tested individually and then, progressively, as it was integrated with associated functionality,” says Bacon. “Data passed through detailed analysis, mapping, and reconciliation. Calculations were subject to automated testing covering all potential scenarios. Workflow processes, which lie at the heart of UPM, were tested using controlled test packs of expected results. Also, at a system level, integration testing, volume testing and performance testing were all undertaken.” But Bacon warns that the model office approach is not a panacea to ensuring a successful transition to ‘going live’ with a system. “However, as a final simulation and test of real-life conditions it was an important element of our programme,” he says.
Given all the critical elements in an implementation - system procurement, re-engineering of processes, data management, training, etc, – effective project management is key to its success, says Harper. Bacon agrees. “Sound project and risk management are fundamental to ensuring success, and this must include careful planning, breaking the project into manageable stages, and cooperative monitoring of progress,” he says. Qayyum says that an organisation should have a dedicated project team, with the time, commitment and ability to make decisions to make the project work. Harper recommends hiring a specialist project manager if necessary.
The challenges of system’s implementation is one of the reasons that some pension funds are turning to a new way of accessing computer applications called application services provision (ASP). In this model, the software developer runs the application at its site: the organisation rents use of the application, sending data to be processed via the Internet or dedicated connection. Once the processing is complete, the software developer sends back the results, or posts them on its website where the user can access them and possibly do further calculations. The ASP model means that a pension fund need not install the software in-house; nor will they have to operate and maintain the system.
The implementation of an ASP system entails connecting to the software developer’s site, and preparing the data – the data still has to be cleaned and reformatted, so this part of the process is largely the same as for an system installed in-house. But it is not necessary to have in-house IT staff to run the system – although Harper warns that it is still necessary for someone in the organisation to understand how the systems works in terms of its functions and processes, though they need not understand it at a technical level.
When Dutch pension fund for doctors SBA Artsenpensioenfondsen recently selected the Pam portfolio management and accounting system from Princeton, it opted for the ASP version (ePam). “SBA has a history of outsourcing software; we build and maintain our own office network, and outsource all software building and maintenance,” says Cees Stal, consultant at SBA. The implementation of ePam, which is now underway and should take around six months, entails Princeton allocating SBA time and resources on the computers at its site, configuring the application to SBA’s requirements and creating the connection with SBA. Meanwhile, SBA is setting up the securities master file and the general ledger, under the guidance of Princeton, which is also providing general training on the system.
A major advantage for SBA is that it does not have to provide any technological resources for the implementation, says Stal. The major demand has been in the back office, where staff are running the new system in parallel with the old one, he says.
But whether the system is installed in-house or is an ASP, it is critical that staff buy into the project, says Bacon. This applies as much to staff who will be using the system once it is live, as it does to those involved in the implementation. And to achieve this requires “effective and open communication along with comprehensive training”, he says.
How long will implementation take? It depends on things such as the size and complexity of the system, whether it is installed in-house or is an ASP, and the amount of resources an organisation can dedicate to the project. But ideally, an organisation should devote a couple of months to planning for the new system, three to four months for procuring the system, and then six months or more for its actual implementation.

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