Input: Fed Agencies to Spend Heavily on ERP

The federal government will continue to spend heavily on enterprise resource planning over the next five years to automate and streamline internal business processes, according to a new study.

Market research firm Input Inc. reported May 29 that federal spending on ERP software and related services will grow nearly 9 percent over the next five years to reach $1.8 billion by 2005, up from $1.2 billion in 2000.

The study noted that professional services represents more than 50 percent of ERP spending and will exceed $1 billion by 2005, growing faster than software, hardware or maintenance spending.

ERP is a business management system that automates and integrates major financial and administrative information systems, such as accounting, budgeting, payroll, personnel and purchasing for a private organization or government agency.

For its study, Input of Chantilly, Va., interviewed agency officials and vendors and reviewed government budget and strategic plans.

The trend in government spending runs counter to the private sector, where spending on ERP software has slowed as corporations focus instead on e-business and high return-on-investment applications.

Although e-government remains a driving force in the federal marketplace, Input found that federal agencies will continue to implement ERP software to automate and streamline internal business processes over the next five years.

"Government organizations realize that solid back-end systems are critical as they move to implement customer resource management and other e-government initiatives," said Ellen Zidar, Input's manager of e-government services.

Input also found some major changes in the way federal organizations are approaching ERP projects, starting with the business case.

"ERP systems are no longer just about replacing outdated computer systems," Zidar said. "ERP initiatives are now driven by business cases substantially tied to agencies' overall missions and objectives. Trying to avoid the ERP miscues of the past, projects are becoming more focused, with clearly defined business benefits."