Inland Revenue (IR) is the New Zealand government department responsible for the collection of over 80% of the government's revenue in New Zealand.  It also collects and disburses social support programme payments and provides the government with policy advice.

As well as collecting taxes, Inland Revenue administers

• Working for Families tax credits.
• payment of Paid Parental Leave.
• collection and payment of child support.
• collection of Student Loan debt.
• collection of KiwiSaver (New Zealand's work-based retirement savings scheme).

Inland Revenue employs over 5,500 full-time-equivalent staff in 17 cities across New Zealand.

Like most tax and revenue organisations around the world, in the last 25 years IR has implemented vast IT code changes in one main tax system.  This legacy tax system is used to administer and support the ever-changing legislation and policy, i.e., the business rules.

Most of the business logic — the business rules — has been buried in complex IT code, which makes it very difficult to trace back to why the business rule was originally coded, to understand whether the business rules are still relevant and what changes have been made to them over the years.

Duplication and misinterpretation of business rule application is common, leading to inaccuracies and, at times, to increases in the number of manual business processes required to process customer transactions.

Implementing rule changes and business and system requirements becomes increasingly complex.  Extra pressure is placed on the available staff and the already allocated and prioritised funding, making it a challenge to meet the ever-increasing expectations of the New Zealand Government and customers to do things faster with accuracy, within budget, and with very little manual handling.

The way Inland Revenue managed its business rules needed to improve.  Just over three years ago we began the journey into what we now refer to as Enterprise Rules Management.

The Journey Begins

Business rules management is often seen as a technical or IT deliverable and an implementation of an automated business rules engine, and implementing Oracle Policy Automation (OPA) was where we began.  Early on, it was tempting to dive in and start developing OPA customer-facing products and exhibit how rapidly decision tools could be developed and deployed.

Stakeholders would have benefited quickly from the speed in which tools could be delivered.  However, using OPA in such a tactical way wouldn't provide the longer-term value.  If anything, this type of development could have easily added to the complexity and instability that was already occurring in IT systems, and progress in the overall goal of improving the way we managed our business rules would be hindered.

We began to focus on what business rules management truly meant, and invested in an enterprise rules management strategy and vision.  We steered purposely away from what we termed as quick wins.

Using an enterprise rules management approach is described in IR as:

the analysis, modelling, management, and implementation of all business rules found within legislation and policy which are required to create and define the boundaries of business processes enabling organisational agility

It allows us to

• establish a common and agreed-to understanding of business terminology.
• trace the true source and the original intent of the business rules.
• understand where the business rule needs to be applied.
• identify the business processes needed to guide the business rules.
• understand the controls needed to enforce the business rules.
• identify the relationships between business rules.
• model and test changes to business rules and understand the impact on existing business processes.
• determine which system and who/what needs to consume the business rule logic.

We began with Inland Revenue's already-passed legislation and policy; all full of business rules, these became our blueprint.  The legislation and policy needed to administer all Inland Revenues business processes had mostly been coded and embedded in an IT system that spanned 20-plus years.

In those 20 years, IR has implemented tremendous legislation change.  Changes have ranged from implementing entirely new law, such as KiwiSaver, through to smaller yearly changes to rules in income tax thresholds.  New and existing legislation and the guiding policies have all been embedded in our IT system, which was built over 20 years ago primarily to administer tax and was now also being used to administer social policy.

IT code is not natural language.  Implementing legislative and policy business rules in an IT system, which is used to process decision logic, creates workarounds and, in many cases, manual business processes.  Inland Revenue has multiple IT systems in place to aid millions of customers in meeting their tax compliance and social policy obligations.  Each system uses a slightly different interpretation or operational policy to support the decisions required.  Consistency and transparency in applying those decisions is one of our biggest challenges.  Staff and customers can get a slightly different point of view depending on the channel they choose to use.

The driving force and support to manage rules at an enterprise level came from our executive leadership team, who understood the commitment needed to separate business rules from business and system processes.  The directive from our senior leaders was to begin the process of replacing all business rules embedded in our IT systems with OPA centralised business rules at every opportunity.

Laying the Foundation

A business rules Centre of Excellence was established.

