Modular solutions play well

The operative word for enterprise resource planning vendors targeting the federal market is "modular."

They have unbundled their once tightly integrated suites and are more often selling individual components, while looking to lure back organizations with an array of follow-on applications that include Web-based back- and front-office applications, such as e-procurement and customer relationship management.

Pegged at $19.8 billion last year, worldwide ERP sales will reach $31.4 billion in 2006, AMR Research Inc. estimates.

That growth is spurred mostly by new offerings, not traditional back-office functions such as finance, human resources and logistics, said John Hagerty, vice president of enterprise management service at AMR Research.

In the federal space, ERP has not been "as widely embraced," said Ray Bjorklund, vice president of consulting services at Federal Sources Inc., a market research firm.

Regarded as largely commercial in focus, ERP has "never been quite a good fit for a lot of government operations," he said.

However, the tools seem to be gaining grudging acceptance. "Virtually every vendor has intensified their focus on the public sector," Hagerty said.

The applications have become "more modular, more user-friendly" but still require "you to change the way you do business," Bjorklund added. "In some respects, the federal government has decided to change the way [it does] business, so [it] can use these automation tools."

Agencies may be relenting, but obstacles remain.

"The technology is no longer the challenge — it is getting the culture to accept change...and then take advantage of" it, said Ron Sullivan, vice president and general manager of PeopleSoft Inc.'s federal sector. Agencies often have to be shown not only the potential cost savings, but also how the applications can help "provide better service to citizens."

The acquisition process can also be troubling for vendors. Requests for proposals tend to stress "meeting requirements in traditional ways," Sullivan said, adding that often, the advantages of Web-based applications are best observed by looking "outside the box."