PFM Domain GRP REFORM AND MODERNIZATION

Good Practice VENDOR EXPERIENCE AND SUCCESS

Applicable EMERGING ECONOMIES AND DEVELOPED COUNTRIES

FreeBalance®

Public Financial Management Good Practices

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how can governments evaluate the success of COTS PFM

vendors?

Emerging economy and developed country governments are increasingly adopting Commercial-Off-the-Shelf (COTS) software to replace legacy and custom developed software applications for financial, budget, expenditure, tax,

treasury and civil service management.

These governments leverage software applications, often called Financial Management Information Systems (FMIS), to enable involved in Public Financial Management (PFM) reform and modernization.

Government organizations can chose to acquire Enterprise Resource Planning (ERP) COTS software from large software firms whose software is used in multiple “vertical” markets or Government Resource Planning (GRP) software

designed exclusively for governments.

FreeBalance is unique among the three leading COTS FMIS vendors to

government through a 100% GRP focus.

Large ERP vendors and systems integration firms have strong marketing departments and large marketing budgets to influence potential clients. This can result in the impression that large multinational firms have had significant success in meeting government public financial management goals.

Some vendors are also able to present Fear, Uncertainty and Doubt (FUD) about competing vendors often presenting a misleading impression of the real

value of software choices.

FUD has been used specifically to give government decision-makers misleading impressions about FreeBalance.

what has been the FreeBalance global

GRP contribution ?

1. FreeBalance GRP software has a much higher implementation and sustainability success rate that ERP software in industry or government.

2. FreeBalance GRP software has been successful implemented in advanced,

middle income and fragile states.

3. FreeBalance has modern web-based software that is technically more advanced

that legacy web-enabled software provided by leading ERP vendors.

has ERP been successful in developed nation governments for financial

management?

Major ERP Project Failure in Developed Country Governments

A large ERP shared services project in France country was estimated to be $200M over budget by the audit office and more than 1 year late and resulted

in late payments of over $2.2B to defense contractors.

National Audit Office in the United Kingdom found that the use of ERP shared services added rather than reduced costs

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Reports by the United States Government Accountability Office (GAO) and the Department of Defense

(DoD) Inspector General (IG) found that 11 of 13 ERP projects were over-budget costing American taxpayers

Billions of Dollars with one ERP project resulting in $1B “largely wasted”

what are the major difficulties experienced in ERP implementations in the public sector in developed

countries?

ERP failures and cost overruns in the public sector have resulted in difficulties, contract cancelations and lawsuits:

Australia: State government ministry

Canada: non-profit, city

France: city

Ireland: 2 projects within an important ministry

United Kingdom: university, councils (1) (2) (3) and government ministries (1) (2)

(3)

United States: non-profit, school district, universities (1) (2) (3) (4) (5), 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)

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what is the evidence of ERP success across industries?

25% indicated that organization had not recovered ERP implementation costs

Between 20% and 35% of all ERP implementations fail

51% of ERP implementers judged their implementation as unsuccessful

Nearly 70% of large projects were found to be improbable of achieving project

success

41% of ERP projects achieved all or the majority of benefits

60% received 50% or less of anticipated benefits

40% of ERP projects failed to meet business case within 1 year of going live

Average for ERP projects was 50% of intended benefits

ERP projects saw the implementation of -59% of intended functionality

34% of respondents “very satisfied” with ERP project

Fewer than 1/3 of decision-makers recommend their ERP vendor

ERP vendors achieved a D+ in return on investment

75% of organizations experienced a productivity dip after implementing ERP

20% of survey respondents terminated ERP projects

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what is the evidence of on-time and on-budget success with ERP?

53% of companies reported budget overruns

40% of all ERP projects will exceed estimates by 50% or more

Average ERP cost variance was 182% of budgets

Average ERP cost variance was 178% of budgets

Average ERP implementation cost was 40% over budget

Average ERP implementation takes 23 months, has a total cost of ownership of

$15 million and with an average negative net present value of $1.5 million

Users of Tier 1 ERP vendors will experience higher Total Cost of Ownership (TCO)

than users of Tier 2 vendors

ERP upgrades cost about ½ the value of the original license fee and 20% of the

original implementation costs

Experts warn that organizations should expect to pay as much as 3 times the

original ERP software cost to upgrade to new technology

Interviews with reference customers of a major ERP vendor found that 57% did

not achieve a positive ROI

61% of projects exceeded timelines

Project duration averages 17.8 months for first phase

Average implementation time from the 2 major ERP vendors are 17 and 18

months with average variance of 2 and 4 months over schedule

Average variance for ERP projects was 230% of schedule

Up to 80% of ERP exceed time and budget estimates

70% of respondents stated their ERP project timeline was inadequate

what is the evidence of FMIS success in emerging

economies?

