Enterprise Computing Rings in a New Era

Enterprise Computing Rings in a New Era<@VM>Changing Face of ERP<@VM>More Than Just Box Kicking<@VM>Managing Inside And Out at SBA<@VM>Commercial Partners, Government Solutions<@VM>Outsourcing ERP

For many government organizations, the post year-2000 era has meant out with the old stovepipe systems and in with new enterprisewide applications.

Agencies are looking to pull together functions that run across their organizations, such as human resources, supply chain management and procurement. The goal is to use Web technologies to share data, streamline operations and provide managers with a broad view of their organizations.

To achieve this goal and lay a foundation for a Web-centric government, agencies are stepping up efforts to re-engineer their enterprise computing models. In general, these efforts share a common strategy: Use commercial best business practices to boost efficiency.

In the past year, for example, the Defense Logistics Agency inked a deal to replace its legacy programs with a supply chain management system. The Small Business Administration began integrating its human resources and financial programs. And the U.S. Customs Service pushed ahead with efforts to wire together its assets management systems.

This enterprise modernization push has sparked a surge in sales of enterprise resource planning applications into the formerly ERP-resistant government market. ERP software sales are expected to reach
$3.4 billion this year, a 6 percent gain over 2000, said Ray Bjorklund, vice president of consulting services for market research firm Federal Sources Inc., McLean, Va.

Also reaping revenue from this modernization push are services companies, such as Fairfax, Va.-based American Management Systems Inc., that offer customized, off-the-shelf solutions for the government market.

"It is a big market with room for a lot of players," said Zip Brown, vice president of AMS' e-government solutions group.

A few fundamental issues are fueling the re-engineering push.

The first is a need for new systems. A survey of government officials conducted last year revealed there were a lot of very old legacy systems in use, said Carol Kelly, vice president and service director, electronic government strategies at the Meta Group, Stamford, Conn.

Agencies kept these old systems together to maintain mission-critical operations through the year 2000 crisis with a plan to move forward post Y2K, said Ron Sullivan, vice president and general manager for
the federal government for PeopleSoft Inc., Pleasanton, Calif.

Policy issues are another driver for re-engineering. There has been steady drumbeat from the White House and Congress to use commercial best practices through initiatives such as the National Performance Review and Clinger/Cohen Act and Government Performance and Results Act.

The latter two laws, passed in 1993 and 1996, respectively, force agencies to link their plans with results and incorporate commercial management practices into their IT management strategies.

"There has also been a significant decline in the number of federal employees and their budgets and an increase in a demand for service," said Steve Perkins, senior vice president and general manager for federal business for Oracle Corp., Redwood Shores, Calif.

These pressures have helped ERP surmount the government's long-standing wariness of ERP.

"ERP has always been kind of the square peg in the round hole" when it came to government uses, Bjorklund said.

Traditionally, "agencies would go to a vendor like SAP for only a really targeted initiative," said Kelly. Otherwise, they would turn to companies such as AMS for a more tailored solution.

Fear of failure also has staunched enthusiasm for ERP, she said.

"One of the challenges in implementing ERP is the fact that ... it does come with a business process," said Eric Stange, managing partner of defense industry at Accenture, formerly Andersen Consulting, Chicago. "It is highly configurable, but every time you try to modify it ... to satisfy ... a unique government agency requirement you start to diminish its value." The dam really broke for ERP in the public sector in 1998 when sales of supply chain and financial applications jumped 161 percent and human resources 61 percent over the previous year, said Tom Topolinski, lead analyst worldwide applications software at market research firm Gartner Dataquest, Stamford, Conn.

But ERP also has changed, and the term itself has become kind of passé, Bjorkland said.

Instead of the total overarching solution once proposed, vendors now offer solutions built around certain operations, such as financial, human resources and supply chain, he said.

"There was a great deal of hype about buying an ERP solution," PeopleSoft's Sullivan said. "I don't believe the government focused on buying it in that modality; we have seen agencies focusing on one or two components."

"We believe people still want to buy larger suites with fewer removable parts," said Oracle's Perkins. Agencies not only get the commercial best practices, but also critical updates for the systems and the interfaces between the different modules.

Vendors have also sharpened their government focus. In December 2000, for example, SAP's public sector group acquired Procurement Automation Institute and its IPRO automated procurement system for the public sector.

IPRO has been integrated into SAP's government offerings, said Thomas Shirk, president of SAP Public Sector and Education. SAP is also beefing up its government development team in Washington.

In addition, ERP vendors are providing one-stop shopping for e-government needs, such as Web portal technology.The Defense Logistics Agency is buying MySAP.com, SAP's Web portal application as part of its business systems modernization program, said David Falvey, program manager at DLA. The organization expects to use it to enter the world of
e-procurement, he said.

"Our initial focus, though, is getting our back office in order," he said.

The organization took a giant step in that direction in August 2000 when it awarded a $389.8 million contract to Accenture to replace its aging shipping systems with SAP supply chain management software, and advanced planning and scheduling tools from Manugistics Inc. of Rockville, Md.

The agency began plotting a change in 1998 when it found itself facing systems with too much down time. The Cobol programmers needed to maintain those systems also were being lost to retirement.

After exploring alternatives, the organization opted to go with ERP at least partly because of a desire to adopt new business practices.

In the cyberenvironment, material is more often shipped directly from suppliers to customers, so DLA needed to change its focus from managing boxes of materials to managing information about those boxes, Falvey said.

Now re-engineering its business practices, DLA plans to begin rolling out the system in fiscal 2002.While it doesn't have shipping responsibilities, the Small Business Administration is accountable for managing $50 billion in loans, and comes under a great deal of congressional oversight. So it is imperative that the agency have rein over its external and internal business operations.

