Sustainable Public Financial Management

Doug Hadden, VP Products

A FreeBalance team attended an InterAmerican Development Bank workshop from May 15 to 17: International Workshop on Public Financial Management for IFMIS Coordinators. [Presentations are located on that web page and my Storify version of tweets during the event are below.] We prefer the term "Government Resource Planning" (GRP) to "Integrated Financial Management Information Systems" (IFMIS). Nevertheless, IFMIS (SIAF in Spanish) is the term most often used among International Financial Institutions. 

We were very happy to get an invitation from the IDB to attend the entire conference and to give a short 15 minute presentation. (It was actually 14 minutes.) Three Enterprise Resource Planning (ERP) vendors were also invited, but only Oracle came and presented. Our partners Samsung SDS and Everis also presented. 

We've been going to Public Financial Management related conferences and workshops for some time. Insight in what is working and what isn't working is progressing. Patterns are emerging. And, many of these patterns are relevant across countries. In this case:

• Analysis of why some Public Financial Management reform doesn't work as expected and how to organize reform to achieve success from Matt Andrews of the Harvard Kennedy School, whose recent book, Limits of Institutional Reform, is a seminal work 
• Analysis of the links between GRP systems and extent of budget transparency by Cem Dener of the World Bank. He introduced a study that will be published in June with a budget transparency rating for 175 countries. He showed countries grouped in A, B, C and D. The main outlier was our customer Timor-Leste rated as an A thanks to the transparency portal that we developed that integrates with our GRP system.
• Analysis of drivers for accountability and GRP systems from Philipp Krause of the Overseas Development Institute who showed that the push from transparency can often come from internal government demand without any democratic insitutions.
• Significant problems in the dominant model for IFMIS in Latin America – custom developed software and significant problems with ERP in government elsewhere.

It was in this environment that I presented about the advantages of Commercial-Off-The-Shelf (COTS) GRP software like FreeBalance and the need for software vendors to be committed to customer successes.

PDF & Storified version of presentation made by a FreeBalance team on May 7th. and links to relevant documents discussed.

On Total Cost of Ownership (TCP) for government financial management systems

http://www.freebalance.com/whitepapers/FreeBalance%2013-01%20Good%20Practice%20GRP%20TCO.pdf

Public Financial Management Good Practice GRP TCO by FreeBalanceGRP

On the use of GRP systems for Anti-Corruption

http://www.freebalance.com/whitepapers/FreeBalance%2013-03%20Good%20Practice%20Anti-Corruption.pdf

Public Financial Management Good Practice Anti-Corruption using Financial Systems by FreeBalanceGRP

On the advantages of GRP specialization

http://www.freebalance.com/whitepapers/FreeBalance%2013-07%20Good%20Practice%20GRP%20Specialization.pdf

Good Practices in Government Resource Planning Vendor Specialization by FreeBalanceGRP

Doug Hadden, VP Products

A study sponsored by ERP vendor Unit 4 by Cindy Jutras is a sobering read.

I winced a few times.

Agility is part of the Unit 4 positioning. The fact that the sponsor is company positioned as agile found that ERP customization is costly doesn’t make the study incorrect. Or, the conclusions any less frightening.

High Total Cost of Ownership (TCO) and restricted business agility are the open secrets of the Enterprise Resource Planning (ERP) world. Why? The technology used by leading ERP vendors is, frankly, obsolete. Not all of it: just the core. The foundation.

So, it’s no wonder that methods developed in the 90s to solve pre-Y2K problems have started to show their age. Especially in cloud computing. And, the opportunities and threats that come from globalization.

The value of this report is that it goes beyond the impact of ERP customization as a high implementation cost that generates delays. This study looks at the impact of making changes to ERP customization to support compliance, reorganization, improved processes etc.

What is this “customization”?

Jutras doesn’t define customization. Many observers see customization as all adaptations to software from configuration through to software code development. My sense, based on the results of the study, that customization is defined as changes that require some element of coding. This includes Business Process Management (BPM) tools that requires elements of coding, scripting, call-outs from the ERP software to other code, and software code customization.

