March 9, 2012Doug Hadden
Doug Hadden, VP Products
Government “shared services” are meant to save money and improve agility. One option is to share a data centre running Enterprise Resource Planning (ERP) software. The UK National Audit Office survey (Efficiency and reform in government corporate functions through shared service centres) of 5 ERP shared services in the UK government shows that this approach increases costs:
- £1.4bn spent to date on five shared service centres
- £159m of planned savings by end 2010-11
- £255m is the actual net cost of those shared service centres tracking benefits
ERP or GRP?
FreeBalance is a provider of Government Resource Planning software. No private sector “enterprise” software. There is mounting evidence of the lack of ERP success even in the private sector. More so in the public sector because the software was originally designed for the private sector in mind.
Most critiques of ERP failure in government point to project management causes. My sense is that Project Management 101 will not solve these problems, although there is a governance problem.
There is something fundamentally wrong about with ERP in government
The 5 ERP systems were from the big two providers. The primary problems with ERP are:
- Inappropriateness of these solutions in government increases complexity because of needed customization: “The software systems used in the Centres have added complexity and cost. All the Centres we visited use Enterprise Resource Planning (ERP) software systems. These are complex and have proven to be expensive.”
- High cost of implementation and maintenance: “, the cost to establish, maintain and upgrade these systems is high.”
- Lack of agility to handle changing legal reform and government mandates: “these ERP systems are complex and it is not easy to modify them when needs change, such as when an organisation is restructured or processes are redesigned.”
- Unnecessary system footprint: “we found the Centres are only using a small part of the capability their ERP systems provide.”
In my opinion, this notion that ERP fails to achieve expectations in government because systems are “overly tailored” is a crock. Government organizations have unique mandates. There are far more ‘lines of business’ in government than a private sector conglomerate. The inability to easily adapt to meet government needs is a weakness of private sector ERP applications.
The Governance factor
Governance is a critical factor. The report states: “most shared service customers do not have adequate information on costs, performance and benefits to make informed decisions.” The NAO analyze some of the factors such as: “smaller departments and agencies have been reluctant to share services with a large department as they feel they will not get the same attention as the primary parent customer.”
My view is that improving the governance structure and providing the voice of the users is important, but not critical to success. What the NAO seems to miss – and pretty much anyone who analyzes ERP failure in government – is that the most important stakeholder to ensure shared services success is at arms’ length – the software vendor. That’s right – governments are expected to consolidate, customize and maintain highly complex ERP software without manufacturer commitment to support government needs. Manufacturers should be contractually obligated to meet government needs – no customization by the customer. Where code developed by the manufacturer is fully supported by the manufacturer.
I often get the reaction from those people who have used FreeBalance and one of the big ERPs: “FreeBalance is simpler and easier to use.” The NAO suggest that government organizations consider “smaller, simpler software solutions.”
It doesn’t always sound like “simple” and “small” are necessarily good characteristics. It implies that there is something missing. “Optimal” might be a better term. Optimal as in:
- No private sector functionality increasing the technical footprint (amount of code, number of tables)
- Designed for government use so is intuitive to government users
- Use of modern computing architecture, so no client/server base code to reduce performance
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