Ifmis-of-tomorrow-

New Technologies for Public Financial Management May 2007 ICGFM

Preface
Slides have been updated with the script used for ICGFM (see notes pages)
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government Integrated Financial Information Management Systems (IFMIS) of tomorrow How computer technology trends today are defining

Agenda
Market and technology forces affecting Public Financial Management (PFM)
Technology and PFM reform
10 key technology and market trends
Conclusions

ICT makes a country’s economy more efficient and globally competitive, improves health and education services, and creates new sources of income and employment for poor people. World Bank, April 2006

IFMIS in Government Today
Typical Solutions
Custom-developed or bespoke
Enterprise Resource Planning (ERP)
Specialized government IFMIS applications
Typical Difficulties
Inflexibility to adapt to reform and decentralization
Sustainability by government ICT staff
Integration between budget execution and accounting
Integration between front-office and back-office

Technology in Context Technology IFMIS Public Financial Management Modernization and Reform Government Objectives

Technology Vendor Viewpoint IFMIS Public Financial Management Modernization and Reform Government Objectives Technology

Reality
Reform comes first
An IFMIS must support on-going PFM modernization
Technology enables the IFMIS
Technology is not government modernization

Government IFMIS of tomorrow… The four computer and market technology forces of today that are defining

1. Consolidation

2. Disintegration

3. Innovation

4. Integration

10 Technology Trends
Consolidation
Enterprise software consolidation
Open source software
Commoditization of the software stack
Disintegration
Decentralization
Business process management
Software as a service (SaaS) and shared services
Innovation
The web as a platform - Web 2.0
Wireless government
Integration
Corporate Performance Management (& Government Performance Management)
Service Oriented Architectures (SOA)

with government and development trends Not all technology and market trends are consistent

ERP systems have become bloated ‘ understructures’ that have become too expensive to maintain. Bruce Richardson, AMR Research August 2006 1. Market consolidation

What is Enterprise Software?
Many acronyms:
ERP (Enterprise Resource Planning)
SCM (Supply Chain Management)
CRM (Customer Relationship Management)
CM (Content Management)
CPM (Corporate Performance Management)
BPM (Business Process Management)
and many others

Enterprise Software Market ERP CRM SCM BPM CPM CM

Siebel Retek PeopleSoft JDEdwards Vantive Triversity SSAGlobal Baan Marcam E-piphany Ironside Mapics Lilly Geac JDA Extensity Comshare Datastream FRX GreatPlains Navision Damgaard Axapta Soloman Scala Intentia Ross Pivotal Accpac Best Mas 90/200 Peachtree Timerline Microsoft SAP Infor Oracle Sage Lawson Epicor Chinadotcom Siebel Retek PeopleSoft JDEdwards Vantive Triversity SSAGlobal Baan Marcam E-piphany Ironside Mapics Lilly Geac JDA Extensity Comshare Datastream FRX GreatPlains Navision Damgaard Axapta Soloman Scala Intentia Ross Pivotal Accpac Best Mas 90/200 Peachtree Timerline

Drivers for Consolidation
Lack of organic growth
Shareholders want companies to invest in more growth
Perception that big = winning
Maintenance business model
Buy customers
Own customers: barriers to entry
Lack of value for upgrading

Current Situation
Survival of the fittest?
Pressure to enter new horizontal and vertical markets
New stack wars
SME market
Emerging markets
Overlapping technology portfolio
Consolidators attempting economies of scale
Customer satisfaction?

