White Paper describes good practices in managing software IT manufacturers, particularly Enterprise Resource Planning (ERP) and Government Resource Planning (GRP) vendors to ensure higher success rates, lower failures. Manufacturers are set up at arms' length in large GRP projects.

1. PFM Domain GOVERNMENT RESOURCE PLANNING
Good Practice GRP VENDOR GOVERNANCE
Applicable ALL GOVERNMENTS
FreeBalance®
Public Financial Management
Good Practices

2. FreeBalance®
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what is Information
and
Communications
Technology (ICT)
project
governance?
According to analysts, the Gartner Group, project governance involves:
 Domains – the "what" of decisions about the project / program
 Authority – the "who" responsible for making key decisions
 Structures and Processes – the "how" of decision making
According to a paper developed for the Australian government:
 Project Governance can be seen as a discipline under Corporate Governance. It
refers to the design and implementation of processes, structures and
communications that need to exist for a successful project
why is project
governance so
critical for PFM?
All ICT projects are risky. Risk factors include:
 Project cost overruns: cost more than anticipated
 Project implementation delays: takes longer than expected
 Unanticipated long-term costs: high Total Cost of Ownership (TCO)
 Lack of benefits realization: poor Return on Investment (ROI) where systems fail
to achieve cost and effectiveness objectives
 Lack of agility: inability to adapt ICT systems to meet emerging organizational
needs
 Abandonment: ICT projects are abandoned where projects are “largely wasted”
Enterprise-class and government-wide ICT projects that are strategic tend to have
more risk than simpler projects. Projects of similar scope tend to have higher risk of
failure in government than in the private sector.
how do
governments
acquire ICT systems
for Public Financial
Management
(PFM)?
Governments acquire ICT Systems to support PFM needs. These systems include:
 Commercial-Off-The-Shelf (COTS), customized COTS, specialized Government
Resource Planning (GRP) COTS that are sometimes called Financial Management
Information Systems (FMIS) and custom developed software
 Implementation, integration, training and support services
 Computing infrastructure including middleware, computer equipment and
network communications
Traditional government procurement methods employed by government include:
 Standard procurement processes including Requests for Proposals (RFPs)
 Procurement lead by Systems Integration (SI) firms
 Use of external funding sources and technical assistance
 Alternative methods such as sole sourcing and Public Private Partnerships (PPPs)
The purpose of this Good Practice document is to explore alternative GRP
procurement methods that reduce risk and improve project governance

3. FreeBalance®
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what are the
options for GRP
software
manufacturer
governance?
There is an emerging model to reduce risk by including the COTS software
manufacturer in project governance:
 COTS software manufacturer commits to enhancing products to meet
government customer demands
 COTS software manufacturer is part of the implementation steering committee
to provide technical advice and to have employees involved “on the ground”
COTS software manufacturer provides a forum to government customers to set
product roadmaps
The traditional method of project governance does not reduce most risk factors:
 Most PFM implementations are acquired through SI firms that are certified by
COTS software vendors
 COTS vendors tend to have no commitment to change software to meet specific
government needs in implementation or support
 COTS vendors tend to consider customer enhancement requests in light of the
needs from multiple public and private sector users
 SI firms typically customize COTS software to meet unique needs where this
customization needs to be maintained through multiple software releases

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what is the success
rate for GRP IT
projects in
government?
ERP failures and cost overruns in the public sector have resulted in difficulties,
contract cancelations and lawsuits:
 Africa (national level): Ghana, Malawi, Rwanda, Uganda, Zambia
 Asia (national level): Azerbaijan, Kazakhstan, Vietnam
 Australia: State government ministry
 Canada: non-profit, city
 France: federal government & sub-national, city
 Ireland: 2 projects within an important ministry
 United Kingdom: university, councils (1) (2) (3), government ministries (1) (2) (3)
and central government shared services
 United States: non-profit, school district, universities (1) (2) (3) (4) (5) (6), a
police department, cities (1) (2) (3) (4), counties (1) (2), state government (1) (2)
(3) (4), (5), (6),federal government (1) (2) (3) (4) (5) (6), defense department (1)
(2) (3) (4)

