E-gov push spurs steady growth in federal market
The term "enterprise resource planning" may have become passe, but the federal ERP market is still quite healthy, according to a study by Input, a market research company.
ERP software automates such classic business operations as managing finances, human resources and payrolls. An analysis by Input shows that the federal ERP market will grow by nearly 9 percent annually during the next five years, reaching almost $1.8 billion and encompassing 4 percent of all federal IT spending by 2005, even as the ERP market in general remains sluggish. Spending on professional services, such as consulting and integration support, represents more than 50 percent of ERP spending and will continue to grow faster than software, hardware or maintenance spending, exceeding $1 billion by 2005, according to Input forecasts.
Although federal agencies are deploying ERP software to automate and streamline internal business processes, said Cathy Vlassis, a marketing representative at Input, the government still has many legacy systems that cannot provide required data or share information with other organizations.
Citizens are demanding a certain level of customer service through e-government, and that is driving the need for up-to-date, interoperable systems, she said. Such back-end systems are "an important part of being ready to implement electronic-government initiatives."
"Today's focus on e-government and Internet-enabled service to citizens has made ERP an outdated term," according to Input's report. "Yesterday's "ERP' vendors are today's "e-solution' providers, extending their application footprints beyond enterprise-centric, back-office functions to front-end systems that enable collaboration with citizens."
ERP may have broadened in scope, but the concept has remained relatively consistent. The Input analysis included typical ERP components — such as applications for managing finances, human resources, procurement and travel systems — but it did not include customer resource management or e-business applications.
"The ERP vendors are selling much broader electronic solutions than they were a few years ago," Vlassis said, but agencies are still struggling to automate and streamline their internal business processes.
Zip Brown, vice president of the e-government solutions group at American Management Systems Inc., said there is a strong market for financial management systems, which are seen as a cornerstone of improved agency management.
The future of the federal ERP market will largely depend on the success of current implementation efforts. ERP systems have shown mixed results, she said.
Conscious of earlier ERP failures, agency managers are developing projects that are more focused and more closely tied to the agency's mission, according to the Input report "Federal ERP MarketView."
So far, agencies have received mediocre financial management grades from Rep. Stephen Horn (R-Calif.), chairman of the House Government Reform Committee's Government Efficiency, Financial Management and Intergovernmental Relations Subcommittee. In his most recent report card, the former university president gave the federal government an overall grade of C-minus.
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