Streamlining your agency’s ERP operations: What happens next?

In previous articles I have discussed the once in a quarter-of-a-century opportunity that Federal Government agencies have to modernise their Enterprise Resource Planning (ERP) systems covering their core finance, HR and payroll functions.

Without rehashing these articles, Federal Government agencies are on the precipice of making significant investment of public funds and setting the ERP platforms that will prevail over the next quarter of a century.  These decisions need to take a longitudinal perspective, and introduce more options and competition into the market with modern, native SaaS, AI enabled solutions that deliver world best practice solutions that will strengthen Australia’s public administration for the next 25 years and beyond.

Let’s assume for a moment that this is going to happen (big assumption I know).  The topic of this article is what happens next?

Current State

Agencies have, in the past, had the all-too-common experience of high, locked-in ERP sustainment costs and those million-dollar price tags for any major enhancement or machinery of government change.  The root cause of this is the high-cost, diverse and highly specialised skills and expertise needed to support the full range of ERP functionality required by even a small or medium sized agency. Typically, given the national and international demand for these unique skills, it is almost impossible to retain these skills in-house, and agencies are often competing with each other, driving up the cost even further.

For smaller agencies, this dilemma is exacerbated, as the breadth of their ERP functional requirements doesn’t reduce but their ability to afford sustainment teams does.  They may only require 1, 2 or 3 FTE in support which need to cover a multitude of those highly specialised skills across the various ERP modules as well as deep technical expertise on occasions. This has often been solved sub-optimally by finding that rare beast of a generalist ERP contractor or two to keep the lights on, but this also introduces a significant key person risk.

New Operating Models

Modern ERP applications, those that are truly native SaaS solutions, provide the opportunity to completely re-think the operating models adopted for ongoing sustainment.  A couple of key differences will be:

• There will be no large technical upgrades in the future as true SaaS solutions provide automatic, periodic updates with limited client technical involvement and
• ERP operations will be driven from the CFO and CHRO business owners and less by IT.

What won’t change is the need for a diverse range of highly specialised skills that are in high demand across the nation. 

So while the focus may be on the initial transition project from your legacy ERP to a more modern platform, your procurement and organisational change scope should include modernising your ongoing sustainment operating models as this is where some of the significant TCO (total cost of ownership) benefits lie.

Applications Managed Services (AMS) – a potential solution

A potential solution to these challenges is to consider the adoption of a fully managed services approach to sustainment of your ERP.  This involves engaging an external provider to provide sustainment services covering:

• End user support
• Break / fix level 3 and 4 support
• Potentially level 2 and systems administration support as required
• Release management
• Minor and major enhancements including training and change management and
• A continuous improvement program to ensure agencies are maximising the benefits and features of their ERP.

The benefits of this approach at an individual agency level are that it provides:

• Full access to the range of specialised skills and expertise on an as required (not permanent) basis
• A scalable solution that can meet surge requirements (eg. MOG, rollout of a new module or major enhancement)
• Resourcing and financial models that meet financial constraints of smaller agencies, and
• Reduced single point of failure risk.

Whole of Government Benefits

Adoption of this approach across a group of agencies or at a whole-of-government level would provide the economies of scale necessary to create a cost effective eco-system to support ERP solutions in the Federal Government.  A group of agencies, utilising the same ERP solution and a single AMS service provider, would allow:

• Reduced costs through economies of scale and increased sharing of resources
• Sharing of costs and IP as solutions developed and implemented in one agency can be leveraged by other agencies (eg. CBMS integrations, APSC reporting solutions, introduction of AI agents,  new regulatory requirements, continuous improvement innovations)
• Resourcing scale that would allow the intake of low cost graduates and interns to be utilised on low level support requirements supervised by more specialised resources as they mature
• Supporting the Australian Skills Guarantee by creating more opportunities for Australian apprentices, trainees, and cadets, ensuring a set proportion of work hours on major ICT government projects, fostering skill development and providing pathways into other skilled employment
• Greater ability to surge to meet any one agency’s demand
• Ability to build a national pool of appropriately cleared ERP specialised skills with deep knowledge and understanding of Federal Government requirements.

Key Features

Based on my experience across a number of previous ERP shared service (did I say that word out loud) initiatives in government, there are some key elements for an AMS solution to be effective. 

Firstly, each Federal Government agency needs autonomy over the configuration and operation of their system.  This is not to encourage unique solutions that cater to the whims of any individual client but to allow for the small, but genuine and unique differences, sometimes mandatory, of each agency.  For example, a small 100-person agency in one office location does not need the same procurement processes as a 5,000-person agency spread across the country.  This autonomy can be achieved, through separate company codes or tenants, without losing the other benefits of shared IP and shared support resources discussed above.

Secondly, there needs to be commercial autonomy.  There must be an arms-length, commercial relationship between the client agency and the AMS provider, for example, where an agency has the funding and an approved business case for investment / change to their ERP.  This model allows the ERP sustainment function to be delivered without the agency being subject to the resourcing and schedule constraints or priorities of other agencies.

Conclusion

In summary, the introduction of a new generation of ERP solutions to the Federal Government will require a fundamental re-think of the operating models used to sustain them.  Learning from the lessons and experiences of the past, there is an opportunity to create an ERP sustainment eco-system that:

• will allow all agencies, in particular small-to-medium agencies, to have access to the full range of integrated ERP functionality needed to
• uplift APS capability
• provide best practice decision support systems, and
• meet stringent cyber and compliance requirements
• and at the same time containing costs.

This can be achieved by thinking ahead of time about “What’s Next?”, applying some intelligent and creative thinking, and adopting modern, SaaS native product supported via Federal Government-specific AMS solutions.