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what are the issues
that arise through
ineffective
manufacturer
governance?
Stakeholder incentives differ in GRP projects:
 Analyst Michael Krigsman has pointed out that IT customers can get caught in
the "Devil's Triangle". Krigsman suggests that cost overruns for IT
implementations come because Systems Integration firms can leverage
complexity to generate more services revenue.
 Lack of political will among politicians or public servants, the ICT provider or
those providing technical assistance
 Lack of government commitment because external funds are being used
 Technical assistance providers including those who develop
 Focus on PFM dogma around “best practices” and the “Washington consensus”
 Vendors often lack flexibility as government needs change because they focus in
the terms of the contract and see change requests as risk
Providers of ICT solutions for PFM can lack appropriate expertise:
 Consultants may have expertise in the COTS system but not in government
 Consultants may have expertise in the public sector in a different country with a
different PFM context
 Consultants and technical assistance providers change through the course of an
implementation project
 Consultants who have the appropriate expertise often do not build public service
PFM or ICT capacity
Traditional Enterprise Resource Planning (ERP) software designed for the private
sector introduces risk to government:
 ERP cost overrun and the failure to meet schedule are because ERP software
requires significant software complex code customization (BPM scripts, call-outs
& software development) to meet government requirements that extends
implementation cycles. The ratio of services to software cost in the public sector
is estimated to be three time that in the private sector or up to 15 times the cost
of software.
 High maintenance costs come from maintaining complex code through problem
troubleshooting and difficult upgrades that increases the Total Cost of
Ownership (TCO).
 ERP functionality is often complex and hard to use in the private or public sector.
46% of ERP implementers characterized that their organizations were not able to
understand how to leverage features to improve the way that they did business.

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what lessons have
been learned in
GRP failures?
 Software manufacturers are often isolated from the implementation project so
cannot contribute to success
 Many government projects rely on too many vendors including application and
middleware software providers, consultants, and equipment providers
 Systems integration and consulting can represent almost half the entire cost of
ERP in government
 According to KPMG, traditional project governance doesn’t help in government
projects
 According to ERP specialists, Panorama Consulting, many firms use “canned
methodologies” but have not taken the time or care to leverage their learning
into their own methodologies
what lessons have
been learned in
GRP projects from
the World Bank?
A recent survey by World Bank staff identified lessons learned in FMIS/GRP
implementations that includes:
 The political commitment and ownership of the borrower matter
 Success depends on adequate preparation
 FMIS priorities and sequencing should be addressed carefully
 A focus on developing internal client capacity early in the process is crucial
 FMIS implementation is complex enough to deserve a dedicated project
 The type of FMIS solution influences implementation
 The total number and complexity of procurement influences project duration
 FMIS projects disburse late due to large ICT contracts, completed at later stages
 ICT related risks need to be clearly identified during project preparation.
Many government
organizations recognize
that there are multiple
points of failure in
GRP/FMIS projects.
Government organizations
recognize that project
governance and turnkey
solutions are required to
reduce risk.

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where are the
points of failure in
GRP
implementations?
 GRP software may not meet government requirements well and can be difficult
to adapt to meet unique requirements
 Application server, transaction management, database and operating system
middleware may be poorly integrated and difficult to maintain across multiple
versions
 The server infrastructure may require significant power resources
 Management of the infrastructure including network and systems management
(performance, reliability, capacity) security (virus protection, intrusion
detection) are complex
Significant Changes in the GRP Market have occurred thanks to the Second Generation of PFM Reform
what trends are
increasing the GRP
governance
burden?
 The first generation of PFM automation covered standard financial functions
where government organizations adopted ERP and custom-developed software.
It was thought that ERP software was more effective and modern than GRP.
 Government reform has become critical as governments seek to optimize
expenditures and improve value for money. Spending reviews, support for
international standards and government transparency became important reform
topics especially in wake of the financial crisis.
 Government organizations have been challenged to use traditional IT approaches
to satisfy this second generation because ERP software must be highly
customized to meet these new requirements. ERP and custom-developed
solutions hamper reform , change and systems integration.
 Government organizations are attempting cross-cutting PFM reform programs
that require integration among multiple IT sub-systems.

