Good Practices Government Resource Planning, Developing and Developed Countries

FreeBalance®
Public Financial Management
Good Practices

PFM Domain GRP REFORM AND MODERNIZATION
Good Practice VENDOR EXPERIENCE AND SUCCESS
Applicable EMERGING ECONOMIES AND DEVELOPED COUNTRIES

how can  Emerging economy and developed country governments are increasingly
governments adopting Commercial-Off-the-Shelf (COTS) software to replace legacy and
evaluate the success custom developed software applications for financial, budget, expenditure, tax,
of COTS PFM treasury and civil service management.
vendors?  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 1. FreeBalance GRP software has a much higher implementation and
FreeBalance global sustainability success rate that ERP software in industry or government.
GRP contribution ? 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 Major ERP Project Failure in Developed Country Governments
successful in  A large ERP shared services project in France country was estimated to be
developed nation $200M over budget by the audit office and more than 1 year late and resulted
governments for in late payments of over $2.2B to defense contractors.
financial
 National Audit Office in the United Kingdom found that the use of ERP shared
management?
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 ERP failures and cost overruns in the public sector have resulted in difficulties,
difficulties contract cancelations and lawsuits:
experienced in ERP  Australia: State government ministry
implementations in
 Canada: non-profit, city
the public sector in
developed  France: city
countries?  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  25% indicated that organization had not recovered ERP implementation costs
evidence of ERP  Between 20% and 35% of all ERP implementations fail
success across
 51% of ERP implementers judged their implementation as unsuccessful
industries?
 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  53% of companies reported budget overruns
evidence of on-time  40% of all ERP projects will exceed estimates by 50% or more
and on-budget
 Average ERP cost variance was 182% of budgets
success with ERP?
 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 A 2003 Study by the World Bank found a lack of success in government FMIS
evidence of FMIS implementations whether COTS or Custom developed:
success in emerging  43% delivered as specified
economies?
 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  FreeBalance implementations have been described as successful under difficult
rate for circumstances including Afghanistan, Kosovo, Sierra Leone and Timor-Leste.
FreeBalance? 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®

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®

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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FreeBalance®

what software used The FreeBalance Accountability Suite, Version 7, is fully web-based in that there is
for FMIS is fully no legacy client/server code used. The FreeBalance Accountability Suite is a net-
web based? 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-  Pure Web reduces software maintenance costs: Web software enables central
based an important management and control to reduce security issues, optimize up-time and reduce
technical maintenance. The use of hybrid client/server technology reduces many of these
advantage? 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  Service-Oriented Architecture to enable interoperability and compatibility with
architecture good numerous sub-systems
practices are used  Business objects (that we call “government entities”) to improve system
in the FreeBalance maintainability and extensibility
Accountability Suite  Scalability including support for horizontal, vertical and diagonal scaling to
Version 7? 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 Conclusions
practice approach 1. ERP software is high risk in industry and government. Specialized GRP software,
to COTS back-office like the FreeBalance Accountability Suite, has proven more successful and
implementation in sustainable in governments.
government? 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

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www.freebalance.com

Good Practices Government Resource Planning, Developing and Developed Countries

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