FreeBalance is a medium-sized Independent Software Vendor (ISV) with considerable success competing against very large Enterprise Resource Planning (ERP) vendors. We are sharing 16 lessons learned by bucking conventional wisdom to encourage industry innovation and creativity.
Conventional View
Large enterprise software companies frequently introduce new products and upgrade existing products. These introductions are presented, by these companies, as innovations. There seems to be increasing “innovation” hyperbole coming from the larger ERP companies. This innovation is rarely incremental innovation and never disruptive innovation. In fact, minor feature enhancements are presented as innovation.
Small and medium sized software companies that do not innovate do not last long. Our approach to innovation differs from what I’ve witnessed in larger companies:
Innovation is not just about product because there are innovation opportunities in process including services, methodologies, go-to-market and business models. More modest-sized companies can focus on unbeatable products and services.
Larger companies build proprietary technology in order to increase “intellectual property”. This technology is sometimes arguably incrementally better than commercial or open source alternatives but provides little additional value to customers. This is especially true of middleware that has rapidly become commoditized. FreeBalance focuses on the value provided in the applications seen by users.
We make no claim that feature enhancements are “innovations”.
Our focus for incremental innovations is to determine how to reduce the Total Cost of Ownership experienced by customers. That means looking for better ways to configure and adapt software easily to meet unique government and language needs. It also means finding ways to reduce the maintenance footprint and upgrade costs.
This weekly news update provides the Government Resource Planning (GRP) community with a brief overview of recent FreeBalance developments and relevant industry news.
Good Practices in Cash Management for Developing Country Governments
We’re seeing increased interest in cash management among developing country governments. There are very few Public Financial Management (PFM) ‘best practices’ yet many good practices that are better depending on the country context. Government Resource Planning Systems (GRP), often called Government Integrated Financial Management Information Systems (IFMIS), are used to enable cash management. This good practice document identifies how GRP enables effective cash management.
A government procurement portal is a platform that allows web users access to information on public spending, procurement procedures (bidding processes), tenders and awards. Users are able to access the bidding documents and review the tender process to ensure that all bidding vendors had equal opportunity in the bidding process. Procurement portal is an example concept in open government, where the public has direct and interactive access to government expenditure information.
Is Open Source disrupting the Enterprise Software market?
Doug Hadden attended the Open Analytics Summit in DC. The notion that open analytics, especially in the realm of big data, is disrupting the enterprise software market was a major underlying theme. Of course, the conference was dominated by open source vendors, so this may not come as a surprise to you. But, it is very clear that open source is disrupting the “soft underbelly” of the EnSw market: middleware.
Ces nouvelles hebdomadaires apportent à la communauté de la planification des ressources gouvernementales (PRG) un aperçu général des récents développements de FreeBalance et des nouvelles pertinentes de l’industrie.
Bonnes pratiques en matière de gestion de la trésorerie pour les gouvernements de pays en voie de développement
Nous observons un accroissement de l’intérêt dans la gestion de la trésorerie parmi les gouvernements des pays en voie de développement. Il n’existe que peu de « bonnes pratiques » dans la gestion des finances publiques (GFP) et pourtant, plusieurs bonnes pratiques sont meilleures selon le contexte du pays. Les systèmes de planification des ressources gouvernementales (PRG), souvent appelés systèmes intégrés de gestion de l’information financière (IFMIS) du gouvernement, permettent de réaliser la gestion de la trésorerie. Ce document relatif aux bonnes pratiques identifie la façon dont la GRP permet d’effectuer une gestion efficace de la trésorerie.
Lire les bonnes pratiques de la gestion de la trésorerie >>
Comment les portails d’achat améliorent la gouvernance
Un portail d’achat du gouvernement est une plateforme qui permet aux internautes d’accéder aux informations sur les dépenses publiques, les procédures de passation de marchés (processus d’appel d’offres), les soumissions et les attributions de marché. Les utilisateurs peuvent accéder aux documents de soumission et examiner les procédés d’appel d’offres pour s’assurer que tous les fournisseurs ont une chance égale lors de ce processus. Le portail d’achat est l’exemple d’un concept du gouvernement ouvert dans lequel le public dispose d’un accès interactif direct aux informations sur les dépenses gouvernementales.
