Big ERP Players Courting Government Agencies
Those who have been disparaging ERP as a pass technology will have to
do a double take at least in the public sector. There are strong indications
of revived interest, as well as reports of major ERP contracts awarded
to leading ERP players recently by the sector. Incidentally, as reported
by Operations Management on-line on November 13, the Tallahassee-based
Florida Retirement System (FRS) concluded in October its four-month search
for a general ledger system with the purchase of PeopleSoft's General
Ledger. The FRS back-office presently uses two PeopleSoft products and
General Ledger provides the potential for an efficient systems interface,
according to Eric Nelson, director of accounting. FRS has $120 billion
in state pension fund assets.
also won a major ERP deal with the Treasury Department in May in association
with Litton-PRC Inc., a McLean, VA consulting company. Under the $110
million, three-year contract, one of the biggest ERP consulting deals
of the past year, PRC will be implementing PeopleSoft's human resources
software. The software will replace more than 100 legacy systems used
for personnel and payroll throughout Treasury and its 14 bureaus. When
fully operational, the system will manage personnel data and payroll for
more than 160,000 federal employees.
to Washington Technology online from October 23, Oracle
Corp. and SAP Public Sector and Education Inc. have captured important
new federal contracts for ERP, signaling continued strong government interest
in ERP solutions. Oracle, within the past month, won contracts with the
National Institutes of Health and the Small Business Administration. Other
recent wins include the departments of Energy and Veterans Affairs. SAP
Public Sector and Education of Washington, in addition, landed an award
in early October with NASA. That win follows others in recent months,
such as a series of pilot projects with the Navy and a major implementation
as part of the Army Wholesale Logistics Modernization contract held by
Computer Sciences Corp. of El Segundo, Calif.
with Oracle and SAP said they are seeing more solicitations for ERP implementations
than they were a year ago "The year 2000 is behind us, and the government
is now unleashing the requirements for modernizing financial systems and
e-gov is over running everything," said Barbara Bleiweis, director of
federal initiatives for SAP.
financial systems is one of the key steps for moving an agency into electronic
government applications", said Steve Perkins, vice president and general
manager of Oracle Federal. Most agencies are adopting ERP in a piece-by-piece
approach, Perkins said. "No one buys and implements in one fell swoop,"
he said. "Everyone picks a spot to start." "Financial applications are
usually a good place to start because they play an important role in making
electronic government applications work", Bleiweis said.
Oracle's recent wins, only the NIH is implementing a broad range of ERP
software components that include financials, supply chain management (SCM),
advanced planning, asset management and procurement, Perkins said. The
others are concentrating just on back-office applications such as financials,
human resources (HR) and procurement, he said.
NASA, SAP is implementing a single financial system that will replace
10 separate systems. The contract is worth $6.67 million in the first
year. The new system will give NASA more capabilities in managing projects
and their costs and generating financial reports, Bleiweis said.
way the government is approaching ERP is similar to how ERP was adopted
in the commercial world several years ago, Perkins said. Most agencies
are starting in one of three areas: back-office applications; supplier
applications, such as procurement and supply chain management (SCM); or
citizen facing applications, such as customer relationship management
(CRM), he said. Eventually, agencies will be doing all three, Perkins
said. With that in mind, ERP vendors have been taking software they developed
for commercial markets and are adapting it for the government market.
companies such as American Management Systems Inc. (AMS) of Fairfax, VA,
which always has had a strong position supplying financial systems to
federal agencies, have been forming close alliances with software developers
who can bring in new applications. AMS has alliances with Ariba Inc. a
provider of electronic commerce software; Siebel Systems Inc., a maker
of customer relationship management software; FreeMarkets Inc., an online
marketplace for complex acquisitions; and govWorks Inc., a developer of
online government services for citizens.
following the ERP market in the government sector estimate that 70 percent
of federal, state and local governments are looking at implementing some
form of ERP. Part of the reason for the growth potential in ERP projects
is that about half of these agencies still rely on old legacy systems.
While this is certainly exciting news for ERP vendors and consulting companies
who have been sales starved during the last 18 months, they will also
have their work cut out for them. Those who can deliver solutions that
satisfy the exacting, stringent requirements of vertical markets are in
the driver's seat to capture that market segment.
an illustration in this particular case, SAP Public Sector and Education
division has recently announced two new operational modules designed to
enhance delivery of personalized applications to users. The Tax and Revenue
Management module within mySAP.com suite provides federal, state, and
local government agencies tools to automate the tax collection process
by enabling citizens (suppliers, partners, or actual end-users) to conduct
and view financial transactions. Records Management module provides these
same governmental agencies, along with colleges and universities, school
districts, and healthcare providers, with the ability to define records
and cases, workflow execution and monitoring, and electronic signature
and information retrieval capability.
PeopleSoft, Lawson Software, J.D. Edwards, Geac and others all have been
busy delivering or have already delivered similar capabilities. CRM and
additional analytic and reporting requirements are another big issue.
Each of these players will bet on creating an offering addressing e-government
with a strong backbone ERP component. Meeting the public sector's needs
will also require ERP vendors to improve ease of installation, ROI, interoperability,
and service support networks. Moreover, escalating competition in the
market will definitely make price a significant competitive factor.
ERP system certainly remains the backbone of a business. It sets the structure
an organization needs to do business and to communicate with internal
and external users and other organizations. The combination of ERP, supply
chains, and the Internet, or collaborative commerce, is an integration
designed to offer faster and easier access to business transactions as
well as customer and supplier data. To this end, the public sector has
realized the compelling need to modernize its back-office systems under
the umbrella of e-government, namely, to provide citizens access via the
Internet to internal public agencies, processes, and systems. This combination
does not mean that ERP systems become obsolete over night. Quite the contrary,
ERP functionality remains critical. The 'new economy' will not cause the
obsolescence of general ledger or payroll for example. Rather, it may
emphasize the importance of their efficient use. Integration and interconnectivity
are therefore the name of the game in the future.
While users in the public sector are in the driver's seat, the task of
selecting the right provider is by no means simple. There is a cutthroat
competition with no clear market winner yet. Government agencies should
be aware of the fact that they need a reliable back-office system in place
in order to conduct their e-gov business or client relationship management.
Therefore, we encourage them to aggressively inform themselves about vendors'
latest product offerings and vigorously negotiate contract terms. Pay
close attention to vendors' extended ERP offerings and discern hype from
importance of a thorough, well-structured software selection process is
of utmost importance given the fact that mere nuances will determine a
winner. Overlooking any of TEC's six parent business applications evaluation
criteria (Product Functionality, Product Technology, Product Cost, Corporate
Service and Support, Corporate Viability, Corporate Strategy; for more
information, see ERP
Systems Evaluation & Selection Audio Conference) can result in a selection
with disastrous consequences. Users should therefore seek assistance in
the selection process from unbiased service providers, preferably with
experience in public sector or similar industries, and base their decisions
only on existing functionality that the vendors are able to demonstrate
during scripted scenario sessions. Best-of-breed strategy may not necessarily
be a bad option. However, 'bolt-ons' should be selected only from official
business partners of the primary ERP vendor, after making sure that partnership
is not a mere marketing pitch.
64,000-dollar question is how functionality rich these new 'e-gov' modules
are, and how seamlessly they have been integrated with the back-office.
Alternatively, how feasible would the integration with third-party products
be? While vendors' corporate viability remains a crucial factor in any
selection process, it seems as though the most of major ERP players are
going to be around for a significantly long time to come.