New Technologies for Public Financial Management

1. New Technologies for Public Financial Management May 2007 ICGFM

2. Preface • Slides have been updated with the script used for ICGFM (see notes pages) • Additional information sources slides have been added at the end of the presentation • For discussion, clarification, or expansion of concepts or desire to have custom presentation provided via WebX or in-person, e-mail me at dhadden@freebalance.com

3. How computer technology trends today are defining government Integrated Financial Information Management Systems (IFMIS) of tomorrow

4. Agenda • Market and technology forces affecting Public Financial Management (PFM) • Technology and PFM reform • 10 key technology and market trends • Conclusions

5. ICT makes a country’s economy more efficient and globally competitive, improves health and education services, and creates new sources of income and employment for poor people. World Bank,April 2006

6. IFMIS in Government Today • Typical Solutions • Custom-developed or bespoke • Enterprise Resource Planning (ERP) • Specialized government IFMIS applications • Typical Difficulties • Inflexibility to adapt to reform and decentralization • Sustainability by government ICT staff • Integration between budget execution and accounting • Integration between front-office and back-office

7. Government Objectives Modernization and Reform Public Financial Management IFMIS Technology Technology in Context

8. Technology Technology Vendor Viewpoint IFMIS Public Financial Management Modernization and Reform Government Objectives

9. Reality • Reform comes first • An IFMIS must support on-goingPFM modernization • Technology enables the IFMIS • Technology is not government modernization

10. The four computer and market technology forces of today that are defining Government IFMIS of tomorrow…

11. 1. Consolidation

12. 2. Disintegration

13. 3. Innovation

14. 4. Integration

15. 10 Technology Trends Consolidation • Enterprise software consolidation • Open source software • Commoditization of the software stack Disintegration • Decentralization • Business process management • Software as a service (SaaS) and shared services Innovation • The web as a platform - Web 2.0 • Wireless government Integration • Corporate Performance Management (& Government Performance Management) • Service Oriented Architectures (SOA)

16. Not all technology and market trends are consistent with government and development trends

17. 1. Market consolidation ERP systems have become bloated ‘understructures’ that have become too expensive to maintain. Bruce Richardson, AMR ResearchAugust 2006

18. What is Enterprise Software? • Many acronyms: • ERP (Enterprise Resource Planning) • SCM (Supply Chain Management) • CRM (Customer Relationship Management) • CM (Content Management) • CPM (Corporate Performance Management) • BPM (Business Process Management) • and many others

19. Enterprise Software Market SCM ERP CRM BPM CM CPM

20. Siebel Retek PeopleSoft JDEdwards Vantive Triversity SSAGlobal Baan Marcam E-piphany Ironside Mapics Lilly Geac JDA Extensity Comshare Datastream Siebel Retek PeopleSoft JDEdwards Vantive Triversity SSAGlobal Baan Marcam E-piphany Ironside Mapics Lilly Geac JDA Extensity Comshare Datastream FRX GreatPlains Navision Damgaard Axapta Soloman Scala Intentia Ross Pivotal Accpac Best Mas 90/200 Peachtree Timerline Chinadotcom Microsoft Lawson Oracle Epicor Sage Infor SAP FRX GreatPlains Navision Damgaard Axapta Soloman Scala Intentia Ross Pivotal Accpac Best Mas 90/200 Peachtree Timerline

21. Drivers for Consolidation • Lack of organic growth • Shareholders want companies to invest in more growth • Perception that big = winning • Maintenance business model • Buy customers • Own customers: barriers to entry • Lack of value for upgrading

22. Current Situation • Survival of the fittest? • Pressure to enter new horizontal and vertical markets • New stack wars • SME market • Emerging markets • Overlapping technology portfolio • Consolidators attempting economies of scale • Customer satisfaction?

