ASUG in 2022 continues its interview series with industry and market-sector SAP leaders in the Americas. This discussion features SAP National VP of State, Local, Education, and Healthcare, Steve Risseeuw. The interview includes Risseeuw’s comments on future SAP activity, technology investments, and service transformation based on new federal funding programs from the last year.

This is an edited version of the full conversation.

Q. What have you/SAP staff seen and heard from North American state and local government customers in the fourth quarter of 2021—and thus far in 2022—regarding overarching technological challenges, plans, and strategies?

A. We consistently hear three themes: workforce recruiting and retention; cyber threats and risks; and modernization of outdated systems.

The first two points are external realities. Similar to the commercial sector, state and local organizations are struggling to recruit, hire, and retain workers. One senior IT leader recently described an organization staffed at 75%. She simply cannot recruit and hire workers fast enough. Staffing levels are creating massive challenges and result in delayed schedules and project slips on new initiatives. And from a cyber perspective, the persistent threat of ransomware and other security attacks are keeping IT leaders up at night.

But outdated systems can and are being modernized. This is helping leaders combat these other challenges. Government customers are working to move core systems to hyperscalers to mitigate some risk and are upgrading legacy systems, such as unemployment insurance, which are decades old. That drive is predominately coming from longstanding business needs—to mitigate risks, keep up with constituent needs and demands, and benefit from newer technologies like predictive analytics. The pandemic brought these needs into sharper relief. Now, federal stimulus and infrastructure improvement funds are providing backbone funding to expedite much-needed legacy modernization, particularly in systems that provide direct services to residents.

Q. What have been the effects of the pandemic, generally, on technological investments at state and local levels? Has that begun to change, and if so, where and how?

A. Like so many industries, the pandemic has had a massive impact on the way state and local governments work—and how they will continue to do so. Because these organizations were on the front line, we saw immediate investment in IT efforts, things like scheduling and testing platforms, contact tracing systems, and call centers. The approach was to stand systems up quickly when possible and to throw contract labor at the problem to address short-term needs.

It was also a moment of discovery. Many organizations learned that they lacked the real-time data management, system integration and analytics (notably, predictive) capabilities they needed across broad categories, from public health, to resource mobilization/allocation, to contact tracing, and to fiscal management. They lacked digital tools to effectively engage in two-way communications with citizens—something citizens had never needed more.

The pandemic also has given governments the impetus and perhaps greater runway to expedite transformation and modernization efforts to respond to the changing landscape of citizen service expectations. In many cases, this means there is an easier path and sometimes even a mandate to begin a core systems transition to the cloud.

For all these reasons, since the pandemic has now slowed down, we are seeing some states lean into the delivery of platforms for digital citizen service, which is critical as citizens and residents no longer go to government offices to receive service. The transformation from traditional service delivery models is going to take time and involve disruption to facilities, staffing levels, and service roles. Those impacts will be felt for years. And, of course, it is impossible to answer the question without acknowledging the massive influx of federal funds flowing into the states for consumption and distribution to cities, counties, and special districts. System modernization is fair game for those funds and offers a once-in-a-generation opportunity to deliver real value.

Q. Have state and local governments begun using monies from the American Rescue Plan Act (ARPA) for SAP-related technology projects, and if so, when, where, and how?

A. With ARPA’s emphasis on key infrastructure projects, it is important for state and local agencies to understand that essential infrastructure often depends heavily on technology systems and services. Besides being foundational to public-sector operations, this technology infrastructure has been slow to modernize, limiting the analytics and capabilities needed to empower agencies, their employees, and the constituents they serve. With broad potential uses and relatively few limitations, the funding could be transformational to pandemic recovery. ARPA-funded tech projects should be considered components of a larger recovery strategy. ARPA funds are not an opportunity to produce an “IT wish list,” but rather to demonstrate the key role technology plays in government modernization.

With that said: yes, we’re beginning to see these projects pick up steam. Some of the conversations we’re currently having with customers are for projects that address issues such as enterprise system modernization, cybersecurity, social services modernization, and citizen outreach and sentiment gathering.

Q. Have state and local governments begun using monies from the federal Infrastructure Investment and Jobs Act (IIJA)?

A. Those funds have yet to flow, as … the federal agencies are finalizing the administrative details (the latest can be found in the White House’s IIJA Guidebook issued in late January)—but agencies are certainly getting ready for them.

The IIJA will only result in long-lasting and transformational outcomes if it's built on the efficiency and intelligence of digital technologies—so even as it puts things like transportation and environmental projects at the forefront, it will also drive massive digital transformation of the public sector. For example, the Internet of Things, ML and AI technology have the potential to play significant roles in supporting the build and maintenance of physical infrastructure (railroads, bridges, roads, etc.) in the United States.

State and local governments can seize this opportunity to better automate their operations from the ground up to meet the increasing demands for secure and smooth project execution and ongoing service delivery. I recommend the following for additional insight into our recommendations for ARPA funding.

Q. How, and where, is SAP helping and advising state and local agency customers gain the most value from their technology investments currently, and moving forward?

