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New Technologies for Public Financial Management

May 2007 ICGFM

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 inperson, e-mail me at dhadden@freebalance.com

How computer technology trends today are defining


government Integrated Financial Information Management Systems (IFMIS) of tomorrow

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

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

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
Government Objectives

Modernization and Reform

Public Financial Management IFMIS Technology

Government Objectives Modernization and Reform Public Financial Management IFMIS

Technology Vendor Viewpoint

Technology

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

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

1. Consolidation

2. Disintegration

3. Innovation

4. Integration

10 Technology Trends
Consolidation 1. Enterprise software consolidation 2. Open source software 3. Commoditization of the software stack Disintegration 4. Decentralization 5. Business process management 6. Software as a service (SaaS) and shared services Innovation 7. The web as a platform - Web 2.0 8. Wireless government Integration 9. Corporate Performance Management (& Government Performance Management) 10. Service Oriented Architectures (SOA)

Not all technology and market trends are consistent

with government and development trends

1. Market consolidation

ERP systems have become bloated understructures that have become too expensive to maintain.
Bruce Richardson,

AMR

Research August 2006

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

SCM

ERP

CRM

BPM

CM

CPM

Siebel Retek PeopleSoft JDEdwards Vantive Triversity


SAP

FRX
Microsoft

GreatPlains Navision Damgaard Axapta Chinadotcom Soloman Scala

SSAGlobal Baan Marcam E-piphany Ironside Infor Mapics Lilly Geac JDA Extensity Comshare Datastream

Oracle

Intentia
Sage

Ross Pivotal

Epicor

Lawson

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?

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
UNU International Institute for Software Technology March 2006
Dr. Mike Reed,

Open Source in Government


Africa Asia and the Pacific South Africa 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 European Union (EU) - Belgium, Bulgaria, Denmark, Estonia, France, Germany, Portugal, Spain, UK Non-EU countries - Ukraine Cities - City of Munich Brazil, Peru, Argentina, Columbia, Mexico, Venezuela 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

Europe

Latin America North America (USA)

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

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

Software Stack
Business Applications Middleware Database Operating System Server Network Storage

Management

Drivers for Commoditization


1. 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 lockedin

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

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 United Nations Global Forum for Reinventing Government
Shabir Cheema November 2006

Devolution Delegation De-concentration Divestment

Budgets
National Government Ministry 1 Provincial Govt

Virements Information

Virements Information

Virements Information

Municipal Govt

Municipal Govt

Municipal Govt

Reporting
National Government Ministry 1 Provincial Govt

Outturn Expenditure Information

Outturn Expenditure Information

Outturn Expenditure Information

Municipal Govt

Municipal Govt

Municipal Govt

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

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

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

What is Business Process Management (BPM)?


Workflow

Design and Development

Orchestration

Business Activity Monitoring

Integration

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

6. Software as a Service (SaaS)

SaaS benefits are crystallizing, but chaos still abounds

Robert Bois, June 2006

Aberdeen Group

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 purposebuilt 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

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

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 OReilly,

OReilly 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

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

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

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

What is Corporate Performance Management?

Reporting
Data Mining Scorecarding OLAP

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


Scenario Planning Budget Planning

Government Objectives

Budget Execution

Budget Forecasting

Budget Review

Performance Monitoring

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

10. Service-Oriented Architecture (SOA)

SOA will make todays ERP systems look like yesterdays mainframe apps.
Bruce Richardson,

AMR

Research August 2006

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

bind

register

discover

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

The Government IFMIS of tomorrow will be:


modular, de-centralized & integrated non-monolithic & multiple vendors wired & wireless commodity & innovative

extend core IFMIS decentralize

measure

Citizen Centric

citizen

Governments will have:


more choices, better choices, proven choices, sustainable choices.

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/1,51 58,1411,00.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/paein ier_forrester.pdf Vision 2010: http://www03.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://wwwwds.worldbank.org/external/default/WDSContentServer/WDSP/IB /2006/04/20/000012009_20060420105118/Rendered/PDF/35924 0PAPER0In101OFFICIAL0USE0ONLY1.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=1 734&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,si d19_gci1230304,00.html?track=NL453&ad=580643&asrc=EM_NLT_1199477&uid=2151015 Does ERP Matter: http://www.infoworld.com/archives/emailPrint.jsp?R=printT his&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/Ser vice_oriented_Architecture/R_and_I/BuildingBlocksPlace.h tm

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