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Traditional software vendor processes add to government implementation & sustainability risks
why is COTS not the
dominant model of
GRP acquisition?
 Both COTS and custom-developed methods are used to support GRP needs
 Bespoke systems often go over budget and seldom get delivered on time. They
require established skill sets in custom software development and—expertise
that is often difficult to find in less developed markets
 COTS software includes features provided to support other customers and have
commercial quality assurance processes resulting in significant “out of the box”
functionality and higher quality that should have a better value proposition than
custom developed code
 The evidence shows that government organizations that chose to acquire
Enterprise Resource Planning (ERP) COTS software from large software firms
whose software is used in multiple “vertical” markets tend to experience similar
risks to acquiring custom developed software
 The acquisition of Government Resource Planning (GRP) software designed
exclusively for governments includes the COTS benefits with the ability to meet
requirements that are often satisfied through custom-developed software

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what good practices
have been
developed for GRP
project
governance?
 Comprehensive, multiple year and holistic approaches to governance required:
o Traditional IT governance is not comprehensive enough to accommodate
needs that requires the guidance of architectural blue prints and project
portfolio road maps
o Integrated governance is the key to significant and sustainable success
o Recognition that implementation efforts may span multiple
administrations and surely will require multiyear investments initially and
potentially in the future for upgrades
o Project decision-making is critical so it is important to identify those
responsible, accountable, consulted and informed
 Capacity building, political will and adaptable change management are
connected as part of holistic governance:
o Unwavering support from sponsors required for success because
examples of failure in the public sector showed that sponsorship and
leadership were lacking
o Developing skills capacity and refining governance processes are critical
to sustainability
o The most commonly cited causes for a slipping timeline fall into four
categories: lack of adequate preparation, lack of the knowledge and
experience needed to ask the right questions, inability to foresee and
mitigate potential challenges and an inability to gauge the impact of
trade-offs along the way
o Inexperience with large IT projects was a commonly cited root cause for
problems and delays
o Change management was cited as a key factor in both project delays and
project success. While the majority of respondents (77 %) reported their
organization established a change management strategy at some point …
more than half indicated some level of failure or weakness
 The appropriate software should be selected:
o Key difference for ERP and GRP implementations is the increased level of
end-user participation to support applications that span large portions of
the enterprise
o The right software fit – Most public sector organizations grasp the value
of embracing off-the-shelf software and commit to reengineer business
processes to more closely align with the software’s functionality. When
asked about the general approach to implementing ERP, 79% of
respondents reported their organization attempted to minimize
customizing software

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what is the financial
sustainability
problem?
 Moderate to high implementation costs add 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 creates a high Total Cost of Ownership (TCO)
 Average TCO measured at over $50,000 per user in one analyst study making
this a material cost 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 with average ERP implementation variance of 2 and 4
months over schedule in one study, 230% of schedule in another study , where
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 courses required 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 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 can be calculated to determine the potential TCO for any software
acquisition
 Adaptable change management means focusing on the statement of objectives
as much or more than statement of work
 Vendors with experience in similar circumstances with global PFM knowledge
helps reduce risk of failure while providing effective advice to achieve political
will and increase capacity
 Vendors with methodologies adapted to the context of delivering PFM reform
and government systems reduces risk

