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Double-digit growth of Enterprise Resource Planning software installations in the last few years inside government signals cultural changes, and groundwork for electronic government via the web.  However, upcoming years may see slower adoption, says Anthony Franzonello, a consultant watching the space at Federal Sources, Inc.  "Modular, incremental implementations are so far proving to be a more successful ERP path than the big money, big-bang approach that typified earlier installations," he said. The government market for ERP and related CRM services stands at $3.4 billion in 2001, and will rise to $3.5 billion in 2002.   ERP software lays the integration of back end systems necessary for front-end access.
 
 Talk of portals first for internal use and then serving customers through the web interfaces has begun at agencies undergoing the ERP transformation. Peoplesoft, one of the key ERP players, unveiled 59 new collaborative applications under Peoplesoft 8 and rearchitected its 108 core products to offer web-based solutions in late 2000. PeopleSoft Inc. unveiled the PeopleSoft Government Portal in May 2001, a solution that integrates PeopleSoft applications, third-party software, and external content specifically for government agencies. The product requires only one logon.  The security architecture restricts access to only the information pertinent to the user's specific role and needs.
 
SAP also announced new initiatives in the portal area with a partnership involving Yahoo in April of this year. And, as funding uncertainties rise, some government agencies are expected to consider an outsourced model, or application service provider to implement their ERP solution without an outright purchase of the software, including the Federal Energy Regulatory Commission (FERC).
Generally speaking, strides in the year 2000 were in planning or implementing modules that affected human resources, supply chain management and financials.  This effort throughout government can be traced back to the National Partnership for Reinventing Government and overall procurement reform. Agencies that kept the faith in ERP last year with new or ongoing initiatives included the U.S. Department of Agriculture (USDA); Federal Prison Industries, Inc. known as UNICOR; U.S. Army Medical Material Agency (USAMMA); and Naval Supply Systems Command (NAVSUP).  One of the largest ERP contracts in the history of federal government was awarded in 2000 to PRC Inc., a subsidiary of Litton Industries, for the Peoplesoft HR Connect suite to replace more than 100 legacy systems at a cost of $110 million.  The primary reason for turning to ERP: converting from legacy systems to integrated client-server technology with web interfaces means access for employees.  Access means efficiency, according to program managers overseeing ERP implementations.
"I like the ERP approach.  I hope we use more of it.  It seems to be a good way to do it.  Web-based solutions are much more efficient, " said Don Whitcomb, a computer specialist at USDA. 
 
USDA Leads the Way Following Trend of HR Module to Financials
 
The USDA has a human resources office in every state of the country and back in the mid 1990s determined that its mainframe technology had to go.  Project Director at the USDA Hans Heidenreich has watched the unveiling of the Peoplesoft HR modules which led to Peoplesoft financial modules last year.  In August 1999, the USDA turned on its flavor of Peoplesoft called Combined Administrative Management System (CAMS) with its Georgia office after pilots in Florida, Arkansas, Oregon, Indiana, and Pennsylvania.  CAMS is based on the HR package from Peoplesoft and customized by Unisys Corp., the project contractor. "We are now a client-server technology using an Oracle database with Peoplesoft.  We feed our information into the National Finance Center overnight and then we receive a confirmation.  It's not real-time yet, but it is a vast improvement-over a three-week lag time before Peoplesoft," Heidenreich explains.  Throughout 2000, the Peoplesoft version called CAMS went into production throughout the country.  USDA is running Peoplesoft version 7 Federal which includes personnel, position management, training modules, and performance management modules under simple customization.  About $2.5 million was spent on the initial outlay for Peoplesoft's HR module. An additional $1.5 to $2.5 million is contracted out to Unisys as the prime contractor each year for maintenance, upgrades, and enhancements.
In the past, Heidenreich said, it would take up to three days to get a report out of the system, before ERP.  Now, reports on sessions that characterize the workforce help determine who needs training, who's in training, and what staffing is required.
The next level of CAMS went into production last year, the finance module.  "Workflow is important.  One of our missions with Peoplesoft was to lower delegations of authority," Heidenreich said.  More than 500 power users now enter the HR system across the country with another 20,000 in self-service, covering employees and managers.
Peoplesoft 7 will be upgraded to Peoplesoft 8 for federal use, which has web-based components attractive to building electronic government.  "Electronic access for our ranchers, and farmers is critical.  All forms for taxpayers will be on the web," he said.
The number one most difficult factor in the conversion was not the technology, but the people issues, he added.  "The culture of your agency plays a role. The aim for change in should be 75%, not 100%.  There reaches a point where you say 'Enough of trying to make this system perfect.'  It's important to know when to pull that trigger," added Heidenreich.
 
