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Lessons Learned in Making Public Financial Management Technology Work

 

August 4, 2009

I had the opportunity to speak at the 2009 Cambodia Finance International Forum in Phnom Penh in July on the subject of financial management for government. You can find my presentation, with speaker notes, below. [All Presentations] [Photos]

The presentation emphasizes the need for software vendors who provide solutions to emerging country governments to change business practices to ensure success. The traditional company model for developing, implementing and support software is a disservice to emerging country governments.I had the opportunity to speak at the 2009 Cambodia Finance International Forum in Phnom Penh in July on the subject of financial management for government. You can find my presentation, with speaker notes, below. [All Presentations] [Photos]

Copyright FreeBalance.
Content can be reproduced with permission. dhadden@freebalance.com

We often characterize countries like Cambodia as ‘developing nations’ – yet your rich culture developed centuries ago. It reminds me that ancient wisdom can be used to solve today’s problems. Let’s start with today’s problems.

Fact: traditional software, whether commercial off-the-shelf or custom developed, is rarely fully successful for Public Financial Management in emerging countries. In 2003, the World Bank found that ½ of the government integrated financial management implementations delivered in emerging countries were on budget, less than ½ on time, 20% on time and on budget and only 6% were sustainable by the government. Experts tell me that results have improved but remain disappointing. Many implementations remain unsustainable by emerging country governments. Yet, FreeBalance has been extraordinarily successful and under more stressful circumstances: lower average human development index and higher ratio of post-conflict countries compared to the World Bank sample.

Why?

To be clear: large software projects often fail in very developed high capacity countries in the private and public sectors. Public Financial Management technology is high reward but high risk. But, it shouldn’t be a gamble – like the casino at the Nagaworld Hotel.

The way in which software is developed and implemented in the west does not work for emerging countries.

I hope to answer these 3 questions:

  1. What problems are encountered in Emerging Country Public Financial Management software implementations?
  2. Where should the software model change?
  3. How can governments overcome these problems?

Problems include:

  1. IFMIS Software takes too long to implement.
  2. IFMIS Software does not adapt well to reform
  3. IFMIS Software cannot be sustained by the government.

What happens when things go wrong? Software vendors and consultants blame the government

  • For not explaining all processes (business process management)
  • For having unrealistic expectations
  • For having changed requirements (change management)
  • For not having enough dedicated staff
  • Or training enough people (capacity building)

This is how Software Companies typically operate:

  • Product managers create specifications
  • Product development creates the product
  • That is marketing and sold
  • The implementation is typically done by a consulting company
  • That provides training to users
  • Who call the vendor customer support for assistance
  • There are many points of failure that hinders success in government
  • Product managers often create specifications for many markets – government is just one of those markets
  • In fact, the most attractive market is often large corporations
  • Developers have no expertise in government
  • Salespeople are willing to sell to any market, including Emerging Markets
  • Consultants get more revenue from customization. Projects often focus on technology, not the process. Technology should follow process.
  • And many do not have government expertise
  • Some consulting firms do not want systems to be sustained by the government, they want to keep consultants in the government for as long as possible
  • Emerging Country government requirements may not be important to the software vendor. We have found that there are many unique needs in emerging countries that differ from requirements in G8 countries.

FreeBalance solutions support government modernization, fiscal decentralization, and public finance reform. FreeBalance specializes in government with over 25 years of successful implementations of public financial management software around the world. This specialization enables FreeBalance to deliver rapidly, on-time and on-budget.

The FreeBalance Integrated Financial Management Information System, the FreeBalance Accountability Suite, is operating in Emerging Country governments in every World Bank region. At the National Government level, FreeBalance is operating in Antigua, Guyana, Kosovo, Sierra Leone, Afghanistan, Mongolia and Timor-Leste. Departmental and sub-national implementations in Panama, Jamaica, Southern Sudan, West Bank and Pakistan.

Our model is different.

  • We focus on government only. Government financial management is different from the private sector. (Example: budget and commitment controls.)
  • And specifically design to meet Emerging Country requirements
  • Our developers only build government financial applications
  • And our salespeople focus on government
  • Unlike other software companies, we participate directly in all implementations to ensure success
  • And focus on sustainability. In fact, we have a sustainability Blog
  • And government requirements always go into upgrades.
  • This different approach makes FreeBalance software the low risk solution.
  • Our consultants to not drop the software off, we help mentor Civil Servants and build capacity. These consultants are former public servants with experience implementing in governments around the world. This helps countries to achieve desired outcomes.
  • All customers are visited at least once a year to identify problems and understand new requirements.
  • Our steering committee, made up of Emerging Country governments approves our product roadmap and owns 20% of our product budget.
  • Customers interact with us and other customers on our Customer Exchange.
  • We hire local people and provide support in country even after the contract is completed.
  • We track all problems and enhancements on a dashboard. I receive a copy of the dashboard every Monday and can view this dashboard in real time. This is the most important report that I receive, as an executive in the company.
  • Any serious customer problem results in the creation of team from every part of the company dedicated to fixing this problem. We have had 5 such teams in the past 3 years – project lasting from 3 hours to 3 weeks. I can tell you that because I’m in charge of the Product and I am on every SWAT Team.

How can governments improve the change for success?

1. IFMIS Software takes too long to implement

  • Select vendors who understand government. It is not enough to know the software.
  • Select products that are designed for rapid implementation.
  • And proven in countries with more stressful conditions than in your country.

2. IFMIS Software does not adapt well to reform.

  • All governments are modernizing. The sequence of modernization depends on the country context.
  • Therefore, software should easily adapt to changing needs.
  • Through configuration – to make it easier for the government to make changes – without requiring expensive consultants.

3. IFMIS Software cannot be sustained by the government.

  • The discussion about sustainability often focuses on financing costs – long term costs. Equally important is the need to sustain the system with civil servants rather than require high-priced foreign consultants.
  • The software should not require significant effort to keep running and to handle upgrades.
  • The vendor should have proven ability to build technical and financial capacity.
  • The underlying technology and method of customization should not be overly complex.

What have we learned?

  • We changed our processes to meet the Emerging Nation market – receiving ISO-9001/2000 certification for customer-centric development and support. Let me be very clear – this transformation from a traditional software company was not easy and we continue to improve our processes to support our customers better.
  • Some governments can afford to implement expensive solutions originally designed for the private sector.
  • Many governments share similar reform challenges.
  • So, it is important to reference government implementation under stressful conditions in other countries in Asia, Latin America, Africa and Eastern Europe.

Let us revisit typical problems blamed on governments.

  • Vendors who understand government do not ask irrelevant questions and share good practices.
  • Vendors commit to implementation schedules – so the software should implement quickly. Don’t be fooled, vendors are not naïve, they understand the risk.
  • Change is inevitable – so the software should be easy to adapt.
  • The software should be easy to maintain so that governments do not need as much dedicated staff.
  • The vendor should be responsible to build capacity.

Since arriving in Cambodia, I have had the opportunity to visit numerous cultural treasures. I was struck by the different posses of the Buddha – and how this applies to implementing public financial management systems. The “Teaching Buddha” speaks of the need to build capacity. The “Calling the Earth to Witness Buddha” speaks about the need for sustainable solutions. This is the kind of ancient wisdom that we can use today.

Making PFM (Public Financial Management) Technology Work: Lessons Learned

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Doug Hadden

Doug Hadden

Executive Vice President, Innovation at FreeBalance
Doug is responsible for identifying new global markets, new technologies and trends, and new and enhanced internal processes. Doug leads a cross-functional international team that is responsible for developing product prototypes and innovative go-to-market strategies.

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