Across the Digital Nation: Enterprise resource planning makes a comeback

Rishi Sood

In light of the state and local government budget shortfalls, the focus on cost containment, enterprise management and revenue forecasting has increased significantly. Moreover, given the depth and speed of these deficits, many new administrations are reassessing the use and scope of the financial management processes in place.

To that end, several public-sector organizations are analyzing the gaps and determining the need to modernize their financial management tools.

These events have led to the very beginnings of a renaissance in the demand for enterprise resource planning solutions, such as integrating financial management systems. Recent research with state and local government decision-makers reveals increasing interest and priority in developing ERP projects. These officials ranked ERP quite high in terms of importance of technology development within their organization. This rebirth in interest for ERP development will be realized more as public-sector budgets rebound.

Over the past six months, three states -- Iowa, Massachusetts and Ohio -- have embarked on new ERP projects that aim to bring a true enterprise look at financial management issues within those states.

Federal government organizations are also exploring similar initiatives. The Justice Department, Environmental Protection Agency and Department of the Interior are all focused on upcoming financial management projects. These initiatives come on the heels of major ERP projects at NASA and the Defense Department.

As a whole, however, this trend in new ERP implementation will likely be quite different than the rapid adoption that occurred during the last decade. In contrast to the big-bang approach during the first implementation wave, state and local governments will seek smaller, more modular-based approaches to new ERP development.

Moreover, these organizations are keenly aware of the holes and gaps in previous financial management modernization projects, and will look to truly develop a complete enterprise solution. There will also be important modules that need to be incorporated to improve overall functionality. Key areas under review include incorporating grants management services and project portfolio management tools.

The competitive environment for these new and upcoming ERP initiatives is quite intense. Important players in this market renaissance include major ERP software firms, such as SAP, PeopleSoft and Oracle Corp.; tier-one systems integrators, such as IBM Corp., Accenture Ltd. and Unisys Corp.; and firms that provide both software and services, such as American Management Systems Inc.

These firms once again will need to translate partnerships into project successes and determine the best price and functionality pathway to follow. Evidence suggests government organizations may capitalize on the intensity of this competitive environment.

However, the selection criteria and the timeline for opportunities will be much different than the first wave of ERP development. Vendors must be tuned to the key objectives of the new state administrations, incumbent packages, funding strategies and sourcing requirements within the major accounts. These will be important signposts to determine market penetration.

This budding market demand may not translate into market opportunity until state funding rebounds, the positions of chief information officers are restocked or additional resources become available. *

Rishi Sood is a principal analyst with Gartner Dataquest in Mountain View, Calif. His e-mail address is rishi.sood@gartner.com.

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