May 3, 2005 By Tod Newcombe
This is an online exclusive from Public CIO magazine
That's what Steve Peck is hoping governments will do if software giant SAP succeeds with its latest strategy. Peck, who is president of SAP Public Services Inc., which covers the entire public sector in the U.S., says the ERP landscape is shifting and SAP is in a unique position to help government and higher education to benefit from the changes.
The shift Peck is talking about is the emergence of Web Services as a driver for innovation that will allow SAP's more than 30,000 customers to build more nimble, specialized applications on top of their traditional ERP installations. Already Peck has seen government customers "snap-on" child support and disaster management solutions to their existing ERP platforms using a new software engine from SAP called "NetWeaver."
Peck recently discussed the public sector ERP market and NetWeaver with Public CIO.
Q: Can you comment on the consolidation taking place in the ERP and enterprise software market and what its effects might be on the public sector?
Peck: during the whole consolidation, which we don't think is over by a long shot, we've taken this high road....my unit is a beneficiary of the nearly $1 billion that our R&D unit invests annually. We have a focus on meeting the needs of the different public sector entities around the globe. I happen to be responsible for public services in the U.S., but there are succinct markets in there. Higher ed has a different landscape from state markets. You have some areas that used to be custom systems that are moving towards more application-based systems. Child enforcement in Florida, for instance. We're working with the Department of Revenue so they can better collect child support payments. That always used to be custom, it's now COTS.
The landscape continues to shift and the traditional finance or HR providers are consolidating, but there are whole new markets opening up giving us new places to go. We want to keep investing as much as we can in the product and meet the needs of each of these communities. That's the approach we're taking as the rest of [the consolidation] goes on.
Q: Are government requirements for enterprise applications changing?
Peck: I think we're seeing a couple of shifts. First, during the '90s some agencies wanted to break down departmental stovepipes and integrate their accounting, or human resources. You saw that going along with the private sector also. It was the rise of client server computing, not mainframe. Then y2k was the compelling event. You had to replace systems to be compliant.
Since then, this is an area now where the public sector is beginning to embrace what the private sector has done, if you have good integrated business processes, both front office and back office, and you've got the ability to get to one source of the truth from a data perspective, you can better serve the mission of the agency.
What we're finding is that agencies have to operate much more efficiently, be accountable, so there has to be transparency and the constituents no longer want to wait in lines and wait to get access to the data. So you've got to have a tight backend process in order to deliver on those promises. We see that consistently, whether it's a small to medium sized city or a large state, like in Pennsylvania, which has a system that cuts across all major agencies to deliver common processes.
Erie County is another customer of ours, where they implemented ERP and the CIO there sees himself as a partner to each one of the lines of business that he serves. And he looks at them that way. What they did was deliver an on-time, on-budget implementation of financials and HR, which gave the CIO so much credibility that he went back to health, fire and police and asked "what more can we do for you."
They are now about to go live to deploy homeland security functionality and disaster planning. Because when you have a common backbone, it opens up visibility to all of your assets. They can then tie it into case management or scenario planning around different kinds of events, such as biological or natural, such as flooding. The economic reality in municipalities is that they must run more efficiently or they will continue to run on a sliding scale of deficit [spending] and the services they can offer.
Q: Is the state and local ERP market looking any different from the federal market and how so?
Peck: It's very interesting because there are very distinct parallels. How they are procured, how they are implemented is a lot different. The federal government has had a legacy of very big IT programs, many of them stove-piped.
When you get into counties and cities, they have to operate pretty efficiently and have to look at their total processes, end-to-end, in order to gain success.
Erie County is like that. Pennsylvania, under former Gov. Ridge, was very unique. They made a decision they were going to break down this myriad of stove piped systems. They were going to operate like one Pennsylvania. That has paid tremendous benefits. They have great processes across the organization; budgets are formulated on time, there's good visibility and they have been able to gain efficiencies.
The Florida Department of Revenue now runs all their taxes through SAP rather than have a myriad number of systems they would collect taxes on. That's $27 billion in revenue that comes into Florida and income tax isn't one of those. So they have to be very careful about how they manage and measure their revenue streams. So they generated both efficiencies and about a 30 percent reduction in administrative cost to [collect] taxes.
They also were able to collect tens of millions of dollars in additional revenue because of better compliance. I can talk to any governor and tell them, 'Governor, Florida was able to add tens of millions of dollars with no new taxes. Is that interesting to you?' And every one of them, of course, says yes.
By doing this part correctly, the state gained the credibility to apply compliance to child support enforcement without any problem. That's a real imperative for CIOs to set up the right expectations and drive the right governance around an enterprise framework whether you are small or large and you've got to deliver results and help manage the delivery of those results, so you get the credibility to move forward.
You can see a big difference with the [government] entities that have projects that have been managed the right way. It's nice to see that when it happens.
Q: How important is the role of the CIO in implementing these enterprise applications? Should the business head take the lead, should the CIO or should the CIO facilitate?
Peck: We see the absolute gamut. We see the business leader driving everything to a CIO just involved with the technology side of it, to CIOs actually helping run the project. I think CIOs in today's public environment -- especially at the federal level --have to bring in the right kind of enterprise architecture and say, "here are the standards we're going to build off of." That's what most corporations are doing that today.
Quite often the business owner will typically have done maybe one or two of these projects in their career, whereas the CIO has managed a lot of them. So they can help bring the best practices to validate where they want to go, make sure they meet the standards of the entity. Because at the end of the day, they are not just the chief technology officer, but chief information and data manager too.
I think that when you have an empowered and proactive CIO, it works. That's a recipe for success.
Q: Can you talk a bit about the technology trends that are impacting enterprise solutions and how those trends will play out in the public sector?
Peck: At SAP, 32 years and 30,000 customers later, we've seen several of the [technology] waves. The one that is going on now that is most important is this concept of having applications and then having the enabling technology that connected those applications to the rest of the enterprise.
Once the common business practices are implemented in ERP, it's the technology now that enables those to connect to the enterprise and then allow specialized applications to be built by partners and customers.
We do that through a platform called NetWeaver. The term that's been coined for it is "applistructure." It is the technology trend of today that says it's not just the applications, but the enabling technology the apps sit on that allow other technologies to be built on top. Research groups, such as Forrester, say applistructures are the fourth wave of computing.
With more than 100,000 installations out there, we're kind of the big bet. We're much bigger in terms of business applications than anybody. In fact, even the new merged Oracle-PeopleSoft is only half our size on a global basis.
We have such a large ecosystem of customers that they are building off of NetWeaver's platform to help and enhance their next set of functionalities.
It's real exciting. I think the innovation that's going to come out of that will be stunning. It allows companies and customers to innovate on a platform where they are not going to have to worry about that platform's standard changing, where they can't keep up with it. It used to be called a bolt-on. Now it's going to be a plug-in application that as the releases of NetWeaver and SAP come forward, it will take those apps right with them.
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