Do or Die:  One Go Live Date Only
 
While culture issues are critical, retiring Thomas Phalen, chief information officer at Federal Prison Industries, decided early in his ERP implementation he was managing to make all players equal.  Federal Prison Industries, represents a $600 million a year, self-supporting unit of the Justice Department's Federal Bureau of Prisons.  It is better known under its trade name, UNICOR, which uses prisoners to make products and deliver services. There are nearly 100 factories in 30 states run by about approximately 20,000 inmates.  The security issues alone posed serious challenges to success for its ERP supply chain management.  The ERP integrated system addressed the need for manufacturing, production planning, material management, and order entry modules. 
Phalen said the decision in hind site to switchover all factories on the same day was a wise one in hind site.  As an SAP customer using the newest R/3 release, there were fixes.  "However, most of what we did was go with 'pure vanilla' SAP R/3, the commercial off-the-shelf (COTS) version as much as possible.  Updating becomes difficult otherwise," Phalen said.
The change management was orchestrated through a steering committee which consisted of senior management, such as the CFO, CEO, and the chief procurement officer, and reps from the field.  "We pushed our ERP implementation as a corporate issue, not IT.  About 21 months before "go live" occurred, change management beginning with surveys to measure the reluctance of the users to use the new system was geared up.  There were 75 different locations and each location had its team which had to be sure that data was corrected and cleaned up. Phalen said. An intranet site was aggressively used to show progress on the project, he added.
Other hands-on efforts were made to make senior management at each location buy-in.  Conference calls were held with teams.  Actual training was scheduled close to launch to maximize on complex and compressed training windows-four weeks before going live. Training was conducted at the Dallas/Ft. Worth Airport in four rooms with approximately 25 PCs each.  "We did take some very important steps to make sure all the factories were closed two weeks prior to full implementation.  Originally we had wanted to do sequential implementations, but to keep it all in sync, that would have been a wasted effort.  This way no one could be asked to be deployed later.  You had to be ready. Each location has one systems administrator," Phalen said.
His observation for other government agencies using an off-the-shelf ERP system-"No matter what efforts are made to convert data, it will be more difficult than you expect.  Involve consultants at the beginning.  The theme should be that it is their job to train your people."  He suggested that "gap analysis" is also important in the beginning.  "We sent real users to evaluate various systems at the site of the major ERP players.  Then the users scored products on use and functionality.  It is users, not IT, you want to choose," Phalen said.
UNICOR is considered one of the largest implementations of SAP R/3 with 1500 concurrent users daily running on NT and SQL Server 7.  The system replaced hardware by Data General Avions that was more than a decade old and software that had been modified to the point where it couldn't be supported.  The original system was dumb terminal-oriented and it was time to move on.
Total costs ran about $13.5 million,  above original estimates of about $11 million.  Industry research indicates that at least half of all ERP initiatives come in 200 percent over budget.  "We needed more consulting services in the end," Phalen said.
 
