ERP's learning curve

Agencies taking on enterprise resource management projects often find themselves in over their heads, and they are are beginning to turn to government centers of excellence for help.

Doug Bourgeois, director of the Interior Department’s National Business Center, knows the drill. “Invariably,” he said, “the question that such agencies ask when they approach us is, ‘This is bigger and more complex than we thought it was going to be. Can you take it over for us? Can you manage it? Can you host it for us?’
NBC provides ERP services to “between 20 and 30 agencies,” Bourgeois said, several of which have had troubled ERP projects and asked him for help.

He said that, in several cases, he has had to turn down the appeals. Even though his center runs more than 600 servers, taking over the ERP functions of some agencies could involve adding as many as 200 more.

ERP systems form the back-office sinews of federal agencies.

Properly functioning ERP systems provide agency leaders with accurate, detailed financial data quickly, but faulty systems invite management disarray—and punishment by overseers in the Office of Management and Budget, Congress and other agencies.

Building an ERP system or getting outsourced ERP services is a core task for CIOs and CFOs, but it’s a job fraught with peril. Savvy CXOs study the causes of ERP project successes and failures closely.

Career risks

Congress, the Government Ac- countability Office and the media have highlighted expensive ERP project failures in recent years and federal IT managers are aware of the career risks they entail, not to mention the possible effects on agency programs.

Even with the history of failed ERP projects dotting the federal landscape, agencies continue to take them on. Slowly, however, it seems many are taking heed of the lessons of past failures by not “paving over the cow paths” of such well-known ERP implosions as the Defense Department’s Business System Modernization initiative or Homeland Security Department’s Emerge2.

In fact, several agencies either have decided not to take on these large and complex projects, instead using a center of excellence under the Financial Man- agement Line of Business initiative, or to stay true to the best practices garnered over the years.

A well-designed and properly implemented ERP system gathers and presents business information from across agency systems—including finance, human resources and acquisition—and consolidates various apps into a seamless whole, vendors and officials said.

Because every agency has similar requirements that an ERP system can fulfill, OMB is pushing the use of the COEs, also known as shared-services providers.

Bourgeois cites the excellence center model as a means of improving the chances of project success.

“From the perspective of an acquiring agency, using a center of excellence to migrate to an ERP system is a risk-management strategy for the agency,” he said.

While the migrating agency does not have to implement the entire system, it still must make sure its current financial, acquisition and human resources applications integrate with the shared-services provider. This in itself can be challenging enough, experts said.
The NBC operates three types of ERP systems: some based on CGI’s Federal Financial System, which is scheduled for retirement; CGI’s Momentum system; and Oracle Federal Financials. Inter-ior’s center, like its counterparts at the Agriculture Department’s National Finance Center, the Transportation Department and the Treasury Department’s Bureau of the Public Debt, stress the experience they have gained in the field and the economies of scale their centers offer.

The commercial center of excellence business is set to gain momentum as SAP America Inc. of Newton Square, Pa., and IBM Corp. prepare to launch their own, according to Andy Malay, vice president of SAP Public Services. The two companies have joined to prepare a proposal to handle the Environmental Protection Agen- cy’s ERP business.

This would be one of the private sector’s first forays into competition for federal financial-management services.

Just say no

OMB has attached its horse to the COE cart because agencies have paid a bitter price for building their own ERP systems. Sam Mok, chief financial officer at the Labor Department, is familiar with the implementation of ERP systems there and at the State, Defense and Treasury departments. Not one has gone smoothly, he said.

Without a commitment from the department secretary that the chief financial officer has final say, people often seek and get modifications to the system plans, a scenario that increases risk, Mok said. Systems might not operate correctly with too much customization; at the least, the system cannot be repeated and the data standardized across agencies.

“If you look at some of the spectacular system failures, which some CFOs lost their jobs over, and I’ve talked with them, they should have been an SOB and said no [to customization]. They might still be on the job. But if you try to accommodate [requests for customization], at the end, they were left out and hung to dry by themselves,” Mok said.

Fortunately, agencies are moving toward commercial systems and more federal IT leaders are beginning to realize the importance of their support to prevent customization and encourage success, he said.

“They know their career can get tarnished if an installation blows up, so they’re paying a lot more attention,” Mok said.

NBC’s Bourgeois also emphasized the importance of leadership from the top to limit customization.

When they work properly, the benefits of ERP systems become clear almost immediately, experts said—speeding business processes and letting managers assign employees to high-value jobs.

The newer systems help to integrate data across systems, said McCoy Williams, director in the Financial Management and As- surance team at the Government Accountability Office.

But when things go wrong, they are obvious, Williams said. His team typically finds that agencies have not properly identified and tested requirements, and failed to change their business processes.

“Agencies are putting in new systems, but they’re doing things the same way as before,” he said.

“Anytime that you’ve got problems in these systems, management is not getting the data it needs to make the decisions on a day-to-day basis,” Williams said.

The ultimate goal is having an integrated system—not just a collection of uncoordinated computers, policies, processes and procedures, officials said.

“To not have that information can be costly and sometimes it may be difficult to put a dollar value on it,” Williams said. “Other times you can quantify how much it’s costing you and sometimes you can point to qualitative factors.”

GAO’s goal is to highlight those hard lessons so agencies won’t repeat their mistakes, Williams said.

Learn from failures

Donna Ryan, CGI Group Inc.’s senior vice president responsible for the Momentum ERP system, said, “I think usually after an agency has had significant failure, there is a good side to that. Generally they have learned a lot of lessons and by the time they come back to the table, they know what they need to avoid.”

Ryan cited problems with projects’ governance structures—which determine the critical balance between organizational change and software modifications—as the most common reason that projects fail.

“The most valuable lesson they learn when they fail [is to limit customization],” Bourgeois said. “Every organization comes into it the same way, saying, ‘We are unique, we need unique requirements, and the software has to be modified.’ ”

While it sounds simple to not customize a commercial product, agencies still fall into the trap, Mok said.

“There are operational and political pressures. And it is very easy to cave into those pressures,” Mok said.

“At the end, they want to create a horse and they end up with a camel. And everybody ends up unhappy,” Mok said.

From his own experience, Mok advises others to stand strong and do it the right way. “You get everybody mad at you, but when the system comes up, everybody loves you,” he said.


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