Lire l’article complet de Liza Benkovitch >>
Est-ce que la source des données ouvertes perturbe le marché des logiciels d’entreprise?
Doug Hadden a participé au sommet Open Analytics à Washington, DC. La notion que les analyses de données ouvertes, en particulier dans le domaine des grandes données, perturbe le marché des logiciels d’entreprise a été un thème sous-jacent important. Bien entendu, la conférence a été dominée par les fournisseurs de source de données ouvertes, ce qui fait que cela n’est peut-être pas une surprise pour vous. Néanmoins, il est clair que la source de données ouvertes perturbe le « ventre mou » du marché des logiciels d’entreprise : middleware.
Esta actualización semanal de noticias proporciona a la comunidad de Planeación de Recursos del Gobierno (GRP*) una visión general de los recientes desarrollos de FreeBalance y las noticias relevantes de la industria.
Buenas prácticas en manejo de caja para gobiernos de países en desarrollo
Hemos visto un mayor interés en el manejo de caja entre los gobiernos de países en desarrollo. Hay muy pocas “buenas prácticas” en la Administración Financiera Pública (PFM*), sin embargo muchas buenas prácticas son mejores que otras dependiendo del contexto del país. Los Sistemas de Planeación de Recursos del Gobierno (GRP*), a menudo denominados Sistema de Información de Administración Financiera del Gobierno (IFMIS*), se utilizan para permitir el manejo de caja. Este documento de buenas prácticas muestra como el GRP* facilita un manejo de caja efectivo.
Como los portales de adquisiciones mejoran la gobernabilidad
Un portal de adquisiciones del gobierno es un portal que permite que los usuarios de Internet accedan a información sobre gasto público, procedimientos de adquisiciones (procesos de licitación) licitaciones y otorgamiento de contratos. Los usuarios pueden acceder a los documentos de una licitación y revisar el proceso con el fin de garantizar que todos los licitantes tengan igual oportunidad en el proceso. El Portal de Adquisiciones es un concepto de ejemplo de un gobierno abierto, donde el público tiene un acceso directo e interactivo con la información de gastos del gobierno.
¿Está Open Source perturbando el mercado de software empresarial?
Doug Hadden participó en el Open Analytics Summit (Cumbre de Análisis Abierto) in el Distrito de Columbia (USA). La noción de que el análisis abierto, especialmente en la esfera de gran data, está perturbando el mercado de software empresarial fue el tema subyacente más importante de la reunión. Sin embargo la conferencia fue dominada por proveedores de open source, lo que no es una gran sorpresa. Sin embargo es muy claro que open source está perturbando “en su punto débil” el mercado de EnSw: el llamado middleware.
I attended the Open Analytics Summit DC yesterday. (Storified below). The notion that open analytics, especially in the real of big data, is disrupting the enterprise software market was a major underlying theme. Of course, the conference was dominated by open source vendors, so this may not come as a surprise to you. But, it is very clear that open source is disrupting the “soft underbelly” of the EnSw market: middleware.
Middleware has been a vehicle for vendor lock-in for years. Customers wishing to move to an alternative enterprise software application are often faced with changing application servers, databases, operating systems and other middleware products. The premise, in the past, is that the largest enterprise software vendors have huge economies of scale.
Economies of scale now favour open source. The innovations in big data, as shown yesterday, promise to disrupt the tired model of a single company owning the software stack.
FreeBalance is a medium-sized Independent Software Vendor (ISV) with considerable success competing against very large Enterprise Resource Planning (ERP) vendors. We are sharing 16 lessons learned by bucking conventional wisdom to encourage industry innovation and creativity.
Conventional View
Companies selling into the “enterprise” and “government” markets that are larger are able to satisfy more requirements, invest in more advanced technology that “future-proof” clients.
Symptoms
Enterprise software firms fight about market share as an indicator of leadership
Enterprise software has become so complex with such a large portfolio that economies of scale have been lost because internal coordination problems are introduced. The larger the portfolio, the greater the communications problem in product development adding layers of coordination among product managements and software developers.
