2009 11 business case for ‘erp’ in government

Business Case for Business Case for ‘ERP’ in ‘ERP’ in Government of Government of CanadaCanada

Business Case for Business Case for ‘ERP’ in ‘ERP’ in Government of Government of CanadaCanada

www.fmi.cawww.fmi.caNovember 25, 2009November 25, 2009Doug HaddenDoug HaddenVP ProductsVP Products

www.fmi.cawww.fmi.caNovember 25, 2009November 25, 2009Doug HaddenDoug HaddenVP ProductsVP Products

Clarification

Original session:• Business Case• NRCAN –

Government of Canada Department

• SAP Implementation• ERP (Enterprise

Resource Planning)• New TBS Investment

Planning Policy

This session:• Government Case• FreeBalance – a

vendor selling to the Government of Canada

• FreeBalance, not SAP

• GRP (Government Resource Planning)

• Huh?

introduction

Goals

• Articulating Benefits– “Value for money and demonstrating sound

stewardship in program delivery.”

• Total Cost– “Demonstrable life cycle management best

practices”

• Project Governance– “An appropriate capacity for managing

projects, which reflects the level of project complexity and risk”

introduction

Point of view

• Articulating Benefits– More potential = harder to measure

• Total Cost– ERP lifecycle cost persistent

• Project Governance– Project complexity is high– Risk is high

introduction

ERP functional footprint

Propertymanagement

Salesforceautomation

Financialmanagement

Humanresources Compliance

Projectmanagement Product

managementQuality

management

Asset &maintenancemanagement

Production &plant

management

Field service/post-market

support

Ordermanagement Procurement

Inventory &warehouse

management

Distribution,transportation,

& logistics

Reporting and analytics

CRM applications Supply chain applications

Enterprise

Customers Suppliers

introduction

1Forrester

ERP Value Problem1

• Costs well understood• Value is not

introduction

1Aberdeen

With budget pressures, governments are looking for effective ways to quantify the return on IT investments. Private-sector methods are a good start,

but not the solution.

Gartner July 2003

Return on the Total Cost…

• Alphabet soup of T.L.A.s• Many created or promoted by vendors• So, you can really trust the vendor

perspective

value

ROI

EVA ROA

TCOIRR

+ statistics1

0

10

20

30

40

50

60

BusinessProcess

Improvements

CostReduction

CustomerDemands

BetterDecisions

EmployeeProductivity

Compliance

1Q'06

4Q'06

4Q'07

1IDC

value

Benefits Balance

Efficiency

ProductivityEffectiveness

value

Benefits Balance

Efficiency

ProductivityEffectivenessTransform

value

Capacity Balance

Capacity

Efficiency

ProductivityEffectiveness

value

Benefits Value

Capacity

People areMoney

Decisionsare

Money

Time isMoney

value

Sample Approaches

Efficiency

Capacity

ProductivityEffectiveness

CPM

BPM

Outsourcing

value

Efficiency Benefits

• Reduce Costs– Paper– Power/utility – Maintenance – Information

Technology

• Throughput: – Net Days

Outstanding– Auditing & reporting– Eliminating errors – Service levels– Lowers costs

through faster payments

– Transaction timesEfficiency

value

Time isMoney

ERP Value Portfolio Argument

value

(1 x ERP) < (n x BOB)

ERP Value Portfolio Argument

value

(1 x ERP)- (IT Costs) > (n x BOB)- (IT Costs)

integration

Productivity Benefits

• Leveraging Automation– Reduce low value, repetitive– Increase high value, variable

• Public Service– Personnel optimization & scalability– Grow without adding personnel– “do more with less”

Productivity

value

People areMoney

Effectiveness Benefits

• Cost Reduction +– Spend management

• Compliance– Improved management & financial controls– Clean audits

• Performance – Key performance indicators– Improved managerial decisions– Better goal linkage

Effectiveness

value

Decisionsare

Money

Transformation Benefits• Service Delivery

– Process innovation– Improved mandate achievement– Higher “customer” satisfaction

• Public Service– Employee recruitment– Employee satisfaction– Promote and mentor top performers– Program objectives

• Transparency– Confidence– From service delivery to participation

Transform

value

Problem with Articulating Transformational Benefits

• Holistic view • Difficult to articulate• Intangible• Lack of proven measurements• Causality• Crystal ball

