CIOs, enterprise architects, and business intelligence managers work together with business managers in tax departments to select software tools that can support tax compliance programs. This analysis offers them an overview of the capabilities that Fast Enterprises, IBM, Intracom IT Services, Revenue Solutions Inc. (RSI), SAP, SAS and Teradata offer.

• There are global and country-specific vendors that offer software solutions for tax compliance. Some are "suite" vendors, while others are primarily focused on best-of-breed tools, such as reporting, predictive analytics or case management.

• U.S. states have started deploying tax compliance suites in the past six to eight years, while other countries — and, in particular, federal/national revenue agencies — have custom-developed solutions based on best-of-breed software components. This trend is not expected to change significantly in the next three years.

• Revenue agencies that are planning to implement tax compliance software tools should start by clearly defining the functional requirements by the type of programs, which, in turn, will drive the fit-gap analysis.

• An analysis of the existing and draft end-state architecture will be necessary because these are complex solutions with multiple modules and interfaces. Integration with the existing tax processing, accounting and collection system, and with multiple data sources such as vehicle, property, employment and business registries, should be key evaluation factors.

• Vendors should also be evaluated on the basis of their ability to support implementation and help desks worldwide in the geography where the agency is located.

• Vendors' understanding of statistical methodologies and business processes that characterize discovery, audit, collection and fraud-detection programs should also be considered in the evaluation.

Tax agencies around the world use data warehousing, reporting, analytics and case management software to improve the efficiency and effectiveness of tax compliance programs, such as collection, discovery and audits. Tax compliance solutions include a variety of functional capabilities that can be grouped into five macrocapabilities:

• Data warehousing: This includes the functionalities to extract, load, cleanse, validate and match data from multiple disconnected databases.

• Lead discovery and analysis: This includes the functionalities to select, review and prioritize discovery, collection and audit cases. Predictive/decision analytics are increasingly used to select audit cases and optimize collections.

• Case management: This gives auditors and collectors the ability to manage, for example, under-reporting and delinquent collection leads.

• Reporting: This includes the ability to track revenue, individual cases, and the activities of auditors and collectors.

• Common services: This entails software capabilities that are necessary to use and integrate other functionalities, such as search, security, document management and data management.

There are multiple global and country-specific vendors that offer software packages that tax agencies can use to support tax compliance programs. Some are "suite" vendors that offer solution sets with tax-compliance-specific process templates and data load scripts, while others are primarily focused on specific software tools. The total cost of ownership of such a solution, in support of multiple programs over a five-year period, can be approximately $15 million for a revenue agency that collects $15 billion to $20 billion of tax revenue annually — thus, selecting the right software is critical.

This study provides tax agencies with IT decision makers, such as CIOs, enterprise architects and business intelligence managers, and provides compliance directors and business analysts in tax departments with an overview of the capabilities of vendors that offer multiple functionalities, even if not a full suite. This research does not analyze:

• Vendors (such as ACL Services and CaseWare International) that offer software packages intended for certain tax compliance roles, and vendors that offer IDEA desktop solutions for auditors.

• Vendors that offer software tools for niche functionalities, such as phonetic matching software or other entity resolution technologies used to discover identity-related frauds.

• System integrators, such as Deloitte and Accenture, that implement and integrate software products from one of the vendors analyzed in this study, or use those products to develop solution frameworks that they implement and customize, but which cannot be sold as stand-alone, off-the-shelf software. IBM is analyzed here, but only for the software packages it offers to tax agency compliance departments.

• Providers of integrated tax systems (ITSs) that revenue agencies use for registering taxpayers, processing returns, collecting revenue and accounting for revenue, such as SAP, Oracle and Fast Enterprises. SAP and Fast Enterprises are analyzed here, but only for the tax compliance software solutions they offer.

• Consultants that provide expertise in data mining/statistical methodologies for the design of compliance programs that require advanced econometric and risk modeling skills, such as Elite Analytics.

