Cost pressures speed back-office consolidations

Tight budgets will accelerate back-office systems consolidations this year. Several efforts are gaining traction as agencies look to reduce redundancies and cut costs by integrating systems.But agencies face special risks when merging their finance, accounting, budgeting, travel and procurement operations, current and former government IT officials say. The projects are technically challenging and often call for IT managers to balance the agendas of several agencies within a department.Back-office consolidations are “a straightforward way to gain efficiencies. Agencies can save money from avoiding the need to maintain and update redundant systems,” said Steve Kelman, a professor at Harvard University’s Kennedy School of Government.Kelman, administrator of the Office of Federal Procurement Policy during the Clinton administration, noted that federal IT leaders confront several risks in such projects. “When agencies develop customized software, the systems may either not work or be too expensive.”He said coordinating different systems across organizations within a department also poses problems, “but the bigger risk is to get more than one functional system to talk to another system.”Several ambitious back-office projects at major agencies—including the Justice, Homeland Security and Transportation departments—are poised to reach major milestones this year.Justice now uses six separate financial systems relying on different business processes and applications, CIO Vance Hitch said at a recent meeting sponsored by Input of Reston, Va.“From a central Justice Department standpoint, it is very difficult for us to produce consolidated financial statements,” he said. “We have problems as we do the audits of the components each year because the systems are all different.”Justice is launching the Unified Financial Management System and testing the Momentum Financials enterprise resource planning app from CGI-AMS, the operating arm of CGI Group Inc. of Montreal, to see if it is suitable.Hitch predicted Justice would soon begin an acquisition to implement its consolidated financial system.He acknowledged that progress in financial consolidation has been slow but says Justice wants to avoid missteps.“It is unbelievable how slow it is moving,” Hitch said. “I am part of that. I don’t want anything to move forward if it is not going to be successful.”He added that planning and centralized management would be critical to UFMS’ success. “All of these projects are big, bad projects, and they run into problems,” Hitch said. “They are all complex. And if we don’t have our management team together, if we don’t know what we are doing, we can be sure that we are going to have problems.”The Justice IT chief said his department now is set to move quickly.According to Input, Justice likely will release a proposal request next month for UFMS. The department will devote an estimated $150 million to the integration contract as part of a total project budget of $200 million.Homeland Security also is wrangling with a financial systems consolidation. The department’s Electronically Managing Enterprise Resources for Government Effectiveness and Efficiency project will merge financial operations for DHS’ 22 agencies [, Quickfind 348].The department has tagged $49 million for Emerge2 this year. Plans call for a 30-month deployment, program manager Catherine Santana said.The system will rely on Oracle E-Business Suite 11i for its core financial functions. Santana’s team has selected ancillary apps for other functions:Emerge2 will use the CommerceQuest software to control the rules by which the department’s business processes interact, Santana said.The team is negotiating with Oracle Corp. on the purchase of the enterprise resource planning package, Santana said. The new system will lead to the replacement of more than half of DHS’ 200 financial apps, she said.Santana has a strategy to minimize the cost of the software licenses she buys. “I try to buy the software at the year-end” for each of the vendors. “They give the best bargains at that time.”The Transportation Security Administration, a sister agency of CPB within the border directorate, recently began running an Oracle financial ERP system that the department will combine with other Emerge2 software, Santana said.Meanwhile, Transportation this year expects to reap the benefits of completing a six-year project to consolidate its agencies on Oracle.Previously, each of the department’s agencies had “run their own systems, largely systems written years ago,” Transportation CIO Dan Matthews said. “They were all unique.”The antiquated financial apps slowed reporting and required headquarters personnel to reconcile the department’s accounts manually.In the conversion process, each of Transportation’s agencies had to change its business processes to adjust to the consolidated system, Matthews said.A large part of that process involved converting records held in the existing apps for use by the Oracle system.The process generated some pointers for CIOs considering similar projects, Matthews said. If he had to do it again, “what we would do better is to have more consistent communication about the process and have better data management internally,” he said.Matthews added, “That means knowing which data is which and cleaning it up before moving it into the new system.”