New Technologies for Public Financial Management

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New Technologies for Public Financial Management

• May 2007
• ICGFM

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Preface

• Slides have been updated with the script used for
  ICGFM (see notes pages)
• Additional information sources slides have been
  added at the end of the presentation
• For discussion, clarification, or expansion of
  concepts or desire to have custom presentation
  provided via WebX or in-person, e-mail me at
  dhadden_at_freebalance.com

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How computer technology trends today are defining
government Integrated Financial Information
Management Systems (IFMIS) of tomorrow
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Agenda

• Market and technology forces affecting Public
  Financial Management (PFM)
• Technology and PFM reform
• 10 key technology and market trends
• Conclusions

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ICT makes a countrys economy more efficient and
globally competitive, improves health and
education services, and creates new sources of
income and employment for poor people.
World Bank, April 2006
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IFMIS in Government Today

• Typical Solutions
• Custom-developed or bespoke
• Enterprise Resource Planning (ERP)
• Specialized government IFMIS applications
• Typical Difficulties
• Inflexibility to adapt to reform and
  decentralization
• Sustainability by government ICT staff
• Integration between budget execution and
  accounting
• Integration between front-office and back-office

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Technology in Context
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Technology Vendor Viewpoint
IFMIS
Public Financial Management
Modernization and Reform
Government Objectives
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Reality

• Reform comes first
• An IFMIS must support on-going PFM modernization
• Technology enables the IFMIS
• Technology is not government modernization

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The four computer and market technology forces of
today that are defining
Government IFMIS of tomorrow
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1. Consolidation
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2. Disintegration
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3. Innovation
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4. Integration
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10 Technology Trends

• Consolidation
• Enterprise software consolidation
• Open source software
• Commoditization of the software stack
• Disintegration
• Decentralization
• Business process management
• Software as a service (SaaS) and shared services
• Innovation
• The web as a platform - Web 2.0
• Wireless government
• Integration
• Corporate Performance Management ( Government
  Performance Management)
• Service Oriented Architectures (SOA)

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Not all technology and market trends are
consistent
with government and development trends
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1. Market consolidation
ERP systems have become bloated
understructures that have become too
expensive to maintain.
Bruce Richardson, AMR Research August 2006
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What is Enterprise Software?

• Many acronyms
• ERP (Enterprise Resource Planning)
• SCM (Supply Chain Management)
• CRM (Customer Relationship Management)
• CM (Content Management)
• CPM (Corporate Performance Management)
• BPM (Business Process Management)
• and many others

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Enterprise Software Market
ERP
CRM
SCM
BPM
CM
CPM
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Siebel Retek PeopleSoft
JDEdwards Vantive
Triversity
SSAGlobal
Baan Marcam
E-piphany
Ironside
Mapics
Lilly Geac
JDA
Extensity Comshare
Datastream
FRX GreatPlains
Navision Damgaard
Axapta
Soloman Scala
Intentia
Ross
Pivotal
Accpac Best
Mas 90/200
Peachtree Timerline
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Drivers for Consolidation

• Lack of organic growth
• Shareholders want companies to invest in more
  growth
• Perception that big winning
• Maintenance business model
• Buy customers
• Own customers barriers to entry
• Lack of value for upgrading

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Current Situation

• Survival of the fittest?
• Pressure to enter new horizontal and vertical
  markets
• New stack wars
• SME market
• Emerging markets
• Overlapping technology portfolio
• Consolidators attempting economies of scale
• Customer satisfaction?

