Sustainable Public Financial Management

Doug Hadden, VP Product

Last year we posted a blog entry describing the improvement in customer support metrics achieved called: So, how’s that “customer centric” stuff working out for you? The number of open support “cases” is an indication of customer support. Less reported defects and less open enhancement requests generally means a better response to customer requirements. More so if the number of open cases drops in the Autumn when there tends to be more usage of the software.

We had achieved “green” status on our dashboard of having less than 200 open cases for about 6 months with the exception of one week. As an executive at FreeBalance, I receive a Monday morning dashboard about customer support.

It’s the only dashboard that I see on a weekly basis because we’re a customer-centric company.

Here’s what greeted me this Monday. That’s right, from almost 600 cases in early 2008 to less than 100. As you can see, less than half are “product issues”. And, many product issues turn out to have other explanations. Nevertheless, this is a remarkable achievement from our service and sustainability team to rally support around customer issues.

Doug Hadden, VP Products

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.

Doug Hadden, VP Products

Does Enterprise Resource Planning (ERP) software have economies of scale that results in lower total costs to government? I suggested in a previous posts why ERP vendors do not have economies of scale. Is this true or just “truthiness”?

The move to shared services for financial, budget and civil service management in government has had mixed results. Does FreeBalance or top tier ERP have a lower TCO? Which solutions have better value?

International Market Results

FreeBalance competes internationally. Most international governments release tenders for turnkey solutions with a 5 year total cost of ownership. These are fixed prices that includes most of what would be considered in a TCO calculation:

• Software licenses
• Implementation and training costs
• Support costs
• Equipment (usually all computers and networking, but not always)

These systems are typically “whole of government” – what we call “shared services” in other countries. Many countries release the prices when bids are opened. I have tracked these prices since 2006. The chart below compares the price for bids that included the 2 top tier ERP manufacturers compared to FreeBalance.

Analysis

• The average top tier ERP TCO is 191.97% of the FreeBalance price.
• There have only been 3 times in which the bid price from a top tier ERP bid was less than FreeBalance. One of those did not include the 5 year calculation.
• FreeBalance has consistently been evaluated as having a higher value based on different formulas used by governments

Lessons for Shared Services

• Software prices represent a minimal cost relative to implementation and service
• ERP software often requires more hardware to operate
• Complex software is more expensive to maintain and adapt
• Not included in the TCO calculation is upgrading – this is where our customers see a significant difference because of our ability to progressively activate
• Shared services governance must include vendors who should commit to features and improvements, otherwise governments are required to customize – effectively becoming software development organizations

FreeBalance is hiring in Ottawa, Canada as the company is growing in the exciting Government Resource Planning (GRP) market. We’re looking for strategic thinkers and overachievers who absorb customer problems and articulate thoughtful creative solutions. Apply your skills on the world stage and do well by doing good.

The following positions were posted today (23 Sept 2011):

• Corporate Accountant
• Application Software Specialist

And we continue to invite you to submit a cover letter and resume for the following positions:

• Pre-Sales Consultant
• Corporate Project Accountant
• Channel Account Manager

For more information, visit the Ottawa, Canada job page on the FreeBalance website.

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.

Make a difference in this world and join FreeBalance!

FreeBalance is hiring in Johannesburg as the company is growing in the exciting Government Resource Planning (GRP) market. We’re looking for strategic thinkers and overachievers who absorb customer problems and articulate thoughtful creative solutions. Apply your skills on the world stage and do well by doing good.

The following positions are available:

• Business Analyst
• Solution Analyst
• Software Developer
• Software Analyst
• Quality Assurance Specialist
• Project Manager

For more information, visit the South Africa job page on the FreeBalance website.

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.

Make a difference in this world and join FreeBalance!

Foro para explorar la transformación del Estado habilitada por la tecnología

Ottawa, Canadá (21 de Septiembre 2011) – FreeBalance, una Empresa Privada Social (EPS) fabricante de software que ayuda a los gobiernos globales a aprovechar la Planificación de Recursos Gubernamentales para acelerar el crecimiento del estado, se complace en anunciar su participación en el Foro Regional de Líderes de Gobierno. Este evento se llevará a cabo en el Hotel Panamericano de Buenos Aires, Argentina, el 21 de Septiembre 2011.