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Information Week 2012 Enterprise Applications Survey found upgrading, optimizing & changing processes
to be significant barriers to success and very time consuming in ERP because of code customization
what has been the
FreeBalance
experience with
GRP success?
 FreeBalance is unique among the three leading COTS FMIS vendors to
government because of a 100% GRP focus with successful implementations in
countries with low to high human development.
 FreeBalance implementations have been described as successful under difficult
circumstances including Afghanistan, Kosovo, Sierra Leone and Timor-Leste.
This is an indication of software flexibility and fast time to results.
 FreeBalance has brought advanced GRP functionality to countries around the
world that has enabled governments to achieve better Public Expenditure and
Financial Accountability (PEFA) than more advanced countries, particularly in
“Accounting, Recording and Reporting.”
 FreeBalance has enabled the governments of Timor-Leste to leapfrog more
advanced countries for transparency and performance management, Antigua
and Barbuda to achieve PFM reform objectives despite tight budgets, Kosovo to
achieve reform and Suriname to accelerate reform through sole sourcing and
Uganda to achieve change management results.

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what has been the
FreeBalance
experience with
GRP success?
 It is very difficult to hide failure in the GRP world. Many government audits are
made public. FreeBalance tracks 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.
 There is an especially high risk in developing countries yet the FreeBalance
success rates are much higher than Tier 1 or Tier 2 ERP vendors.
 The secret to the FreeBalance success is designing software and methodology to
meet the needs of government customers and the choice of customer-centricity.
FreeBalance government customers enjoy higher success rates than those who selected ERP

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FreeBalance has brought advanced PFM features such as e-procurement, budget transparency and
performance results enabling “technology leapfrog.”
what is customer-
centricity?
 Customer-Centric companies use a holistic approach:
o Shared objectives for PFM reform with additional governance structures
like the FreeBalance International Steering Committee align vendors with
government customers
o Processes to integrate product development directly with support and
implementation enables customer-centric product development with
sustainable solutions rather than the traditional product-centric strategy
o The customer-centric company organization structure eliminate barriers
between support, services and product development groups
o Corporate marketing focuses on understanding the GRP domain to
develop unique tools to align with government needs and engage with
the PFM community at conferences
 Customer-centric companies reduce implementation risks:
o Customer-centric software manufactures play an active role in
implementations to reduce customer risk
o Implementation Services are directly aligned to product and support
o Professional services processes are adapted beyond simple Project
Management 101 and product expertise to provide holistic solutions.
o Customer-centric companies selecting partners based on government
experience, skills and commitment to sustainability

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 Customer support is a distinctive competence in customer-centric companies.
o Customer support is more than an empowered customer support
organization including escalating critical problems to company executives
and cross functional SWAT teams
o Use of customer engagement strategies like customer steering
committees rather than user groups
o Focus on training, mentoring for capacity building
o Customer sustainability performance management where the company
performance structure is aligned to customer satisfaction
what is customer-
centric product
development?
There are many implications for software and technology manufacturers that wish
to become customer intimate.
 Product complexity needs to be reduced to make implementations more
sustainable:
o It is rare to find a technical assistance related document that does not
refer to the need for capacity building in developing countries
o The retirement of the baby boom generation in more developed
countries has created a capacity gap
o Software designed for GRP needs to be intuitive and designed for PFM.
o The systems administration burden to manage change and troubleshoot
should be reduced. Methods to reduce errors and help users should be
added.
 The GRP sustainability challenges, particularly in developing countries,
necessitate different product designs:
o Connectivity is limited so large bandwidth computer applications do not
translate well to the developing nation context.
o Access to electricity is also a serious problem, so there is a focus on low
power solutions to make ICT sustainable.
o The environmental impact to generate electricity exacerbates climate
change in fragile ecosystems. Inefficient software design draws hardware
resources, power and bandwidth. This is known as software bloat that
includes squeezing more unneeded features into software
o Ability to progressively activate new features as capacity increases is
critical to support PFM reform
 Customer engagement for product enhancement is critical:
o Companies must support multiple touch points for communications such
as local hiring and multiple channel enhancement requests
o Software manufacturers must enable customers to adapt product
roadmaps and release functionality when it is convenient to customers