23. 2. Open Source Software The growth of free, open-source software presents developing countries with an opportunity to escape from technological dependence on developed countries, but also a challenge to build up local expertise… Dr. Mike Reed, UNU International Institute for Software Technology March 2006

24. Open Source in Government

25. Drivers for Open Source • Software commoditization - lack of incremental benefits in commercial infrastructure software • Government self-reliance – reduce national technological dependence • Cost and choice - cost for license compliance • Future proofing

26. Current Situation • Rapid uptake in emerging countries • Proven performance and reliability • Infrastructure middleware success • Java EE, Apache, MySQL, Linux, JBoss, Tomcat, OpenOffice • Some assembly required • Usability issues • Market volatility • Not established in business applications

27. 3. Commoditization of the software stack Middleware – the layer of software used to connect two applications or to connect an application to the network – is approaching a commodity state. Patrick Carey and Bernard Gleason, Vision 2010 – Future of Business Software Applications August 2005

28. Software Stack Business Applications Middleware Database Operating System Server Network Storage Management

29. Drivers for Commoditization • Standards= • Ability to interchange middleware • Lower cost from vendors • Market maturation • more and more functionality in middleware driving costs down • Application vendors want to be middleware neutral • Customers do not want to be locked-in

30. Current Situation Accelerated Commoditization • Price pressure on middleware • Middleware standards are being set by governments (USA: F.E.A.) • Many governments developed open source middleware policies • On the Internet, no one knows what middleware you are running

31. 4. De-centralization, including political devolution, de-concentration, delegation, and transfer to non-governmental organizations, promotes democracy and good governance by providing an institutional framework to bring decision-making closer to the people Shabir Cheema United Nations Global Forum for Reinventing GovernmentNovember 2006

32. Devolution Delegation De-concentration Divestment

33. Ministry 1 Virements Information Virements Information Virements Information Budgets National Government Provincial Gov’t Municipal Gov’t Municipal Gov’t Municipal Gov’t

34. Outturn Expenditure Information Outturn Expenditure Information Outturn Expenditure Information Reporting National Government Ministry 1 Provincial Gov’t Municipal Gov’t Municipal Gov’t Municipal Gov’t

35. Drivers for De-centralization Administrative Decentralization • Improve government efficiency and effectiveness = improve outcomes • Large % of government budgets deployed locally • Local and cultural autonomy Fiscal Decentralization • Improves participation = more stable countries • Reduce waste and corruption

36. Current Situation • Conflicts with computing trend to integration (centralization) • Clear trend: devolution on every continent • Local capacity and sustainability issues • Difficulties in extending governance with existing solutions

37. 5. Business Process Management Success with BPM also requires a culture of real-time management .. and may need a separate process center of excellence. Gartner GroupFebruary 2006

38. Workflow Business Activity Monitoring Design and Development Orchestration Integration What is Business Process Management (BPM)?

39. Industry Drivers for BPM • Maximizing efficiency - workflow and integration enables greater automation • Difficulties in adapting ERP after customization • Best practices from the private sector? • Horizontal companies hope BPM will reduce customization costs

40. Current Situation of BPM • Established in compliance solutions • Leveraged in process e-government • Not established in government IFMIS • Well established standards • Performance/functionality compromise • No market leading vendor

41. 6. Software as a Service (SaaS) SaaS benefits are crystallizing, but chaos still abounds Robert Bois,Aberdeen GroupJune 2006

42. What is Software as a Service (SaaS)? • Applications are hosted externally: e.g. Salesforce • Typically priced on a subscription basis • Typically provides minimal customization • Business model for SOHO, small to large organizations • Evolution of ASP (Application Server Provider), but typically serving a purpose-built application

43. Drivers for SaaS • High cost to maintain complex software and infrastructure • Licenses • Upgrades • Networks • Databases • SaaS supports fast growth • Attractive for smaller organizations

44. Current Situation • Increasing as a % of the market (from 0 to..) • Uneven adoption: high in customer relationship management • Rarely used in government back-office applications – why? • Similar technology used for shared services, yet… • E-Procurement ideal application • Emergence of appliances

46. 7. The Web as a Platform - Web 2.0 No matter how you brand the hype, get ready for a quantum leap in the way the Web works and — more importantly — how it works for you and your business. Wayne Gomes, Rich Internet Group November 2005

47. What is Web 2.0? • An umbrella term for second wave of internet innovation • Web as platform + diversity of platforms • Mash-ups + syndication • Social software + community • Open source + rapid development • Rich web interfaces • Distributed documentation & data • Companies: SixApart, Flickr, Pandora, Pageflakes, FaceBook, YouTube • Underlying technologies: blogs, wikis, AJAX, RSS, REST, SOAP, VOIP, podcasting, Skype, BitTorrent, Wikipedia

48. Web 2.0 is the network as platform, spanning all connected devices… creating network effects through an "architecture of participation," and going beyond the page metaphor of Web 1.0 to deliver rich user experiences.” Tim O’Reilly, O’Reilly Media