El intercambio de conocimiento es el objetivo clave para el segundo año de Foro Regional de Líderes de Gobierno. Profesionales de la tecnología de la información, de las finanzas públicas, y líderes gubernamentales explorarán como el Estado es transformado y modernizado por la tecnología. Tópicos de las sesiones incluyen: El Modelo Social para la Era Digital en Latino América;  Sociedad de Conocimiento, Inclusión de la Ciudadanía, Políticas Públicas e Infraestructura; y la Gestión del Caso: La Inclusión Digital de los Ciudadanos de la Ciudad de Buenos Aires. El discurso principal será dado por Alberto Eduardo Thill, Subsecretario de Gestión Tecnológica para el Secretariado del Gabinete de Ministros, Argentina.

“La tecnología, como los datos abiertos, permite a los gobiernos mejorar rápidamente su gobernabilidad por medio de la transparencia,” dice Manuel Pietra, Presidente y Gerente de FreeBalance. “FreeBalance se complace en tener la oportunidad de participar en el Foro Regional de Líderes de Gobierno para compartir nuestra experiencia en la transformación de los gobiernos mediante la automatización del ciclo presupuestario y proporcionar métodos para la inclusión digital.”

El FreeBalance Accountability Suite Version 7 es una plataforma completamente basada en la web que ha sido optimizada para un despliegue rápido del gobierno y efectividad operacional. El software FreeBalance ha sido diseñado para los requerimientos de gobiernos Latino Americanos. FreeBalance ofrece opciones de despliegue flexibles y una arquitectura orientada a servicios para facilitar la integración con los sistemas de información del gobierno. La solución de Planificación de Recursos Gubernamentales FreeBalance cubre el ciclo presupuestario entero incluyendo la transparencia financiera y de recursos humanos para mejorar la gobernabilidad y confianza. 

Soluciones de FreeBalance están activas en 19 países gestionando más de un cuarto de trillón de dólares americanos en los presupuestos anuales en todo el mundo. Más de 70.000 usuarios en todo el mundo utilizan software FreeBalance para gestionar una plantilla global de la administración pública de 1.500.000.

Acerca de FreeBalance
FreeBalance ayuda a los gobiernos alrededor del mundo a aprovechar la robusta tecnología del software para laPlanificación de Recursos Gubernamentales (GRP) para acelerar el crecimiento del país. Las soluciones de software de FreeBalance para la gestión de las finanzas públicas y de recursos humanos apoyan la reforma y modernización para mejorar la gobernabilidad, la transparencia y la responsabilidad. Una buena gobernabilidad es requerida par mejorar los resultados del desarrollo. Para más información, visite www.freebalance.com.

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Forum to explore technology-enabled State transformation  

Ottawa, Canada (21 September 2011) – FreeBalance, 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, is pleased to announce attendance at the Regional Forum of Leaders of Government. This event will be held at the Buenos Aires Panamericano Hotel & Resort, Argentina, 21 September 2011.

Knowledge sharing is the key objective for the second annual Regional Forum of Government Leaders. Information technology professionals, public finance practitioners, and government leaders will explore how the State is transformed and modernized through technology. Session topics at the forum include: Social Model for the Digital Age in Latin America; Knowledge Society, Citizen Inclusion, Public Policy and Infrastructure; and Case Management: The Digital Inclusion of Citizens of the City of Buenos Aires. The keynote address will be delivered by Alberto Eduardo Thill, Undersecretary of Technology Management for the Secretariat of Cabinet Ministers, Argentina.

“Technology like open data is enabling governments to rapidly improve governance through transparency,” said Manuel Pietra, President & CEO at FreeBalance. “FreeBalance is pleased to have the opportunity to participate at the Regional Forum of Government Leaders to share our experience in transforming governments by automating the entire budget cycle and providing methods for digital inclusion.”

FreeBalance Accountability Suite Version 7 is a modern pure web-based platform that has been optimized for rapid government deployment, operational effectiveness. The FreeBalance software has been designed for the requirements of Latin American governments. FreeBalance offers flexible deployment options, service oriented architecture facilitating integration with government information systems. The FreeBalance Government Resource Planning solution covers the entire budget cycle including financial and human resources transparency to improve governance and trust. 

