Which is Best for Government – ERP or GRP?
More and more governments are looking to technology for solutions to their most pressing Public Financial Management (PFM) challenges. An Integrated Financial Management Information System (IFMIS) makes management of government finances more efficient by eliminating manual processes. These government financial management systems are generally built using Enterprise Resource Planning (ERP) software or Government Resource Planning (GRP) software – such as the FreeBalance Accountability Suite™.
With an IFMIS, governments can enforce fiscal rules and financial controls, reduce errors and improve data security. But with so many options in the market today, what kind of solution is best for a government – ERP or GRP?
How to Choose Government ERP Software for Your Ministry, Department or Government Agency
Governments looking to modernize their budgeting system have several choices for deploying an IFMIS. These options generally fall under two categories — building from the ground up or procuring a commercial off-the-shelf (COTS) solution.
A fully bespoke system can either be developed in-house within government, or externally, through a private provider. It is also possible to repurpose an existing IFMIS from another government. A bespoke system is tailored to meet the needs of the government. However, because it is built from the ground up, it can be expensive and is prone to delays, making it an unattractive option for those looking for immediate improvements. Furthermore, dependency on programmers with certain skills can become a threat to continuity over time.
Due to the significant risks and costs of developing a bespoke IFMIS, many governments opt to procure a ready-made Commercial-Off-The-Shelf (COTS) solution. These COTS products are often referred to as Enterprise Resource Planning (ERP) systems. ERP software is an integrated IT system used to manage a business. It collects, aggregates, stores, manages, and analyzes business data. The application integrates all the various functions and units within the enterprise. ERP originated in the manufacturing sector as a tool to maximize profit through the identification and reduction of inefficiencies in the production and distribution processes of a company.
What is Government ERP Software?
How Does Government ERP Software Work?
As a system originally designed for use in the private sector, ERP is not a perfect fit as a government IFMIS. The built-in features of an ERP match the requirements of private firms, not of governments. Even though vendors rebrand these systems as Government ERP Software, it is still just ERP. Unlike businesses, governments cannot adopt many of these built-in functions because they may contradict existing policies and legal frameworks. Hence, extensive customization is necessary when deploying ERP software for government.
Customization of government ERP software leads to additional costs and project delays. The ERP vendor will have to analyze, translate and map the government’s requirements to the existing functionalities of their system. In most cases, these ERP suppliers are not used to the pace of change in governments. Unlike in the private sector, where changes to the business processes are near-instantaneous, process reengineering in government is significantly slower due to the various rules and policies that underpin existing practices. ERP vendors have neither the experience nor the dedicated resources to follow through on the change management necessary to successfully roll out a government ERP system.
ERP systems are also too complicated for governments to use and maintain. These systems require users with very specific technical skills and because they are usually built using proprietary and legacy code, maintenance is difficult and expensive.
Read: ERP Failures in Government
So if a bespoke system takes too long to develop and COTS government ERP software will require too much expensive customization and maintenance, what other options are there?
What is Government Resource Planning?
A Government Resource Planning (GRP) system like the FreeBalance Accountability Suite™ is essentially ERP software for governments. Unlike a conventional ERP, all of the GRP’s features, including future updates, correspond to existing functions of a government. It does not have the unnecessary bloat of ERPs, so instead of costly customizations, GRP modules only require configuration. With proper scoping of requirements, a GRP can be configured and deployed in a fraction of the time and cost it takes to customize an ERP.
Read: Why Are GRP IFMIS Implementations Different
Government Resource Planning (GRP) Software is Budget Aware
GRP software is budget aware. It speaks the language of PFM. This is the biggest advantage of GRP over ERP. It is built on the essentials of PFM like the Chart of Accounts, the budget, and the general ledger. This is rooted in the understanding that every project and activity in government is a cost driver linked to a fund source. Hence, every action in government can be traced back to the budget that underpins it. GRP focuses on the management of a budget and links all its functionalities to this main purpose. It is simple yet flexible enough to handle the sophisticated financial rules and budgeting practices of governments.
Benefits of GRP Software
Getting the correct system, having it effectively implemented and ensuring local management of the solution has many benefits and is a critical enabler of sustainable PFM reform including:
- Transparency and accountability to reduce fraud and corruption
- Improved allocation of budgets
- Improved spending efficiency and effectiveness
- More credible budgets
- Improved fiscal discipline
Furthermore, the overall total cost of implementing a GRP solution is significantly lower than adopting ERP because the configuration approach means that implementations are faster.