Enterprise software companies engage in many vertical and horizontal markets meeting that the minimum code base and requirements for database tables is excessive.
Enterprise software market consolidation reduces economies of scale because these ERP vendors are supporting more than one technology in many markets, sometimes up to 6, each with different legacy technology. This also adds to the intra-suite integration burden.
Enterprise software firms acquire middleware vendors (database, application server, virtualization etc.) to increase the code base even further.
Enterprise software firms’ attempts to move to fully modern technology have failed or been delivered late. Some ERP companies have not bothered to upgrade to modern technology.
Ethical View
Large ERP vendors provide tools to enable customers to measure environmental footprints. These vendors also have CSR sustainability programs. Yet, these vendors continue to market bloated software that requires unnecessary additional hardware and bandwidth at the cost of electricity.
Emerging Trend
Enterprise customers have alternative “middleware” choices through open source technology. ISVs are electing to leverage proven open source technology to provide customers with more cost-effective solutions. Open source provides more economies of scale than enjoyed by any proprietary vendor. (It should also be noted that many large proprietary vendors discover that it is better to have communities manage certain product elements.)
Smaller ISVs are leveraging more modern software practices to generate pure-web software that is technically more advanced that achieved by the large ERP vendors.
FreeBalance Approach
Focus on optimizing the product footprint and reducing communications needs makes for a green IT solution to make implementations sustainable.
Designed exclusively for government to optimize the footprint and achieve the software non-functional and functional needs of government.
Delivery of an open system to enable government customers to use open source or commercial middleware.
Tapping into the open source ecosystem to achieve a technology leapfrog to future-proof our customers.
FreeBalance is a medium-sized Independent Software Vendor (ISV) with considerable success competing against very large Enterprise Resource Planning (ERP) vendors. We are sharing 16 lessons learned by bucking conventional wisdom to encourage industry innovation and creativity.
Conventional View
Companies selling into the “enterprise” and “government” markets introduce barriers to competition to where enterprise software firms effectively “own the customer” rather than the customer owning the software.
While getting ready for my presentation next Monday at the International Consortium on Governmental Financial Management (ICGFM) conference in Miami, I had time to reflect on my predictions for 2007. The presentation Monday is on the Social Future of Public Financial Management. 5 Years ago, it was “New Technologies for Public Financial Management.”
The main difficulty with systems used for Government Resource Planning (GRP) in 2007 was:
Inflexibility to adapt to reform and decentralization
Financial sustainability and government self-sufficiency
Integration between budget execution and accounting
Integration between front and back office systems
Sadly, except for the FreeBalance Accountability Suite, all four remain problems today. Enterprise Resource Planning (ERP) software designed for the private sector has made little progress on items 1 and 2 and some improvements in 3 and 4. (High incidents of ERP failure for government financials seems to be an open secret.) Custom-developed software remains problematic on all four items. We’ve seen far too many governments with unsustainable custom solutions with poor integration and inability to adapt to changing government objectives.
Ten Technology Trends in 2007 for Public Financial Management
Open Source software continues to gain acceptance in government, especially for middleware. Large vendors have acquired open source companies and more companies are placing code in open source. There have been significant moves to acquire open source software as an alternative to commercial software in governments like France and Russia. Many large COTS vendors try to use FUD (fear, uncertainty, doubt) about open source security and reliability. Yet, leading open source middleware software has been found to be more secure and reliable. That’s why the largest users of open source software in the US government are DoD, CIA etc.
Software stack commoditization continues with less and less value for software infrastructure, nevertheless big companies continue the approach of trying to “own the customer”. Database and business intelligence vendors have been acquired.And, there is an attempt to put proprietary middleware in hardware boxes to give customers less choice.
Business process management (BPM) has become an integral part of larger enterprise software suites. There has been some consolidation in the market although many best of breed vendros remain. It seems like every year is to be the year of BPM but generally isn’t. My sense is that business process management is often a solution to a problem, it’s just that BPM products are not necessarily the right tool to use.
Software as a Service has exploded. Huge growth. It’s even woken the ERP giants who struggle with the “cloud” business model. As predicted in 2007, the uptake in government has been limited, especially for financial management despite well-publicized usage for e-mail and other services. Governments are now re-branding shared data centres as “private clouds” – which doesn’t really give governments cloud benefits.