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2. Open Source Software
The growth of free, open-source software presents
developing countries with an opportunity to
escape from technological dependence on
developed countries, but also a challenge to
build up local expertise
Dr. Mike Reed, UNU International Institute for
Software Technology March 2006
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Open Source in Government
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Drivers for Open Source

• Software commoditization - lack of incremental
  benefits in commercial infrastructure software
• Government self-reliance reduce national
  technological dependence
• Cost and choice - cost for license compliance
• Future proofing

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Current Situation

• Rapid uptake in emerging countries
• Proven performance and reliability
• Infrastructure middleware success
• Java EE, Apache, MySQL, Linux, JBoss, Tomcat,
  OpenOffice
• Some assembly required
• Usability issues
• Market volatility
• Not established in business applications

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3. Commoditization of the software stack
Middleware the layer of software used to
connect two applications or to connect an
application to the network is approaching
a commodity state.
Patrick Carey and Bernard Gleason, Vision 2010
Future of Business Software Applications August
2005
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Software Stack
Business Applications Middleware Database Operatin
g System Server Network Storage
Management
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Drivers for Commoditization

• Standards
• Ability to interchange middleware
• Lower cost from vendors
• Market maturation
• more and more functionality in middleware driving
  costs down
• Application vendors want to be middleware neutral
• Customers do not want to be locked-in

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Current Situation

• Accelerated Commoditization
• Price pressure on middleware
• Middleware standards are being set by governments
  (USA F.E.A.)
• Many governments developed open source middleware
  policies
• On the Internet, no one knows what middleware you
  are running

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4. De-centralization,
including political devolution,
de-concentration, delegation, and transfer to
non-governmental organizations, promotes
democracy and good governance by providing an
institutional framework to bring
decision-making closer to the people
Shabir Cheema United Nations Global Forum for
Reinventing Government November 2006
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Devolution Delegation De-concentration Divestment
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Budgets
National Government
Provincial Govt
Municipal Govt
Municipal Govt
Municipal Govt
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Reporting
National Government
Ministry 1
Provincial Govt
Municipal Govt
Municipal Govt
Municipal Govt
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Drivers for De-centralization

• Administrative Decentralization
• Improve government efficiency and effectiveness
  improve outcomes
• Large of government budgets deployed locally
• Local and cultural autonomy
• Fiscal Decentralization
• Improves participation more stable countries
• Reduce waste and corruption

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Current Situation

• Conflicts with computing trend to integration
  (centralization)
• Clear trend devolution on every continent
• Local capacity and sustainability issues
• Difficulties in extending governance with
  existing solutions

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5. Business Process Management
Success with BPM also requires a culture of
real-time management .. and may need a separate
process center of excellence.
Gartner Group February 2006
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What is Business Process Management (BPM)?
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Industry Drivers for BPM

• Maximizing efficiency - workflow and integration
  enables greater automation
• Difficulties in adapting ERP after customization
• Best practices from the private sector?
• Horizontal companies hope BPM will reduce
  customization costs

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Current Situation of BPM

• Established in compliance solutions
• Leveraged in process e-government
• Not established in government IFMIS
• Well established standards
• Performance/functionality compromise
• No market leading vendor

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6. Software as a Service (SaaS)
SaaS benefits are crystallizing, but chaos still
abounds
Robert Bois,Aberdeen Group June 2006
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What is Software as a Service (SaaS)?

• Applications are hosted externally e.g.
  Salesforce
• Typically priced on a subscription basis
• Typically provides minimal customization
• Business model for SOHO, small to large
  organizations
• Evolution of ASP (Application Server Provider),
  but typically serving a purpose-built application

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Drivers for SaaS

• High cost to maintain complex software and
  infrastructure
• Licenses
• Upgrades
• Networks
• Databases
• SaaS supports fast growth
• Attractive for smaller organizations

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Current Situation

• Increasing as a of the market (from 0 to..)
• Uneven adoption high in customer relationship
  management
• Rarely used in government back-office
  applications why?
• Similar technology used for shared services, yet
• E-Procurement ideal application
• Emergence of appliances

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7. The Web as a Platform - Web 2.0
No matter how you brand the hype, get ready for
a quantum leap in the way the Web works and
more importantly how it works for you and
your business.
Wayne Gomes, Rich Internet Group November 2005
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What is Web 2.0?