The growth of free, open-source software presents developing countries with an opportunity to escape from technological dependence on developed countries, but also a challenge to build up local expertise… Dr. Mike Reed, UNU International Institute for Software Technology March 2006 2. Open Source Software

Open Source in Government Federal Government - DOD, NSA, NASA, NIST, FEMA, USAID, DOL, National Weather Service, FAA State Government - California, Oregon, Massachusetts, Hawaii, Delaware, Texas, Rhode Island, Utah Municipal Government - City of Austin, Dallam County Texas North America (USA) Brazil, Peru, Argentina, Columbia, Mexico, Venezuela Latin America European Union (EU) - Belgium, Bulgaria, Denmark, Estonia, France, Germany, Portugal, Spain, UK Non-EU countries - Ukraine Cities - City of Munich Europe Japan, China, Korea, Singapore, Thailand, Taiwan, India, Israel Australia - Department of Veterans Affairs, Bureau of Meteorology, Taxation Office, Department of Health and Centrelink, South Australia Government, Australian Capital Territory, NSW Department of Agriculture, Northern Territory Department of Education Asia and the Pacific South Africa Africa

Drivers for Open Source
Software commoditization - lack of incremental benefits in commercial infrastructure software
Government self-reliance – reduce national technological dependence
Cost and choice - cost for license compliance
Future proofing

Current Situation
Rapid uptake in emerging countries
Proven performance and reliability
Infrastructure middleware success
Java EE, Apache, MySQL, Linux, JBoss, Tomcat, OpenOffice
Some assembly required
Usability issues
Market volatility
Not established in business applications

Middleware – the layer of software used to connect two applications or to connect an application to the network – is approaching a commodity state. Patrick Carey and Bernard Gleason, Vision 2010 – Future of Business Software Applications August 2005 3. Commoditization of the software stack

Software Stack Business Applications Middleware Database Operating System Server Network Storage Management

Drivers for Commoditization
Standards =
Ability to interchange middleware
Lower cost from vendors
Market maturation
more and more functionality in middleware driving costs down
Application vendors want to be middleware neutral
Customers do not want to be locked-in

Current Situation
Accelerated Commoditization
Price pressure on middleware
Middleware standards are being set by governments (USA: F.E.A.)
Many governments developed open source middleware policies
On the Internet, no one knows what middleware you are running

including political devolution, de-concentration, delegation, and transfer to non-governmental organizations, promotes democracy and good governance by providing an institutional framework to bring decision-making closer to the people Shabir Cheema United Nations Global Forum for Reinventing Government November 2006 4. De-centralization,

Devolution Delegation De-concentration Divestment

Budgets Municipal Gov’t Municipal Gov’t Municipal Gov’t Provincial Gov’t National Government Ministry 1 Virements Information Virements Information Virements Information

Reporting National Government Provincial Gov’t Ministry 1 Municipal Gov’t Municipal Gov’t Municipal Gov’t Outturn Expenditure Information Outturn Expenditure Information Outturn Expenditure Information

Drivers for De-centralization
Administrative Decentralization
Improve government efficiency and effectiveness = improve outcomes
Large % of government budgets deployed locally
Local and cultural autonomy
Fiscal Decentralization
Improves participation = more stable countries
Reduce waste and corruption

Current Situation
Conflicts with computing trend to integration (centralization)
Clear trend: devolution on every continent
Local capacity and sustainability issues
Difficulties in extending governance with existing solutions

Success with BPM also requires a culture of real-time management .. and may need a separate process center of excellence. Gartner Group February 2006 5. Business Process Management

What is Business Process Management (BPM)? Workflow Integration Design and Development Business Activity Monitoring Orchestration

Industry Drivers for BPM
Maximizing efficiency - workflow and integration enables greater automation
Difficulties in adapting ERP after customization
Best practices from the private sector?
Horizontal companies hope BPM will reduce customization costs

Current Situation of BPM
Established in compliance solutions
Leveraged in process e-government
Not established in government IFMIS
Well established standards
Performance/functionality compromise
No market leading vendor

SaaS benefits are crystallizing, but chaos still abounds Robert Bois, Aberdeen Group June 2006 6. Software as a Service (SaaS)

What is Software as a Service (SaaS)?
Applications are hosted externally: e.g. Salesforce
Typically priced on a subscription basis
Typically provides minimal customization
Business model for SOHO, small to large organizations
Evolution of ASP (Application Server Provider), but typically serving a purpose-built application