ERP vendors developed customization methods to enter new markets: different verticals, countries, customer sizes. And, customers needed to implement competitive differentiated practices. So, high cost and long implementation cycles. Which is why there is so much guff about implementing so-called “best practices” to reduce the customization hangover experienced by so many organizations.

No customization in FreeBalance?

FreeBalance provides Government Resource Planning (GRP) software. One of the characteristics of this software is that there is no customization as I have defined it with the exception of integration with sub-systems and some elements of business intelligence. (And, rather than make integrators or customers build functionality that we don’t have, we commit and put this functionality into the main line of the code.)

FreeBalance supports this no customization model because we can and we should. We can because we’re focused in one “vertical market”. We should because it is ethical. In my opinion, it is not ethical to force high costs to public organizations. As you can see from our government customer list , long-term financial sustainability is a critical factor. Our GRP software has to affordable in the long run to enable developing nations like Afghanistan, Kosovo, Sierra Leone, Suriname and Timor-Leste to grow and improve governance.

Government is the ERP customization canary in the coal mine

Jutras found that more than 1/3 of the organizations surveyed have implemented extensive ERP customization and almost 2/3 have experienced moderate customization. Only 4% of respondents reported little or no customization.

Which makes the “good practice” guff from ERP vendors a “buy case” and not a “use case”!

You may be surprised to learn that governments require more agile business systems than the private sector. Yes, governments are not known for agility. What they need are systems that enable change – more change than is experienced by the private sector including:

• Legal reform that changes GRP configurations because governments cannot adopt new processes without a legislative approval. So, governments change configurations often.
• Organizational structures change more frequently based on government objectives that includes merging ministries, eliminating ministries, splitting out ministries, and privatization.
• Moves to transparency and accountability that are orders of magnitude more complex than compliance changes in the private sector.

ERP systems used in government tend to be more customized that in the private sector. One analyst commented on an ERP implementation in a G8 country as being so highly customized that it bore no resemblance to the original code. It’s frightening how much public money is wasted needlessly because of ERP adoption in government.

To be fair, there is only one publicly reported incident of Unit 4 failure in government and that could be explained through a number of factors. (And, from 2004) But, the leading 2 ERP vendors have a lot of explaining to do.

The other ERP open secret is that governments that have departmental level ERP systems have completely different customizations. So, the move to “shared services” to share a single ERP in these governments to save money is, frankly, a pipe dream . CIOs looking to implement ERP shared services using one or both of the 2 leading vendors need to read this report so that they are not complicit in wasting public money.

Doug Hadden, VP Products

Large IT projects are not for the feint of heart. Or, the risk adverse. Despite our high success rates in Government Resource Planning (GRP) relative to other solutions, I can tell you that implementations are rarely problem free

It was with interest that I read last month Chris Kanaracus‘s article “The scariest US software project horror stories of 2012.” I found 2011 and 2010 year-end articles about the largest ERP failures of the year from Kanaracus.

29 horror stories in total.

15 in the public sector.

That’s right: a touch over half.

In a market that is about 20% of the entire IT market.

So, if the stories are representative of IT failure, that means that public sector implementations are between 2 and 3 times more risky than the private sector.

Analysis

The culprits here are software and process. Software designed for the private sector and shoe-horned into government and custom-developed applications add significant risk.

The political nature of the public sector and the movement of public servants in organizations adds additional risk. FreeBalance has achieved success rates well above average with software designed for government AND business processes adapted to the government context.

Believe me, Project Management 101 is not enough.

Doug Hadden, VP Products

There is an interesting rant about the implementation of the leading Enterprise Resource Planning (ERP) software for the Government of Zambia. The article alleges corruption in the implementation of this Integrated Financial Management Information System (IFMIS). The author doesn’t mince words. And, there have been corruption allegations in the past.

Frankly, I have no idea whether any of these allegations are true.

Recurrent Pattern: Leading ERP Software in Government – over budget and late

Over-budget ERP projects in government are regular occurrences. With no corruption.

The original budget for the project was $24M. The actual cost is estimated to be over $42M. That’s why we think that governments should select the low risk solution: Government Resource Planning (GRP), like the FreeBalance Accountability Suite.