A 2003 Study by the World Bank found a lack of success in government FMIS implementations whether COTS or Custom developed:

43% delivered as specified

50% delivered on budget

21% delivered on time

25% unsustainable

69% likely to be sustainable

6% highly likely to be sustainable

A 2011 Study by the World Bank found that FMIS implementation sustainability has

improved but that 18% remain unsustainable.

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Examples of FMIS implementation problems in emerging economies including Azerbaijan, Costa Rica, Ghana, Kazakhstan, Malawi , Maldives, Russia, Rwanda, Uganda , Zambia and Vietnam.

FreeBalance has enjoyed more successful GRP implementations than ERP. Custom or “bespoke” solutions often fare worse: 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.

what is the success rate for

FreeBalance?

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, based in Ottawa Canada, has been successfully implemented in countries with low, medium, high and very high Human Development Indexes

(HDI).

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.”

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FreeBalance Government Customers range from post-conflict “fragile” states to countries in the G8.

FreeBalance software is deployed in more Government of Canada departments and agencies than any

other FMIS software package.

FreeBalance has brought advanced PFM features such as e-procurement, budget transparency and

performance results enabling “technology leapfrog.”

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FreeBalance government customers that have undergone PEFA assessment enjoy better scores than countries with higher HDI who do not use FreeBalance software. FreeBalance customers have been

recognized for achievements of substantial reform.

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what software used for FMIS is fully

web based?

The FreeBalance Accountability Suite, Version 7, is fully web-based in that there is no legacy client/server code used. The FreeBalance Accountability Suite is a net-

native application built on Java Enterprise Edition.

The majority of COTS ERP software programs are web-enabled whereby legacy code remains the heart of the application. Such legacy code bases are built on proprietary

software languages such as:

Advanced Business Application Programming (ABAP)

Client/server Application Language (C/AL)

Configurable Network Computing (CNC)

Dexterity

Dynamic Enterprise Modeler (DEM)

EntepriseOne

MorphX and X++

PeopleTools Procedural Language/Structured Query Language (PL/SQL)

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why is fully web-based an important technical

advantage?

Pure Web reduces software maintenance costs: Web software enables central management and control to reduce security issues, optimize up-time and reduce maintenance. The use of hybrid client/server technology reduces many of these

benefits.

Pure Web improves software performance: Legacy client/server programming languages can be inefficient compared to modern languages. Presentation, business logic and data layers are often mixed and translation layers are often required to support integration with sub-systems and to support web

deployment. This reduces performance and scalability.

Pure Web reduces infrastructure costs: Proprietary client/server infrastructures have large technology monolithic technology footprints and are difficult and costly to maintain. Many systems cannot leverage open virtualization, clustering and load-balancing technology. Open systems give governments more choices of

open source and proprietary middleware.

Pure Web reduces communications costs: Legacy systems often require data replication and always-on networks because of inefficient client/server design.

Pure Web provides more flexible software deployment: Systems based on client/server design have complex software licensing, upgrading and deployment. Pure web systems are ideal to deploy in government clouds.

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what software architecture good practices are used in the FreeBalance Accountability Suite

Version 7?

Service-Oriented Architecture to enable interoperability and compatibility with numerous sub-systems

Business objects (that we call “government entities”) to improve system maintainability and extensibility

Scalability including support for horizontal, vertical and diagonal scaling to enable running software from a small number of users on a laptop to hundreds of thousands via a data centre

Web-native multi-tier architecture to support technology change and choice in the future

Servlet-based Java Enterprise Edition to provide proven enterprise-class scalable solutions in an open system

what is a good practice approach to COTS back-office implementation in

government?

Conclusions

1. ERP software is high risk in industry and government. Specialized GRP software, like the FreeBalance Accountability Suite, has proven more successful and

sustainable in governments.

2. FreeBalance software has been implemented successfully across a range of development contexts from fragile states through to G8 countries. The FreeBalance Accountability Suite has enabled lower developed countries to leapfrog more developed countries. And, with the large installed base in the Government of Canada, FreeBalance supports advanced PFM requirements.

3. Unlike most ERP software, the FreeBalance Accountability Suite is fully web-based using modern software architecture good practices that enable growth,

extensibility, scalability and choice.

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

www.freebalance.com