Trends of Public Sector ERP: The Best Approach for Government
By Charlie Johnson, Vice-President Consulting Services, AMS Advantage ERP Program

As governments work to transform their environments from an internal resource optimization to a process integration and external collaboration focus, ERP stands at the forefront of solutions that will achieve this goal. ERP is proven to significantly increase efficiency, improve information access, reduce total cost of ownership, and help government achieve the highest levels of accountability and constituent service.

Yet implementing ERP in a manner that achieves its promises is no easy task. Public sector organizations often rationalize their ERP modernization initiatives within the context of budgetary constraints and are faced with multiple ERP providers that, on the surface, are difficult to discern. In addition, adjudicating between competing ERP solutions on their functional merit is not only difficult because of the complexity of ERP systems, but it is further complicated by the intricacy of the government acquisition process. Therefore, it is particularly important that the business value be sold at the executive and political levels of government and, to be successful, that government embeds the ERP solution within its culture and processes. What's more, the level of detailed analysis required to map functional requirements to ERP solutions is an arduous task that, even if done thoroughly, hasn't always delivered a successful implementation.

In this article, CGI works to address these issues by examining the evolution and shortcomings of ERP solutions; by defining the features and functionality needed to address government transformation; and by recommending the steps to take to position for success.

Evolution of ERP in Government
In public sector markets, federal, state, and local ERP systems evolved due to advancements in the commercial sector in the 1980s. Specifically, independent financial systems were augmented to include those functions required to manage the "business of government," where constituents replaced the consumer in the value chain and accounting and budgeting were required to account for tax revenue expenditures.

During this evolutionary period, many ERP vendors specialized in industry-specific ERP offerings. This was not based on a well-planned and executed vertical strategy, but based more on short-term business dynamics and heritage. In short, if a vendor sold a financial application to three or more pharmaceutical businesses, they would then advertise a pharmaceutical business focus. This ERP supplier would expand their offerings to include pharmaceutical-specific modules, such as inventory control and MRP. Over time, the supplier had a solid offering for the pharmaceutical sector and would then branch out to somewhat related sectors like oil and gas, chemicals and biotechnology. Again, this was not founded on a well-planned and executed market strategy, but was more of a marketing campaign.

Organizations outside of an ERP vendor's target vertical typically paid a premium to have ERP software customized to handle their unique requirements. This holds true today, when organizations acquire ERP applications that are not specifically designed for their vertical.

As ERP vendors evolved within specific vertical markets, over time, they began to compete with one another as they expanded their sales strategies toward industries outside of their core competencies. As market saturation in the commercial sector truncated ERP vendor growth strategies, larger ERP vendors began pursuing public sector opportunities to increase market share and revenues.

What Does Government Need from an ERP Vendor Today?
The scope of functionality required by government is more than any single vendor can provide, given the requirement for both government specificity and the enablement of all processes. The deployment decision does not boil down to a simple choice between purely single-vendor vs. best-of-breed approaches. Instead, the decision concerns the degree of single-vendor-centricity that is appropriate for the organization. Efforts will rely on a robust, integrated, organization-centric suite of applications that are based on open architectures and capable of real-time information exchange. In essence, government will need to leverage the following core features of ERP solutions to enable them to achieve their mission:

• Deeper functionality and more specific government requirements and processes
• Technology that leverages the Internet for both inter-enterprise connectivity and a unification of the end-user experience
• Open architectures that allow for easier integration and interoperability

What Is the Right ERP Strategy?
Government needs to set a vision for integrating all organization-centric business processes without requiring a single-vendor approach. This allows users to determine the degree of vendor centricity required to fulfill the enterprise's process requirements and, via the integration capabilities, the best-of-breed components to include.

CGI supports Gartner's ERP application and deployment focus, which touches on business, application and technology strategies. The focus includes:

• Role: Expose information to enable collaboration with other agencies and departments
• Domain: Public sector focus
• Functions: Government specific processes and functionality
• Process: Externally connected
• Architecture: Web-based, open, componentized
• Data: Internally and externally published and subscribed

As users demand more specific functionality within government, vendors are moving toward providing government-specific functionality. The challenge is for users to determine when vendor solutions are as mature — and as functionally robust — as best-of-breed applications. If both conditions are met, the integrated choice is likely more prudent. If either or both of the conditions are not met, organizations must assess the risks and costs inherent with either choice and make the decision that best meets government needs.

Who Should Government Partner With?
Today, most ERP solutions are deficient with regard to government-specific functionality, resulting in organizations facing difficult decisions regarding a particular vendor's suitability for government, let alone their particular organization.

Investment decisions force vendors of these solutions to make difficult decisions about which domains, industries and segments they will pursue. Not only will user demand for deep government focus force vendors to change their marketing strategies, but a new integrated process focus from users will require application vendors to consider focusing on process optimization rather than best-of-breed functionality to meet the needs of government.

As a result, in addition to the government-focus vs. application breadth decision, vendors will adopt either a process optimization focus or a functionality focus. Therefore, governments should heavily weigh ERP vendors' demonstrated domain expertise within their industry. Organizations should emphasize complete process integration when evaluating application vendors. If utilizing a vendor with a broader functionality focus, governments should plan to supplement the core solution with point solutions designed to optimize functions.

Overcoming Challenges for Government
Government faces their own set of challenges in navigating the trends of ERP. The good news is that the vendors' efforts will reduce application cost of ownership and complexity over time. The bad news is that government still has to overcome challenges in four main areas:

• Integrating best-of-breed components into core vendor offerings, as single vendor-only solutions are no longer the best strategy
• Managing ERP deployment in an environment where the technology infrastructures and application portfolios are in a constant state of change
• Dealing with an increasingly constrained supply of resources available for the effort
• Balancing ERP investment with other critical technology initiatives

Governments must consider the degree of integration that can be achieved. Each best-of-breed component will increase ownership costs and, as more components are introduced, the number of custom connections can multiply rapidly. Consequently, many organizations will forgo functional supremacy to simplify the overall application architecture.

This choice, however, can also negatively impact ownership costs. Where an application is functionally deficient, users may choose to develop their own customizations. Customizing packaged applications can become a habit-forming exercise that, if not tightly managed, will significantly impair an organization's ability to migrate to later versions without significant manual intervention. This balance between integration costs and development costs becomes paramount to managing total cost of ownership (TCO) on an ongoing basis.

To overcome these challenges, government must develop implementation strategies that are appropriate to their domain and that enable efficiency and effectiveness in their operational, financial and collaborative processes. The achievement of that goal can be more single-vendor-centric or more best-of-breed in nature. Regardless, the final product is a government-specific rendering of the best available ERP applications.