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 in person, e-mail me at [email protected]

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 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

Government Objectives Modernization and Reform Public Financial Management IFMIS Technology

Technology Vendor Viewpoint

Technology IFMIS t emen s ctive anag d Reform nt Obje rnization an al M anci Fin Governme Mode Public

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 BPM CPM CM CRM

Siebel Retek PeopleSoft JDEdwards Vantive Triversity SSAGlobal Baan Marcam E-piphany Ironside Mapics Lilly Geac JDA Extensity Comshare Datastream Epicor Microsoft Oracle Chinadotcom Lawson GreatPlains Sage Navision Damgaard Axapta Soloman 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?

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…

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

Open Source in Government

Africa Asia and the Pacific Europe Latin America North America (USA) 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

Drivers for Open Source

• • • •

Software commoditization

- lack of incremental benefits in commercial infrastructure software

Government self-reliance

– reduce national technological dependence

Cost and choice -

compliance

Future proofing

cost for license

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

Drivers for Commoditization

1.

2.

Standards

= – Ability to interchange middleware – Lower cost from vendors

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 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

Shabir Cheema United Nations Global Forum for Reinventing Government November 2006

Devolution Delegation De-concentration Divestment

Budgets

National Government Provincial Gov’t Ministry 1

Virements Information

Municipal Gov’t

Virements Information

Municipal Gov’t

Virements Information

Municipal Gov’t

Reporting

National Government Provincial Gov’t Ministry 1

Outturn Expenditure Information Outturn Expenditure Information Outturn Expenditure Information

Municipal Gov’t Municipal Gov’t Municipal Gov’t

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 =

countries more stable

Reduce waste and corruption

Current Situation

• • • •

Conflicts

with computing trend to integration (centralization) Clear trend:

devolution

continent on every Local capacity and sustainability issues Difficulties in extending governance

existing solutions with

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

customization ERP after • • 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, Aberdeen Group June 2006

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

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

BitTorrent, Wikipedia : blogs, wikis, AJAX, RSS, REST, SOAP, VOIP, podcasting, Skype,

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

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 today’s ERP systems look like yesterday’s 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

register bind 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

core IFMIS decentralize extend measure

Citizen Centric

citizen

Governments will have: more choices, better choices, proven choices, sustainable choices.

[email protected]

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://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/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=NL 453&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

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