A report a few years ago, but no longer available on the web, had some of the following all to familiar conclusions on the implementation:

• the complexity of the system, structure and vocabulary alienates and further hampers participation
• concern has been that the system itself might be too advanced and complex
• will become underutilized and that the costs involved won’t pay off
• concerns that budget experts of the consultant implementing the system may not fully have understood the procedures in place

There are numerous sources concluding that the roll-out has been slow. Another source reports that the new public accounting system IFMIS is one of the sub-components that show the slowest progress – it is about two years behind schedule. Another report identified the impact of the  IFMIS implementation on governance in Zambia.

Where do these costs come from?

The report from a few years had the following breakdown:

The total services costs (consultancy, training and maintenance) was estimated to be 4 times the cost for software licenses. It seems likely that the addition $20M is primarily services related. It might be fair to conclude that the total licenses cost is somewhere around $3.5M and services in the $25M range. That’s because ERP software requires significant amounts of customization, business process management and training. Especially in government.

That’s why government organizations must examine the true Total Cost of Ownership (TCO) to understand the real cost impacts.

Lessons for More Developed Countries

I’m currently at the Financial Management Institute of Canada, Professional Development Week – Focus on Value this week. (Follow tweets using #pdweek). I’ve had the opportunity to talk to numerous government financials professionals, mostly at the federal government level in Canada. My somewhat frightening conclusion is that procurement specialization in the Government of Canada obscures the true TCO because the following are all acquired separately:

• Financial management software
• Database and middleware software
• Computer hardware
• Professional services
• Training and certification

Because of budget constraints, many finance professionals I have spoken to have serious concerns about the financial sustainability of ERP software in the Government of Canada. That’s a wake up call.

Consider this: the most financially secure developed country government is unable to handle these costs. Specifically, the very same ERP software that is being implemented in Zambia?

There are almost 5,000 attendees at PDWeek. It’s the premier government financial management conference in Canada.

Where is this ERP vendor? Not at the conference.

Doug Hadden, VP Products

We just finished the one-day training course in London to a group of public financial management professions from Africa and Asia, held at the Crown Agents office. There was a lot of information squeezed into the course that I gave, as you can below. It had a bit of “drinking from a firehose” effect with so much information.

The primary focus of the training was on lessons-learned in implementing Government Resource Planning (GRP) systems in emerging economies. Participants in the course were from the national and regional levels of government and from donors. There was some interesting discussions about vendor governance, donor assistance and PFM sequencing that is almost universal and mostly vendor-neutral.

You can see the topics covered in the embedded document.

Slideshare.

What did I learn from participants?

• General view from the PFM professionals was that the 3 most important PFM reform objectives are improved budget planning, procurement, debt and cash management
• No one could guess how fast the fastest FreeBalance implementation was. Closest guess was 6 months which is slightly more that 6 times the fastest time.
• Proper sequencing of reforms and the underlying technology remains a challenge in developing countries. Many participants expressed the view that donor representatives often have personal preferences.
• Most participant agreed that it is difficult to make most commercial software solutions  self-sufficient in governments.
• It was agreed that major enterprise software vendors rarely participate in Public Financial Management events. (And, when they do, show little interest in learning from conference sessions.)
• One customer of one of the ERP vendors is pleased because there is direct manufacturer support. That happens infrequently (except for FreeBalance, of course.) Maybe that vendor is reading this blog and learning something

Doug Hadden, VP Products

Why is Total Cost of Ownership (TCO) so important?

• Governments implement Government Resource Planning (GRP) or Enterprise Resource Planning (ERP) software to improve fiscal discipline, government efficiency and improve Value for Money (V4M).
• The initial cost for enterprise software may not reflect the overall cost or Total Cost of Ownership (TCO) experienced by government organizations. Governments can show VFM fiscal discipline by analyzing all internal and external GRP acquisition and maintenance costs across multiple years.
• Many government organizations fail to calculate many long-term internal costs required to use, manage and maintain GRP software over many years.
• TCO is critical to financial sustainability because governments are engaged in on-going Public Financial Management (PFM) reform. TCO should consider more than the maintenance of a “steady state.”

