Sustainable Public Financial Management

Doug Hadden, VP Products

Executive meetings with customers is a cornerstone of our customer-centric approach to Government customers. After all, why should salespeople have all the fun? More importantly, executives in companies need to have direct unfiltered feedback from customers. It provides the context for decision-making. And, it is particularly important in our case because we focus exclusively on a single market – government. Hence, a deep understanding of the customer context is critical to our continued growth and success. We’re in the midst of engaging our Government of Canada customers. We’ve also met with policy stakeholders and customers from other vendors, particularly at conferences.

There are some interesting trends in Public Financial Management (PFM)  in the Government of Canada.

Transparency and Government 2.0

FreeBalance Government of Canada customers discussed openness and Web 2.0. There is a general trend about Government 2.0 adoption in the Government of Canada. Our discussions transcended the typical concerns over quality, privacy, security and risk of open data. Internal transparency among government organizations was an unexpected theme. Transparency in government tends to cover budget and financial disclosure, open procurement and civil service recruitment and spending. It is often assumed that the government acts as a single actor in these transparency categories. Yet, there is an overlap in policy and budget transparency between policy and executing agencies. This mirrors the need for policy and budget transparency with civil society and businesses.

Governments are under significant pressure to achieve better value for money: improve results with fewer resources and lower budgets.  In Canada, this has created a portfolio of policy analysis covering the entire spectrum of PFM. Communications between policy and executing organizations can be improved and harmonized through the use of new technologies, often called “Government 2.0.” There is a concern that traditional methods of policy information gathering and policy making may not have the desired result. Particularly when these policies are intended to cover emerging technology and new paradigms. There is a need for the type of continuous engagement on ideas and solutions enabled by blogs and wikis to achieve value for results. 

We also found that the transparency categories listed above does not address the holistic transparency footprint. For example, policies on budget transparency can affect civil service reporting. General policies to improve effectiveness have significant impacts on procurement and civil service processes and transparency. Government of Canada policy and political organizations are also struggling with notions of privilege and confidentiality in the development of policy.

Functional Gaps Remain

There is a major trend to process standardization within the Government of Canada. Standard processes and classifications provide for more effective decision-making at lower costs than unique processes and classifications. Yet, there are unique requirements in most government organizations. That’s why these organizations are separate. Virtually every Government of Canada organization has at least one unique requirement that impacts information systems. This complicates standardization of processes, systems or classifications. Integration with unique applications has become a key need for information systems within the Government of Canada.

Of course, we also see many functional gaps within Commercial-Off-the-Shelf (COTS) information systems designed for the private sector. Many of these systems have to be enhanced with software applications designed for government. In particular, there are gaps in generic budget awareness in financial and human resources systems.

Risk of Legacy Technology

Government of Canada organizations are struggling with modernizing the software portfolio. There is a range of legacy technology in use by the Government of Canada including custom-developed mainframe and client/server applications that were designed to address functional gaps. Sometimes the COTS private sector software alternatives were too expensive with unneeded feature sets. And, this older technology is often difficult and expensive to maintain. And, difficult to integrate. Yet, functionally critical.

Many Government of Canada organizations are leveraging the older generation of web-enabled software. This appears to be a risk.  There are many definitions of web enablement that has creating confusion. Many software vendors  position products as web-based when the user interface is presented in a browser and there are no plug-ins required to operate. However, many enterprise applications have client/server software at the core. This software operates through a translation layer that reduces performance and limits integration – particularly in the Service Oriented Architecture (SOA) environment envisioned in Enterprise Architectures.

The use of Cloud Computing and Software as a Service (SaaS) is growing dramatically in the private sector. Many incumbent enterprise software vendors not yet adapted to this market. For example, Salesforce.com provides configuration tools and integration points meet customer needs. The technology centrally hosts many customers with many configurations. Software designed for single on-premises deployment are difficult to adapt for the Cloud. And, for hosted shared services.

Total Cost of Ownership (TCO) and Sustainable PFM

The emphasis on value for money has enabled Government of Canada organizations to track the true cost of PFM software. Software, consulting, support and training services are often acquired seperately by Government of Canada organizations. The focus on TCO had identified the previously hidden costs for sustaining the PFM investment. Many Government of Canada organizations are discovering that some COTS and custom software requires significant on-going consulting fees. Training and certification requirements for some software applications have high recurrent annual costs.

