FreeBalance Business Model Defies Conventional Thinking
People ask why FreeBalance focuses on the global government market. Or, why FreeBalance builds software. Surely, there’s more money to be made supporting Oracle or SAP ERP.
- There’s a lot more revenue available to customize ERP systems than build government-specific GRP software
After all, ERP systems cost twice as much as GRP, initially, and far more in the long run – most of that money goes to consultancies. And, it’s the gift that gives on giving as governments struggle with complex ERP, difficult customization, challenging upgrades, and retaining qualified staff.
- Compounded by locking in governments to proprietary technology stacks: databases, middleware, programming languages
Why it matters: it’s public money! Customer lock-in and rent seeking are thought to be clever commercial business practices, but not:
- socially responsible for companies
- financially sustainable by governments
These practices consume money better spent for public services. That’s a tragedy. No amount of Corporate Social Responsibility or philanthropic activities can make up for it.
Our view as a for-profit social enterprise is that governments are at the nexus of solving “wicked problems” by providing
- sustainable development
- citizen wellbeing
That’s why we are an exclusive B2G (Business to Government) provider leveraging digital technologies and Public Financial Management (PFM) to improve governance. And, that’s why we’re global. Solving “wicked problems” in emerging economies and developing countries has a significant positive impact.
- “Public finance and public administration are at the heart of development. If development is about transforming state, society and economy, having capable institutions able to raise, deploy and account for effective use of public funds is indispensable.” Overseas Development Institute
- “Good public financial management systems are important for democratic governance, macro-economic stability, effective use of resources available and poverty reduction. Good PFM systems can also help prevent corruption and foster aid effectiveness. A sound PFM system is a precondition for making it possible to effectively channel resources to service delivery like e.g. basic education and health services. Ineffective PFM systems, on the other hand, can hamper development and increase the risk of corruption.” Norwegian Agency for Development Cooperation
- “Effective delivery of public services is closely associated with poverty reduction and growth, and countries with strong, transparent, accountable PFM systems tend to deliver services more effectively and equitably and regulate markets more efficiently and fairly.” Andrew Lawson
By the numbers, government is the most important “vertical market” with the greatest impact on lives. In addition:
- Government is the largest market
- Government is the largest employer
- Government is the most underserved market
An alternative view is that governments are not that much different from businesses:
- Governments seek to operate as “enterprises”
- Governments seek to adopt private sector “best practices”
- Governments seek to adopt private sector “KPIs”
Reality check-government differs significantly from businesses:
- Legislation required to change government processes
- Unique “commitment accounting”method
- Budgets are the legal embodiment of government policy
- No profit and loss bottom line to gauge public sector performance
At the core for good governance is Public Financial Management (PFM): effective
- Scenario planning for agility, liquidity, and fiscal space
- Spending value-for-money, and revenue mobilization
- Evidence-based decision-making, and fiscal transparency
Government is a difficult market to find success:
- Complex procurement processes generate long sales cycles
- Incentives, capacity, and change resistance makes projects challenging
- Project problems become politicized
- Politics slows decision-making, removes champions