Average cost by category for Enterprise Software differs among analysts depending on data completeness, category definitions and duration analyzed. Nevertheless, studies show that consulting for implementation tends to be the highest cost.

Why is TCO Such a Problem in Enterprise Software?

• Moderate to high implementation costs ranging from a 1:1 ratio in the private sector to 3:1 to 15:1 in the public sector with examples where services significantly exceeded other costs.
• Average TCO measured at over $50,000 per user in one analyst study making this cost material to government budgets. Governments are legally “budget-driven” where high TCO and unexpected cost overruns may require supplemental budgets or extracting funds from other priorities.
• High maintenance costs that originate from maintaining complex code and problem troubleshooting, and difficult upgrades that can increase TCO after the initial implementation.
• High upgrade costs increase the TCO where ERP upgrades are estimated to be ½ the value of the original license fee and 20% of the original implementation costs where experts warn that organizations should expect to pay as much as 3 times the original ERP software cost to upgrade to new technology
• Unexpected risk costs were average implementation variance of 2 and 4 months over schedule in one study, average variance for ERP projects was 230% of schedule in another study , and up to 80% of ERP exceed time and budget estimates in a third study.
• Additional sustainability costs for staff retention and certification. Some ERP solutions have expensive functional and technical training course to certify government staff. Government employees can leverage this certification to join private companies. Governments need programs to retain talent and prevent this “brain drain”.

What are the Acquisition Costs for GRP Software?

• Internal personnel costs and consulting fees for needs analysis and the development and maintenance of a request for proposal. Procurement costs including engaging financial and IT experts throughout the process. Government procurement cycles for GRP tend to be lengthy.
• Computing hardware, networking and required bandwidth for the computing infrastructure to support the GRP. This includes disaster recovery sites, testing centre, provisioning of reliable power and long-term telecommunications contracts. This also includes the personnel costs to accept shipments of equipment.
• Middleware software including security, database, load-balancing, operating systems and systems management tools necessary to support the implementation.
• The GRP software license costs are typically based on the number of (named or concurrent) users or size of the government.

What are the GRP Implementation Costs?

• Project management costs including dedicated employees to project, program management office, communications and meetings.
• Installation, provisioning and set up of the GRP software and middleware.
• Internal personnel costs and consultant costs to articulate the current business processes, legal requirements, forms and report requirements.
• Internal personnel costs and consultant costs for any changes to current processes required by the software or good practices. This could include comprehensive business process re-engineering and additional staff training.
• Data conversion costs including quality assurance. This can also include data completeness analysis where information that is not in the current system needs to be uncovered from other sources.
• Internal personnel costs and consultant costs to manage old and new systems in parallel.
• Configuration and customization costs, typically accomplished by external consultants or software vendors. This covers adapting the core software and integration, reports and forms.
• Internal personnel and consultant costs for piloting, analyzing and acceptance testing following quality assurance processes.
• Technical training for middleware, networks, computers and systems management. Functional training for GRP users.
• Development of any special documentation or user guides that describe the government processes and how these are accomplished within the software
• Additional implementation phases may occur such as adding additional software modules, more users or new government entities.

What are the On-Going Costs for GRP?

• Maintenance costs for all hardware and software purchase, which includes vendor customer support. This is typically an annual contract.
• Government personnel acting as first line support for equipment and software. This also includes case management to track bugs and enhancements while maintaining the vendor relationship
• System tuning of databases, operating systems and networks as number of transactions increase.
• Changes to configuration and customization of reports or forms accomplished by internal staff or consultants.
• Bandwidth, telecommunication, electricity and rental/lease/space costs.
• New fiscal year processing including carry-over of previous year funds accomplished by internal staff or consultants
• Upgrade costs associated with moving to newer software versions. This includes change management to ensure that any customization accomplished in the previous version is added to the next, testing and acceptance.

What are the Hidden Costs in GRP?

Total costs change through the lifecycle of GRP usage where implementation costs are higher that additional year steady state. Additional per year costs can mount because of software upgrades, government modernization and unexpected costs.