Drivers for SaaS
High cost to maintain complex software and infrastructure
Licenses
Upgrades
Networks
Databases
SaaS supports fast growth
Attractive for smaller organizations

Current Situation
Increasing as a % of the market (from 0 to..)
Uneven adoption : high in customer relationship management
Rarely used in government back-office applications – why?
Similar technology used for shared services , yet…
E-Procurement ideal application
Emergence of appliances

No matter how you brand the hype, get ready for a quantum leap in the way the Web works and — more importantly — how it works for you and your business. Wayne Gomes, Rich Internet Group November 2005 7. The Web as a Platform - Web 2.0

What is Web 2.0?
An umbrella term for second wave of internet innovation
Web as platform + diversity of platforms
Mash-ups + syndication
Social software + community
Open source + rapid development
Rich web interfaces
Distributed documentation & data
Companies : SixApart, Flickr, Pandora, Pageflakes, FaceBook, YouTube
Underlying technologies : blogs, wikis, AJAX, RSS, REST, SOAP, VOIP, podcasting, Skype, BitTorrent, Wikipedia

Web 2.0 is the network as platform, spanning all connected devices… creating network effects through an "architecture of participation," and going beyond the page metaphor of Web 1.0 to deliver rich user experiences.” Tim O’Reilly, O’Reilly Media

Drivers for Web 2.0
The Web as a Platform – using the internet as an API for new applications
Radical decentralization – distributed data, reused, remixed, (re)-aggregated, and (re)-syndicated
Self-service and participation
Infrastructure is available
The Network Effect
The Long Tail

Web 2.0 in Government
Norway has the first Web 2.0 Government – eNorway 2009 initiative
US Government Ready for Web 2.0
Blogs – the govsphere is growing fast
RSS feeds – proliferating rapidly among US government agencies
Wikis – adopted by UK, US government for collaborative “telework”

Current Situation
Consumer market driving business applications
Corporations adopting blogging technology (Microsoft Channel 9)
Superior collaborative capabilities
Upset commercial vendor status-quo
Security concerns in government

New wireless technology is resulting in innovative business models and holds the promise of connecting poor users, extending competition to all market segments, and accelerating development of broadband infrastructure and access. World Bank April 2006 8. Wireless Government

What is Wireless Government?
Light e-government using mobile telephone technology
Mobile telephone as kiosk
Citizens and Businesses
Finding government services
Notifications and alerts
Civil Service
Requisitions and receiving
Approvals
Time & Attendance

Drivers for Wireless Government
Proven voice and text technologies
Mobile telephone is the tool of choice for small transactions
Growth in emerging countries
Overcoming the digital divide
Citizen and civil servant usable and inexpensive

Current Situation
Early adoption in government
Exposing IFMIS capabilities via wireless devices is difficult
Remains differences among devices
Most e-government needs computers and the Internet
Practical work on life events

Agencies are addressing goals of decreasing administrative burdens, lowering costs, enabling better informed decision making, and ensuring tmeliness in responding to sector needs. Aberdeen Group March 2004 9. Corporate Performance and Government Performance Management

What is Corporate Performance Management? Scorecarding Reporting OLAP Data Mining Budget Planning

Drivers for Corporate Performance Management
Too much information
Business Intelligence tools such as reporting are not prescriptive
Not all indicators are relevant
Financial information is after the fact – you cannot change the past
Many non-integrated Business Intelligence (BI) tools

Corporate Performance Objectives
“ Key Performance Indicators” (KPIs) and “scorecards” are simple to understand
KPIs measure in progress
Aggregates measurements from many sources
Utilizes capabilities of many tools
Provides clarity for what is important

Government Performance Management
Business
“ Bottom Line” is clear: profitability
Measured on quarterly profitability
“ Bottom Line” is financial
Budget is a guideline
Simple financial measurements: revenue, expenditures, cost centres…
Government
Government mandates require many objectives
Measured on long-term outcomes
“ Bottom Line” is outcomes
Budget is the law
Difficult financial measurements: objectives, funds, projects…

