State and local officials explore more streamlined, customizable enterprise resource planning solutions.
“The smallest ERP system known to man.” That is what Anand Dubey, Alaska’s director of enterprise technology, calls the homegrown alternative to an enterprise resource planning (ERP) application he created and dubbed the Virtual Manager.
ERP is often defined as an architecture that supports the distribution of enterprisewide information across all functional units of a business or service organization. Dubey is on a mission to get officials in his state to rethink the traditionally expensive and complicated ERP implementation in favor of a system he created for less than $100,000 to track his Enterprise Technology Services (ETS) Division’s service catalog and personnel costs.
“States can do $200 million ERP implementations and not know whether they are lowering their total cost of ownership or offering better service,” he said. “There is a real danger that you have acquired a monster asset that is bleeding you dry. What good does it do to automate if you aren’t necessarily providing better service or saving money? All you are doing is converting file clerks to programmers and IT support people.”
Dubey is not alone in seeking out alternatives to traditional ERP offerings. Even in the private sector, there’s a recognition that these deployments often fail to achieve their objectives. A 2010 survey by Denver-based Panorama Consulting Group found that 57 percent of ERP implementations take longer than expected; 54 percent go over budget; and 41 percent of organizations surveyed failed to realize at least half of the business benefits they expected from their ERP systems.
Squeezed by budget cuts, some public-sector officials are looking for cheaper, faster-to-implement and more customizable ERP solutions.
“With the budget issues they face, officials wonder how they can afford huge capital outlays and manage the risk of these deployments going awry over three or five years,” noted Rishi Sood, Gartner vice president and head of public-sector programs.
More states, cities and counties are becoming receptive to new ERP ideas. At the state level, Sood is seeing more interest in total application outsourcing. He points to a recent deal Maine announced that involves CGI Group Inc. hosting and maintaining the state’s AMS Advantage ERP implementation in CGI’s cloud environment, which Maine officials say offers the state a more predictable cost structure in the long term.
In smaller and mid-sized cities and counties, Sood expects to see increased use of software-as-a-service platforms, which are less customizable than the application outsourcing involving CGI and Maine, but provide economies of scale.
Also on the horizon are shared services through demand aggregation. For instance, the Canadian province of Ontario and several cities within it work with an ERP vendor on a combined solution. Smaller municipalities may also consider open source ERP solutions, which are starting to catch on in the manufacturing sector.
“For states and the largest counties and cities, the mission criticality of their ERP makes open source less attractive to them,” Sood added, “but there is always interest in open source, especially at smaller levels of government.”
When Dubey became Alaska’s ETS director almost three years ago, he wanted to know how much money his agency was spending on each of the services it provides. He was upset that it took the finance staff a week to get back to him with data from the old mainframe ERP system — and even then he still had difficulty discerning how his personnel spent their time.
Dubey set out to create a catalog of services and assets his agency provides. He then asked employees to dump their traditional time sheets and track all their work hours to specific service requests.
“For instance, Alaska owns a microwave telecommunications system,” he explained. “We get service requests to do things such as fix a tower. Now when employees track their time, they tie it to the service request and the asset, and using the Virtual Manager, I can see how much each is costing me.”
Business intelligence (BI) is another pet peeve. “People like to talk about the BI reports they get from traditional ERP systems,” Dubey said. “But when I ask them what they actually do with their favorite five reports, they don’t say much. They don’t know what they are going to do with them.”
With the Virtual Manager, Dubey produces simple pie charts that break down services by day, month, year and how much the agency is spending on each service.
“You can drill down in those right to the invoice and timecard level,” he said. “So I know what I am spending on telecom infrastructure. This system has become my eyes and ears.”
Dubey asks people to show him things they can do with a multimillion-dollar ERP program that he can’t do with his five-screen Virtual Manager. “If someone tells me something I can’t do, I think the program is agile enough that we could change it to be able to do it,” he said.
Dubey’s first goal was to gain acceptance of the tool within the ETS and then to proselytize other state agencies and CIOs around the country. But he admits that changing people’s minds about ERP is difficult. Perhaps ironically, his state currently is considering the procurement of a massive ERP system.
“I do have some input there,” he said, “and I wish the world were that simple that I could direct it. But there are directors of finance and bureaucrats who have been in state government for 25 years, and they just don’t believe you can do for $100,000 what other states are paying $200 million for. I tell them, ‘God didn’t create those systems; people did.’ And sometimes it takes someone new to come along and change the paradigm. I am that mad man on the mountain.”