• Lost productivity as systems are run in parallel and the employee learning curve.
• Reduced efficiency by adding so-called “best-practices” that adds complexity to existing processes.
• Change management costs for new government regulations and training on processes within the software.
• Disaster, lost data, business disruption through late implementation or system failures including audit and reporting disruption.
• User conference and training travel and expenses charges to keep up-to-date on software changes.
• License audits where vendor demands additional payments
• Maintenance options may require additional payment to achieve necessary service to overcome problems.
• Unexpected add-ons when product portfolio does not meet entire requirement.
• Middleware changes such as operating system or databases outside the GRP system upgrade period.

What TCO Factors are more Important in Government than the Private Sector?

• Adapting a private sector financial system for government often increases customization work to support legal processes and public sector financial standards. Software designed for the private sector tends to require significant upfront customization costs.
• Larger technical footprint of ERP systems means requiring multiple computers and application servers and consuming large amounts of disk space that increases the TCO beyond the initial cost. The sophistication of the larger technical footprint requires more internal support, better software tools and higher technical capacity.
• Lower technical capacity in the public service in some countries can increase TCO. Some ERP applications require significant technical knowledge to implement and support, including systems management and database tuning, often requiring permanently contracted external consultants.
• Lower accounting functional capacity of the public service in some countries may require additional financial management training. Some systems are designed for more complex accrual accounting. Other systems have complex business processes that must be followed by public servants.

Software designed for Government, GRP, tends to have a lower TCO that software designed for the private sector, ERP. Based on analysis of turnkey TCO proposals, FreeBalance compared to Tier 1 ERP Vendors.

How does the Choice of GRP or ERP software affect TCO?

• Adaptability: code customization (including software code, call-outs, scripting) costs more than configuration for implementation and significantly more for software upgrades because customized code has to be maintained.
• Footprint: hardware and bandwidth footprint including replication services can add significantly to space, equipment and electricity costs.
• Leverage: importance of the government market to the software manufacturer is critical to ensuring that product upgrades meet emerging needs otherwise customization costs increase year over year.
• Governance: many GRP projects create governance structures with Systems Integration firms but not the software manufacturer. This reduces commitment to meeting government needs over time.

What is a Risk Management Approach to GRP TCO?

• A risk management approach identifies risk factors, risk appetite and risk mitigation strategies. Example of risk factors include: organizational capacity, vendor success ratio, extent of expected customization.
• Risk factors can be used to calculate an expected budget overage. Risk mitigation strategies add costs. Both factors can be used when determining the potential TCO for any software acquisition.

What are some TCO in GRP Good Practices?

1. A risk management approach based on industry experience in similar projects, the extent of required customization and the level of commitment by the software manufacturer to the government market and to the government customer can be used to calculate expected budget overages. Some hidden costs can be estimated. Governance structures and leverage with the software manufacturer should be included in the risk calculation.
2. A long-term project approach should identify increased per-year costs by vendor version upgrade path and upgrade policies. The multiple-year project plan should act as input into the IT budget.
3. Government experience with software vendors should be modelled to determine expected implementation and maintenance costs.
4. A “turnkey” approach should be used by committing a single provider or consortium to assume a fixed-price schedule.
5. Internal costs should be modelled as part of the TCO calculation. This includes the expected costs for additional training and certification. (Prices for courses are publicly available.) Employee retention and turnover should be analyzed.
6. Customization costs for the initial implementation should be used as an anchor to calculate future software upgrade and customization changes. Industry figures for average duration of upgrades should be used.

Enterprise Software Success Myth #1

Doug Hadden, VP Products

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.

Symptoms

• Enterprise software market consolidation reduces competition through acquisition
• Enterprise software firms acquire middleware vendors (database, application server, virtualization etc.) to lock-in customers to a complete software stack
• Enterprise software firms are using hardware appliances for further lock-in
• Enterprise software firms generate the majority of revenue from software maintenance while forcing upgrades (with one notable exception in the ERP world)
• Enterprise software firms are trying to prevent 3rd party maintenance firms from operating
• Enterprise software firms audit customers to uncover new ways to charge them

Ethical View

• Methods designed to manipulate the market and reduce competitiveness is not ethical
• Forcing the cost for upgrades when there is little or no value is not ethical

