New New Technologies Technologies for Public for Public Financial Financial ManagementManagement

New New Technologies Technologies for Public for Public Financial Financial ManagementManagementMay 2007May 2007ICGFMICGFMMay 2007May 2007ICGFMICGFM

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@freebalance.com

governmentIntegrated Financial Information Management

Systems (IFMIS)of tomorrow

How computer technology trends today are defining

Agenda

• Market and technology forces affecting Public Financial Management (PFM)

• Technology and PFM reform

• 10 key technology and market trends

• Conclusions

ICT makes a country’s 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

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

Technology in Context

Technology

IFMIS

Public Financial Management

Modernization and Reform

Government Objectives

Technology Vendor Viewpoint

Technology

IFMIS

Public Financial Management

Modernization and Reform

Government Objectives

Reality• Reform comes first• An IFMIS must support on-going PFM

modernization

• Technology enables the IFMIS

• Technology is not government modernization

Government IFMIS of tomorrow…

The four computer and market technology forces of today that are defining

1. Consolidation

2. Disintegration

3. Innovation

4. Integration

10 Technology TrendsConsolidation

1. Enterprise software consolidation2. Open source software3. Commoditization of the software stack

Disintegration4. Decentralization5. Business process management6. Software as a service (SaaS) and shared services

Innovation7. The web as a platform - Web 2.08. Wireless government

Integration9. Corporate Performance Management (& Government

Performance Management)10. Service Oriented Architectures (SOA)

with government and development trends

Not all technology and market trends are consistent

ERP systems have become bloated ‘understructures’ that have become

too expensive to maintain.Bruce Richardson, AMR Research August 2006

1. Market consolidation

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

Enterprise Software Market

ERP CRMSCM

BPM

CPM

CM

Microsoft

SAP

Infor

Oracle

Sage

LawsonEpicor

Chinadotcom

SiebelRetek

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

SiebelRetek

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

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

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?

The growth of free, open-source softwarepresents 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

2. Open Source Software

Open Source in GovernmentAfrica South Africa

Asia and the Pacific Japan, China, Korea, Singapore, Thailand, Taiwan, India, Israel

Australia - Department of Veterans Affairs, Bureau of Meteorology, Taxation Office, Department of Health and Centrelink, South Australia Government, Australian Capital Territory, NSW Department of Agriculture, Northern Territory Department of Education

Europe European Union (EU) - Belgium, Bulgaria, Denmark, Estonia, France, Germany, Portugal, Spain, UK

Non-EU countries - Ukraine

Cities - City of Munich

Latin America Brazil, Peru, Argentina, Columbia, Mexico, Venezuela

North America

(USA)

Federal Government - DOD, NSA, NASA, NIST, FEMA, USAID, DOL, National Weather Service, FAA

State Government - California, Oregon, Massachusetts, Hawaii, Delaware, Texas, Rhode Island, Utah

Municipal Government - City of Austin, Dallam County Texas

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

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

Middleware – the layer of software used to connect two applications

or to connect an application to the network – is approaching acommodity state.

Patrick Carey and Bernard Gleason,

Vision 2010 – Future of Business Software Applications August 2005

3. Commoditization of the software stack

Software Stack

Business ApplicationsMiddlewareDatabase

Operating SystemServer

NetworkStorage

Managem

en

t

Drivers for Commoditization1. Standards =

– Ability to interchange middleware– Lower cost from vendors

2. 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

Current SituationAccelerated 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

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

4. De-centralization,

DevolutionDelegation

De-concentrationDivestment

Budgets

Ministry 1

Municipal Gov’t

Municipal Gov’t

VirementsInformation

VirementsInformation

VirementsInformation

Municipal Gov’t

Provincial Gov’t

National Government

National Government

Provincial Gov’t

Ministry 1

Municipal Gov’t

Municipal Gov’t

Municipal Gov’t

Reporting

Outturn ExpenditureInformation

Outturn ExpenditureInformation

Outturn ExpenditureInformation

Drivers for De-centralizationAdministrative Decentralization• Improve government efficiency and

effectiveness = improve outcomes• Large % of government budgets deployed

locally• Local and cultural autonomyFiscal Decentralization• Improves participation = more stable

countries• Reduce waste and corruption

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

Success with BPM also requires a culture of real-time management ..

and may need a separate process center of excellence.

Gartner Group February 2006

5. Business Process Management

What is Business Process Management (BPM)?

Workflow

Integration

Design and Development

Business Activity

MonitoringOrchestration

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

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

SaaS benefits are crystallizing, but chaos still abounds

Robert Bois,Aberdeen Group June 2006

6. Software as a Service (SaaS)

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

Drivers for SaaS• High cost to maintain complex software and

infrastructure– Licenses– Upgrades– Networks– Databases

• SaaS supports fast growth• Attractive for smaller organizations

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

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

7. The Web as a Platform - Web 2.0

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

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 O’Reilly, O’Reilly Media

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

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”

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

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

8. Wireless Government

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

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

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

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

9. Corporate Performance and Government Performance Management

What is Corporate Performance Management?

Reporting

OLAPData Mining Scorecarding

Budget Planning

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

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

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…

Performance and Budget

BudgetExecution

BudgetPlanning

GovernmentObjectives

ScenarioPlanning

BudgetForecasting

PerformanceMonitoring

BudgetReview

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%

Current Situation

• Mixed– Capacity issues– Improvements in MTEF– Remains output focused– Better results in projects yet…

• Commercial performance management software not budget centric

SOA will make today’s ERP systems look like yesterday’s mainframe apps.

Bruce Richardson, AMR Research August 2006

10. Service-Oriented Architecture (SOA)

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

Web Services

registerdiscover

bind

Current Situation• Proven practical in Web 2.0• Business software:

– Early & emerging – Rapid momentum

• Revolutionizing enterprise software– Therefore…

• Technical issues being solved

Conclusions

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

Modular

and Modular

modular, de-centralized & integratednon-monolithic & multiple vendors

wired & wirelesscommodity & innovative

The Government IFMIS of tomorrow will be:

coreIFMIS decentralize

extend

measure

Citizen Centric

citizen

more choices,better choices,proven choices,

sustainable choices.

Governments will have:

dhadden@freebalance.com

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

Recommended Links• The Future of Software:

http://www.forrester.com/Teleconference/Previous/Overview/1,5158,1411,00.html

• The Future of Government Communications Networks: http://www.dts.ca.gov/news_events/ppt/Gartner_JoeSkorupa.ppt

• Innovation Does Matter: http://fr.sun.com/sunnews/events/2006/may/symposium/pdf/paeinier_forrester.pdf

• Vision 2010: http://www-03.ibm.com/industries/education/doc/content/bin/IBM_BCS_White_Paper_Vision_2010_Business_Applications.pdf

• Information and communications for development 2006 : global trends and policies: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2006/04/20/000012009_20060420105118/Rendered/PDF/359240PAPER0In101OFFICIAL0USE0ONLY1.pdf

• Web 2.0 in Business: http://www.mckinseyquarterly.com/article_abstract.aspx?ar=1913&l2=13&l3=11&srid=9&gp=1

Recommended Links• Ten Trends to Watch in 2006:

http://www.mckinseyquarterly.com/article_page.aspx?ar=1734&L2=21&L3=114&srid=190&gp=0

• 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?track=NL-453&ad=580643&asrc=EM_NLT_1199477&uid=2151015

• Does ERP Matter: http://www.infoworld.com/archives/emailPrint.jsp?R=printThis&A=/article/07/04/09/HNerpmatter_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/BuildingBlocksPlace.htm