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The Business Case for ERP in Government

 

March 3, 2014

Doug Hadden, VP Products

Many technologists see FreeBalance as a provider of Enterprise Resource Planning (ERP) software for government. That may have been the thinking, a few years ago, when I was asked to step in for a cancellation at a conference to present the business case for ERP in government. The notion that implementing software designed for the private sector in government had gained significant traction by 2009. And, the advantages of Commercial-Off-The-Shelf (COTS) compared to custom developed was well understood in developed countries. Yet there persisted integration and flexibility problems in ERP government implementations.

We had been presenting Government Resource Planning (GRP) as a different category of software from ERP. Our position that ERP provides a poor value for money for core budget, financial, procurement and human resources functions in government has been gaining traction. ERP in government failure examples continue to mount.

Three Business Case Measurements

I did present the case as articulated by leading ERP vendors and technology analysts in 2009 around three concepts:

  • Potential benefits: tangible benefits that could accrue through the use of technology to meet current and future needs
  • Total Cost of Ownership (TCO): long-term costs to achieve benefits (More on for ways to measure TCO)
  • Project Governance: methods in which ERP projects are managed including managing ERP vendors (More information on project governance)

My view at the time was that ERP vendors were over promising on benefits, delivering high costs to government and operating outside project governance structures in order to remain unaccountable.

Dubious State of the 2009 ERP Value Proposition in 2014

Much if the value hyped by ERP vendors last decade has turned out to be just that: hype.

  1. Portfolio Management: notion that the cost to manage a product suite from one vendor is much lower than managing a portfolio of ‘best-of-breed’ applications. Reality: governments have been unable to effectively use a single suite of ERP software to cover Public Financial Management, ERP applications lack budget awareness across the suite, integration is not built-in (requiring complex metadata management), and so-called ERP suites are now made up of so many acquired products and technologies. Yet, ‘integration’ remains a cornerstone of ERP vendor marketing hype!
  2. Improved Decision Information: It is somewhat ironic that ERP vendors were touting information visibility in the last decade as a critical non-tangible benefit. That’s because after doing so, the two largest ERP vendors announced the acquisition of Business Intelligence companies. ERP vendors have escalated the hype to real-time reporting and in-memory analytics, all of which can be accomplished with alternatives!
  3. Benefits at Scale: The notion that significant benefits accrue only after a number of years through improved business processes coupled with expanding ERP footprint. This is perhaps the most intellectually dishonest element of ERP hype. It provides a justification for increasing commitment to a poor business case as costs mount and benefits do not accrue.

ERP as Transformational?

ERP costs continue to mount, partly from improved visibility into areas that were once difficult to measure, and partly from managing legacy technology. Yet, ERP vendors have entered new realms of marketing hyperbole.

ERP vendors, as I described a few years ago, are marketing as enablers of government transformation and agility.

It’s awesome how vendors are able to say this with straight faces. Sadly, this hype is deluding government decision-makers and costing taxpayers.

  • Legacy proprietary ERP technology was not designed to support 21st century government transformation, it was designed to automate manufacturing, retail and other private sector functions
  • Technology that relies heavily on software code customization (proprietary code, especially) reduces organizational agility
  • Process ‘standardization’ has diminishing returns in complex organizations like government while reducing the opportunity for innovation

What happens when the hype implodes? It’s the equivalent of a taxpayer bailout. With ERP vendors likely to escape justice.

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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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