• An umbrella term for second wave of internet
  innovation
• Web as platform diversity of platforms
• Mash-ups syndication
• Social software community
• Open source rapid development
• Rich web interfaces
• Distributed documentation data
• Companies SixApart, Flickr, Pandora, Pageflakes,
  FaceBook, YouTube
• Underlying technologies blogs, wikis, AJAX, RSS,
  REST, SOAP, VOIP, podcasting, Skype, BitTorrent,
  Wikipedia

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Web 2.0 is the network as platform, spanning all
connected devices creating network effects
through an "architecture of participation," and
going beyond the page metaphor of Web 1.0 to
deliver rich user experiences.
Tim OReilly, OReilly Media
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Drivers for Web 2.0

• The Web as a Platform using the internet as an
  API for new applications
• Radical decentralization distributed data,
  reused, remixed, (re)-aggregated, and
  (re)-syndicated
• Self-service and participation
• Infrastructure is available
• The Network Effect
• The Long Tail

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Web 2.0 in Government

• Norway has the first Web 2.0 Government eNorway
  2009 initiative
• US Government Ready for Web 2.0
• Blogs the govsphere is growing fast
• RSS feeds proliferating rapidly among US
  government agencies
• Wikis adopted by UK, US government for
  collaborative telework

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Current Situation

• Consumer market driving business applications
• Corporations adopting blogging technology
  (Microsoft Channel 9)
• Superior collaborative capabilities
• Upset commercial vendor status-quo
• Security concerns in government

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8. Wireless Government
New wireless technology is resulting in
innovative business models and holds the
promise of connecting poor users, extending
competition to all market segments, and
accelerating development of broadband
infrastructure and access.
World Bank April 2006
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What is Wireless Government?

• Light e-government using mobile telephone
  technology
• Mobile telephone as kiosk
• Citizens and Businesses
• Finding government services
• Notifications and alerts
• Civil Service
• Requisitions and receiving
• Approvals
• Time Attendance

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Drivers for Wireless Government

• Proven voice and text technologies
• Mobile telephone is the tool of choice for small
  transactions
• Growth in emerging countries
• Overcoming the digital divide
• Citizen and civil servant usable and inexpensive

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Current Situation

• Early adoption in government
• Exposing IFMIS capabilities via wireless devices
  is difficult
• Remains differences among devices
• Most e-government needs computers and the
  Internet
• Practical work on life events

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9. Corporate Performance and Government
Performance Management
Agencies are addressing goals of decreasing
administrative burdens, lowering costs, enabling
better informed decision making, and ensuring
tmeliness in responding to sector needs.
Aberdeen Group March 2004
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What is Corporate Performance Management?
Scorecarding
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Drivers for Corporate Performance Management

• Too much information
• Business Intelligence tools such as reporting are
  not prescriptive
• Not all indicators are relevant
• Financial information is after the fact you
  cannot change the past
• Many non-integrated Business Intelligence (BI)
  tools

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Corporate Performance Objectives

• Key Performance Indicators (KPIs) and
  scorecards are simple to understand
• KPIs measure in progress
• Aggregates measurements from many sources
• Utilizes capabilities of many tools
• Provides clarity for what is important

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Government Performance Management

• Business
• Bottom Line is clear profitability
  
• Measured on quarterly profitability
• Bottom Line is financial
• Budget is a guideline
• Simple financial measurements revenue,
  expenditures, cost centres

• Government
• Government mandates require many objectives
• Measured on long-term outcomes
• Bottom Line is outcomes
• Budget is the law
• Difficult financial measurements objectives,
  funds, projects

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Performance and Budget
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Inputs, Outputs, Outcomes

• Objective
• Government development goal
• Input
• The money in the budget
• Output
• The money spent
• The items purchased
• Outcomes
• Results for the national interest