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how is the
FreeBalance GRP
approach different
from the traditional
model?
The i3
+qM 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. This methodology differs from traditional
software manufacturer and systems integrator processes by:
o Integration of product development, implementation and support processes
o Multiple customer and PFM feedback options including participation in
conferences to share and learn good practices
o Rigorous method of selecting implementation partners
o Use of the FreeBalance International Steering Committee, SWAT teams and
local hiring to better understand government needs
o Enabling customers to change the FreeBalance product roadmap

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what does the
i3
+qM methodology
project governance
look like?
 The i3
+qM methodology supports governance throughout planning,
implementation and sustainability
 FreeBalance executives are directly involved in the project and program
governance
 Knowledge by FreeBalance staff in similar government circumstances insures
focus on good practices, blueprints, change and communications management
 FreeBalance ensures that software is compliant to government requirements
rather than relying on software code customization
why do software
manufacturers
avoid governance?
 Very few software manufacturers are directly involved in the implementation of
GRP systems
 The hands-off approach used by COTS software vendors enables deniability
should projects go awry
 COTS vendors are often involved in too many “vertical markets” to commit to
important features needed in the public sector

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how does the i3
+qM
enable financial
sustainability?
 The project governance structure sets product development priorities to ensure
that software adapts to meet government requirements to optimize costs
 Sustainability processes are included in governance structures
what are the
advantages of
direct software
manufacturer
contracting?
 Technology infrastructures can be tuned to meet government requirements
when designed by the COTS vendor
 Development of requirements and selection of vendors can be lengthy resulting
is systems that have fallen out of date with government needs
 Winning RFP vendors become reluctant to consider change requests or charge
significant change request fees
 Consulting organizations and technical assistance providers for GRP proposals
can have personal preferences that may not suit government needs
 Long-term commitments between ensures political will for governments and
vendors and vendors with a direct relationship with governments are more likely
to invest locally
 Reform momentum can slow when the initial GRP project has been completed
while a direct relationship can maintain momentum and address important
government needs

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how are non-ICT
issues addressed
through a
customer-centric
model?
 Political will is enhanced through small wins and sequencing based on good
practices
 Capacity building is provided holistically including GRP knowledge, PFM good
practices, project management and systems management
 Performance management methods track service level agreements, capacity
improvements, international assessments
 Good practices in accounting procedures and International standards support
are enabled
 Change management responsiveness is enhanced
Direct relationships between Governments and COTS vendors can help address holistic needs
why should
governments
consider a Social
Enterprise, like
FreeBalance, as a
GRP partner?
 Social Enterprises understand the linkage between environmental and financial
sustainability where IT solutions should have a green footprint while enabling
growth and change
 FreeBalance shares similar objectives to governments in capacity building,
transparency and country growth
 Studies show that there are high failure rates with ERP implementations in the
private sector and in government while FreeBalance is a global GRP practice
leader
 FreeBalance has a much better success rate than competitors. Some of this can
be attributed to software and some to process

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how can direct GRP
software
manufacturer
governance
improve
opportunities for
success?
Conclusions
1. Traditional methods of GRP procurement often increases risks of failure
2. Shared objectives and customer-centric processes increases the chance for
implementation success and financial sustainable solutions
3. Governments can leverage all vendor capabilities to improve governance through
long-term procurement methods
4. Governments drive product functionality via customer-centric GRP vendors
5. Governments can benefit from timely implementations and agile progressive
activation through partnerships with GRP vendors
There are very few “best practices” but many “good practices” in Public Financial Management.
FreeBalance, a global provider of Government Resource Planning (GRP) software and services
shares good practices from experience with developed and developing country governments
around the world.
www.freebalance.com