Planning to Go ERP for Supply Chain Management
 
LTC Patrick T. Byrne understands the need for front-end consulting and change management since he serves as the primary point of contact for the United States Army Medical Material Agency (USAMMA)'s needs assessment to go to ERP this year, 2001.  USAMMA has estimated it will have the ability to recoup more than $100 million over the next 9 years with this initiative.
The primary function of the Army's medical logistics system is to ensure the right medical equipment and supplies are available when and where they are needed.  Traditionally, medical material support was accomplished by procuring medical material from manufacturers in large quantities, placing that at Defense Logistic Agency depots, and issuing the material when it was requisitioned by medical units.  "Just in time" inventory management and electronic commerce now requires more of what ERP offers.
USAMMA's ERP implementation is broken out in 4 phases.  Each phase covers a component of the Agency's processes.  Phase One includes assembly management, inventory management, requisition management, financials and tracking, and project management. This is funded at $10 million and will take most of this year to implement.  Next phases, unfunded as of yet, include depot maintenance, excess management, technology assessment, and human resources.
LTC Byrne sees cost avoidance as the operative term.  "The largest and most immediate gain will come from our ability to control assembly management functions from an enterprise vantage point." USAMMA currently outsources the assembly management of medical sets to DSCP, and this will change so that USAMMA establishes the infrastructure, business processes and staff required to perform the tasks in-house. 
Byrne said the ERP advantage streamlines current business processes to move from 18 months to 3-5 months or less in medical kits, outfits and medical sets and with 60-70 percent of fill to 95-100%.
"Ours is a commercially based industry, so it makes sense to adopt what works best in that sector," Byrne added.
A similar initiative this year is occurring in the U.S. Navy which has taken SAP applications for use in procuring and distributing parts for all of its weapons systems. The supply chain project is being handled by the Naval Supply Systems Command (NAVSUP). During this planning phase, new business practices have been implemented, in addition to the replacement of legacy systems.  The current procurement applications for weapons systems originated in the 1960s. Outside analysts indicate that the data conversion of this magnitude of project will be the time-consuming and expensive process. The effort is funded at $50 million to develop a system built around the SAP core modules.  Maintaining the old system fell in the range of $80 million annually.  "Although vendors such as Oracle, SAP, and Peoplesoft have upgraded and improved their products since the first major ERP wave, many of the underlying cultural and technical hurdles to a successful ERP implementation project still remain," according to Franzonello of Federal Sources, Inc. 
 
Application Service Providers to the Rescue
 
Janet Dubbert, FERC Director of Management, Administrative, and Payroll Support, has worked with Peoplesoft tools for human resources management since 1998, and by the end of 2001, the agency will turn to an application service provider approach.  Outsourcing has become a popular discussion point in government agencies to avoid the costs of managing an internal IT team through upgrades, systems administration, maintenance and other related activities.
"This will be a multi-year contract with Accenture handling the application management and Usi doing the hosting, "Dubbert said.  FERC has gone to a concept of manage to budget beginning in 2000, and the ERP implementation is helpful with the financial management, she said.
The value of an ASP is being touted beyond government in the education arena as well, with PSINet teaming up with Sallie Mae to offer an ASP service to higher educational institutions in the US.  PSINet claims its ASP program is a complete ERP service for an institution's financial, human resources, and student administrative functions.
"ASP is a good idea for federal agencies and the model has received quite a bit of hype.  We are looking at our own ASP models for the federal space," said Ron Sullivan, vice president and general manager of the federal sector for Peoplesoft.
Like the ERP initiative at USDA which is not an ASP play, FERC began with implementing Peoplesoft Human Resources Management with the US Federal Government product suite, in addition to Peoplesoft Financial Management, and general ledger, payables, and purchasing modules.
Dubbert said the time-keeping component has been most difficult from a change management point of view because it is so different.  " Some people in FERC were very familiar with Windows and some were not.  We had the full gamut of a knowledgebase.  Training was an eye-opener.  We moved to establishing Power Users and they in turn train and provide guidelines, by creating a training guide," she said.
FERC took a direct approach in making decisions on implementation and change management.  There was no steering committee.  End users were involved only in specific business processes. "Change is change, and you can't underestimate the impact.  In the long run, we will recognize efficiencies-all manual process will go away," Dubbert said.
She indicated that no ROI had been conducted yet.  About 200 employees are currently using the HR suite and some financial management now.  All employees will eventually be part of the rollout efforts.
According to a META Group study on Enterprise Resource Management, the time to implement ERM applications ranges from 18 months to 26 months. META Group reported it takes two and one-half years from project initiation to achieve a quantifiable return on investment.
 
 
Dawn Marie Yankeelov writes frequently for Faircount International and  owns ASPectx, a marketing and web consulting firm based in Louisville-Ky., for Fortune 1000 clients, trade associations and government accounts, which includes an ASP Knowledgebase.  For more information contact, dawny@aspectx.com.