We knew that success was reliant on having the right minds, and having a centralised team meant that while we were establishing our enterprise rules management foundations and principles, those minds could be cultivated.  The decision was made to have the team located in the business area of Inland Revenue rather than an IT area.  A clear message had been sent — enterprise rules management was about the business managing rules rather than handing them over to IT to encode.

We recruited Business Rule Authors; we employed those who had law or accounting degrees, not IT professionals but those who had been taught to interpret law.

We put the Authors through rigorous OPA training and accreditation — the only organisation in New Zealand at that stage to do so.  We invested in the establishment of best practice standards for authoring/developing OPA business rules and made sure that at a technical level OPA was fully supported by Inland Revenue's IT teams.  Our Enterprise Solution Architects were given the responsibility to advocate the use of OPA as a viable solution every time business rules were being introduced or changed.

Our Rule Authors set about harvesting rules from legislation.  The rules were authored as they appear in legislation, with no additional layers of interpretation.  Storage is in plain English, and our interpretation is approved by IR's legal team.

Our foundation layer is impressive — within an 18-month period we harvested and authored thousands of rules, including those from

• the Income Tax Act.
• the Goods and Services Tax Act.
• the Child Support Act.
• the Tax Administration Act.
• the KiwiSaver Act.
• the Privacy Act.

By having the legislative business rules stored in OPA, the traditional development effort could be reduced by up to 70%.  This foundation layer enables us to be in a position to model impending rule changes and to determine the likely impact.  By harvesting the Acts, our foundational principle of re-use had also been cemented.

Approximately 65% of all our business processes have common decision points and/or calculations, all of which can be directly related back to a source of truth, such as legislation and operational policy.  Having legislative rules harvested and centralised in OPA means that every product or service needing a decision or calculation can re-use the same OPA business rules.

A measureable benefit of re-use is the impact it has on our annual income tax season.  Rules analysis showed us that we had numerous online products that all needed the same calculation performed; the rules for those calculations can be directly related back to the same sections in the Income Tax Act.  Those products all use the one set of rules now centralised in OPA.  When the rules change (as they do every year) our Authors will make the required changes in a few hours, rather than the days (or sometimes weeks) traditionally required.  The time and money saved by having the rules centralised in OPA allows us to invest in the continuous improvement of our business processes and in enhancing the online experiences of our staff and customers.

Meeting the Challenges

This approach came with its challenges.

Like every large organisation, the environmental culture and the loyalty of staff plays a large part in meeting challenging timeframes and budgets.  Inland Revenue is no different.  For over 20 years we have been implementing vast legislative changes; business and IT subject matter experts come together, pulling out all stops to try to meet the agreed-to business requirements and project deliverables.

The Business Rules team spent months presenting the enterprise rules management vision to every business and IT team within Inland Revenue.  The response was always the same:  "Enterprise rules management and using OPA was a great solution to the many challenges facing the organisation, and how soon could we start?"

The Business Rules team provided work effort estimates which, when compared to traditional development methods, showed that we could deliver the expected results in the timeframes needed.  However, when the final solution decisions came through we found that we (and the use of OPA) were often disregarded. 

The reasons varied — the most common being the belief that it was easier to "tweak" IT code than to invest in something transformational like OPA.  Also, our IT culture had a long history and could be trusted; the future benefits that enterprise rules management would enable weren't considered in the final decision making process.  Using OPA was often described as taking a risk and investing in something that was deemed transformational, rather than a transitional means to that transformation.

Stepping Back to Re-evaluate

We needed to re-evaluate our approach or take the risk that the real benefits of enterprise rules management and OPA would never be realised.

We found that even though we had our foundational principles for OPA re-use established, we were missing something fundamental.  We needed to change the perception of the decision makers and get them to look at change from a rules management perspective, not from a technical solution point of view.  They needed to be sold on the value the investment would bring.

We discovered the book "Building Business Solutions" by Ron Ross & Gladys Lam, who have developed and used proven rules management techniques to solve business alignment and business agility challenges all around the world.  When we started learning more about their business analysis techniques and concepts, we also discovered the missing part of our enterprise rules management strategy.

Implementing legislation and policy change often comes with uncontrolled change and/or continued growth in the project's original and agreed-to business requirements scope.  Every stakeholder and business partner has his or her own priorities and business improvement ideas, traditionally and rightly so; business analysts want to meet those expectations.  Inland Revenue is no different.