Government of Canada organizations are discovering that cost saving associated with pooling resources are not significant. This seems to be dependent on the COTS solution selected. Despite savings through clustering departments, shared hosting, or centralizing data centres, there remains a high cost for Government of Canada organizations. It seems that economies of scale are hard to achieve when the software solution is not designed for this purpose. Of course, our position is that FreeBalance software has been designed for the government domain and new methods of deployment.

Customer Centric

I wroter earlier about improvements in FreeBalance customer support metrics. These metrics are outputs and may not be related to customer experience or expectation. And, improving processes to improve customer-centricity tends to have a delayed outcome as past problems are solved. Our Government of Canada customers told us that we have improved support. This was also confirmed in meetings that we have had with central authorities who also recognize how well we are supporting customers. Although, it should be noted that customer engagement is a journey and not a destination. We are always looking at ways to improve customer support and embedding customers into our software development processes.

International Success

Our Government of Canada customers are proud of the contribution they have made to FreeBalance GRP products. They know that the respected discipline in PFM in the Government of Canada is being used to improve governance in countries around the world. They are also benefiting from this market. The scalability and hosting requirements for international customers has been important in the technology design of Version 7 of the FreeBalance Accountability Suite. Functionality richness has also increased the product portfolio to meet more PFM needs in Canada.

Doug Hadden, VP Products

Another report of a failed Enterprise Resource Planning (EFP) system in government. This one going to the courts. The facts appear to be: ERP solution couldn’t easily adapt to meet government requirements and consulting company was not able to adapt to meet government requirements. The ERP and system integration vendors are well-known. Successful and profitable. Large. “No one gets fired for buying this solution” magnitude large.

What causes a government customer to believe that the Commercial-Off-the-Shelf solution needs to be re-architected and redesigned? 

 Or Patrick Marshall from a June GCN story to conclude that “many government entities have had horrendous ERP experiences?“

Or Michael Fauscette of IDC to suggest that government “agencies aremoving away from ERPs to software as a service and multiple vendors for specific functionalities”.

A Disclaimer

FreeBalance products are often categorized as ERP. We cover the financial, budget, human resources, procurement, revenue and performance management application sprectrum. But, we don’t sell to “enterprises”, only governments. Strictly speaking, we provide Government Resource Planning (GRP) software.

What goes wrong?

This most recent story does identify two systemic problems associated with ERP implementation in government. Government organizations should be forewarned to manage risk.             

1.  ERP was orginally developed for “enterprises“, not government. Top Tier ERP packages use a customization approach to meet public sector needs. Government organizations should recognize this when decided to acquire ERP or the alternative: software designed specifically for government or “GRP”. There are legitimate reasons why governments should consider top tier ERPs that we have talked about in the past. (I was asked to present on the subject and I spoke about the ERP value proposition in government.)

2.  Generic methodologies for software implementation using experts in the software, rather than experts in the domain tend to be risky. Explaining the government domain to good consulting firms can be time consuming and suffer from consultants not asking the “right” questions resulting in something that appears to meet the terms and conditions of the contract but doesn’t meet government customer requirements.

Lessons Learned

Government organizations looking to migrate from current solutions to an ERP need to manage risk by:

1. Ensuring that the ERP solution has been successfully implemented in peer organizations = same level of government, similar level of sophistication in financial management, similar standards etc. (For example, the success of a post office ERP implementation in a European government doesn’t mean anything to a county government in the United States looking to implement public financial management or an African government looking at human resources.)
2. Check the references, but check customers that the vendor does not present. A lot can be learned at public financial management conferences.
3. Ensure that vendor evaluation includes the Total Cost of Ownership – all licenses, hardware, power consumption, training, certification, maintenance, support, upgrades etc. Even if you are acquiring some of these products and services from other vendors.
4. Ensure that the winning professional services firms is providing experts in public financial management. It is often better to have PFM experts than experts in the ERP application.
5. Seeing is not believing. In other words, the quality of the demonstration may not indicate the quality of the vendor. Demonstrations can be slick. Test the vendor by asking domain questions: like ”how do your other customers manage multi-year charts of accounts and commitments?” and “how do your other customers ensure that salary budgets are properly forecasted to prevent overspending?”
6. None of this matters if the government is not governing and steering the implementation. Don’t wait for the integrator to communicate. Don’t be satisfied with how the integrator’s methodology functions – they don’t have to use the stuff!