• Company background: Fast Enterprises has 300 employees who are all dedicated to the tax and revenue industry, it has revenue of approximately $100 million, and it has offices in the U.S. and Canada. The company develops and sells only one product, GenTax, which is a commercial off-the-shelf (COTS) software package for government tax and revenue agencies.

• Product: Fast Enterprises started to develop GenTax in 1997. The GenTax product suite provides integrated tax capabilities, such as customer and account registration, return processing, financial management, workflow, reporting and analysis, taxpayer access for Internet self-service, and a set of compliance capabilities:

  • Data Warehouse: This can be deployed on SQL Server, Oracle, IBM DB2 or Teradata; no additional data load, extract, matching or other tools are required. The tool is integrated with the rest of the GenTax suite and provides preconfigured adapters to load data from the most common U.S. Internal Revenue Service (IRS) files.

  • Discovery: This allows the user to create a tax compliance discovery plan that filters the data in the Data Warehouse to produce information that can be acted on further. Analysis and mining capabilities are available to sort, segment, score, export to Excel, and create leads on which auditors will take action.

  • Lead Management: The Discovery process matches leads with taxpayers in GenTax, providing access to collections, audit and other integrated tax functions. Users can move leads into Lead Management individually or in bulk for the appropriate case management.

The workflow capabilities embedded in GenTax offer specific support for collection management, such as lien, bankruptcy, payment plans and bill items, audit management, lead management, and generic case management. The financial module's revenue accounting capabilities, combined with the Report Manager, provide an agency with real-time recovery results. Reports can track where the funds came from as well as what prompted the remittance, and can also determine whether the revenue was the result of a collection, audit or discovery lead:

• Customer base: Sixteen revenue agencies — 13 U.S. states, a provincial government in Canada, a U.S. county and the Board of Inland Revenue of the Republic of Trinidad and Tobago — currently use the Data Warehouse and Discovery modules for tax audit selection. A total of more than 400 distinct discovery programs are currently in production at these agencies.

• Go-to-market: Fast Enterprises has more than 300 employees dedicated to supporting client implementation of GenTax and maintenance; however, they sometimes collaborate with local partners. All sales opportunities are developed directly by Fast Enterprises' account managers and executives.

• Technical architecture: GenTax version 8 is built on Microsoft .NET Framework 3.5, Microsoft Windows Presentation Foundation (WPF), Microsoft Silverlight and Windows 7. GenTax is capable of interfacing using XML, secure FTP, Web services and service-oriented architecture (SOA). The GenTax Data Warehouse module can be deployed on SQL Server, Oracle, DB2 or Teradata.

• Fast Enterprises' tax compliance offering's strengths and challenges:

  • Strengths: Lead discovery and analysis and case management as part of the GenTax integrated tax system. Fast Enterprises has strong expertise in the U.S. state and Canadian provincial tax systems.

  • Challenges: Knowledge transfer requires strong technical and project management expertise due to the breadth of modules included in the suite. GenTax has only basic advanced analytical features. Investments to grow outside of North America and Latin America could stretch resources in the early stages of that process.

• Company background: IBM is a global IT vendor. In 2009, it had more than $95 billion in revenue and 400,000 employees. IBM provides hardware, software and professional services to more than 170 countries worldwide. It also has a government practice in every region of the world.

• Products: IBM offers database and data warehouse solutions with its DB2 and Informix product lines, and also offers IBM SPSS Modeler, a data mining and text analytics workbench. Federal/national and state agencies use IBM SPSS predictive analytics software to risk-assess accounts and identify those with a high probability of delinquency, to help determine collection strategies, and to focus the limited audit resources on the most productive cases. In particular, IBM SPSS predictive analytics software analyzes and identifies patterns in multiple data sources, such as taxpayer profiles, previous filings, call center notes and audit histories. IBM SPSS Modeler also offers:

  • Built-in automated modeling features that use a cross-section of data mining techniques to build analytic models and combine multiple predictions.

  • An Automated Data Preparation (ADP) node to analyze data and identify fixes, to screen-out fields that are problematic or unlikely to be useful, to derive new attributes when appropriate, and to improve performance through screening techniques.

