Spending on packaged business software in the public sector is increasing, according to experts, but they say public agencies are taking a cautious approach to software vendors such as SAP and Oracle.
Still, SAP sees the era of in-house specialty systems in the public sector coming to an end. SAP executives say successful ERP implementations in government and public agencies show that the software that runs Fortune 500 companies can be tweaked to manage a city's social service agency as well.
SAP has brought in one of its successful public sector customers to help lead these efforts moving forward. Rod Massey, who as the CIO of Clark County, Nevada, spearheaded its technology transformation, is joining SAP to guide new software and features for the public sector. Massey said he will highlight the advantages of packaged software to modernize systems in public agencies and municipalities.
"When agencies lack integration, intelligence and reporting capabilities, it's easy to show how an organization can benefit from software such as SAP," Massey said in an interview with SearchSAP.com.
In Clark County, which includes the city of Las Vegas, Massey oversaw a $38 million IT system overhaul that standardized the county's public agencies on mySAP ERP. The system improvements automated social services and the courts to boost efficiencies and speed up daily transactions. The improvements also included massive technology upgrades such as the addition of radio frequency identification technology at Las Vegas' McCarran International Airport.
SAP has taken the right approach to addressing the unique issues that dominate public agencies and municipalities, Massey believes. For example, an ROI awareness program helps put the focus not just on cost savings but on other factors, such as social and political ROI.
"The public sector is really an ecosystem rather than an industry," Massey said. "Everything is connected, from social services to security and everything else."
SAP counts 1,320 global public sector customers, said Tom Shirk, president of SAP's global public services business unit. Although its core strength in the United States has been in the federal government, SAP is also targeting local and county governments as potential customers and sees opportunities in public healthcare and state agencies, Shirk said.
"Most government spending was on in-house technologies, but now we see the split at about 50-50," Shirk said. "The trend is a reduction of in-house software towards packages like SAP."
For many years, the only choice for government agencies was software written specifically for the private sector, said Gene Leganza, vice president at Cambridge, Mass.-based Forrester Research Inc. The result was in-house custom software that could handle specific government activities such as managing requests for aid at a social service agency or organizing police case files.
More public agencies are choosing software packages such as SAP, Leganza said, but they are doing so cautiously.
"Governments are interested in permanency," he said. "They don't want to be acquiring mission-critical software from some garage shop that won't be here in the future."
Costly overruns associated with massive system overhauls also make it a challenge for big vendors such as SAP to convince an agency in the public sector to move forward with a project, Leganza said. Often, cost overruns can be traced to complicated procurement processes, he said.
"Bigger projects are more risky than smaller projects," Leganza said. "There's a growing interest in rapid development -- cutting projects into smaller and smaller chunks, such as a series of six-month projects rather than a massive three-year project."
Massey expects the ROI program to address some of these concerns by helping potential customers develop a business case and demonstrate value beyond cost savings.
Still, SAP is playing catch-up to Oracle, which has more visibility than SAP in the public sector in the United States, Leganza said. SAP is adding new features, such as case management for social services, which will make it more appealing to new customers.
"SAP is doing more at the state and local level with human and social services research," Leganza said. "There are a lot of public sector organizations looking to modernize what they're doing for administering social services programs."
Agencies need to look internally to improve business processes and find the right software to handle future growth and other changes, according to Massey.
"Part of the strength of SAP that we saw in Clark County was its broad portfolio of services," Massey said. "We had a university medical center and an international airport to address, and we saw an advantage to standardizing on one platform."