- By Charlotte Adams
- Aug 16, 1998
While activity in the federal market for financial applications has been building for several years, changes now are occurring at a rapid rate in terms of the technology being offered and how it is being sold.Financial management system (FMS) software has been an important issue for agencies since 1990, when Congress passed the Chief Financial Officers Act, which required agencies to produce audited financial statements— a requirement that practically presupposes the use of accounting software to track and manage an agency's wide range of financial transactions.
For the past year or so, agencies across government have begun moving from home-grown, mainframe-based FMS applications to commercial off-the-shelf solutions (COTS) that can be deployed in a client/server environment. These agencies are able to take advantage of the new capabilities that FMS vendors are building into their products, adapting business practices to the financial packages they buy, rather than the other way around. But bigger changes may be on the way. The General Services Administration, which administers the government's FMS product contract, this summer announced that it was shifting FMS program management from the Federal Technology Service (FTS) to the Federal Supply Service (FSS), through which most vendors sell COTS products— a move that could change the FMS landscape substantially. The emphasis on COTS reflects a push across government to adopt more commercial financial management practices, observers said.
"There's no question that trends in commercial and government management are coming closer together than ever before," said Sherry Amos, PeopleSoft Inc.'s vice president of industry strategy for education and government. "People are interested in best-practices management."
At present, agencies are required to buy financial applications off the FMS schedule, which features nine vendors with products that GSA has certified (see list at right.) Two popular vendors in the commercial market, PeopleSoft and SAP America Inc., have been adding federal financial features to their wares, with plans to enter the certification process.
Emphasis on Flexibility
One of the major benefits that COTS vendors tout is flexibility. In contrast with older applications, which tended to have a limited and rigid set of functionality, solutions today offer a wide range of functionality from which users can select, depending on their requirements.
For example, Oracle Corp. looks to make its U.S. Federal Financials package easier for agencies to use by expanding the amount of information agencies can convey with a transaction, said Wayne Bobby, director of government financial systems for Oracle Government, Education and Health. Every agency has an "account code string" that describes each transaction, Bobby said. For example, these could list the appropriation, organization and function associated with a transaction. Oracle's U.S. Federal Financials package allows the string to be "up to 30 segments long," while some competing packages are limited to eight segments, he said.
The software's workflow and business rule modeling capability also make it adaptable, said Ken Macomber, a product team leader implementing an Oracle purchasing system at the Federal Aviation Administration. Workflow and business rule modeling enable an organization to tailor the flow of information— such as an invoice— through an organization based on that organization's own rules for carrying out that process.
Of course, such flexibility has its price. The Oracle system is so flexible with its extended account code strings that it "takes a lot of setup," said Marc Montgomery, new business solutions program manager at NASA's Jet Propulsion Laboratory (JPL) in Pasadena, Calif., which is migrating to Oracle's system.
SAP also emphasizes the flexibility of its software. The accounting modules of SAP's R/3, for example, feature some 800 reports, more than 2,000 data elements and more than 300 pre-configured screens. The software's "business engineer" feature "lays out approximately 1,000 business processes we have set up in the system," said Robyn Seaton, SAP's industry segment manager for the public sector.
World Wide Web technology is also increasingly important, both as a graphical user interface and for tools such as invoice-approval processing, said Jean-Luc Alarcon, president of the market research firm Software Product Expertise, Reston, Va.. Oracle, SAP and PeopleSoft already provide both levels of functionality, he said.
American Management Systems Inc. unveiled last spring a Web-enabled version of its client/server-based Momentum Financials, said Harry Barshdorf, vice president of AMS, Fairfax, Va.
Orion Microsystems Inc. will be introducing a Web front end to its GLOWS core financial software this year, said Norman Kanefsky, Orion's president. Besides added ease of use, a browser interface would simplify software installation and support, he said.
To an increasing extent, accounting systems "are being perceived as management, as opposed to administrative, tools," along with other so-called Enterprise Resource Planning (ERP) software, Alarcon said. ERP generally denotes core business applications, such as financials and human resources management.
Developers are building in performance analysis tools with "pre-built templates," he said. SAP, PeopleSoft and Oracle are pursuing the capability, and products should start to emerge later this year. These tools and templates will analyze performance "based on financial and nonfinancial information. They can pull information from in-house applications and databases" as well as from financial packages. The idea is "to enable users and managers— not just accountants— to access directly and in a timely fashion information on how an organization is doing," Alarcon said.
