Australia: ERP in government

special report Technology decision makers within the public sector recently voted enterprise resource planning (ERP) projects as one of the most high-value IT projects. According to research undertaken by S2 Intelligence, out of a sample of 495 IT projects, ERP was voted as returning the greatest value more frequently than any other category.

special report Technology decision makers within the public sector recently voted enterprise resource planning (ERP) projects as one of the most high-value IT projects. According to research undertaken by S2 Intelligence, out of a sample of 495 IT projects, ERP was voted as returning the greatest value more frequently than any other category.

Who would've thought? The results are surprising considering ERP has the stigma of being exactly the opposite -- a clunky, expensive system that has been the cause of many a wasted dollar. One that customers keep pouring more money into to try and make this dog of a system that has already cost so much actually return some value.

Take the instance of Launceston City Council. It was running a legacy system called Genesis for finance and payroll. However the company behind Genesis started running into trouble, it had been taken over a few times, and thinking long term, Launceston City Council felt it should replace the package.

The council put out a tender and chose Technology One's Proclaim One software for its property rating system, Great Plains' Empower software for human resources (now owned by Microsoft), Esri for its geo-spatial system, and Dataworks for workflow management. For the financial system, the Council decided to go with Oracle, a company with a strong track record in the public sector.

After a lot of effort put into setting it up, a little while later the Powers That Be in the council decided it

Cranston Gilbert, Launceston City Council
was time to move from Oracle and find something else. Cranston Gilbert of the Launceston City Council was involved in the Oracle implementation, and says the Oracle system was replaced because it was too big for a council with only 25 users, and the version it was using was unsupported.

Asking Gilbert if it was an easy decision to move away from Oracle, he pauses. For others at the council it wasn't a hard decision, but for Gilbert it represented a lot of work going down the drain. -I think it was a tough decision to move from Oracle, we put a lot of effort into setting it up."

He says the implementation was completed over a very short timeframe -- less than three months -- and in retrospect he says it was too short. However it is now more than three years since Oracle was replaced and Gilbert can see how the current system is proving to be more efficient.

The Council replaced Oracle with Technology One's Finance One software, and added an asset management package from MRO Software called MAXIMO. The asset management software has been integrated with Finance One, Empower, and Esri and is being used for purchasing, managing service requests, internal audits, and processing invoices. MAXIMO has actually taken over some of the processes of the previous Oracle system and has cut out some duplication.

When asked about the benefits currently being shown, Gilbert is still cautious. -We still have a long way to go with it. In certain areas we see benefits in it but in others it will be a long haul.

-The disadvantage is integration, it can be quite complex. When we were first sold the solution we were told it would be a seamless integration, and it's not quite as easy as that," he says. -When we have everything sorted out it will be good."

Common problems
The experience of Launceston City Council is probably familiar to more than a few other government entities.

Page II: Phase two of government ERP implementations is set to take off. What can you expect?

The common problems with ERP implementations cover two areas: the scope of the project, and integration. According to Gartner analyst Kristian Steenstrup, some got caught up in the ERP bandwagon and over-invested in ERP when all they really wanted was finance and HR software.

-ERP in government is ERP without the manufacturing...the government departments that use ERP, it was really to pick up finance and HR -- and Oracle and SAP have been the big sellers.

-Some of the reasons why it goes wrong is an ERP system is geared around a high-volume of usage, and if you are a government department then the proportion of people using ERP is much smaller than say in manufacturing, and you end up having a smaller usage of the system," says Steenstrup.

Len Augustine, SAP
Andrew McAdams of Jigsaw Services agrees. Jigsaw Services is an applications consulting company focused on government that has partnered with PeopleSoft and handles government implementations of PeopleSoft's EnterpriseOne and Enterprise products -- formerly JD Edwards' products. McAdams says that government in general tries to bite off more than it can chew. -It wants all the benefit now, instead of building sustainable growth."

The problem with ERP is that it isn't really a quick-benefit type project. Bruce McCabe of S2 Intelligence says ERP is typically a high-risk project due to the scale of the projects, the expense, and the difficulty of implementation. But the trade-off is that ERP also represents high reward when implemented well, says McCabe.

The next step
At the moment those rewards are centred on finance, HR, and payroll, representing the traditional move into ERP by governments. The next step is to extend on the current capabilities and start adding different modules. The large vendors in this space -- SAP, Oracle, and PeopleSoft -- generally agree on what that next step includes: asset management, e-procurement, CRM, and business intelligence.