Doug Hadden, VP Products

In an interesting meeting yesterday, a top IT official at the Government of Canada said that “legacy technology is a terrible anchor.”  Meanwhile, Josh Greenbaum of the Enterprise Matters Blog posted an entry that multi-tenancy in cloud computing is a vendor issue. This recieved a lot of comment, particularly from Ray Wang of the Altimeter Group.  Multi-tenancy hosting was one of the benefits described by Workday during their technology summit.

Josh made the important observation that “a customer that looks at multi-tenancy as a key criteria for acquiring a new piece of functionality is basing their decision on factors that are not directly relevant to their TCO.”  This is a critical point for any organization looking at leveraging cloud computing. As I commented: “In the cloud, no one knows what architecture you have.”  Yet, the architecture becomes a super critical issue when governments are hosting multiple government organizations.

Client Benefits: for those government organizations using a hosted shared service

As I described in my comment to the blog entry: ” There has been a lot written about enterprise architectures and vendors are quick to promote architectural advantages. You are right here because the further we get away from TCO & functionality – where the “rubber hits the road” for clients, the more we get into almost metaphysical discussions of “potential” TCO & functionality. Effective architecture is seen as future proofing but it is a third order benefit. (Second order benefit is feature sets you don’t need now, but possibly might need.)”

First order benefit:

Efficiency & effectiveness to meet mission + ease of compliance with government reporting requirements

Less the Total cost to achieve functional needs =

software/chargeback costs, governance costs (participation in the system governance), training & certification costs, upgrade costs + cost of the complete solution meaning the costs to develop applications to fill gaps, manual processes that are not automated, extra oversight over standardized processes that do not fully meet organizational needs + cost to migrate and business re-engineer to go from current systems

Second order benefit:

Leveraging new feature sets and functions not currently in use can improve efficiency & effectiveness to meet mission

Third order benefit:

Architectural benefits of hosted solution that reduces hosting costs that can reduce the cost to client organizations to:

• Future-proof and grow to meet functional needs and scale to user demands
• Change configurations to support on-going govrnment modernization

• Maintain a technical footprint that could be bloated requiring too much hardware and high power consumption

Benefits from Hosting Agency

The third order benefits from the client perspective are critical to hosting agencies. Shared services are intended to reduce costs and provide a better value to citizens. Yet, many contemporary software architectures are not able to achieve the cost reduction. Ironically, the costs to host multiple organizations can be higher than individual on-premesis deployments. Why?

1. Technical architectures that rely on customization tend to be costly to meet multiple organization functional needs
2. The customization approach often makes adapting to new government mandates and process modernization difficult
3. Minimum technical footprints can be large and need to accomodate to peak period-ending activities across multiple organizations where government Service Level Agreements can result in unused over capacity

 Where do Governments go from here?

Virtualization seems to be the blunt approach to optimize technical footprints. Vendors providing products to governments need to address the standardization/uniqueness problem where multiple compliant configurations are possible, as we have described before. And, the burden to adapt to government modernization should not fall on government IT professionals.

Annual conference to explore “Guardians of Our Communities, from Local to Global” theme

Ottawa, Canada (August 19, 2010) – FreeBalance, a global Government Resource Planning (GRP) software company, will be showcasing the latest version of its Civil Service Management (CSM) software at the 62nd IPAC National Convention. FreeBalance CSM is a fully integrated, web-based human resource information management and payroll software solution designed exclusively for government.

The IPAC conference runs from August 22nd to August 25th at the Westin Hotel in Ottawa, Canada. The IPAC conference provides public service professionals with an opportunity to enhance their knowledge of public administration, share the latest research, and learn best practices. The IPAC conference continues to be a model of public democracy for the world.

“The IPAC conference is internationally renowned and attracts public service professionals from around the world, including FreeBalance customers,” said Manuel Pietra, President & CEO of FreeBalance. “We look forward to demonstrating how FreeBalance civil service management solutions help improve government capacity, performance and results.”

The theme of this year’s IPAC conference is “Guardians of Our Communities, from Local to Global”. Attendees will explore five themes that address the many ways in which public policies and services affect the economy and communities. These themes include the social fabric, the economy, security and sovereignty, innovation and technology, and governance. The conference will also build an understanding of who are the guardians, and define the roles of public, non-profit, and private sectors.