The SBA has launched a program to modernize those areas. Still in the pre-RFP stage, the first phase of that effort will concentrate on its external operations, including the loan monitoring and oversight systems, said Kristine Marcy, SBA's chief operating officer.

Although part of phase two, the agency has already started on its internal administrative and core financial systems. In October 2000, SBA hired SRA International Inc. of Fairfax, Va., to implement an integrated financial and human resources system from Oracle. The project, called the Joint Administrative and Management System, is worth $6 million to SRA and $1.5 million to Oracle, Marcy said.

"The integrated system will give us better information and quicker access to that information and a more composite view of where we stand at any particular point in time," Lawrence Barrett, SBA's chief of information, said.

Currently, financial and human resources or payroll are outsourced separately, said Barrett. Because information must be passed from one system to the other, there are times when transactions may be impacting the budget but not showing up in the general ledger.

When fully implemented Oct. 1, between 200 and 450 SBA employees will use the system, but at some future point it is likely to be opened up for some vendors, said Rick Klein, director of office information systems at SBA.

The Customs Service's biggest need is assets management, said Tom Garrison, director of financial systems for the agency's office of finance. The organization manages facilities in about 300 locations around the country, and at many of those sites there are standalone systems or no systems at all, Garrison said. The result is duplicative administrative work.

In September 1999, the service acquired asset management as part of an overall financial system from SAP and contracted with PricewaterhouseCoopers to integrate it.

The goal is to standardize the management of the organization's properties, both real and personal, everything from buildings to vehicles, he said. When fully deployed, the system will be used by 2,400 personnel.

Customs next plans to deploy procurement and core financial systems, but the timetable for those is unclear because they must be done in sync with the organization's overall modernization program, he said.

Zip Brown

All things are not going the way of ERP, AMS' Brown said. Offering a customized best-of-breed solution to the government, AMS continues to hold a substantial stake in the government space, said industry observers.

"We bring commercial practices to the federal government, but we recognize the difference between the worlds," Brown said.

"Rather than addressing the enterprisewide computing needs with big monolithic systems ... we implement what we call enterprise data management systems, which means ... sharing of data between the various types of systems," said Caroline Rapking, vice president of AMS' state and local solutions group.

AMS has pieced together an enterprise solution for government composed of products from companies such as
Ariba Inc., webMethods Inc., Gelco Information Network Inc. and Siebel Systems Inc.

Enterprise Computing and ERP: The Difference

Enterprise computing encompasses all the information technology systems used by an organization to conduct its business operations.

Enterprise resource planning applications are software tools used to integrate an organization's business functions, such as financial, human resources and supply chain management. Initially focused on manufacturing operations, ERP has become an umbrella term stretching out to include customer relationship management and business intelligence applications.

Integrating it into its offering, AMS will customize a product, such as Ariba's e-business tool, so it can address government systems such as the Federal Procurement Data System, which every federal agency must feed information into, Brown said.

Working with the Ariba product, AMS last year helped GSA launch GSAauction.gov, an online site to auction off surplus items, Brown said. GSA also is one of AMS' largest customers for Momentum, its federal financial management program.

The agency signed up with AMS in 1998 and has been carrying out phased implementation beginning with a funds management system, said GSA Chief Financial Officer William Early.

The early phases will standardize the organization's checkbook systems and provide for credit card reconciliation.

Implementing the new accounting system is slated for October 2002, after the data elements for the new standard general ledger are all mapped, Early said. Although it is a customized product, "it clearly had more structure and more pitfalls than we would have guessed," he said.

A key benefit of the implementation will be the acquisition of a standard general ledger, which is required by law.

The off-the-shelf product will also make it easier and less costly for GSA to comply with new requirements, because AMS must provide updates for any changes to the standard.An early adopter of enterprise resource planning applications, the Federal Energy Regulatory Commission, an independent regulatory agency within the Energy Department, is now turning over the management of those systems to the private sector.

Last year, FERC tapped Accenture of Chicago, and USinternetworking Inc. of Annapolis, Md., to take over the hosting and day-to-day management of the organization's human resources and financial operations, said Janet Dubbert, FERC's director of management, administrative and payroll support.

Under an application service provider (ASP) outsourcing arrangement, FERC will pay the two companies less than $2 million for both applications, including transition and production costs, under a five-year contract, Dubbert said.

Under an ASP arrangement, the service providers are responsible for maintaining, upgrading and distributing software and services to customers, who in turn pay a periodic fee.

FERC moved to this arrangement about two years after it began re-engineering its operations using PeopleSoft Human Resources Management for the U.S. federal government. After contracting with PeopleSoft Inc. late in 1998, the organization went live with the human resources application in March 1999.

At that time, "we were the first federal agency to use the federal product from start to finish, including human resources, base benefits, time and labor and payroll as an integrated solution," Dubbert said.

In October 2000, FERC implemented PeopleSoft Financial Management for Education and Government software, including the general ledger, payables and purchasing modules.

The two systems cost about $5 million for implementation and maintenance over the last two years, Dubbert said.

The agency's decision to acquire the systems was prompted by a couple of issues.

First, the Department of Energy would no longer support FERC's human resource, time and attendance and payroll systems. The department made the move as part of its efforts to streamline operations under the National Performance Review, she said.

In addition, FERC was migrating from a mainframe system to a client-server system, she said.

The ERP systems allow the agency to add functionality at its own pace, said Dubbert. Because the systems are integrated, they provide real time management information to help with work-force planning efforts.

Once the systems are outsourced, the organization will focus on adding new human resources and financial features, such as training and budget and accounts receivable, she said.

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