November 29, 2012Doug Hadden
Doug Hadden, VP Products
There is an interesting rant about the implementation of the leading Enterprise Resource Planning (ERP) software for the Government of Zambia. The article alleges corruption in the implementation of this Integrated Financial Management Information System (IFMIS). The author doesn’t mince words. And, there have been corruption allegations in the past.
Frankly, I have no idea whether any of these allegations are true.
Recurrent Pattern: Leading ERP Software in Government – over budget and late
Over-budget ERP projects in government are regular occurrences. With no corruption.
The original budget for the project was $24M. The actual cost is estimated to be over $42M. That’s why we think that governments should select the low risk solution: Government Resource Planning (GRP), like the FreeBalance Accountability Suite.
A report a few years ago, but no longer available on the web, had some of the following all to familiar conclusions on the implementation:
- the complexity of the system, structure and vocabulary alienates and further hampers participation
- concern has been that the system itself might be too advanced and complex
- will become underutilized and that the costs involved won’t pay off
- concerns that budget experts of the consultant implementing the system may not fully have understood the procedures in place
There are numerous sources concluding that the roll-out has been slow. Another source reports that the new public accounting system IFMIS is one of the sub-components that show the slowest progress – it is about two years behind schedule. Another report identified the impact of the IFMIS implementation on governance in Zambia.
Where do these costs come from?
The report from a few years had the following breakdown:
The total services costs (consultancy, training and maintenance) was estimated to be 4 times the cost for software licenses. It seems likely that the addition $20M is primarily services related. It might be fair to conclude that the total licenses cost is somewhere around $3.5M and services in the $25M range. That’s because ERP software requires significant amounts of customization, business process management and training. Especially in government.
That’s why government organizations must examine the true Total Cost of Ownership (TCO) to understand the real cost impacts.
Lessons for More Developed Countries
I’m currently at the Financial Management Institute of Canada, Professional Development Week – Focus on Value this week. (Follow tweets using #pdweek). I’ve had the opportunity to talk to numerous government financials professionals, mostly at the federal government level in Canada. My somewhat frightening conclusion is that procurement specialization in the Government of Canada obscures the true TCO because the following are all acquired separately:
- Financial management software
- Database and middleware software
- Computer hardware
- Professional services
- Training and certification
Because of budget constraints, many finance professionals I have spoken to have serious concerns about the financial sustainability of ERP software in the Government of Canada. That’s a wake up call.
Consider this: the most financially secure developed country government is unable to handle these costs. Specifically, the very same ERP software that is being implemented in Zambia?
There are almost 5,000 attendees at PDWeek. It’s the premier government financial management conference in Canada.
Where is this ERP vendor? Not at the conference.
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