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Public Financial Management Good Practices

PFMDomain GoodPractice Applicable

GRPSUSTAINABILITY&TCO IMPLEMENTATIONGOODPRACTICES DEVELOPEDCOUNTRYGOVERNMENTS

shouldgovernments considerERPorGRP?

DevelopedcountrygovernmentsareincreasinglyadoptingCommercialOffthe Shelf(COTS)softwaretoreplacelegacyandcustomdevelopedsoftware applicationsforfinancial,budget,expenditure,tax,treasuryandcivilservice management. AmajorimpetusforrecentCOTSprojectsistoreplacemultipleapplications withinagovernmentorganizationwithoneintegratedsolutionortosupport numerousgovernmentorganizationswithahostedsharedserviceorprivate governmentcloud. GovernmentorganizationscanchosetoacquireEnterpriseResourcePlanning (ERP)softwarefromlargesoftwarefirmswhosesoftwareisusedinmultiple verticalmarketsorGovernmentResourcePlanning(GRP)softwaredesigned exclusivelyforgovernments.

ReportsbytheUnitedStatesGovernmentAccountabilityOffice(GAO)andtheDepartmentofDefense (DoD)InspectorGeneral(IG)foundthat11of13ERPprojectswereoverbudgetcostingAmericantaxpayers BillionsofDollarswithoneERPprojectresultingin$1Blargelywastedandanotherprojectstoppedafter 7yearsand$1Binvestedwouldrequireanadditional$1.1Bforaboutaquarteroftheoriginalscope

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largeERPproject failuresin developedcountry governments

MajorERPProjectFailureinDevelopedCountryGovernments AlargeERPsharedservicesprojectinFrancecountrywasestimatedtobe $200Moverbudgetbytheauditofficeandmorethan1yearlateandresultedin latepaymentsofover$2.2Btodefensecontractors NationalAuditOfficeintheUnitedKingdomfoundthattheuseofERPshared servicesaddedratherthanreducedcosts

majordifficulties experiencedinERP implementationsin thepublicsectorin developed countries

ERPfailuresandcostoverrunsinthepublicsectorhaveresultedindifficulties, contractcancelationsandlawsuits,althoughlawsuitsarerarebecausevendors wouldratherdowhatittakestomakethesituationrightthanfacepotentialpublic relationsdamagefromahighprofilelegalbattle: Australia:Stategovernmentministry Canada:nonprofit,city France:city Ireland:2projectswithinanimportantministry UnitedKingdom:university,councils(1)(2)(3)andgovernmentministries(1)(2) (3) UnitedStates:nonprofit,schooldistrict,universities(1)(2)(3)(4)(5),apolice department,cities(1)(2)(3)(4),counties(1)(2),stategovernment(1)(2)(3)(4), federalgovernment(1)(2)(3)(4)(5)(6) Between20%and35%ofallERPimplementationsfail 51%ofERPimplementersjudgedtheirimplementationasunsuccessful Nearly70%oflargeprojectswerefoundtobeimprobableofachievingproject success 41%ofERPprojectsachievedallorthemajorityofbenefits 40%ofERPprojectsfailedtomeetbusinesscasewithin1yearofgoinglive AverageforERPprojectswas50%ofintendedbenefits ERPprojectssawtheimplementationof59%ofintendedfunctionality 34%ofrespondentsverysatisfiedwithERPproject Fewerthan1/3ofdecisionmakersrecommendtheirERPvendor ERPvendorsachievedaD+inreturnoninvestment 75%oforganizationsexperiencedaproductivitydipafterimplementingERP 20%ofsurveyrespondentsterminatedERPprojects

evidenceoflimited successrateswith ERP implementations acrossmultiple industries

SuccessRates

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evidenceoftypical costandschedule overrunsofERP projectsacross multipleindustries

Costs 40%ofallERPprojectswillexceedestimatesby50%ormore AverageERPcostvariancewas182%ofbudgets AverageERPcostvariancewas178%ofbudgets AverageERPimplementationcostwas40%overbudget AverageERPimplementationtakes23months,hasatotalcostofownershipof $15millionandwithanaveragenegativenetpresentvalueof$1.5million UsersofTier1ERPvendorswillexperiencehigherTotalCostofOwnership(TCO) thanusersofTier2vendors ERPupgradescostaboutthevalueoftheoriginallicensefeeand20%ofthe originalimplementationcosts Expertswarnthatorganizationsshouldexpecttopayasmuchas3timesthe originalERPsoftwarecosttoupgradetonewtechnology InterviewswithreferencecustomersofamajorERPvendorfoundthat57%did notachieveapositiveROI

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OntimeDelivery Averageimplementationtimefromthe2majorERPvendorsare17and18 monthswithaveragevarianceof2and4monthsoverschedule AveragevarianceforERPprojectswas230%ofschedule Upto80%ofERPexceedtimeandbudgetestimates 70%ofrespondentsstatedtheirERPprojecttimelinewasinadequate

whydoesERPhave Diagnosis lowsuccessratesin ERPsoftwareisdesignedfortheprivatesectoracrossmanyindustriesthatrarely government? provideagoodvalueformoneytogovernments.LargescalepublicsectorERP implementationsrequireadditionaltimeduringtheanalysisanddesignphaseto focusonthegapbetweenthecommercialprocessandtherequiredprocess 1. ERPcostoverrunandthefailuretomeetschedulearebecauseERPsoftware requiressignificantsoftwarecomplexcodecustomization(BPMscripts,callouts &softwaredevelopment)tomeetgovernmentrequirementsthatextends implementationcycles.Theratioofservicestosoftwarecostinthepublicsector isestimatedtobethreetimethatintheprivatesectororupto15timesthecost ofsoftware. 2. Highmaintenancecostscomefrommaintainingcomplexcodethroughproblem troubleshooting,anddifficultupgradesthatincreasestheTotalCostof Ownership(TCO).Forexample,theGovernmentofCanadainternalsupportfor 15differentcustomizedversionsofamajorERPpackagereceivedanawardfor savingmorethan$12Mannuallyincostavoidance.Thisishardlyadefinition ofITsuccess. 3. ERPfunctionalityisoftencomplexandhardtouseintheprivateorpublic sector.46%ofERPimplementerscharacterizedthattheirorganizationswerenot abletounderstandhowtoleveragefeaturestoimprovethewaythattheydid business. whatisagood practiceapproach toCOTSbackoffice implementationin government? Conclusions 1. GRPsoftwareisdesignedforthegovernment.Itispossibletocreatesoftwarefor asingleverticalmarketthatdoesnotrequirecodecustomizationtosupport needsinmostcountriesacrossalllevelsofgovernment. 2. GovernmentscanconfigureGRPsoftwaretomeetuniquerequirementsthereby reducinglifecyclecostsandmorelikelymeetingimplementationschedulesand optimizingbenefits. 3. Softwaredesignedforgovernmenttendstobemoreintuitiveandeasiertolearn forPFMneeds.

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ThereareveryfewbestpracticesbutmanygoodpracticesinPublicFinancialManagement. FreeBalance,aglobalproviderofGovernmentResourcePlanning(GRP)softwareandservices sharesgoodpracticesfromexperiencewithdevelopedanddevelopingcountrygovernments aroundtheworld.

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