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Slide 1: New Technologies for Public Financial Management May 2007 ICGFM
Slide 2: 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
Slide 3: How computer technology trends today are defining government Integrated Financial Information Management Systems (IFMIS) of tomorrow
Slide 4: Agenda • Market and technology forces affecting Public Financial Management (PFM) • Technology and PFM reform • 10 key technology and market trends • Conclusions
Slide 5: 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
Slide 6: 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
Slide 7: Technology in Context Government Objectives Modernization and Reform Public Financial Management IFMIS Technology
Slide 8: Government Objectives Modernization and Reform Public Financial Management IFMIS Technology Vendor Viewpoint Technology
Slide 9: Reality • Reform comes first • An IFMIS must support on-going PFM modernization • Technology enables the IFMIS • Technology is not government modernization
Slide 10: The four computer and market technology forces of today that are defining Government IFMIS of tomorrow…
Slide 11: 1. Consolidation
Slide 12: 2. Disintegration
Slide 13: 3. Innovation
Slide 14: 4. Integration
Slide 15: 10 Technology Trends Consolidation 1. Enterprise software consolidation 2. Open source software 3. Commoditization of the software stack Disintegration 1. Decentralization 2. Business process management 3. Software as a service (SaaS) and shared services Innovation 1. The web as a platform - Web 2.0 2. Wireless government Integration 1. Corporate Performance Management (& Government Performance Management) 2. Service Oriented Architectures (SOA)
Slide 16: Not all technology and market trends are consistent with government and development trends
Slide 17: 1. Market consolidation ERP systems have become bloated ‘understructures’ that have become too expensive to maintain. Bruce Richardson, AMR Research August 2006
Slide 18: 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
Slide 19: Enterprise Software Market SCM ERP CRM BPM CPM CM
Slide 20: 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 Sage Intentia Ross Pivotal Epicor Lawson Accpac Best Mas 90/200 Peachtree Timerline
Slide 21: 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
Slide 22: 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?
Slide 23: 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,
Slide 24: 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)
Slide 25: 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
Slide 26: 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
Slide 27: 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
Slide 28: Software Stack Business Applications Middleware Database Operating System Server Network Storage Management
Slide 29: 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
Slide 30: 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
Slide 31: 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
Slide 32: Devolution Delegation De-concentration Divestment
Slide 33: Budgets National Government Ministry 1 Provincial Gov’t Virements Information Virements Information Virements Information Municipal Gov’t Municipal Gov’t Municipal Gov’t
Slide 34: Reporting National Government Ministry 1 Provincial Gov’t Outturn Expenditure Information Outturn Expenditure Information Outturn Expenditure Information Municipal Gov’t Municipal Gov’t Municipal Gov’t
Slide 35: 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
Slide 36: 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
Slide 37: 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
Slide 38: What is Business Process Management (BPM)? Workflow Design and Development Orchestration Business Activity Monitoring Integration
Slide 39: 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
Slide 40: 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
Slide 41: 6. Software as a Service (SaaS) SaaS benefits are crystallizing, but chaos still abounds Robert Bois,Aberdeen June 2006 Group
Slide 42: 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
Slide 43: Drivers for SaaS • High cost to maintain complex software and infrastructure – Licenses – Upgrades – Networks – Databases • SaaS supports fast growth • Attractive for smaller organizations
Slide 44: 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
Slide 46: 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
Slide 47: 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 • •
Slide 48: 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
Slide 52: 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
Slide 53: 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”
Slide 54: 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
Slide 56: 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
Slide 57: 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
Slide 58: 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
Slide 59: 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
Slide 60: 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
Slide 61: What is Corporate Performance Management? Reporting Data Mining Scorecarding OLAP Budget Planning
Slide 62: 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
Slide 63: 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
Slide 64: 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…
Slide 65: Performance and Budget Scenario Planning Budget Planning Government Objectives Budget Execution Budget Forecasting Budget Review Performance Monitoring
Slide 66: 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% • • • •
Slide 67: Current Situation • Mixed – Capacity issues – Improvements in MTEF – Remains output focused – Better results in projects yet… • Commercial performance management software not budget centric
Slide 68: 10. Service-Oriented Architecture (SOA) SOA will make today’s ERP systems look like yesterday’s mainframe apps. Bruce Richardson, AMR Research August 2006
Slide 69: 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
Slide 70: Web Services bind register discover
Slide 71: Current Situation • Proven practical in Web 2.0 • Business software: – Early & emerging – Rapid momentum • Revolutionizing enterprise software – Therefore… • Technical issues being solved
Slide 72: Conclusions
Slide 73: 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
Slide 74: Modular
Slide 75: and Modular
Slide 76: The Government IFMIS of tomorrow will be: modular, de-centralized & integrated non-monolithic & multiple vendors wired & wireless commodity & innovative
Slide 77: extend core IFMIS decentralize measure
Slide 78: Citizen Centric citizen
Slide 79: Governments will have: more choices, better choices, proven choices, sustainable choices.
Slide 80: dhadden@freebalance.com
Slide 81: 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
Slide 82: Recommended Links • • • • • The Future of Software: http://www.forrester.com/Teleconference/Previous/Overview/1,5158,1411,0 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_forres Vision 2010: http://www-03.ibm.com/industries/education/doc/content/bin/IBM_BCS_Whi Information and communications for development 2006 : global trends and policies: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/I • Web 2.0 in Business: http://www.mckinseyquarterly.com/article_abstract.aspx?ar=1913&l2=13&l3
Slide 83: 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_gci1 Does ERP Matter: http://www.infoworld.com/archives/emailPrint.jsp?R=printThis&A=/a The Building Blocks of a Simpler Future are in Place http://www.accenture.com/Global/Services/By_Subject/Service_orie