  • A number of analytical procedures for predicting outcomes, thereby allowing advanced users to pick and choose the best one for their tasks, including Nearest Neighbor analysis, which is a method for classifying cases based on their similarity to other cases.

  • An Auto Cluster node that estimates and compares clustering models that identify groups of records with similar characteristics.

  • Text Analytics, which is a fully integrated feature that uses advanced linguistic technologies and natural-language processing (NLP) to process a variety of unstructured text data, extract and organize the key concepts, and group these concepts into categories. Incorporating all available types of data, especially a person's sentiment, increases the "lift" or accuracy of predictive models.

  • Support for the CRoss-Industry Standard Process for Data Mining (CRISP-DM).

• Customer base: Users of IBM SPSS solutions include state and federal government tax agencies in North America and abroad.

• Go-to-market: IBM SPSS has approximately 60 employees who work on implementing the organization's products. In addition, IBM SPSS uses approximately 100 companies/individuals with expertise in advanced analytical methodologies as part of its "sourcing" pool.

• IBM Global Business Services (GBS) has expertise in advanced analytics for tax and revenue, and has practitioners skilled in SPSS products. GBS developed two solution frameworks that are specific to the tax and revenue market: the Tax Audit and Compliance System (TACS) and the Tax Collections Optimizer (TCO). IBM GBS developed both solutions by leveraging the experience of multiyear engagements with tax agencies — in particular, the New York State Department of Taxation and Finance; however, the IBM SPSS Modeler is not part of TACS or TCO, but plans are in place to integrate it in the future:

  • TACS applies methods for the identification and selection of tax returns and taxpayer case files by using risk determination techniques.

  • TCO is an analytical solution that predicts the collectability of debt, identifies the next best action to take to resolve debt issues, and uses optimization techniques for the assignment of tax enforcement resources.

• Technical architecture: IBM SPSS Modeler provides a Java-based graphical user interface. IBM SPSS Modeler Server is written in C++. The analytics management platform ― IBM SPSS Collaboration and Deployment Services ― used to manage analytical processes and deploy analytics within an organization is built on Java and Java Platform, Enterprise Edition, and the user interfaces are Java-based. IBM SPSS products run on all of the most common operating systems, databases and application servers.

• IBM's tax compliance offering's strengths and challenges:

  • Strengths: Data warehousing, reporting and advanced analytics. Also, global consulting and service delivery and support capabilities.

  • Challenges: Different modules that originated from different platforms make it difficult to build an integrated solution. There are limited prepackaged tax-specific templates.

• Company background: Intracom IT Services is part of Intracom Holdings, which is a telecommunication service, IT service and defense electronics conglomerate headquartered in Greece. The IT services arm has consolidated group revenue of more than €150 million, and has approximately 1,650 people. The vendor's major industry focus is on government and financial services, while its geographic focus is in EMEA.

• Products: In late 2008, Intracom IT Services Denmark acquired the Eskort Compliance and Enforcement Solution from WM-data, a Swedish IT services provider that, a few months earlier, had been acquired by Logica. Eskort is a suite of systems providing support for compliance processes within a taxation or customs authority. Eskort has traditionally offered integration with integrated tax processing systems. Recently, however, Intracom decided to offer Eskort bundled with its own integrated tax processing offering, which is being developed:

  • Data warehousing and advanced reporting: Eskort follows a component-oriented philosophy and acts as a "plug-in" module that utilizes the customer's existing standard data management and advanced reporting applications. If a customer does not have tools to support data integration and reporting, then alternative open-source solutions, such as Talend's Open Data Solutions and JasperReports, can be used. Intracom provides the consulting services to help integrate Eskort with those industry-standard data warehouses and reporting tools.

  • The Eskort Risk Analysis/Selection is a knowledge-based, expert risk-analysis system performing a multidimensional analysis of data retrieved from data warehouses or relational databases. The solution includes tools and applications to configure the risk analysis system, monitor the analysis tasks, and select candidates for audit or collection. It supports two major types of risk analysis: transactional analysis, which focuses on the risk analysis of single documents (e.g., a single tax return form) and behavioral risk analysis, which focuses on the analysis of a larger set of taxpayer data (i.e., months or years of relevant taxpayer data).