• No objective measurement like Profit

Transform

value

Personnel Reduction Redeployment

Inventory Reduction

Productivity Improvement

Faster Financial Close Cycle

Service Order Management

Cycle Time Improvement

Procurement Cost Reductions

IT Cost Reduction

Cash Management Improvement

Revenue Enhancement

Maintenance Cost Reduction

Typical ERP Benefits

Improved Information

Visibility

New/Improved Processes

Improved Customer

Responsiveness

Standardization

Integration

Improved Cost Structure

Greater Flexibility

Tangible Benefits Realized Intangible Benefits Realized

value

1Deloitte

First Generation of Public Financial

Management Automation

to 2006

Silos

Second Generation of

Public Financial Management Automation2009 – 2013

ParticipationCollaboration

Transformation

Strategic Inflection

Point2006 - 2009

Integration

value

ERP Footprint

internal external

socia

lstru

ctura

l

government 2.0

“back-office” e-government

value

The Secret of Total Cost of Ownership

• Product acquisition • Software implementation • On-going costs• Total TCO over 5 years can be 5 times

the initial cost for software

cost

The Secret of Total Cost of Ownership

• Product acquisition – Needs + planning phase costs– Computing hardware, networking and

bandwidth – Middleware & Application– Software license costs

• Software implementation • On-going costs

cost

The Secret of Total Cost of Ownership

• Product acquisition • Software implementation

– Internal and consultant costs to articulate & adapt processes

– Installation, provisioning and set up – Middleware configuration– Configuration and customization costs- change– Phased implementation including pilot, testing and

analysis– Technical & Functional Training– Development of any special documentation – Project management “overhead”

• On-going costs

cost

Software to Services Ratios1

1

5

1

15

0

2

4

6

8

10

12

14

16

Commercial Government

Software

Services

cost

1Office of Management + Budget

The Secret of Total Cost of Ownership

• Product acquisition • Software implementation • On-going costs

– Multi-year life-cycle maintenance costs – Internal personnel providing internal support. – System tuning of databases – Changes to configuration, reports or forms.– New fiscal year processing – Upgrading to a new versions – Additional roll-out of modules

cost

Typical Enterprise Software Acquisition Cost1

Total Software

Costs

22%

Computer

Hardware and

Networking

20%

Internal costs

22%

Consultants for

Implementation

36%

cost

1Averaged across many published reports

Change- the gift that keeps on giving11IDC

cost

0

10

20

30

40

50

60

Need ExtraFunctionality

Changes inBusiness Process

Change inReporting+

Analysis

Change in BusinessInfo Req's

Mistakes Other

66% of all IT projects either fail outright or take much longer to install

than expected because of their complexity.

The Economist October 2004

Disappointing Industry Results1. 40% of enterprises exceed time and budget

estimates > 50%2. ERP technology to business benefits rated

D+3. 15% large implementations failed 4. 51% were over budget, over schedule or

under delivered. 5. Half of all respondents incur additional

costs after implementing financial applications

6. Only 41% of companies have achieved the majority of targeted benefits from their ERP systems

7. Fewer than a third of enterprise decision makers would recommend their ERP vendor to another company

1. Gartner Group

2. Peerstone3. Standish4. BearingPoint5. IDC6. Accenture7. Yankee

Group

risk

Governance + Risk

Risk Private Sector

Risk Government

risk

Risk factors in Government

1. Political

2. Political

3. Political

risk

Risk is Good

RISK ~ REWARD

risk

Risk Factors

political

tech

nica

l

GOVERNMENT CHANGE

MANAGEMENT

risk

Change Management Risks

• Generic/Standard vs. Customized/Unique• Evolution vs. Revolution• Government Implementation Experience

• Treasury Board Investment Planning Policy

+ Critical Success Factors

+ Project Governance

~ Change Management

risk

Good Practices

• Vendor Success Stories?• IT Analyst Recommendations?• Vendor Selection Process?1

• Local Cluster Groups?• Financial Management Conferences?

– FMI– AGA– ICGFM

risk

1Forrester

Governance

Risk Private Sector

Risk Government

risk

capacity building

communi-cations

staged

RISK ~ REWARD

sustainable

politics is communications

ERP- Long-Term View1

0

50

100

150

200

250

300

350

400

450

500

Ben

efit

s ($

M)

Phase II Phase III

IT Operating Expense Reduction

Business Operating Expense

Reduction

Additional Net Income

Reduced Materials Costs

2/3 of B

enefit

1. AMR Research

Cost of Consolidation

conclusion

Capacity Balance

Capacity

Efficiency

ProductivityEffectiveness

conclusion

Transformation

Sustainability

Point of view

• Articulating Benefits– Easy – US DOD discovers– Hard – Transformational

• Total Cost– ERP lifecycle cost persistent

• Project Governance– Complexity risk– Government change management

conclusion

• www.freebalance.com/blog