A. This is an area I am very passionate about. SAP is celebrating our 50th year in 2022 and we have a 28-year history supporting state, local, and education customers in the United States. Here is the thing: our customers didn’t buy a point-in-time solution. They invested in commercial off the shelf (COTS) software. SAP’s continuous investments in our software means that since 1997, our U.S. public sector customers have had access to new functionalities and the new capabilities, as they’ve come out. We owe those customers our best thinking and collaboration so they can take advantage of the upgrades that enable them to get the most capability, and the most value, from their spend.

I’ve supported public-sector customers from across the federal, state, and local levels, and I think there is a break down in how COTS software has been procured over the years. Organizations typically fund the initial go-live but then don’t fund the recurring upgrades—the investment falls off and they have to be careful not to fall behind. That’s why we work so hard to continuously engage—to have our partners continuously engaging—with our customers to support their efforts to move forward and to educate them on the capabilities that can help them move forward.

Q. Are there state and local government agencies that are on the forefront of RISE with SAP adoption? If so, please note the agencies, their progress, and the results.

A. Candidly, we launched RISE a year ago, right in the middle of a true crisis for State, Local, and Education (SLED) organizations. Like the private sector, this environment forced them to contend with the urgency of modernizing their systems—but unlike the private sector, these agencies are not able to pivot and migrate as quickly. That said, the RISE value proposition is absolutely resonating with our SLED customers as the fastest way to transition into becoming an intelligent enterprise, and we expect factors this year, including ARPA and IIJA funding, to fuel more RISE successes with state and local government agencies.

Q. How is SAP helping state and local agencies make the business case for cloud migration for legacy systems/applications?

A. One of the aspects that I love about SAP culture is the investment we make in helping customers understand, articulate, and quantify value. It is in our DNA. We have value advisory and industry advisory teams that are part of our engagement with prospects and customers. These teams, and the data and experience they bring, enable us to engage customers to articulate value and model business cases for their investments. The most important conversations we are having right now involve sitting down with long-time customers to dig into the efforts they put into operating their IT systems and applications. The discovery is critical because it allows us to learn how they run and forms the foundation for sharing how we run when SAP systems are delivered via the cloud.

We also emphasize more than just the technology leg of the transformation stool; we also focus on process and people. It doesn’t start and stop at the boundaries of the app/function in question. This comes through:

  • A thorough but flexible cloud road-mapping methodology that lets SAP and our customers collaboratively identify pain points, successes to build on, and specific opportunities for improvement (often using industry-specific comparative best practices and quantitative metrics). Importantly, the end product is a series of options (something public-sector leaders are always looking for given fiscal, political issues, etc.) and not a single pre-baked solution.
  • The emphasis we place on solid business process improvement and change management methodologies from both our SAP Services team and our system integrators.
  • Insights from our business process intelligence tool, Signavio, which guides organizations (whether they are existing SAP customers or not) through as-is process optimization and to-be process optimization, with qualitative and quantitative metrics that public-sector executives and elected officials find compelling.

Q. What are the key business issues/challenges that are driving organizations to cloud adoption this year?

A. The cyber risks associated with running systems that are open to the public or open to a hybrid workforce; the flow of federal stimulus funds that gives organizations a jump-start on the moves they have been wanting to make for years but have been prevented from making due to budgetary concerns; overcoming the people shortfalls they are facing and getting capabilities quickly and to have them managed by the OEM—the list is long and brings new challenges every day.

This will be an exciting year: for the first time in a long time, the public sector has access to the right tools to help solve their biggest issues AND they have access to the funding to make it happen.

Q. Cybersecurity is a top challenge for all organizations, including state and local government agencies. This is especially true given the amounts and types of data they have and manage. What SAP tools and strategies are at the forefront of your discussions with governments regarding this challenge?

A. The foundational contract with COTS is that we have the responsibility to keep providing updates and the customer has the responsibility to apply those updates. This applies to functional enhancements to our applications as well as security patches. Moving to cloud delivery of SAP applications—finance, human resources, procurement, and reporting—is the key strategy for our discussions with governments and educational institutions. Public-sector leaders, and leaders at educational institutions, have a huge challenge supporting complex environments on tight budgets, and the cyber threat is ever-present.

Even large and well-funded public-sector IT organizations are having a hard time staying on top of the changing threat environment and their inability to attract and retain the kind of technical talent required to be proactive and not reactive to security threats. And those that are slow to put together a solid enterprise cloud migration strategy with top private-sector partners not only put their organizations at risk, but also fuel unnecessary and increasing operational spend.

Q. Likewise, sustainability is a top challenge for state and local government agencies and their constituents. What SAP tools, strategies, and internal practices are foremost in your discussions with governments regarding this need and opportunity?

A. With sustainability as a key pillar of the IIJA, these conversations are really ramping up with our customers. The act is empowering agencies to develop sustainable infrastructure that should be resilient to climate change, and technologically advanced, socially inclusive, efficient, and flexible. To do this, organizations need new digital tools, performance indicators, and awareness of sustainability concepts and metrics--across all infrastructure improvement stages, including planning, design, procurement, construction, and long-term operational effectiveness.

At the local level, SAP is at the forefront of circular economy/circular cities innovation, which aims to use nearly all elements of our Business Technology Platform. Additionally, we aim to use our supply chain and procurement applications to help manage the full life cycle of production, consumption, and disposal. This involves procuring, sharing, leasing, reusing, repairing, refurbishing, and recycling existing materials and products as long as possible.

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