FreeBalance Civil Service Management enables governments to manage the civil service cycle from recruitment through retirement. To improve government capacity and results, FreeBalance CSM delivers:

• Human resources functionality to support civil service reform and management including movement, capacity building, salary planning, performance appraisal and recruitment
• Payroll and pensions functionality to support government rules for payroll and pensions
• Benefits and self-service functionality to support civil service benefits, travel and subsistence and self-service portals

FreeBalance CSM, a core component of FreeBalance Accountability Suite, supports the unique and evolving requirements of government. This includes Shared Services, Government Resource Planning, Government Performance Management, Government 2.0, and Service Oriented Architectures. The FreeBalance Accountability Suite covers the entire budget cycle and provides fiscal control over fund allocations, expenditures, appropriations, revenue administration, and human resources.

FreeBalance customers span the globe and the user community includes public financial management professionals in 18 countries, including Uganda, Namibia, Sierra Leone, Southern Sudan, Timor-Leste, Afghanistan, Kosovo, and Iraq. FreeBalance operates in 15 customer time zones. FreeBalance has more than 60,000 users around the world. FreeBalance software manages a global civil service workforce of 1,500,000, and also manages a quarter trillion ($US) annual budgets worldwide.

About the Institute of Public Administration of Canada
Founded in 1947, IPAC is a dynamic association of public servants, academics, and others interested in public administration. Anchored by its 17 regional groups nationwide, it is a member-based organization that creates knowledge networks and leads public administration research in Canada. IPAC is the leading organization dedicated to the identification and sharing of good practices and policy in public administration. For more information, visit www.ipac.ca.

About FreeBalance
FreeBalance helps governments around the world leverage robust Government Resource Planning (GRP) technology to accelerate country growth. FreeBalance software solutions for public financial and human resource management support reform and modernization to improve governance, transparency and accountability. Good governance is required to improve development results.

Founded in 1984, FreeBalance is a for-profit-social-enterprise (FOPSE) company headquartered in Ottawa, Canada, with sales and support offices in Washington, DC (United States), Lima (Peru), Lisbon (Portugal), London (Great Britain), Pristina (Kosovo) and St. John (Antigua and Barbuda). FreeBalance solutions have been implemented in countries across the globe, including Canada, United States, Sierra Leone, Guyana, Pakistan, Mongolia, Afghanistan, Antigua & Barbuda, Timor-Leste, Republic of Kosovo, Palestine, Panama, and Uganda. For more information, visit www.freebalance.com.

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Case Study describes sequence of successful PFM reforms in Kosovo from 1999

Ottawa, Canada (August 16, 2010) – FreeBalance, a global Government Resource Planning (GRP) software company, today released a Case Study that details the Government of Kosovo’s success at improving governance through PFM reform. The Kosovo PFM Case Study covers the sequence of PFM reform in Kosovo from 1999 to the present day. PFM reform is critical to improving good governance. Good governance is critical to economic development. This Case Study is the first in a series to be published to assist governments around the world achieve country growth.

2010-07-26 Kosovo PFM Case Study

The Kosovo Financial Management Information System (KFMIS) is based on the FreeBalance Accountability Suite. The KFMIS has supported the Government of Kosovo agenda of reform and modernization.

“The advances of the KFMIS are very important for the Public Financial Management reform of the Government of Kosovo,” said Lulzim Ismajli, Treasury Director, Ministry of Finance & Economy, Government of Kosovo. “We have been working with FreeBalance since 2000. We’ll continue our cooperation towards continuous advancement of the KFMIS in order to drive public finances in the way of advanced management so as to be comparable with PFM systems of developed EU countries.”

The PFM Case Study analyzes Public Expenditure and Financial Accountability (PEFA) assessments. The Government of Kosovo has achieved excellent results (B and higher) for over half of the assessment criteria. The country context of economic, capacity and sustainability challenges are described. The PFM Case Study describes the Government of Kosovo goals of improved governance and transparency, and provides a GRP modernization scorecard.

“FreeBalance congratulates the Government of Kosovo on its remarkable achievements in PFM reform,” said Manuel Pietra, President & CEO of FreeBalance. “The Kosovo PFM Case Study illustrates how the Government of Kosovo has strengthened governance with the resulting economic benefits this brings to its people.”

