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The government COTS vs. custom developed software dilemma


December 5, 2013

Doug Hadden, VP Products

What is the public to think when confronted by the failure of custom-developed health exchange software (“Obamacare”) on one hand and Commercial-Off-The-Shelf (COTS) enterprise software adapted for health exchange (“Cover Oregon”) on the other? My sense is that it fuels the stereotype of government as inefficient and ineffective. And, the private sector as efficient and effective.

Media reporting on the failures of the US healthcare exchange have been strong on myth, short on facts and very short on technical information. (This coverage by Eric Kavanagh is well worth the read). For one thing, the Obamacare web site isn’t just a web site. It’s an e-commerce site with a lot of integration.

Large IT projects have high risks whether in the public or private sector. There are different incentives in the public and private sector that could explain the anecdotal evidence that there is a higher failure rate in government.

Custom and COTS Risk Factors

There has been a significant debate within the Public Financial Management (PFM) community on whether it’s best to custom develop a Financial Management Information System (FMIS) or to acquire COTS. This discussion rarely mentions that not all custom apps are alike nor are all COTS apps alike.  In a recent US State failure, the Tier 1 ERP vendor claimed that because the software works elsewhere (in different contexts), that the fault lies with the government.

Here are some observations:

  1. Customization: the risk of failure for any enterprise-class software project in government is proportional to the delta between the requirements and what the software does. So, custom software has high risk because the software doesn’t do PFM, it’s just a platform. And, Enterprise Resource Planning (ERP) software designed for the private sector often requires significant customization – including work-arounds to operate. By customization we mean code customization rather than simple configuration. Custom developed software requires 100% code customization. COTS ERP software can require up to 80% code customization in government.
  2. Adaptability: the customization problem is compounded when you consider that government financial reform is on-going and that the software will need to adapt further. There is high risk in custom-developed software of hard-coding that restricts adapting. ERP software is more adaptable, but uses proprietary programming languages. And, ERP vendors force customers to upgrade meaning that there can be forced “refactoring” of customized software to make it work with the new version.
  3. Best and Worst practices: ERP software often imposes so-called “best practices” from the private sector (or in the minds of the marketing department) on governments that increases inefficiency, is not legally permissible or forces more customization. Custom-developed software suffers from the opposite phenomenon where poor practices can be implemented.

The FreeBalance Way

FreeBalance is a Government Resource Planning (GRP) specialist. Many of our implementations are in developing countries where there is far less capacity than in the United States. And, we have a good success rate. We provide a COTS GRP suite, the FreeBalance Accountability Suite, and a COTS GRP platform for custom development, the FreeBalance Accountability Platform. This platform includes all the GRP “business objects” and a technical development platform that we use.

One of the reasons is how we’ve mitigated the three main risk factors.  In addition:

  1. Customization: both the Suite and the Platform reduces the delta with government needs. The focus on the government domain reduces the need for code customization to meet needs so virtually all needs are supported through configuration. Unlike traditional vendors, FreeBalance will commit to missing features so that governments do not need to customize. Customization, with our platform, is available and is not proprietary.
  2. Adaptability: we call this “progressive activation”. Governments that use our Suite are able to progressively activate and re-configure to achieve PFM reform. And, governments that use our Platform, and take our training, are able to progressively activate underlying business objects.
  3. Good practices: FreeBalance provides a library of good practices that are aligned with the country context: government needs, human capacity, bandwidth, legal reform.


Good Practices in Government Resource Planning Vendor Specialization

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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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