We learned about rules analysis techniques such as

• Business process models to define the business tasks required for an end-to-end business event.
• Concept models to understand the business operations and define the business terminology.
• Policy Charters to lay out the strategy for the business solution.
• Decision analysis to identify and analyse questions arising in business activities.

We've found that, by analysing change from a business rules perspective (every change does normally begin with a change to the business rule!) and by applying these rules analysis techniques, we have been able to start focussing our time and energy on implementing the system requirements needed to meet the most essential business goals.

• Every improvement opportunity (or business goal) is still captured, and business owners are able to visualise the tactics and the associated risks, enabling them to make informed decisions on the business goals they want to focus on and (more importantly) fund.


• The Business Rules team is able to directly relate every business goal and tactic back to the legislation and the existing or required policy (the business rules) required to meet those goals.


• Projects are able to estimate the cost for the delivery of the business goals the business owners have agreed on, saving time and money, avoiding an increase to the business requirements, and ensuring all involved know exactly what success will look like.

We now have a small team of Business Rule Analysts, who also have law or accounting degrees, so they aren't traditional Business Analysts.  The Rule Analysts are tasked with delivering and championing these techniques and outcomes across IR.  It is our intention to have them team up with other analysts and use these rule management techniques and concepts to overcome some of the challenges facing the organisation.

The Transformational Shift in Perspective

Inland Revenue is starting to view change from a rules perspective. 

Traditional methods of solutioning through sourcing detailed business requirements and implementing them in IT systems is still prevalent.  However, we are gradually being given the opportunity to apply our enterprise rules management methods.

Earlier this year the NZ Government passed a Bill that meant significant changes to Inland Revenue's Child Support Act.  The Child Support Act enables custodial parents and caregivers to directly apply for assistance in gathering and being paid child support, owed by a liable parent, rather than needing to go to court.  We will move from a fairly simple set of business rules (where a liable parent's obligation was worked out on just their salary and the number of shared custodial days) to a very complex set of rules (where every relevant relationship, including their children from other relationships, will be taken into consideration).

The budget given to implement this new legislation (and the policy required to support it) is tens of millions of dollars, and it will take us four years to embed.  Traditionally, these new rules would be coded in our IT systems; the IT code wouldn't be able to align directly to the new legislative rules, and many workarounds and manual processes would normally be required.  Yearly changes to those rules would mean significant code change across multiple platforms and system processes, which in turn would have an impact on the already-scarce resources and timeframes available to implement those (and every other) approved Legislative/Policy (rule) changes.

A transformational decision was made to use OPA to centralise the new business rules required for the assessment calculation.  We took an enterprise rules management approach, analysed the legislation and policy required, and interpreted them into re-usable OPA business rules.  Using OPA enables products and services to consume and re-use those business rules, aligning them to the true intent of the law.

One centralised OPA rulebase will be integrated across three digital channels:

• our IT legacy system,
  
• our external customer-facing website, and
• an internal tool to support staff with customer enquiries.

Regardless of the channel, all product consumers will be receiving exactly the same information and result.

To achieve this outcome we had to separate business rules from business requirements; then we needed to prove that OPA could integrate with any existing IT system and that it could receive the inputs required from all channels (systems and people).  We spent months on integration and performance testing and on providing assurance that what we'd been telling the business and IT teams for years could actually be realised — and that it was a more sustainable option than re-coding our 25-year-old legacy system.

The high quality of the OPA business rules required for the assessment calculation has been acknowledged by both the business stakeholders and our test analysts.  And there's another benefit of our re-use principles:  those rules already tested won't need to be fully re-tested when other services are developed.

What's Next?

So what's next for Inland Revenue and Enterprise Rules Management?

We now have an established Rules Reference Architecture and a proven and approved rules management framework.  Any change manager choosing an IT system over OPA for managing business rules now needs to go through an exemption process.   Our Rule Analysts are being sought out, and their analysis and models are providing substantial benefits across the organisation.  Our Rule Authors continue to lead the way with OPA authoring.  2014 will see us focussing on decision models and on being able to model the impacts of impending policy change.

Longer term, Inland Revenue is about to embark on the largest business transformation journey New Zealand has ever seen.  Over a billion dollars will be invested in both technology and business processes.  Enterprise Rules Management is a building block in ensuring a successful outcome.

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