• To improve education and literacy rates in remote
  regions
• M earmarked for this purpose
• M spent in 5 regions
• 2 schools built, 40 additional teachers hired,
  250 computers and 1,500 books purchased
• Year 1 literacy tests increased by 2. Year 2
  by 5. Year 3 by 10

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Current Situation

• Mixed
• Capacity issues
• Improvements in MTEF
• Remains output focused
• Better results in projects yet
• Commercial performance management software not
  budget centric

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10. Service-Oriented Architecture (SOA)
SOA will make todays ERP systems look like
yesterdays mainframe apps.
Bruce Richardson, AMR Research August 2006
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SOA Drivers

• Promise of re-use write once, use many times
• Component-based architectures promise of
  assembling applications from parts
• Mix programming language, operating system and
  middleware
• Pick best-of-breed applications

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Web Services
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Current Situation

• Proven practical in Web 2.0
• Business software
• Early emerging
• Rapid momentum
• Revolutionizing enterprise software
• Therefore
• Technical issues being solved

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Conclusions
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Impact on the IFMIS of Tomorrow

• Immediate Impact
• Consolidation Business Process Management
  Software as a Service
• Long-Term Trend
• Performance Management
• Major Change to IFMIS
• De-centralization Open Source Commoditization
  of Software Stack Service Oriented
  Architectures
• Innovation Opportunities
• Web 2.0 Wireless Government

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Modular
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and Modular
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The Government IFMIS of tomorrow will be
modular, de-centralized integrated non-monolithi
c multiple vendors wired wireless commodity
innovative
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extend
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Citizen Centric
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Governments will have
more choices, better choices, proven
choices, sustainable choices.
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dhadden_at_freebalance.com
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Conceptual Analysis

• Best tools and authors to analyze complex trends
  in high technology
• Geoffrey Moore on technology adoption
• Clay Christensen on innovation
• Marshall McLuhan on medium (enhancement,
  reversal, retrieval, obsolesce)
• Gartner Group on technology hype cycle

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Recommended Links

• The Future of Software http//www.forrester.com/T
  eleconference/Previous/Overview/1,5158,1411,00.htm
  l
• The Future of Government Communications Networks
  http//www.dts.ca.gov/news_events/ppt/Gartner_JoeS
  korupa.ppt
• Innovation Does Matter http//fr.sun.com/sunnews/
  events/2006/may/symposium/pdf/paeinier_forrester.p
  df
• Vision 2010 http//www-03.ibm.com/industries/educ
  ation/doc/content/bin/IBM_BCS_White_Paper_Vision_2
  010_Business_Applications.pdf
• Information and communications for development
  2006 global trends and policies
  http//www-wds.worldbank.org/external/default/WDSC
  ontentServer/WDSP/IB/2006/04/20/000012009_20060420
  105118/Rendered/PDF/359240PAPER0In101OFFICIAL0USE0
  ONLY1.pdf
• Web 2.0 in Business http//www.mckinseyquarterly.
  com/article_abstract.aspx?ar1913l213l311srid
  9gp1

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Recommended Links

• Ten Trends to Watch in 2006 http//www.mckinseyqu
  arterly.com/article_page.aspx?ar1734L221L3114
  srid190gp0
• ERP Graveyard http//www.erpgraveyard.com/
• Is it time for Wikigov http//www.gcn.com/online/
  vol1_no1/43410-1.html
• ERP Consolidation May be Threatening Innovation
  http//searchcio.techtarget.com/originalContent/0,
  289142,sid19_gci1230304,00.html?trackNL-453ad58
  0643asrcEM_NLT_1199477uid2151015
• Does ERP Matter http//www.infoworld.com/archives
  /emailPrint.jsp?RprintThisA/article/07/04/09/HN
  erpmatter_1.html
• The Building Blocks of a Simpler Future are in
  Place http//www.accenture.com/Global/Services/By_
  Subject/Service_oriented_Architecture/R_and_I/Buil
  dingBlocksPlace.htm