The Hidden Costs of Not Staying Current

Well-run governments promote financial transparency, accountability and decision-making that’s based on good data. Finance staff are often in charge of supplying that data in a timely manner — whether it is for the budget process, program analysis, budget control or satisfying routine requests for information.

If you could take a look behind the scenes, you’d see the extraordinary efforts that go into processing, tracking, managing, manipulating and ultimately reporting that information.

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• Old technology likely to produce poor results
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More and more governments are now completing these tasks using tools offered by modern enterprise resource planning (ERP) systems, yet many still rely on antiquated software technology from 15, 20 or even 25 years ago.

Meeting modern public-sector needs with decades-old technology isn’t easy. Systems must be flexible and able to handle an increasing amount of work so they can respond to changes in accounting rules, expectations for service delivery and the sophisticated operations that most governments run.

Managers, executives, elected officials and even the public also expects data to be readily available and usable. Overcoming outdated technology’s substandard functionality and shortcomings requires government staff to maintain and support a patchwork of old databases, legacy code and hundreds or even thousands of Excel spreadsheets, held together by the technological equivalent of tooth picks and duct tape.

Today, in a world where cell phones are discarded after two years and the computing power in everyday devices can outperform just about anything available a decade ago, it is remarkable that many organizations still rely on “green-screen technology” from the early 1990s to process payroll, manage their budgets and perform the thousands of other routine transactions that power local government.

Even organizations with up-to-date maintenance and support for their ERP systems wrestle with the challenges of time. For example, many governments stick with the original scope of the implementation of their system, seldom activating or implementing new functionality.

Similarly, some governments struggle with decisions that were made during the initial implementation or with being trapped by sub-optimum configuration decisions that restricted the full use of the system. Just as a 20-year-old car that has been maintained to the manufacturer’s recommendation is not the same as a new car, a 20-year-old system with all the regular maintenance packs and upgrades is not the same as a new system.

A modern, well-run organization requires a modern ERP system to provide a solid foundation for integrated functions, efficient processing of transactions, improved service levels, automated business processes, strong internal controls and the use of data across the organization.

Implementing such a system is a large undertaking that requires commitment and effort from across the entire organization. While the most visible outcome is a new system, no ERP system implementation is primarily about the software. It’s about the policies and business process that the system supports.

Over the past 20 years, GFOA has been involved in more than 500 ERP readiness and implementation projects, and we have seen both the good and bad.

A simple Internet search on “ERP implementation failures” will provide more than enough examples to clearly demonstrate the challenges involved in these projects, but they don’t all end with delays, cost overruns, missing scope, unmet needs, burntout employees or lawsuits.

The fact is that many organizations have been extremely successful in using the ERP projects as an opportunity to transform their organizations, adopt best practices, improve efficiency, provide more effective services, and better promote financial management outcomes.

When correctly managed with effective service-level agreements, deploying an ERP system in the “cloud” can decrease ongoing costs, reduce the technical staffing effort, and mitigate technical and security risks.

Officials who are supporting or overseeing an ERP project need to understand that modernizing an ERP system is a significant investment in the organization’s financial management infrastructure. The benefits you’ll receive from the project are directly related to the work that goes into it.

To be successful, focus on best practices in change management, process improvement, project management and organizational governance. Based on our experience with ERP systems, GFOA has also identified a few critical lessons:

• Analyze business processes and define requirements. All projects should start out with clearly defined goals and requirements that are based on the individual government’s processes, well understood by both the government and the vendor, and continuously tracked throughout the project. It’s also critical that requirements, processes, and decisions are documented. The project team should be held responsible for demonstrating that all requirements and project goals have been completed.
• Ensure proper staffing. Vendors that claim to have uncovered the secrets to an “easy” ERP project are selling a fantasy. All ERP projects should clearly identify sufficient staffing levels, and organizations must be prepared to commit staff and potentially back-fill existing positions.
• Ask difficult questions. To avoid repeating bad processes in a new system, organizations must be prepared to bring in new ideas, to challenge the status quo, and to engage in discussion and debate about future policies and business process.
• Hold the vendor accountable. Vendors that sell the benefits of an ERP system need to be held accountable for delivering their products and services. This includes milestone-based pricing, a warranty on the project requirements, clear criteria for system and deliverable acceptance, and service-level agreements.

Old technology likely to produce poor results

A government that operates an old, outdated technology is probably experiencing some or all of the following inefficiencies behind the scenes, as staff works to satisfy the information needs of department heads, executives, elected officials and the public:

• Redundant entry of data and duplication of effort
• Unnecessary paper-based processes that require significant manual intervention
• Excessive use of shadow systems to track critical data
• Significant time spent reconciling errors
• Inconsistent application of policies and controls
• Inconsistent, fragmented, or incomplete data
• A high number of interfaces or customizations, and
• Outdated processes that fail to take advantage of new standards and expectations.