FreeBalance solutions are active in 19 countries managing more than a quarter trillion ($US) in annual budgets worldwide. More than 70,000 users around the world use FreeBalance software to manage a global civil service workforce of 1,500,000.

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. For more information, visit www.freebalance.com.

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1st Aid Blog Forum: Corporate Social Responsibility

Doug Hadden, VP Products

“Corporate Social Responsibility is here to stay. It’s part of the global humanitarian context, for better and/or for worse. As humanitarian relief and development professionals we have to deal with CSR.”

The Talesfromthehood humanitarian aid blog (@talesfromthhood)

Is CSR a fad?

These are early days for corporate social responsibility. Some businesses are seeking new ways of philanthropy. And some are leveraging CSR as marketing. Cynics either view CSR as an unneeded cost for shareholders or as another way business pulls the wool over our eyes.

Fake CSR and philanthropy are first phases of the maturing of corporate social responsibility.

Holistic CSR: CSR as Important Outcome

Businesses will move from “feel-good” philanthropy to where CSR will be an important business outcome. The bad news for humanitarian aid professionals: businesses will demand output and outcome reporting. Things that can be scorecarded, charted and presented in the annual report. Data that can show improvements on a quarter by quarter basis. This isn’t going to be pretty because humanitarian work does not easily operated on a quarterly basis. Outcomes are especially hard to measure in humanitarian aid as it is with any social impact.

The good news is that businesses will begin to see CSR in a more holistic manner. Businesses as an actor in society. My sense is that business will see humanitarian aid as one pillar to a more holistic view that includes:

• Leveraging business innovation to develop products and services designed to enable humanitarian aid, give early warning or help eliminate conditions that generate crisis
• Global supply chain concerns that will move beyond fair trade to supporting innovation in developing countries that improve the cultural understanding by businesses
• Networking with like-minded organizations where businesses will leverage core competencies

CSR as Business Model

The CSR discussion is somewhat dominated by large businesses. This phenomenon can hide the impact of a fundamentally new model – the social enterprise. For profit social enterprises are less risk adverse than traditional non profits. And, these businesses are driven to innovate in order to compete globally. Profit acts as validation as one pillar of triple bottom line reporting.

FreeBalance is a social enterprise bringing good governance to governments around the world. CSR is our business model. And, we have traditional CSR activities as well – primarily the support of SOS Children’s Villages and World Read Aloud Day in the countries where we do business. We also hire locally to build capacity in public financial management.

So, FreeBalance is not specifically in the humanitarian aid business. Public financial management assists in country development. Good government fiscal management can help governments to mitigate social issues and respond more effectively to disasters.

Our lessons for those businesses looking to assist humanitarian aid is:

• Lead from the top, listen to the bottom. Senior management must set the stage for social responsibility and then get out of the way and listen to employees.
• Consider aid organizations and aid recipients as customers. Leverage business techniques for customer innovation and customer support that have helped your organization to succeed.
• Build the multicultural footprint of your company. People from different cultures and backgrounds will help build your business globally and provide you with better perspective on how you can truly help.
• If you are a traditional business, consider building an innovation centre to re-purpose your products and services for humanitarian aid.
• Use social media – it’s the best learning tool.

Doug Hadden, VP Products

Companies that achieve “economies of scale” have a competitive advantage: ability to offer lower costs. The consolidation of the Enterprise Resource Planning (ERP) market gives the remaining vendors this advantage.

Or does it?

ERP companies have not achieved economies of scale.

What’s the proof point?

The burden on customers to customize ERP software to meet requirements.

Vertical and Horizontal Solutions

ERP companies provide solutions in multiple vertical markets (or industries) and horizontal markets (business functions). This can be shown in a diagram.

The larger ERP vendors provide solutions in almost all of these markets. It’s true that it’s easier to build a product for a particular market when one has a product in an adjacent market. This provides extensibility – the ability to extend into other markets at a reduced cost because much of the work has already been accomplished.

Yet, economies of scale have not been effectively achieved by these ERP companies. Why?

1. Product portfolio size is so much larger that 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.
2. Legacy software languages are used rather than modern object-oriented languages. This reduces the ability to re-use functionality. “Re-factoring” is often necessary.
3. Acquisitions by large vendors 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.
4. Size of code base and databases increases because of product portfolio making it more difficult to manage.
5. Infrastructure support for operating systems and databases adds complexity because of the need to port legacy technology and integrate with new platform.