Emerging Trend

• Power is shifting from companies to buyers thanks to social media and the increase in available industry information
• Enterprise software market is moving out of the so-called “tornado” meaning that customer-centric processes are critical to growth
• Enterprise customers have alternative “middleware” choices through open source technology
• Trust has become the critical factor in repeat business

FreeBalance Approach

• No forced product upgrades
• Adjust the product roadmap based on customer feedback rather than the other way around
• Support commercial and open source alternatives for middleware to achieve best value and trust with customers
• Organize as a customer-centric organization and use customer scorecard metrics for management decisions

Growth, Sustainability and Responsibility

Doug Hadden, VP Products

FreeBalance has a good business. And, a business that “does good.” This FreeBalance “social enterprise” mandate where Corporate Social Responsibility (CSR) may seem somewhat naive in the cutthroat world of large enterprise software vendors and global systems integration companies. Yet, this combination of FreeBalance company characteristics continue to attract new partners for us.

In the past, global systems integration firms engaged FreeBalance primarily for tactical reasons such as a sales opportunity. This dynamic is changing: partners now see the value of long-term strategic relationships with FreeBalance.

It’s a Good Business

Systems integration vendors are attracted by the growth potential of partnering with FreeBalance. It’s a good business that helps generate more revenue.

1. Government IT Opportunity

Governments represent one of the largest, if not the largest, “industry vertical” market. (It depends on how one classifies vertical markets.) The FreeBalance Accountability Suite has been designed exclusively for Public Financial Management. The Suite augments the government product and services portfolio for systems integration firms. This increases the product portfolio enabling system integration firms to compete for more opportunities in this lucrative market.

2. Emerging Economies Opportunity

FreeBalance has been successful in emerging markets. These markets are showing significant growth while traditional “developed nation” markets have become stagnant. System integration firms recognize that there is more growth and opportunity in these developing countries. They have also discovered that software that works well in the “west” is often less effective elsewhere. At the same time, there are innovation pressures to leapfrog developed countries. The innovative (all-web/no legacy) FreeBalance Accountability Suite gives systems integration firms products designed for emerging nations in mind that enables technology leapfrog.

3. GRP Opportunity

The Government Resource Planning (GRP) market has transitioned from the use of custom-developed applications and Enterprise Resource Planning (ERP) software as the main choice for governments. Government reform and the drivers for optimizing expenditures while increasing transparency challenges traditional approaches. Governments find that ERP software must be highly customized to satisfy requirements. ERP and custom-developed solutions hamper reform and change. Not to mention comprehensiveness. This new class of GRP software makes system integration companies a better and more compelling story of sustainable success for governments.

4. Competitive Edge

Systems integration firms need to attract new business and be competitive. Unlike developed countries, GRP opportunities tend to focus on turnkey implementations and Total Cost of Ownership (TCO). This exposes to the government additional costs such as services (because of complex software), upgrades (because ERP vendors force upgrades) and hardware infrastructure (because ERP vendors use legacy client/server code). The prices from government tenders in developing countries are often made public. Our study shows that the average FreeBalance proposal is slightly more than 1/2 the price of those from the leading ERP vendors. Partnering with FreeBalance gives systems integration firms a competitive pricing edge.

It’s a Business that “Does Good”

Many systems integration firms recognize that the right solutions for developing countries creates stability, reduces poverty and improves health and education. First with strong CSR programs are particularly attracted to working with FreeBalance.

5.Good Governance

Analysis shows that good governance has positive cross-cutting effects in developing countries. A recent World Bank report showed the relationship between PFM reform and government effectiveness. FreeBalance customers have seen significant improvements in Public Expenditure and Accountability (PEFA) assessments. FreeBalance government government customers perform, on average, much better in PFM reform than countries with higher capacity.

Systems integration firms can augment CSR programs through a partnership with FreeBalance. This also helps our partners to attract and retain talent because personnel are changing the world for the best.

6. Responsibility Marketing Impact

Social responsibility is rapidly becoming a way for business to differentiate. This generates positive returns. The increased scrutiny of CSR programs means that businesses can no longer “green wash” by using clever marketing to give the impression of social responsibility. The Internet and social media exposes spin.