Achievements by the Government of Kosovo include:

• Improved governance as demonstrated by the 2007 and 2009 PEFA assessments
• Effective sequencing of PFM reform
• Capacity built for budget execution, cash management and procurement government-wide
• Decentralization of budget execution reflecting successful capacity building
• Achieving International and European standards
• International Monetary Fund (IMF) member admittance

FreeBalance customers span the globe. This user community includes public financial management professionals in 18 countries, including Panama, Guyana, Antigua & Barbuda, Jamaica, Uganda, Timor-Leste, Afghanistan, Kosovo, Mongolia, and Canada. FreeBalance operates in 15 customer time zones. FreeBalance has more than 60,000 users around the world. FreeBalance software manages a global civil service workforce of 1,500,000, and also manages a quarter trillion ($US) annual budgets worldwide.

About FreeBalance

FreeBalance helps governments around the world leverage robust Government Resource Planning (GRP) technology to accelerate country growth. FreeBalance software solutions for public financial and human resource management support reform and modernization to improve governance, transparency and accountability. Good governance is required to improve development results.

Founded in 1984, FreeBalance is a for-profit-social-enterprise (FOPSE) company headquartered in Ottawa, Canada, with sales and support offices in Washington, DC (United States), Lima (Peru), Lisbon (Portugal), London (Great Britain), Pristina (Kosovo) and St. John (Antigua and Barbuda). FreeBalance solutions have been implemented in countries across the globe, including Canada, United States, Sierra Leone, Guyana, Pakistan, Mongolia, Afghanistan, Antigua & Barbuda, Timor-Leste, Republic of Kosovo, Palestine, Panama, and Uganda. For more information, visit www.freebalance.com.

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Doug Hadden, VP Products

FreeBalance committed to a customer-centric approach in late 2006. We adapted our processes in product management, development, support and implementation to achieve this objective. This resulted in achieving ISO-9001 certification in late 2007. We implemented a customer portal and scorecard in 2007. The scorecard was automated in March of 2008. There is the view that companies can only improve those things that are measured. We measure customer cases. Customer cases include:

• Software problems that could be defects in the code.
• Data problems that may be caused by software defects, database or hardware issues
• Software enhancement requests
• Service requests – looking for implementation assistance or advice

All cases are rated by severity and priority by customers. Customers determine whether a case is considered an emergency.

The results from this approach are:

1. Reducing the number of open cases by 70% since March 2008
2. Reducing the number of open emergency cases by more than 97% since March 2008 compared to rolling average over the past year
3. Achieving “green” on emergency cases- 2 or less  since July 2008
4. Achieving “green” on total open cases – 200 or less October 2009, except for a peak in April 2010

There are some other observations that are relevant:

1. The trend shows a gradual reduction in case loads even though FreeBalance is growing the number of customers and modules in use by current customers. It will be very challenging for us to continue to achieve “green” with three large implementations scheduled to go live this year.
2. Case loads tend to peak in the autumn of each year. Case loads may increase starting in September.
3. Many long-term customers have remarked that our service has improved. (This was a bit of a surprise because I wasn’t asking about support.)
4. Many cases take weeks to resolve. Most FreeBalance customers have mature software that requires effort to reproduce problems. And, FreeBalance manages customer data securely to meet Canadian privacy laws and Government of Canada security regulations.
5. The distribution of case types has changed over the past 2 years. Software and data problems represented less than 50% of total cases in 2008. It now represents roughly 60% as processes for service requests have accelerated.
6. Many long-standing enhancement requests have been satisfied in Version 7 of the FreeBalance Accountability Suite.
7. The frequency of SWAT Teams – where FreeBalance staff from multiple groups get together to solve a significant customer issue, has reduced significantly. There has been only SWAT team over the past 12 months.
8. There is no question that regional offices with local staff are required to achieve better support.
9. The number of problems or enhancement requests that occur outside the system through e-mail or informal channels has been reduced over the past 2 years. This is a good sign because it ensures that FreeBalance management is paying attention to the right things! 

Doug Hadden, VP Products

Many observers see the British Petroleum (BP) oil spill as a seminal moment in Corporate Social Responsibility (CSR).  Chrystia Freeland in the Washington Post has gone so far as to suggest that CSR has finally been exposed as the “fetish encouraged by the philanthropies that feed off it and funded by the corporate executives who have found that it serves their bottom line.” Beyond Petroleum, the BP CSR campaign tag line went well beyond. There seems to be no top kill to stop the big blog spill. The CSR blog reaction firestorm has been illuminating. Many observers have presented some thoughtful analysis of what the gulf spill means to CSR. (More on that later.)

