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Public Financial Management Good Practice GRP TCO

Public Financial Management Good Practice GRP TCO

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Published by FreeBalanceGRP
Calculating the Total Cost of Ownership for Government Resource Planning (GRP)/Integrated Financial Management Information Systems (IFMIS)
Calculating the Total Cost of Ownership for Government Resource Planning (GRP)/Integrated Financial Management Information Systems (IFMIS)

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Categories:Types, Business/Law
Published by: FreeBalanceGRP on Jan 18, 2013
Copyright:Attribution Non-commercial

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01/06/2014

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PFM Domain
GRP
 
S
USTAINABILITY
&
 
TCO
Good Practice
 
C
ALCULATING
T
OTAL
C
OST OF
O
WNERSHIP
 
Applicable
A
LL
G
OVERNMENTS
,
 
A
LL
L
EVELS OF
G
OVERNMENT
 
FreeBalance
 
Public Financial Management
 
Good Practices
 
 
 
FreeBalance
 ® 
 
2
what is the “TotalCost of Ownership”
issue? 
 
Governments implement Government Resource Planning (GRP) or EnterpriseResource Planning (ERP) software to improve fiscal discipline, governmentefficiency and improve Value for Money (V4M).
 
The initial cost for enterprise software may not reflect the overall cost or TotalCost of Ownership (TCO) experienced by government organizations.Governments can show VFM fiscal discipline by analyzing all internal andexternal GRP acquisition and maintenance costs across multiple years.
 
Many government organizations fail to calculate many long-term internal costsrequired to use, manage and maintain GRP software over many years.
 
TCO is critical to financial sustainability because governments are engaged inon-going Public Financial Management (PFM) reform. TCO should considermore than the
maintenance of a “steady state”
by exploring costs to supportadapting to modernization.Average cost by category for Enterprise Software differs among analysts depending on data completeness,category definitions and duration analyzed. Nevertheless, studies show that consulting for implementationtends to be the highest cost.
 
 
FreeBalance
 ® 
 
3
what is the TCOproblem?
 
Moderate to
high implementation costs
ranging from a 1:1 ratio in the private sector to 3:1 to 15:1 in the public sector with examples where services significantly exceeded other costs. 
 
Average TCO
 measured at over $50,000 per user in one analyst study making this a material cost to government budgets
. Governments are legally “budget
-
driven” where high TCO
and unexpected cost overruns may requiresupplemental budgets or extracting funds from other priorities.
 
High maintenance costs
that originate from maintaining complex code andproblem troubleshooting, and difficult upgrades that can increase TCO after theinitial implementation.
 
High upgrade costs
 
Unexpected risk costs
 
Additional sustainability costs for
staff retention
and
certification
. Some ERPsolutions have expensive functional and technical training courses required tocertify government staff. Government employees can leverage this certificationto join private companies. Governments need programs to retain talent andprevent this
“brain drain”
.
 
what are the GRPacquisition costs?
 
 
Internal
personnel costs and consulting fees
for needs analysis and thedevelopment and maintenance of a request for proposal. Procurement costsincluding engaging financial and IT experts throughout the process. Governmentprocurement cycles for GRP tend to be lengthy.
 
Computing
hardware, networking and required bandwidth
for the computinginfrastructure to support the GRP. This includes disaster recovery sites, testingcentre, provisioning of reliable power and long-term telecommunicationscontracts. This also includes the personnel costs to accept shipments of equipment.
 
Middleware
software including security, database, load-balancing, operatingsystems and systems management tools necessary to support theimplementation.
 
The GRP software
license costs
are typically based on the number of (named orconcurrent) users or size of the government.

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