Differing Comfort Levels
Agencies are embracing COTS solutions to different degrees. At one end of the spectrum is the Library of Congress, which takes a cautious approach. At the other end are organizations such as GSA and NASA's JPL, which are opting for full-scale replacement of existing systems.
In 1993 the library moved to AMS' mainframe-based Federal Financial System software, which covers "core" government budget management and accounting requirements, and to AMS' client/server procurement software. But the "technology leap" is not there yet to justify widespread adoption of client/server software for core functions, said John Webster, the director of financial services at the library. In the interim, the library will develop a data warehouse repository that can pull budget and accounting data out of the mainframe for performance analysis and reporting.
GSA, on the other hand, is jumping fully into client/server-based financial management processing. The agency's Pegasys project will replace its legacy mainframe financial system with AMS' client/server-based Momentum Financials, according to William Topolewski, director of GSA's Office of Financial Management Systems.
In keeping with its determination to customize the software as little as possible, GSA stressed open standards and integrated workflow capability as well as federal and agency requirements, Topolewski said. "We're looking at Momentum and saying, 'Why can't more of our business lines operate in this fashion?' " Momentum is being deployed "in the context of a truly re-engineered federal organization," AMS' Barshdorf said.
Nevertheless, there will be some customization, Topolewski said. But modifications will be easier to make because of the software's use of standard C++, open database structures and open application programming interfaces, he said. APIs are "hooks" that allow users to develop additional software that is tightly integrated with the underlying application. GSA also plans to use Momentum's Web support for deployment to field stations, thereby supporting thousands of users.
JPL also is undertaking full modernization of its financial system, moving from mainframe-based software to Oracle's Financials. JPL is following a two-step charter, re-engineering its business processes and supporting them with automated tools, Montgomery said. After picking Oracle, "we balanced the re-engineering around what [the software] could do."
Like JPL, just about every agency must balance the need for customized solutions that meet government requirements with the desire to buy commercial software. GSA's recent decision to change its management of the FMS program raises some questions about the COTS issues, observers say.
FTS' FMS software (FMSS) schedule— the mandatory source for agencies buying financial applications— requires vendors to go through an extensive certification process to show that their software can meet government requirements.
Once the program is folded into FSS, most observers expect that certification process to change considerably, if not go away altogether.
"If this was commodity software," the move "wouldn't be an issue," Barshdorf said. But it is extremely complex and important software, accounting for billions of dollars and "governed by a body of rules and regulations," he said.
The nine vendors on GSA's FMSS schedule were provided with the incentive to invest in meeting federal core financial requirements and yet offer their software at favorable prices, Barshdorf said. With GSA's nonmandatory information technology schedule, such incentives would "not necessarily be the case," and the federal government could be the loser in the form of fragmented vendor accountability and higher procurement costs.
Federal-specific requirements are key to government financial systems, according to Irvin Faunce, a financial systems consultant in Rockville, Md. "The core financial requirements are the heart of any federal system that's going to be built." The trouble with some systems developed primarily for the private sector is that they may have great arms or legs but not a heart, he said.
Developers of more purely commercial software currently outside the FMSS schedule take a more optimistic view.
"There's a mind shift among government managers to look at COTS solutions and take advantage of the business practices incorporated with ERP solutions," said Michelle Cooper, PeopleSoft's federal marketing manager. They see it "as a way of adopting and driving best practices and re-engineering government systems."
PeopleSoft "has focused on serving broad management needs" to support decision-making and is adding federal features to its financials product, with general availability expected next year, PeopleSoft's Amos said. The U.S. Mint, a nonappropriated agency, is already implementing PeopleSoft's Manufacturing, Distribution and Financials product.
SAP also is federalizing its product and has signed several agencies, including the National Credit Union Administration.
AMS, however, foresees a possible "watering down and dilution" of the focus on core federal financial requirements. "No commercial COTS software is flexible enough to do the job," Barshdorf said. "You can't re-engineer an organization so it doesn't do appropriation accounting." The company is "not aware of any large-scale, successful production system being implemented in the federal government with [pure COTS]," he said.
-- Adams is a free-lance writer based in Alexandria, Va. She can be reached at [email protected]