The above article was published in the February 2006 edition of FEDTECH Magazine. It looks at the Bush administration's Financial Management Line of Business initiative, and provides thoughts on some of the critical challenges. The article is one in the series I write entitled "The Business of IT."

1. THE BUSINESS OF IT
Financial Management LOB:
Can It Deliver on OMB’s Promise?
By Paul Wohlleben
I
n tennis, the lob is a defensive shot used years, the universe of provider agencies
to keep a player in a point — rarely do has expanded through the creation of
players hit outright winning shots using franchise funds. These initiatives have
a lob. In today’s government, the LOB has been reasonably successful, mainly by
a much different meaning. The Line of providing services to small agencies.
Business initiatives are key components While the initial capabilities were based
of the President’s Management Agenda, on custom software, the provider agencies
focused on providing common business now often offer services running on gov-
functions from a fairly small number of ernment-certified commercial packages.
centers of excellence to a broad set of Meanwhile, a number of larger agen-
customer agencies. cies have implemented custom and com-
The objectives are twofold: reduce mercial applications to serve their
cost and improve quality and operational internal requirements. Most of these
performance. Unlike the tennis analogy, efforts rely on vendors with significant
the government’s LOB initiatives com- experience implementing financial sys-
prise an aggressive strategy to produce tems as integrators. Even so, most failed
outright winners. Let’s look at the Finan- to meet their intended goals, and many
cial Management LOB (FMLOB), and resulted in problem implementations,
examine whether it can deliver on cost overruns and few benefits. In some
this promise. cases, agencies abandoned the efforts.
So what are the lessons learned? Here
Checkered Past are the most salient:
Most efforts to develop, implement • Financial systems projects are complex
and operate financial systems in the and difficult undertakings that require
government have been problem- capable functional and project skills,
atic at best and abysmal failures strong leadership, and organizational
at worst. The requirements for will and alignment.
federal accounting and finan- • Agencies have applied flawed financial
cial management are signifi- systems modernization strategies and
cantly more complex than approaches.
those for companies. Many • Execution fell short.
agencies have their own set of
seemingly unique requirements, some New Vision
resulting from internal processes and Simply stated, the FMLOB strategy
some from external influences. calls for consolidating the government’s
PHOTOGRAPHY BY STEVE BARRETT
The government has attempted efforts financial services at a fairly small num-
similar to the FMLOB in the past. During ber of qualified agencies and companies.
the Reagan era, the Office of Manage- The providers — the centers of excel-
ment and Budget initiated cross-servicing lence or COEs — would market their
arrangements. The Agriculture Depart- capabilities, and agencies would select
ment’s National Finance Center is the from among them using a competitive
most prominent example. In subsequent selection process.

2. Financial Modernization Success Hinges on Five Factors
■ Creating a competitive environ- costs per transaction and offer better
ment. Sizable cost savings will accrue prices to customers. The ability to
from consolidating the government’s flexibly scale both the infrastructure
financial processes into fewer systems, and the resource base to serve new
OMB and the Federal CFO Council’s
but competitive alternatives are required customers is critical; it would seem pri-
Financial Systems Integration Committee
to institutionalize savings over time. The vate-sector providers are better able to
set ambitious goals for FMLOB financial
more commodity-like the alternatives meet this requirement.
systems:
become through standardization, the
• Provide timely and accurate data for ■ Gaining momentum. OMB can use
greater the resulting savings.
decision-making. the power of the budget to ensure that
• Facilitate strong internal controls. ■ Standardizing requirements. agencies consider and use the COEs
• Reduce costs by providing competitive A look back at failed modernizations for financial systems needs. Market
alternatives for agencies to acquire, will find a number where organizations forces must drive agency and provider
develop, implement and run financial intended to standardize business decisions. If the FMLOB can generate
systems through shared services. processes before implementing energy and interest and then achieve
• Standardize systems, business processes systems, but failed to. This is difficult some early success, the program will
and data elements. and challenging work, requiring be able to sustain continued growth.
• Provide for seamless data exchange significant expertise, strong change
between and among agencies by imple- ■ Executing. The FMLOB strategy
management and transformation skills.
menting a common language and struc- is based on a solid business case,
■ Scaling to meet the need. The with a market waiting to be satisfied.
ture for financial information and
economics of operating financial sys- Effectively implementing the strategy
system interfaces.
tems drives providers to seek growth, requires granular planning at both the
through which they can reduce fixed governmentwide and agency levels.
Game Plan
Recent OMB guidance lays out a three-
stage program for implementing FMLOB,
essentially prescribing critical milestones must focus on ensuring that competitive Chances for Success
for achieving the vision and goals. options for financial systems are available The number of financial systems migra-
Stage 1: Transparency and standardi- to agencies and that financial data can be tions that must take place in the rela-
zation. First, the FMLOB team must easily compared and aggregated across tively near future will be challenging for
establish a foundation for a competitive agencies. FMLOB. If each agency implemented and
environment and the seamless integra- To improve the competitive environ- ran modernized systems independently,
tion of financial data. ment, the FMLOB team created the COE the costs would be significant and the
Transparency will provide clarity to framework: a limited number of stable results would not produce seamless inte-
evaluate the performance and cost of and high-performing centers providing gration of financial data. The FMLOB
shared service alternatives and the steps alternatives to agencies investing in mod- strategy addresses these concerns. If fully
agencies undertake to migrate to a COE. ernized financial systems. The benefit of implemented, it should deliver on its
OMB identifies two specific projects: the seamless data integration will be avail- goals, most notably, reducing costs and
establishment of common performance able as an outcome of the standardization improving data exchange.
measures and the development of migra- efforts of Stage 1. The FMLOB initiative is ambitious,
tion planning guidance. The standardiza- Stage 3: The results. OMB envisions a challenging, potentially rewarding and
tion of business processes, interfaces and fully realized FMLOB where the best high-risk. Anything less than full realiza-
data will provide the basis for managing financial services are available to all agen- tion of the program’s promise can still
the cost and risks of migration and cies at the best prices. An additional deliver great benefits to the government.
ensure financial data can be shared across expected benefit is a reduction in govern- To those involved in any aspect of the ini-
systems. mentwide IT costs and risks. tiative, Godspeed and good luck. F T
To promote standardization, OMB OMB is executive sponsor for
calls for the development of standard FMLOB. The Federal Systems Integra- Paul Wohlleben is a former federal
business processes and the creation of a tion Commission is serving in an advi- CIO and a partner at Grant Thornton
common governmentwide accounting sory capacity to assist with oversight and LLP. His column examines key
code. guidance. The Financial Systems Integra- issues related to managing IT in gov-
Stage 2: Competitive environment tion Office will provide tactical imple- ernment organizations. He can be
and seamless data integration. The COEs mentation support. reached at paul.wohlleben@gt.com.
FEBRUARY 2006 FEDTECHMAGAZINE.com 7