April 16, 2014Doug Hadden
Doug Hadden, VP Products
A recent news story proclaimed the achievement of auditability for the US Army thanks to the successful implementation of a Tier 1 ERP package. The system known as the General Fund Enterprise Business System (GFEBS) was implemented in a little under 8 years at a cost if around $1.4 Billion. Numerous legacy systems have been replaced or interfaced. “Among the military services, the Army is unique in its sole reliance on ERP systems to achieve auditability. By comparison, Jones said, most of the other services rely on legacy systems and procedures to reach their auditability goals.”
What is the definition of ERP success in government?
A ‘perspective’ is needed to understand how narrow the concept of success can be manipulated. In this case, GFEBS stands out as not a complete disaster relative to other Department of Defence ERP initiatives:
- According to the DoD Inspector General, GFEBS is only $71.4 Million over budget, much better than the average of 8 projects of $1 Billion over budget. (Not the total of exceeding budgets in 8 projects, the average.
- The full ERP implementation is not yet complete, “many of these older systems won’t be completely phased out until 2018“. That’s a total of 12 years.
- GFEBS is in production, while some DoD projects like the US Air Force ERP were abandoned after $1B was spent.
Where has all the money gone?
Public sector financial management is different. That’s why Government Resource Planning (GRP) software from companies like FreeBalance has higher success rates than ERP software designed originally for the private sector. This means that customization becomes orders if magnitude more difficult and expensive when leveraging ERP in government. An analysis by GovWin shows the need for additional services for DoD ERP: “services spending far outweighs spending on either hardware or software, coming in at a total of $7.1 billion obligated from FY 2009 to FY 2014. Obligations for software come in second with $541 million spent over the same 5.3 year period. Obligations for hardware total $301 million.” Not all of the 13 to 1 ratio of services to software cost can be explained by customization. Yet, it is difficult to conceive that much more than $1 billion can be explained by software maintenance and training. Some of the licenses were likely acquired before 2009, but it’s not clear how that is recognized in contracts. Customization and managing upgrades because of customization is likely more costly than software licenses.
Replacing legacy with legacy?
As tech analysts Gartner has pointed out, most ERP systems are legacy. That’s because Tier 1 ERP software uses old proprietary client/server code that requires significant code customization. This is good news for consultants but bad news for governments. One wonders whether, by 2018, DoD will be planning to replace the ERP software that was legacy when first implemented in 2012.
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