FreeBalance is a socially responsible firm as a for-profit social enterprise. Systems integration partners can leverage our business model and good practices to improve responsibility. Good corporate responsibility is good marketing and lead generation.

It’s a Sustainable Business Opportunity

Much of the CSR discussion is about environmental sustainability. Financial sustainability is as important in developing countries. (There is, of course, a linkage between the two and developing countries are on the front line.)  There is a reason why FreeBalance focuses on sustainability and calls this blog sustainable public financial management: governments are likely to buy more products and services if the current systems are environmentally and financially sustainable.

7. Focus on Customer Success

FreeBalance is a GRP practice leader. Studies show that there are high failure rates with ERP implementations in the private sector – much higher in government. FreeBalance has a much better success rate than competitors. Some of this can be attributed to software. The customer-centric process used by FreeBalance has ensured that the company has adapted methodology to ensure customer success and rolled lessons learned from customers into the software. Systems integration firms can leverage FreeBalance good practices to make GRP more financially sustainable by governments to help generate additional revenue.

8. Building Growth rather than “Devil’s Triangle”

Analyst Michael Krigsman has pointed out that IT customers can get caught in the “Devil’s Triangle“. Krigsman suggests that cost overruns for ERP implementations come because systems integration firms leverage complexity to generate more services revenue.

It is true that ERP vendors have many features that can generate more revenue for systems integration firms including code customization and proprietary middleware. Systems integration firms can leverage this to “own the customer” and extract the maximum services revenue as possible.

Not all systems integration firms operate on this notion of “value extraction” that sounds more like rent seeking. This is especially the case in the global GRP market where there is significant word-of-mouth. That’s why some systems integration firms are leveraging FreeBalance software to develop trust with government organizations in developing countries. This trust relationship enables systems administration firms to grow through providing more valuable services for government customers.

9. Competitive “Secret Sauce”

It’s very difficult to hide failure in the GRP world. Many government audits are made public and it’s not pretty. We track success rates for FreeBalance and ERP companies in developing nation governments. This includes implementations that have been publicly mentioned in the press, audit reports or at conferences as having significant problems. Of course, there is high risk in developing countries and we encounter many challenges. Our success rates are much higher than Tier 1 or Tier 2 ERP vendors.

The secret to our success is designing software and methodology to meet the true needs of government customers. This means configuration, progressive activation, adaptable help and optimized technical footprint built into the software. Systems integration firms are attracted to solutions that are more successful that reduce risk of cost overruns in fixed price contracts.

10. Flexibility

Systems integration firms can provide much of the GRP needs of any government. Partner programs for ERP companies tend to be rigid. Systems integration firms are often grouped into classes of vendors, have geographic or vertical market limitations and must investment significantly to become partners. These schemes often increases risks to customers. Costs can be higher as software manufacturers manage the channel. And, systems integration firms need to recover the high cost to do ERP business by charging customers.

The FreeBalance partner methodology customizes the relationship with partners. There are some restrictions because systems integration firms need to be trained. There are no other restrictions to the services footprint for systems integration firms in the design, implementation and support of GRP. With one noted exception: FreeBalance must be part of the governance structure with the government customer so that we can adapt products to meet unique needs (rather than forcing code customization), share practices to improve the success ratio and learn about emerging trends. For example, the FreeBalance International Steering Committee provides more effective governance for governments than the traditional “user group” method used by ERP vendors.

The FreeBalance partner methodology enables systems integration firms to leverage distinctive core competencies in public financial management, program management and customer support to reduce implementation risk and TCO.

Hal Le, Director International Products

I had the opportunity to present some trends that we are seeing when working with our partner countries on themes of governance and transparency in Libya last week.  My keynote was at the at the International Libyan Conference on Electronic Government in Tripoli.

There are many decentralization models. All of these models can be enhanced with ICT technology like Government Resource Planning (GRP) to improve governance and transparency.  Capacity building in line with Public Financial Management (PFM) reform is necessary for sustained governance reform. That means that GRP tools need to adapt to the changing conditions.

2012-07 Decentralization, Governance and GRP Final