CSR is a relatively new concept. It is fraught with confusion because many observers can’t visualize how being corporately responsible can be anything but expensive (and pretentious). Others, see it as a marketing ploy by greedy business. Or a misguided hippie 1960s flashback. Or Scrooge-type guilt. Or the latest business fad.

I’d like to suggest a framework to visualize the evolution of CSR.

Stage 1: The Business of Business is Business

(Follows Milton Friedman’s famous viewpoint).

• Realization: Business leaders recognize the Profit is required to sustain business.
• CSR POV: CSR is a cost and serves no useful purpose to increase profitability and does not add to shareholder value.
• CSR Risk: Government regulation means the business must be in “compliance”.
• CSR Threat: There is risk that competitors that practice CSR may gain competitive advantage.
• CSR Opportunity: Fake Social Responsibility marketing efforts.

Step 2: Business Embraces CSR

• Realization: People and Planet sustainability is required to sustain Profit in the business. Exploiting the environment will result in loss of necessary resources for the business. Exploiting people will result in less customers. 
• CSR POV: CSR increases profitability because it grows the supply chain and ensures enough customers.
• CSR Risk: The holistic view of environmental and social sustainability leading to sustainable business is difficult to measure. Business needs to improve outcome measurements.
• CSR Threat: CSR arms race develops. Large enterprises can leverage high profits for philanthropy. On the other hand, marketing noise can make it difficult for buyers to know the difference between real and fake CSR.
• CSR Opportunity: People prefer to buy from ethical businesses.

Step 3: For Profit Social Enterprise (FOPSE)

• Realization: Profit drives innovation
• CSR POV: Profit can be a more effective feedback loop for success in solving social or environmental issues. FOPSE may be more effective than the non-profit model for solving some issues.
• CSR Risk: FOPSE requires questioning traditional business models. (In this case, BP must not only be “beyond petroleum” but petroleum free.) FOPSE companies compete against mainstream organizations with well-understood value propositions.
• CSR Threat: FOPSEs tend to be smaller businesses competing against very large companies. Those larger companies, especially those with real CSR initiatives, can out market FOPSEs.
• CSR Opportunity: FOPSE is disruptive and can create sustainable competitive advantage.

FreeBalance FOPSE Experience

FreeBalance is a For Profit Social Enterprise (FOPSE) software company that helps governments around the world to leverage robust Government Resource Planning (GRP) technology to accelerate country growth. Our mission is governance because good governance is required for economic development. We’ve published a guide on how to become a FOPSE. Here’s our experience to date:

• The CSR exercise helped FreeBalance to change the traditional business model used by software companies.
• The customer-centric approach needed as a FOPSE has helped FreeBalance  grow significantly while competitors have stagnant results.
• The FOPSE approach has been very successful to differentiate FreeBalance globally.
• CSR is positively related to profit.

How to Become a for-Profit Social Enterprise (FOPSE)

Doug Hadden, VP Products

Governance has become an increasingly important indicator of shared services success. Government shared services tend to succeed best when government organization service customers can impact decisions by the shared services provider. Good oversight can help align service provider priorities with customer needs. For all the work on improving governance mechanisms, program offices, competency centres and working committees – we seem to be forgetting an important third party – the software manufacturer. In our view, shared services governance centres on the service customer where the government service provider aligns with government policy and the software provider.

Shared services governance needs active and comprehensive software manufacturer participation. Yet many government shared services initiatives are arms length from the vendor. The software manufacturer will pick and choose enhancements from many customers. And, it is implicit in this type of relationship, that the shared services provider is responsible for customizing Commercial Off-the-Shelf COTS software to meet service customer needs. Large development and testing organizations are created by the government services provider. The consolation: at least the total cost to customize a group of ministries, departments and agencies is less than if every government organization did it themselves.

User Groups is not Governance

The enterprise software market has created customer expectations. Customer-centricity is not one of those expectations. Enterprise software companies define the scope of customer involvement. It’s all part of the supply chain. Customers gather at User Group Conferences to learn about what will be delivered and when. When upgrades will be necessary. When products that work will be “sunsetted”. (That’s one of my favourite expression like “friendly fire” – doesn’t sound anywhere as bad as it is.)

There is limited transparency.  That’s because there isn’t visibility into the entire software development cycle.

It’s an open secret – user groups are mostly about marketing and public relations. Vendors hope to cross-sell and up-sell.

Is there an Alternative Governance Model?