  • The Eskort Selection Workbench application is used to focus and rank taxpayers' risks. The list of taxpayers can be filtered using different types of criteria, and the system can be configured to support the selection process automatically, semiautomatically or manually, depending on the process requirements of each agency. Full integration with Eskort Case Management & Tracking supports the creation of audit cases (single or in bulk).

  • The Eskort Case Management & Tracking system supports users in their daily compliance work to manage the compliance process and monitor the progress of compliance activities; to track cases (e.g., audits) throughout their entire life cycles, from initiation to review and approval/appeal; and to report on performance and generate relevant management information. It supports automatic and manual creation of audit cases, and it can be configured to be used in multiple case flows (e.g., desk audit, field audit, appeals). Recently, Intracom extended its compliance concept to enable the hypotheses generated by predictive data analytics systems to be transformed into rules, using a knowledge management environment that will be provided through a special configuration of the Eskort Case Management & Tracking system. This system provides support for template-based correspondence, which can be used for case-specific correspondence and bulk mailings.

  • The Eskort Audit Support system supports auditors in their daily work of planning, performing and reporting on audits. The users can create and access an electronic case file through the Eskort Case Management & Tracking system, which contains relevant data from the tax legacy system, agencies' data warehouses, third-party data sources, and so on. The user can then work with the case offline, and, when he or she logs back onto the central server, the case file is automatically synchronized with a master file in the audit repository. This synchronization also supports multiauditor cases wherein each auditor works on a specific aspect of the audit, which is then integrated with a complete set of findings for the whole audit.

  • The Eskort Case Management & Tracking system can be used to create reports in relation to the user's profile, while detailed reporting about actual cases is produced by the Eskort Audit Support system. Advanced reporting is typically achieved by integrating with third-party reporting products, such as JasperReports and SAP BusinessObjects.

• Customer base: Eskort is currently being used by approximately 30 customers in more than 20 countries on five continents. Examples of customers include the South African Revenue Service, the Michigan Department of Treasury, the New Jersey Division of Taxation, the Directorate General of Taxes of Indonesia, the Greek Ministry of Finance and the Swedish Tax Agency.

• Go-to-market: Intracom sells the Eskort solution suite through a dedicated internal sales force and through partners. Intracom has a team composed of approximately 40 professionals to implement the solution or to complement the work of other system integrators. Primary Intracom partners include international vendors and national/local providers. License pricing is based on a mixture of the volume of revenue and the number of users of the systems.

• Technical architecture: All subsystems built on a mixture of C++ and Java have just been migrated to an n-tier, service-based architecture. The Eskort Compliance and Enforcement Solution does not include a proprietary data warehouse capability, but Intracom can integrate with all industry-standard data warehouses. For use in analysis, data is loaded typically into a multidimensional data model; Eskort offers facilities for configuring this load from multiple relational or XML-based data sources.

• Intracom's tax compliance offering's strengths and challenge:

  • Strengths: Tax-specific lead discovery and analysis, and case management capabilities. Subject matter expertise in the compliance domain. International delivery and support capabilities.

  • Challenge: Limited penetration of the new version of the product, which was migrated to an n-tier architecture.

• Company background: RSI was established in 1996 and has experienced revenue growth ever since. It currently employs approximately 200 professionals. RSI offers tax compliance and revenue management software solutions and services for U.S. government agencies. More than 80% of RSI's revenue comes from U.S. state tax departments.