Another unconventional approach is sharing ERP services between two public-sector organizations. Such an experiment is under way in Ohio’s higher-education field between the University of Akron (UA) and Lorain County Community College (LCCC).
“We are trying to prove the viability of creating a shared administrative services center so each university and college doesn’t have to have its own,” explained Jim Sage, the UA’s CIO. “One of the keys to that is a shared ERP system. We believe we can eliminate a lot of duplication on the administrative side.”
By sharing technology, the schools can shave 5 to 10 percent off their IT budgets, Sage said. “But studies suggest that through sharing administrative operations, we might save 30 to 40 percent.”
The organizations completed the project’s first phase by installing a common Oracle PeopleSoft application for both schools. PeopleSoft was already in use at the UA, and Sage said it had the best architecture to handle multiple legal entities.
“Other ERP systems weren’t designed to support multiple legal entities in terms of software licensing,” he added. The LCCC had been using Jenzabar software and was in the process of looking at other ERP systems when the shared services deal was struck.
The next step will combine select business functions at the UA and LCCC to prove that combined administrative units can adequately serve multiple institutions. The ultimate goal is to create a stand-alone nonprofit organization and move the management of administrative functions to it.
Earlier attempts to develop shared services failed due to a lack of trust between schools, Sage admitted. “Once one school tried to control the project, others would disengage. I convinced our president it could not be controlled by one school but had to be managed by an outside organization.”
City and county government officials are becoming savvier about what goes into a successful ERP implementation, said Adam Rujan, a partner with Plante and Moran, a Southfield, Mich.-based certified public accounting and business advisory firm.
“They are becoming better consumers of ERP,” he said. “They are recognizing they may not need the larger Tier 1 ERP system and are devolving to smaller Tier 2 systems, which have lower maintenance costs.”
Cities and counties also are developing more robust IT governance models, which often are in reaction to an ERP implementation, Rujan added. “These systems are pervasive, and they realize that operating on a common system requires the organization to get more involved in IT decision-making.”
After looking for ERP options that were less expensive and time-consuming, Roger Rick, IT manager for the Redevelopment Authority of the City of Milwaukee, switched to a software-as-a-service version of 4gov from the agency’s ERP software vendor the Customer-Driven Co. (CDC) Software. The authority now pays a fixed monthly subscription fee that includes system maintenance, backups, security upgrades and disaster recovery.
“It does offer savings in the sense that there is no software to maintain, no servers, storage or backup,” Rick said. “We can have one less IT support person on staff.”
Another benefit, he said, is that the implementation of upgrades is almost immediate. “They can work on changes and tweak them until they are satisfied and then turn them on overnight without disrupting us,” he noted. “The challenge is that the vendor has to be responsive to your needs, because you don’t have your hands on anything. You could really be left hanging if they don’t meet your needs. My experience with [CDC] is that they are responsive and knowledgeable.”
As cities look to upgrade from outdated systems, they also look for systems that require less IT support and allow users flexibility in creating their own reports. The budget-crunch in Nevada cities such as Sparks (population 88,602) meant more full-featured ERP solutions from Oracle or SAP would be too expensive to support. City employees looked at several offerings and chose Agresso Business World, a mid-market ERP solution from Unit4 Business Software, a European company whose U.S. subsidiary is based in Dallas.
The first motivation was that the city’s previous software was 18 years old and both the software and hardware it was running on would no longer be supported, explained Sherri Flynn, Sparks’ systems development administrator.
Recent work force cutbacks mean that she and a staff of just two other people have to support Agresso and 60 other city software applications. “Mainly we wanted our users to be able to create reports and work with it themselves without a systems administrator’s help all the time,” Flynn said.
With Agresso, users are becoming more self-sufficient because they can create their own inquiries and export results into Microsoft Excel files. “Some ERP implementations require the dedicated support of 10 people,” she said. “The fact that we were downsizing makes Agresso a godsend.”
Despite the trepidation about doing ERP implementations, Gartner’s Sood stressed that there’s still tremendous need in state and local government for the true functions of an ERP system. “Especially with the budgetary problems they are experiencing, there is a need to have deep insight into how revenue is being spent and the management of finances,” he said.
And with federal stimulus funds, it’s important to have good oversight of grants management functionality that ERP systems can provide. “In contrast to other vertical markets, there is opportunity in the public sector for growth in ERP,” Sood said, “and these new business models that are still emerging will become more prevalent.”