-In its early releases it started off being around internal processes for a company. They were around optimising your own processes. It makes for more efficient government and results in faster service, but it doesn't show any visible signs like Web sites and CRM systems," says SAP Marketing and Alliances Director, Len Augustine. -The second phase are things like portals, creating data warehouses for transactional information for reporting, and many are now looking at strategic enterprise management."

-[Government] would see it more in the silos of solutions, I don't think they think of it as ERP and I think it is more often referred to as modules, but it is integrating all processes across an enterprise," he adds.

For the software vendors, ERP in government has been a tricky project.

Page III: Phase two of government ERP implementations is set to take off. What can you expect?

Unlike other industries, the software can't be customised for the one industry because the needs and operations of government, from council to council, state to state, and between federal departments, differ. The vendors soon realised that customising a product for government wasn't going to be easy, and they are still learning.

Gartner's Steenstrup says: -The further you go into detailed processes the less suitable it is for government. ERP vendors have been making their capabilities more general so that it is better suited to the administrative type functions -- essentially you have ERP functions that have been extended and adapted for government."

The problem for vendors is that the landscape is changing again, because as government enters the second phase of ERP, the common interests between the three levels of government split even further.

According to McAdams, the drivers behind local government ERP projects stem from wanting to improve the understanding of infrastructure, such as parks, roads, etc, and taking services online. Whereas at the state and federal levels, McAdams say the focus is -often about facilitation, it tends to focus on human capital management, and there is a strong focus on CRM and responding to clients".

With two different ERP avenues, vendors are responding by creating different versions of their software. Oracle for instance, after suffering a few losses in local government (Launceston City Council is one example), has since launched a special edition of its E-Business suite, packaged especially for smaller companies. It has also introduced an asset management package -- a module popular in local government. Since then the company has had success with Cairns City Council (previously operating on legacy systems, the council has replaced it all, from finance to asset management, with Oracle's E-Business suite on Dell Linux servers) and the University of Technology, Sydney.

PeopleSoft offers both Enterprise and EnterpriseOne-branded software, the latter aimed at companies with a revenue of less than $250 million with an emphasis more on construction and asset management. A few months ago, Jigsaw Services and PeopleSoft announced a deal with five councils to deliver EnterpriseOne, mainly for its asset management capabilities. The councils involved were South Australia's City of Unley, Western Australia's City of Swan, Queensland's Gladstone City and Livingstone Shire councils, and Thames Coromandel District in New Zealand.

And SAP has just released a set of quick fix packages called SAP Direct for its enterprise software and services, with the ERP add-on focusing in integration help.

However for such a dynamic industry ERP vendors seem to be moving slowly on this. It could be argued that more is needed than just repurposed software. Certainly you have to wonder about those overblown government ERP projects -- the fault can't entirely lie with the customer, after all the vendor is the supposed expert on the product and should realise what the customers' needs were before selling the product. McAdams believes that government so far has been poorly led. -In general, vendors haven't provided strong leadership," he says.

A cynical person could argue that when the market is hot, vendors can afford to pay little attention to actually helping a customer, however when sales start to plateau you need to rely more on word-of-mouth and a good reputation. When the first phase of ERP started dying down is probably when the idea to repurpose the software came in. The problem is that the second phase of ERP is looking to be a high point.

Gartner says ERP licence revenue in Australia alone was US$82.8 million in 2002. During the same period CRM was worth US$47.2 million. Jigsaw's McAdams thinks the ERP market is -only just starting to warm up now".

-Victoria will be spending $320 million on IT in health only," says McAdams. -We sold 16 sites last year. Business picked up on technology as an enabler in the mid-90s but government has taken a period of time."

-There is a very simple way of looking at it -- the generation of people coming out of uni are happy handling everything on the Internet, so this service delivery in government is just getting started," he adds.

With a second bout of ERP coming up, you can only hope veterans of the first installment have learnt some lessons. McAdams says the common problem he comes up against, particularly in councils, is too many decisions being made by too many people, and a lack of leadership. While ERP vendors can surely do more to help customers through the process, there really is only so much they can do. This means government customers need to be across the technology and know how to manage a project.

Thinking back on the problems experienced at Launceston City Council, Gilbert has this bit of advice to pass on: -Don't underestimate the work involved."