Magazine article Government Finance Review

The Future of ERP in the Public Sector

Magazine article Government Finance Review

The Future of ERP in the Public Sector

Article excerpt

This article examines the evolution of enterprise solutions and likely trends in the future for the public sector.

The Enterprise Resource Planning (ERP) systems that transformed private-sector organizations now are gaining acceptance in the public sector. Although many system acquisitions in the public sector still tend to focus on one aspect of an ERP system (such as human resources, payroll, or accounting), some jurisdictions are beginning to look across all areas for their applications. Many governments look for a vendor that provides a full suite of products rather than just a single functional application. Because of the public sector's interest in more comprehensive enterprise systems, the major ERP vendors have developed specific public-sector functionality and have started planning public-sector oriented enhancements to their systems. Prospective purchasers should not only look at future functionality, but also examine the vendor's vision for the future, its ability to realize that vision, and its track record of investment in the research and development that is necessary to get that functionality into the product.

What is ERP?

At the simplest level, an ERP system is one that manages all of the resources necessary to perform a business function. These resources fall into three areas: human resources, financial resources, and physical resources. Another widely used definition is more detailed: an ERP system is a software solution that addresses the enterprise needs of an organization, taking the process view to meet organizational goals by tightly integrating all functions of an enterprise. ERP systems are designed to tightly integrate business processes across organizations.

Governments, like other organizations, have been hampered by their fragmented approach to programs and the systems that automate those program areas. This fragmented approach to programs and systems is probably most problematic at the state level, although local governments also suffer from an inability to share data across organizations. The inability of governmental organizations to access up-to-date financial information makes it difficult to manage the enterprise, another problem that modern ERP systems work to eliminate.

Evolution of ERP Systems

ERP systems got their start in manufacturing industries. In today's competitive marketplace, companies need to manage their resources efficiently. In addition, managers need up-to-date financial and cost information in order to compete effectively in the global marketplace. Governments and businesses no longer have the luxury of taking months to make key decisions. ERP systems allow them to access complete and accurate data quickly. The ability to get up-to-date information quickly is even more important in today's Internet-driven world.

Given the history of the development of ERP, manufacturing and supply-chain functionality made up the core of early ERP systems. The addition of human resource functionality to the existing financial and supply-chain ERP suite completed the primary building blocks of today's ERP products.

As the industry matured, ERP vendors looked to expand their presence in the market and began taking a vertical industry approach by designing functionality into their products that extended the ERP system into more areas of an organization. Like a vine, ERP systems began to find their way into more parts of an organization. In addition, ERP vendors began looking at vertical markets and developing industry-specific functionality. At the same time, the government market attracted attention because of its large size and its need for the benefits that ERP systems were providing in the private sector.

Government is an "industry of industries," containing elements of many vertical markets. Governments are primarily service-delivery organizations, but one can find elements of such diverse industries as retail, finance, utility, manufacturing, find natural resources, within the government market. …

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