November 13, 2015Doug Hadden
Information technology used to support Public Financial Management (PFM) is a public investment.
Like any asset, Financial Management Information Management (FMIS) software can accrue benefits over time and can depreciate. What sets FMIS apart from many public investments is the ability to extend to support more functions. This benefit, in the enterprise software industry, is known as extensibility. On, the other hand, the inability to adapt to reform and modernization, to integrate with new system, or has a significant cost for maintenance is known as technical debt. Technology analysts, the Gartner Group, see software as an asset or a liability, depending on the context. Maintenance and operations costs result in “insufficient strategic spend,” according to IBM. Enterprise and GRP software should be considered as part of an asset portfolio, much like an investment. Many government organizations in Latin America have accrued significant technical debt.
Legacy or dated software can represent “technical debt”, estimated to represent over $1Trillion world-wide in 2015 according to the Gartner Group. We tend to think of technical debt as an issue for sustainability because it reduces financial sustainability because of costs and limits reform sustainability through inflexibility.
Portfolio management “enables objective and transparent decisions around investing, consolidating, modernizing, or replacing applications,” according to IBM. Technology analysts, Forrester Research, sees portfolio management as leading to the “identification of applications that could be candidates for decommissioning…and…helps create a business case for each application retirement decision and promotes value through long-term saving.”
Is Your Government Organization Suffering from Technical Debt?
Highly customized system designed to meet unique needs has been identified as the largest contributor to technical debt. “Gartner now defines legacy as: ‘any system that is not sufficiently flexible to meet changing business needs.’”
How do you know whether you have a significant FMIS technical debt?
- The more FMIS different subsystems (budget preparation, payroll, procurement, accounting, assets etc.) operating on different technology platforms (4GLs, .Net, Java, proprietary etc.) reduces extensibility, increases maintenance costs, limits integration and restricts reform (because of the need to duplicate functionality across multiple systems such as a change in budget classifications)
- The more systems are custom developed or customized COTS represents significant costs to maintain and upgrade – this can be determined based on the amount of internal IT support and external consultant required to operate, troubleshoot, adapt and upgrade
- The amount of manual intervention required to complete the entire budget cycle including manual steps, manual duplication, and the preparation of analysis and reports on spreadsheets separate from FMIS systems
The Perfect FMIS Storm in Latin America
There are more FMIS portfolio choices in Latin America that can reduce technical debt while accruing benefits:
- Cloud computing platforms built on new technology, rather than legacy ERP, provide lower capital costs, reasonable flexibility, and better cost predictability
- Government Resource Planning (GRP) systems like the FreeBalance Accountability Suite provide high configuration, rather than code customization, flexibility and can be deployed as a shared service (private cloud) or in the public cloud
- GRP platforms like the FreeBalance Accountability Platform enable sharing of government functions across custom applications, accelerates development and enables sub-system integration
Government organizations in Latin America can look at the FMIS portfolio strategically. They can combine current systems with cloud, GRP and platforms to create an effective investment portfolio that improves financial and reform sustainability.