• Products: Tax compliance is the core strength of RSI. In this solution area, RSI combines a suite of software products and four practices of consulting services: data warehousing and business intelligence; audit management; decision analytics; and accounts receivable management. In the past two years, RSI has invested to set up consulting and system integration capabilities to provide legacy modernization, legacy support, the implementation of custom, transfer or COTS solutions for revenue management systems, and the implementation of custom or COTS solutions for unemployment insurance systems. RSI has also designed and developed an ITS in cooperation with the state of South Carolina, and will productize and offer the product — branded Revenue Premier — as a COTS solution. RSI's compliance offering, DiscoverTax 2.8.0, consists of several modules:

  • Tax Compliance Data Warehouse: A specific data model to associate all data in a relational dataset that refers to a portfolio — i.e., every piece of data related to a taxpayer, such as demographic details, billing history and relationships with other individual and business taxpayers. This module uses Pitney Bowes tools for address validation, Embarcadero extraction, transformation and loading (ETL) tools and SSA-Name3 phonetic matching software. In some implementations, RSI uses IBM or SAS ETL tools. RSI also maintains a library of loading scripts for the most common integrated tax system, other government archives (such as the IRS, the U.S. Department of Motor Vehicles [DMV] and U.S. W-2 tax records), and for D&B and LexisNexis.

  • Case Management System: Administers the process of pursuing and tracking noncompliant leads, such as discovery, audit and collection. It is integrated with the data warehouse module. It provides the capability to "check-out" cases to a laptop to work cases in the field, including automated synchronization with the central case repository. The case system may also be extended to include audit case and collection case functionalities, and these modules may each operate as stand-alone solutions. This module also supports revenue tracking and other standard reports. For more advanced reporting and ad hoc querying, RSI offers integration with SAS and IBM Cognos tools.

  • Correspondence Management System: Provides correspondence functionalities, such as notice creation, notice administration and data management. Users can create Microsoft Word, Pitney Bowes DOC1 or Adobe Acrobat correspondence with dynamic data elements pulled from assessments, lead selections, or any data within the database. Previously generated notices may be viewed and reprinted at a later date.

  • Selection: The integrated selection module is an Excel-like tool that enables end users to select taxpayers for audit, compliance or other uses based on configured markers, such as geography, return or income source line-item values, or based on the existence of licenses, to create cases automatically and to maintain a library of past selections that is progressively tracked and refined.

  • Decision Analytics and Compliance Library: A suite of analysis and scoring solutions and methodologies for taxpayer behavioral modeling and noncompliance detection to identify patterns of noncompliance and apply them to discovery, fraud, audit and collection operations. RSI's Integrated Taxpayer Compliance Management methodology leverages the decision analytics to optimize resource usage of a revenue agency, and to increase voluntary compliance by the taxpayer.

  • TaxMaster: A stand-alone laptop tool that supports the field audit process — i.e., data gathering, reviewing individual taxpayer data, recording audit decisions, computing additional taxes and reporting.

• Customer base: RSI has 38 customers among U.S. government agencies; in 2009 and early 2010, RSI signed new contracts or renewed business with the Washington, D.C. Office of Tax and Revenue, Maine Revenue Services, North Carolina Department of Revenue, Pennsylvania Department of Revenue, Connecticut Department of Revenue Services, New Mexico Tax and Revenue, South Carolina Department of Revenue and Georgia Department of Revenue.

• Go-to-market: RSI has a direct sales force of six professionals targeting revenue agencies and employment agencies that deal with revenue collection. The DiscoverTax price includes a one-time license fee, based on population size, and annual maintenance fees, while the TaxMaster license fee is based on the number of seats. RSI has delivered performance-based contracts with some of its customers to fund the initial investment and to be paid back based on the amount of additional collections that the tax agency realizes after the implementation. RSI's staff usually implements the DiscoverTax and TaxMaster solutions; RSI's technology division is responsible for hardware and software implementations; and RSI's consulting division is responsible for configuration, project management and training. RSI's two solution centers (in Sacramento, California and Charlotte, North Carolina) develop products and support customers. RSI has occasionally partnered with system integrators, such as CGI, Accenture and Deloitte, but does not have exclusive arrangements.