Performance and Budget Budget Execution Budget Planning Government Objectives Scenario Planning Budget Forecasting Performance Monitoring Budget Review

Inputs, Outputs, Outcomes
Objective
Government development goal
Input
The money in the budget
Output
The money spent
The items purchased
Outcomes
Results for the national interest
To improve education and literacy rates in remote regions
$M earmarked for this purpose
$M spent in 5 regions
2 schools built, 40 additional teachers hired, 250 computers and 1,500 books purchased…
Year 1: literacy tests increased by 2%. Year 2: by 5%. Year 3: by 10%

Current Situation
Mixed
Capacity issues
Improvements in MTEF
Remains output focused
Better results in projects yet…
Commercial performance management software not budget centric

SOA will make today’s ERP systems look like yesterday’s mainframe apps. Bruce Richardson, AMR Research August 2006 10. Service-Oriented Architecture (SOA)

SOA Drivers
Promise of re-use : write once, use many times
Component-based architectures – promise of assembling applications from parts
Mix programming language, operating system and middleware
Pick best-of-breed applications

Web Services register discover bind

Current Situation
Proven practical in Web 2.0
Business software:
Early & emerging
Rapid momentum
Revolutionizing enterprise software
Therefore…
Technical issues being solved

Conclusions

Impact on the IFMIS of Tomorrow
Immediate Impact :
Consolidation – Business Process Management – Software as a Service
Long-Term Trend :
Performance Management
Major Change to IFMIS :
De-centralization – Open Source – Commoditization of Software Stack – Service Oriented Architectures
Innovation Opportunities :
Web 2.0 – Wireless Government

Modular

and Modular

modular, de-centralized & integrated non-monolithic & multiple vendors wired & wireless commodity & innovative The Government IFMIS of tomorrow will be:

extend core IFMIS decentralize measure

Citizen Centric citizen

more choices, better choices, proven choices, sustainable choices. Governments will have:

dhadden@freebalance.com

Conceptual Analysis
Best tools and authors to analyze complex trends in high technology:
Geoffrey Moore on technology adoption
Clay Christensen on innovation
Marshall McLuhan on medium (enhancement, reversal, retrieval, obsolesce)
Gartner Group on technology hype cycle

Recommended Links
The Future of Software: http://www.forrester.com/Teleconference/Previous/Overview/1,5158,1411,00.html
The Future of Government Communications Networks: http://www.dts.ca.gov/news_events/ppt/Gartner_JoeSkorupa.ppt
Innovation Does Matter: http://fr.sun.com/sunnews/events/2006/may/symposium/pdf/paeinier_forrester.pdf
Vision 2010: http://www-03.ibm.com/industries/education/doc/content/bin/IBM_BCS_White_Paper_Vision_2010_Business_Applications.pdf
Information and communications for development 2006 : global trends and policies: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2006/04/20/000012009_20060420105118/Rendered/PDF/359240PAPER0In101OFFICIAL0USE0ONLY1.pdf
Web 2.0 in Business: http://www.mckinseyquarterly.com/article_abstract.aspx?ar=1913&l2=13&l3=11&srid=9&gp=1

Recommended Links
Ten Trends to Watch in 2006: http:// www.mckinseyquarterly.com/article_page.aspx?ar =1734&L2=21&L3=114&srid=190&gp=0
ERP Graveyard: http://www.erpgraveyard.com/
Is it time for Wikigov: http://www.gcn.com/online/vol1_no1/43410-1.html
ERP Consolidation May be Threatening Innovation: http://searchcio.techtarget.com/originalContent/0,289142,sid19_gci1230304,00.html?track=NL-453&ad=580643&asrc=EM_NLT_1199477&uid=2151015
Does ERP Matter: http://www.infoworld.com/archives/emailPrint.jsp?R=printThis&A=/article/07/04/09/HNerpmatter_1.html
The Building Blocks of a Simpler Future are in Place http://www.accenture.com/Global/Services/By_Subject/Service_oriented_Architecture/R_and_I/BuildingBlocksPlace.htm

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