Middleware

ERP companies also develop proprietary middleware. This can also be shown in a diagram.

Middleware technology is needed to deploy enterprise-class applications. ERP vendors have built or acquired middleware technology often providing a complete proprietary “software stack”.

Yet, economies of scale have not been fully achieved by this approach. Why?

1. Open source technology has replaced most of the software stack. The perceived value of proprietary stacks has waned. ERP companies are faced with upgrading and maintaining software in the wake of open source advancements. Open source has much better economies of scale.
2. Legacy software increases the burden for supporting open technology standards. And, scalability becomes difficult as ERP vendors attempt to find ways of scaling legacy technology.
3. Multiple markets makes it impossible to design middleware optimized for every customer context. Hence, the resulting ERP software tends to be bloated because it has to adapt to every context.

FreeBalance Approach

FreeBalance has achieved some interesting economies of scale. Primarily by taking the “route less traveled.”

The laser focus on government, in what many observers call “Government Resource Planning” (GRP) reduces portfolio burden on FreeBalance.

Some economies achieved include:

1. Configuration rather than customization approach makes the software easier to implement, adapt, upgrade and progressively activate.
2. Budget-aware applications are tightly integrated for the government context. Human resources, grants management, procurement, asset management etc. applications respect budget controls and commitments.
3. Government metadata like the chart of accounts is shared across the portfolio.
4. Hands-on approach to implementation means that FreeBalance builds products based on direct government customer experience including using implementers in product design. This eliminates confusion in product design and achieves clarity.

The FreeBalance middleware approach is also different.

This middleware approach achieves economies of scale by:

1. Modern software language, Java Enterprise Edition, is the only language used. Java EE is an object-oriented language. FreeBalance develops software based on a Public Financial Management Component Map whereby extensibility is planned in advance.
2. Government Entities or reusable business objects have been designed. These objects are easily extended and reused across the portfolio. (And, also available for 3rd parties building government-specific applications.)
3. Open source middleware that is proven in enterprise-class implementations is used. Of course, some assembly is required – but not to the extent of building this from scratch.
4. Government design in the platform has been achieved by choosing effective middleware and adapting that middleware for the government context. This builds from the “non-functional” requirements that enables deploying software with an optimal footprint and complies with Green IT concerns.

Best Practices

FreeBalance has learned from best practices in software design. (Our processes are ISO-9001/2008 certified). Software developers who begin working with FreeBalance are pleased about the elegance of the platform design – what we call the FreeBalance Accountability Platform. Especially relative to the leading Integrated Development Environments (IDE) used by very large enterprise software vendors.

Doug Hadden, VP Products

As described in a post yesterday, I’ve been working on a paper for the Association of Budgeting and Financial Management (ABFM) conference in October. I’ll be on a panel discussion on October 15th on Online Expenditure & Performance Reporting.

The premise of the paper is that government budget management is modernizing to “Budget 2.0″ that leverages Web 2.0 technology and social media. The roadmap to Budget 2.0 includes:

• Budget Preparation including the process for creating and approving budgets
• Oversight including internal government and external stakeholders
• Citizen Engagement includes methods of communicating to external stakeholders
• Transparency Mechanisms leveraged by governments
• Budget Comprehensiveness including all government tiers, parastatal organizations and coverage of all revenue and expenditures
• Accounting Methods from cash through accrual accounting
• International Standards Support for public sector and transparency standards
• Policy Formulation including the process of building policy and aligning policy to budgets
• Budget execution including how execution is controlled to meet budget objectives
• Government Communications Medium from published documents through to open data
• Timeliness on information provided to parliaments and citizens

The following shows the work in progress.

Budget 2.0 Roadmap Interaction

Budget Preparation Modernization

Towards participatory budgeting

Oversight and Engagement Modernization

Towards citizen oversight

Transparency Mechanisms Modernization

Towards open data

Budget Comprehensiveness Modernization

Towards treating whole of government as an enterprise

Budget Execution and Accounting Method Modernization

Towards true value of government and government performance

International Public Sector and Technical Standards

Towards true financial comparison between governments

Timeliness

Towards timely data to enable timely decisions

Policy Management

Towards participatory policy