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Australian States & US DoD are “canaries in the coal mine” of ERP Shared Services Failure


August 30, 2013

Doug Hadden, VP Products

Governments in Australia have joined the United States Department of Defense as the "canaries in the coal mine" demonstrating the high failure rate of Enterprise Resource Planning (ERP) projects – especially 'shared services' in the public sector.

Has it come to this: Governments gloating about ERP projects that do not fail?

What are ERP vendors doing about this high failure rate in government?

We believe that governments should leverage Government Resource Planning (GRP) software designed exclusively for the public sector. As a GRP provider, we've been collecting incidents of ERP failures in government that we seem to be obligated to frequenly update. There seems to be evidence that there are higher risks of failure in the public sector than the private sector. Yet, the public sector is a large and attractive market for major ERP vendors representing about 20% of the entire IT market.

ERP vendors are using a clever 4-prong strategy to shift the blame:

  1. Use of consulting firms for implementation, where the ERP manufacturer is at arms' length from any project governance structure
  2. Focus on so-called "best practices" to attempt to convince governments to run "out-of-the-box" functionality that is often inappropriate or illegal in government jurisdictions
  3. Present the notion that success only comes from very large shared services implementations – that benefits will only accrue on massive scale despite the huge governance issues that occur when rationalizing government processes across so many entities with so many mandates
  4. Market the idea that governments need to run like enterprises, hence should use "enterprise" resource planning, despite the fact that the software is filled with unneeded private sector functionality and massive customization is often needed

Therefore, any ERP failure can be blamed on the consulting firm or the government in the governance structure. Blaming the victim becomes subtle by pointing out that the government did not use so-called "best practices", was not able to articulate and standardize business practices and did not run as an "enterprise".

So what are the big Tier 1 ERP vendors doing to ensure higher success rates in government? Apparently: absolutely nothing.

What if FreeBalance doing about GRP failure in government?

One of the advantages of a large installed base in emerging economies has been to develop a more holistic view of implementation problems. Yes, we have a much higher success rate than ERP companies in situations where the failure rate ought to be far lower.

We've made some important conclusions:

  1. Government needs differ dramatically from the private sector, particularly in the need for continuous change to keep up with government reform
  2. Customization through programming code can be virtually eliminated outside of integration and complex reporting – this notion of "configuration" enables more rapid implementation and change to make systems more financially sustainable
  3. High costs are also incurred in ERP systems because manufacturers use legacy core code that requires more equipment and bandwidth than is necessary
  4. As the GRP manufacturer, FreeBalance must be part of project implementation and part of the governance structure – committing to any missing functionality and mentoring governments on public financial management, information technology and program management where needed

We've contributed a "good practice" document on how governments should govern software manufacturers. 

GRP & IT Vendor Governance in Government by FreeBalanceGRP

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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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