• Technical architecture: DiscoverTax is Java-based for all service-side Web components, and .NET-based for the end-user interface. TaxMaster is developed in Delphi, but is planned to be migrated to .NET. The DiscoverTax software runs on Windows, AIX and Linux servers, Oracle, Microsoft and IBM databases, and Tomcat and WebSphere application servers. However, RSI has accommodated other configurations of hardware, operating system, Java Virtual Machine (JVM) and relational database management system (RDBMS) when clients required it. A conventional implementation for a data warehouse with several discovery programs can take six months from the time a project begins to the time when data is loaded, cleansed, matched and analyzed, and then initial cases and first letters are sent out to delinquent taxpayers.

• RSI's tax compliance offering's strengths and challenges:

  • Strengths: Integrated suite. Experience in integrating compliance systems with integrated tax systems (custom and COTS) and best-of-breed analytical products. Product development and service skills are solely specialized on tax agencies. It has prepackaged data integration templates and a widely implemented library of compliance programs for the U.S. market.

  • Challenges: Limited ability to service customers outside the U.S. Advanced reporting and analytics require integration with best-of-breed software vendors.

• Company background: SAP is one of the largest global software application vendors. In 2009, it generated €11.5 billion of revenue and employed 51,500 people. Its public service solution management industry business unit, which serves public-sector, defense, healthcare, and higher education and research clients, accounted for slightly less than 7% of revenue.

• Products: SAP has proved to be a viable provider of enterprise back-office applications, such as accounting and human capital management and procurement, to governments around the world. More recently, SAP has increased investments to market CRM and industry-specific solutions, such as SAP Grants Management, SAP Social Services and Social Security, and Tax & Revenue Management. SAP's offering for tax compliance supports three common use cases for tax agencies: nonfiler discovery, audit selection and collection management. The solution framework is a combination of SAP Tax & Revenue Management and SAP BusinessObjects capabilities:

  • SAP NetWeaver provides extraction and incremental data loads. SAP BusinessObjects Data Services complements NetWeaver to integrate various data sources, ensure data integrity and build data foundation. It also centralizes the discovery, correction and prevention of data quality through parsing, cleansing, standardization, matching and consolidation features.

  • SAP BusinessObjects Xcelsius Enterprise is a point-and-click data visualization tool. SAP BusinessObjects Web Intelligence enables tax agencies to set up self-service access to data, reporting and information analysis. SAP BusinessObjects Voyager is a tool designed for online analytical processing data that delivers functions for the analysis of multidimensional datasets. SAP BusinessObjects Explorer delivers search functionality and automatically generates the chart that best represents the retrieved information. These capabilities are combined in SAP BusinessObjects Enterprise.

  • SAP Crystal Reports provides the means to create formatted reports with "what if" scenario models and interactive charts — and deliver them via the Web, e-mail, Microsoft Office, Adobe PDF, or embedded in enterprise applications.

  • Predictive modeling capabilities are incorporated in BusinessObjects predictive analytics software based on IBM SPSS Modeler (formerly SPSS Clementine). In addition to the IBM SPSS standard product, SAP provides enhanced connectivity to SAP BusinessObjects Enterprise.

  • SAP's Customer Relationship Management application, as part of SAP Tax & Revenue Management, provides the case management capabilities.

• Customer base: SAP currently has six customers in the U.S., Canada and Asia/Pacific that are using these tax compliance capabilities. There are approximately 100 government agencies worldwide using SAP for collection management as part of their compliance activities, and 60 of these are using Tax & Revenue Management as an integrated tax system for return processing, revenue collection and tax accounting. Some Tax & Revenue Management customers are also using the solution for audit and risk-based collection initiatives.

• Go-to-market: SAP sells its tax compliance solution directly and indirectly. Primary co-opetitors in this space include Teradata for the database and data warehousing tools, IBM for the predictive workbench, and Intracom, whose Eskort tax compliance suite is certified on the SAP NetWeaver stack. Together with its partner, Zementis, SAP set up a prototype to demonstrate the integration between Zementis' real-time prediction engine running on the Amazon Elastic Compute Cloud (EC2) and SAP's Tax & Revenue Management module.