Wireless government has picked up especially in developing countries. What’s new here is the impact of civil society and innovation outside of government. Governments can use crowdsourcing or be crowdsourced – as we saw with the Arab Spring. Tools like Usahidi have proven highly effective for election and crisis mapping. Arab Spring. The explosion in mobile technology usage in Africa, Asia and Latin America is slicing through the digital divide.
SOA adoption is also slower than I expected. Many vendors try to hoodwink us into thinking they have Service-Oriented Architectures. It is difficult to fully support SOA, particularly with granular objects with legacy ERP code. It’s got to the point where SOA is just a noise word that vendors use rather than something customers can use.
Government Financial Management System of the Future: Prediction and Reality
I predicted that the GRP of the future would be modular, de-centralized, integrated, non-monolithic, multiple vendors products, mobile, commodity and innovative. How does this compare with the 2012 reality?
Not so good predictions: yes, major vendors have put barriers to modular and non-monolithic software architectures. There’s some hope as vendors seem forced to, at least, support integration. This has created some space for multiple products to work together for customers. Large vendors are creating “ecosystems” for partner products. That increases choice – but not optimal choice because it relies on monolithic products.
Scorecard for 2007 Predictions
Better predictions: Mobile technology – now with the Consumerization of IT (CoIT) with tablets and smart phones is disrupting the market and giving users better tools. This is one of the innovations that we are seeing that provides governments with IT-enabled innovation. Others: social media, crowdsourcing, big data, visualization.
Data centre consolidation is seen as the ‘low hanging fruit’ for shared services in government. Economies of scale, lower costs, better performance. There are shared servers projects planned by the federal governments of Canada, the UK and the United States.
Beware the low hanging fruit
Sharing servers does not provide the benefits of shared services (standardization, risk mitigation, governance etc.) And, shared servers can cost governments more than the alternative: keeping data centres as they were.
Setup costs – a recent analysis by Price WaterhouseCoopers found that data centre consolidation “could eventually save between $45 million and $293 million” but at a cost of “between $145 million and $278 million in one-time costs.” Therefore, the return on investment is as low as 116% and as high as 202%.
Management Layer - management and organizational communications costs increase to coordinate among so many government organizations.
Personnel Costs – there can be significant re-training costs to update personnel on newer systems and support more complex network and systems management tools. The Price WaterhouseCoopers report suggested that major savings would accrue thanks to a reduction in IT staff: “the business case for this strategy, to achieve its maximum benefits, will have significant labour implications.” So, there will also be compensation packages.
Timeliness – the time required for consolidation in any large government means an opportunity cost. New technology is rapidly being introduced. Operating systems and databases systems are being upgraded. And, new low-cost open source middleware is becoming more available. There is a risk of consolidating old technology. And, there is the further risk that many of the services contemplated to operate on the shared services can be securely and less expensively deployed on the cloud, as we see in the United States.
Formalized SLA and QoS – the need to maintain formal service level agreements and Quality of Service requires equipment and tools. It’s one thing for a departmental server to crash. It’s another thing altogether if the shared service isn’t consistently reliable, as we have seen with failures in Google Mail, Twitter (fail whale), Salesforce and Blackberry. Customers demand reliability – even for free services. So, this means redundancy, back-up servers, back-up centres and fault tolerance. (There was a Forrester Research report a years ago that explained the huge incremental cost to achieve “five 9’s” availability.)
Distance – data centre consolidation extends the distance between user and server, particularly in big countries. Servers in Canada or the United States could be in different time zones than users. This often means increasing bandwidth or adding regional centres to overcome the increase in reliability and performance related to distance.
Peak of peak activities – data centres need to be planned based on expected activity. This means the need to deploy servers to handle the highest volume. Governments operate on the same fiscal period. Therefore, an exclusive government data centre needs to be provisioned based on peak activities around government year-end. Therefore, any advantage by balancing the load across multiple servers can be negligible when the data centre is provisioned to handle peaks of 5 or 10 times the nominal volumes.