Software vendors need to be committed to government shared services. After all, governments are taking the risk that consolidation and standardization will reduce costs and improve agility. This can be a 7 to 8 figure gamble. Software manufacturers need to be equally committed. Involved. Change roadmaps to suit customers.

We believe that governments should be leading vendor roadmaps. That’s one of the reasons that many government organizations prefer developing custom software. Sure, it costs more and quality is difficult to achieve – but, at least you don’t run based on arbitrary decisions made by business people thousands of kilometers away!

That’s why governments should insist on the Steering Committee strategy to pool requirements from other governments to set the vendor roadmap. Vendors should offer to embed governments directly in the software development cycle. Many vendors think that beta testing is a great benefit to customers. Except when customers are asked to test features they don’t need. Government shared services governance should include visibility into product requirements, specifications, test plans and roadmaps. Outside of the annual User Group meeting.  And beta testing – testing features governments need. That’s why we believe in transparency and governance in shared services. It forms part of our Blueprint for shared services.

After all, FreeBalance is in the transparency and governance business!

Doug Hadden, VP Products

We’ve discussed the current state-of-the-art in government shared services. There’s some discontent among government users for technology shared services. Despite a rather obvious set of benefits from standardization and consolidation of similar GRP functions such as budget, financial and human capital management. Gartner Group concluding that “shared services” is on the descent to the trough of disillusionment.

Process standardization is a key benefit experienced in the private sector. Standardization reduces cost for training, support and upgrading software. Private sector companies can benefit from best practices. They adjust their processes to achieve greater efficiency. Government doesn’t work that way. Adjusting processes to achieve greater efficiency or standardization often requires changes to the law. Privacy,agency  independence, de-centralization and other problems can make standardization exercises difficult. Shared services initiatives begin with analysis of the current situation. There can be significant commonality among government organizations.

The pattern of dissimilar processes expands based on the number of organizations compared. Even small government agencies can have significant differences in mandate. Problems encountered with standardization include:

• Disjointed processeswhere only parts of shared processes are standardized. The comprehensive “line of business” cannot be fully automated leaving government ministries, departments and agencies with the option of manual processes or creating special purpose tools. This has been a general problem in government IT that standardization can worsen rather than aleve.
• Diminishing returns where adapting organizational processes to the standard reduces efficiency or service delivery.
• Legal and processbarriers where standardization cannot be implemented by some organizations. This can dramatically reduce the return on investment for setting up an expensive shared services infrastructure if it cannot be leveraged by all government organizations.

The primary difficulty in achieving government shared services for “lines of business” isn’t standardization – it’s the technology tools used. Many shared services initiative use Enterprise Resource Planning (ERP) software developed for the private sector. This software has some unfortunate characteristics:

• Customization: the use of code customization to achieve government needs that increases the Total Cost of Ownership (TCO). This makes it difficult to transition sets of customized code to standard processes.
• Single instance: the design of private sector software expects a single entity operating standard processes. Many government shared services initiatives requires hosting multiple different instances, which defeats the purpose of shared services in the first place.
• Reliance of industry practices: this use of so-called “best practices” makes it difficult to standardize a complete process across multiple organizations. And, very difficult to support legal reform and modernization of financial processes.

We have been very adamant that software technology can be designed specifically for government. We’ve developed an innovative shared services technology approach. This approach is based on three important “non functional requirements” for the design of Version 7 of the FreeBalance Accountability Suite:

• Configuration where the broad spectrum of government processes can be easily configured and requires no customization.
• Multiple configurations where a single hosted system can support different configurations.
• Reliance of government good practices proven around the world to support change and modernization.

The FreeBalance approach to shared services supports a different deployment model:

• Standardization of many processes facilitated through the configuration approach. These processes will be standard and identical.
• Semi-standardization through a configuration rangewhere government organizations can select processes within a narrow approved range. Once again, this approach is supported through parameters in the FreeBalance Accountability Suite. Semi-standardization enables governments to achieve the benefits of consolidation by broadening the shared services footprint without significantly increasing costs.
• Local or central hostingof functions unique to the government organization. These functions may need to be separate from shared services because of legal requirements. Or, the processes are so unique as to make central hosting cost ineffective. The FreeBalance Accountability Suite supports this approach through hybrid deployment where processes can be hosted in more than one location.
• Phased migration of configurations where government organizations can move to compliant and mandated standard processes over time. This reduces the training costs and lack of productivity associated with switching solutions abruptly.