• Technical architecture: SAP products run on all of the most common operating systems, databases and application servers. Implementation of a tax compliance suite for multiple use cases can take up to 24 months.

• SAP's tax compliance offering's strengths and challenges:

  • Strengths: SAP NetWeaver data integration and data quality capabilities. BusinessObjects business intelligence suite. Integration with SAP Tax & Revenue Management integrated tax system. Global delivery and support capabilities.

  • Challenges: Different modules originated from different platforms, thus requiring some technical expertise for full integration. Limited prepackaged tax-specific templates for loading data sources from outside the tax agency. Limited prepackaged tax-specific templates for advanced analytics.

• Company background: SAS is a $2.31 billion business intelligence and analytics software solution vendor, and it has 11,055 employees. The government sector represents approximately 15% of SAS's worldwide revenue.

• Products: SAS has a long history of providing data warehousing, analytics and reporting software to federal, state and local governments across the globe. In the tax compliance area, it offers three packaged solutions that are based on SAS's core foundation components: SAS Data Integration Studio for data extraction, loading, matching and cleansing; SAS Business Intelligence software for query and reporting; and SAS Analytics for advanced modeling:

  • SAS for Government Tax Audits includes rules to detect known fraud patterns, anomaly detection to find unknown but unusual patterns, predictive modeling to learn from past known schemes, and link analysis to identify hidden associations between entities. SAS develops unsupervised as well as semisupervised learning models based on data from past tax years.

  • SAS for Government Tax Collections provides a solution framework and data model to enhance the collection process by scoring receivables and recommending optimal treatments for each account.

  • SAS Fraud Framework for Government combines all products for an end-to-end framework to support data integration/preparation, analysis, alert/lead generation, and investigation/case management. The SAS Enterprise Case Management system works in two steps. In the first, it can take the existing rule base and identify opportunities to improve it by changing cutoffs. In the second step, the system can identify pockets of space that were ignored by the existing rule base and suggest new rules to be added to the rule base to increase compliance.

• Customer base: More than 70 federal, state and local government revenue agencies worldwide are currently using or implementing SAS business intelligence solutions. Major contract wins in 2009 included HM Revenue & Customs in the U.K., the New York City Department of Finance and the Comptroller of Maryland.

• Go-to-market: SAS has approximately a 100-member sales staff that directly targets the government sector, and an equal number of technical staff members who support system implementations in governments. There are no professionals exclusively dedicated to the implementation of tax compliance solutions, but in a typical project, there are two or three analysts with previous experience in this domain area. SAS also partners with other vendors, such as Accenture, CGI, Teradata and RSI, in tax compliance projects. SAS offers tax compliance solutions as a direct license with first-year fee and annual maintenance, and as a hosted solution. There are two hosted offerings:

  • The hosted SAS Fraud Framework for Government, which includes hosting the entire stack from the data warehouse to the user interface

  • The hosted scoring service, which includes only analytical modeling and lead scoring

• Technical architecture: SAS products run on all of the most common operating systems, databases and application servers. Implementation of SAS tools for a tax compliance program can take as much as eight months for full production.

• SAS's tax compliance offering's strengths and challenge:

  • Strengths: Data warehousing, reporting and advanced analytics. Global delivery and support capabilities. Launch of a case investigation interface, and predefined analytic models and templates for an end-to-end tax compliance solution.

  • Challenge: The end-to-end tax compliance solution is relatively new to the market, although underlying technology components have been used in tax agencies for a few years.

• Company background: Teradata is a $1.7 billion hardware and data software vendor. It is present in approximately 60 countries and employs 6,000 staff members. Teradata offers database software, enterprise data warehousing, data warehouse appliances and analytics to government agencies in the U.S. and Australia, and it is building a presence in EMEA, Canada and Asia/Pacific.

• Products: Primary focus area for Teradata in government include tax compliance, finance and performance management, government healthcare, intelligence and logistics. Teradata has been providing tax compliance solutions since 1999. The current version (5.0.1) of Teradata's Tax Compliance Framework comprises five modules based on some foundational elements: Teradata Data Warehousing, Teradata Tax Logical Data Model, business intelligence and ETL tools, and a single sign-on portal:

  • Discovery program: Incorporates data mining and analytical models, soft matching, and address standardization to score, rank, prioritize and assign discovery leads produced in the data warehouse.