Platforms – governments operate many unique applications because of mandates or so many “Lines of Business”. This means that any data centre consolidation requires the support of many technology platforms. This can include supporting different versions of different platforms with different fixes, security vulnerabilities, scalability profiles, and upgrade complexity.
Virtualization isn’t magic – not all applications and platforms play nice within virtualized environments. Virtualization is not magic to balance loads across a server farm. Switch load balancing, technology capacity planning is also required. The complexity increases with numbers of platforms and apps.
Network and Systems Management – there is likely a need for more sophisticated network and systems management tools to monitor health across the data centre requiring the creation of a Network Operations Centre.
Root cause analysis – it can be more difficult to uncover performance and reliability root causes because of last six points. It’s easy to reboot the IIS server in the server in the wiring closet to see what happens. It’s another thing to diagnose server problems across a farm of racks filled with blades.
Power and reliability – one of the key benefits to data centre consolidation is reduced power consumption. Except that these data centres require operating 24/7 and special power provisions and back-up generators.
Bad fruit doesn’t make good wine
I’m not saying that these ‘shared server’ initiatives in government will fail. My point: there is significant risk. And that risk pales in comparison to shared services.
Former American Federal Government CIO Vivek Kundra described waste in government IT as perpetuated by an I.T cartel. As he said in his New York Times opinion piece: “This powerful group of private contractors encourages reliance on inefficient software and hardware that is expensive to acquire and to maintain.” The industry was quick to respond. According to an article in Washington Technology: “Several federal IT executives were outraged by Kundra’s comments, but declined to speak publicly for fear of negative repercussions.”
The resistance to move to more efficient cloud services was the primary focus for Mr. Kundra’s comments. An analysis in Public Technology suggests that government moves to cloud computing may result in moving to a different ICT cartel. Gartner analyst Andrea di Maio suggests that IT cartels are here to stay: “For one “cartel” that goes (or reshuffles), another cartel sets in. For one silo that gets broken a new silo emerges.”
It’s about Open
On-premises, shared service, private cloud, public cloud – it’s very much about open. For all the benefits of any deployment strategy in government, there remains a problem: closed.
Closed software operates on a vertically integrated software stack. The software vendor tends to own most of that stack. There a significant incentives for software vendors to keep the stack proprietary and to control the value chain.
Incentives of Closed
Enterprise software firms are rewarded for introducing inefficiencies. This can be seen as a sophisticated IT form of rent-seeking. These are the incentives for these companies:
Use size to eliminate agile competition: leverage concepts such as spend and portfolio management to present notion that reducing the number of vendors would actually cost less
Use customization as hostage mechanism: ensure government customers have invested significant effort to customizing software and hence become reluctant to switch to more efficient methods
Use partner incentives to keep products complex: ensure that partners generate long-term revenue opportunities by not baking services out of products
Use FUD where possible: leverage “fear, uncertainty and doubt” about security, integration, scalability, total cost of ownership etc. even where open systems outperform closed
Adopt new models tactically: support cloud computing, open source middleware and integration standards where necessary and when it provides some advantage against other closed systems
Focus on the proprietary stack “shiny new objects” to add barriers to switching: incremental improvement of middleware components such as “in memory” or “massively parallel” databases that provide minimal additional value
Government adoption of inefficient shared services built on software not intended for the purpose shows the danger of closed systems. Cloud-deployed software may also be dangerous for governments.
The Open Solution
Why would a company like FreeBalance develop an open solution? This seems counter-intuitive in the software world. In the IPO craze of the late 90′s, it was all about “proprietary” technology. Dot coms re-invented the same things.
How did that work out?
Only a few dot coms survived.
Today, consumer-based social media companies grow thanks to open infrastructures.
The FreeBalance approach of an open platform including the support for open source components that gives government choices is different. And, it was a fundamental choice because:
As a social enterprise, the notion of holding customer hostage does not fit within our way of doing business. Rent-seeking approaches wastes money in developed countries – but this is far from benign in developing countries
We recognize that value is at the top of the stack – the application used. Our business model is to partner with government organizations to earn trust and innovate based on customer feedback.
Open always wins in the end. Why? More economies of scale, easier to adapt and integrate. Ability to change as technology changes.