  • Case manager: Enables the ability to assign, track, manage, correspond, process, evaluate, calculate and produce reports for audits and discovery leads; and integrates with the discovery program for lead management, resource/workload optimization, correspondence generation, and integration with the existing tax system.

  • Reporting: Analyzes audit and case results. Standard reports provide the ability to view current and historical activities (with drill-down/drill-through capabilities), create ad hoc queries, develop custom reports and provide operational intelligence.

  • Revenue tracking: Tracks revenue from cases across multiple variables, including tax type, tax year, program, and by amounts assessed and collected. It also tracks the initial case revenue and subsequent collections.

  • Performance information dashboard: Provides access for managers and auditors/analysts to key performance indicators to monitor critical business activities for the measurement of efficiencies. Functionalities include the ability to create trigger alerts for thresholds and to access detail-level data through drill-down capabilities.

• Customer base: Teradata has eight customers using its Tax Compliance Framework in the U.S., one in EMEA and one in Asia/Pacific. Non-U.S. implementations leverage the IP developed for the U.S. state solution, but they are considered custom implementations. The most recent contract wins in 2009 included the states of Ohio and Maryland.

• Go-to-market: Teradata has 10 sales executives who target revenue agencies directly. A typical implementation includes four to six professionals from Teradata and staff members from system integrators, such as Accenture, Deloitte and Capgemini.

• Technical architecture: Teradata's Tax Compliance Solutions are Java-based and run on top of the Teradata RDBMS using SQL, stored procedures, and open-source components, including Apache's Tomcat and Struts. The Case Management Solution module runs on top of the Teradata RDBMS and includes Java components as well as ColdFusion. Recommended server operating systems are SUSE Linux and Windows X. Teradata's Real-Time Reference Enterprise Architecture supports SOA integration with IBM WebSphere, BEA WebLogic, Microsoft, Tibco BusinessWorks, SAP NetWeaver and Oracle. Implementing the discovery portion of the solution, with revenue actually being collected, has taken as few as 70 days in some cases.

• Teradata's tax compliance offering's strengths and challenges:

  • Strengths: Integrated tax compliance suite. Global delivery and support capabilities, especially for data warehousing. Prepackaged tax compliance templates for the U.S. market.

  • Challenges: Early stages of development for some of the modules, such as lead management, which has been implemented only by one U.S. state so far. Advanced reporting and analytics require integration with partners. Limited prepackaged templates for customers outside the U.S.

Gartner expects that, in the next three to five years, tax compliance programs will still be supported by a combination of data warehouse, business intelligence and analytical software products from various vendors. In fact, a U.S. state government that Gartner recently spoke with is using GenTax for collection and as the core source of the single version of the truth about taxpayer accounts — but it is also using SAS to look up data, set up alerts and query returns to better select audits. However, differences exist between the state and provincial government markets in North America and other geographies:

• In the U.S. state government industry, Teradata and RSI compete head-to-head to provide tax compliance solution suites; Fast Enterprises provides an integrated tax system that is often used to support tax discovery and collection programs; and other vendors provide best-of-breed products.

• In other countries, and at the U.S. federal government level, a siloed approach still prevails in coping with the size and complexity of programs; thus, best-of-breed software components are used as the basis for custom-developed solutions.

This research did not find major differences in tax compliance solution adoption trends between midsize-to-large tax agencies and small tax agencies, such as those collecting less than $5 billion per year. Because most agencies implement tax compliance solutions on a program-by-program basis, rather than with a big-bang approach at the enterprise level, even smaller agencies can prioritize investments to their business requirements and fund availability.

Table 1 summarizes the analysis of vendors' strengths and challenges, and, based on that, advises when it is most appropriate to use a certain solution, or when it makes sense to consider alternatives.