On March 1, 2013, arvato, a business process outsourcing (BPO) partner of UNIT4, announced that it had secured a contract to operate a shared service center on behalf of the UK Government. As part of the deal, arvato acquired the Department for Transport (DfT) Shared Service Centre in Swansea, South Wales and will provide back office services in a seven-year contract, with an optional three-year extension. The goal is to deliver better services and greater cost savings.
Indeed, in its “Next Generation Shared Services – The Strategic Plan” the government includes the following as one of its key objectives:
“To ensure that a lower cost Enterprise Resource Planning (ERP) solution is available as part of the ISSC solutions, to reduce the cost of the current ERP solutions, and to remove the barriers to entry for smaller departments and ALBs by reducing software and maintenance costs through consolidation. Without the provision of single ERP systems and therefore single processes the Government will struggle to reach its upper quartile efficiency targets and therefore testing this will be an early part of the programme.”
So as part of the deal, the UK government gets a new ERP. Arvato will replace the existing SAP solution with the cloud-based Agresso Central Government ERP platform in a phased migration. Interest in cloud-based software as a service (SaaS) has definitely been on the rise over the past few years. And so has interest in replacing existing ERP solutions.
In 2012 Mint Jutras posed the question, “Is it time to purchase a new ERP?” Based on data collected in the second half of 2011, only one in four of you said, “Yes!” Another 24% were undecided but over half (51%) gave us a resounding, “No.” We explored the possible reasons for replacing existing solutions. We shared with you the average and “World Class” results that could be achieved, suggesting that those of you not in the market for a new ERP might want to reconsider. New technology and robust feature functionality available today will put older solutions to shame and you might be missing out and missing out big time.
Many listened. The percentage of those looking to purchase a new solution more than doubled in our latest survey. In our most recent 2013 ERP survey, when we asked the same question, many more (56% to be exact) said, “Yes, we intend to purchase a new ERP within the next 3 years.” Twenty percent (20%) are still on the fence but only 24% said, “No.”
Lack of functionality, outdated technology and the inability to scale with growth of the business have traditionally been the top three reasons prompting actual replacements and this year was no different. In terms of potential replacements: functionality and technology also claim the top two spots, but the possibility of reducing the overall total cost of ownership through a replacement appeared as a significant driving force, along with the emergence of standards being applied across the enterprise. Compared with the quest for fit, functionality and enabling technology these are relatively new motivations, but a motivation indeed for the UK government.
How does spending time, effort and money on a new solution result in savings? Given the scope, replacing ERP will typically require cost justification in order to estimate the expected return on the investment. But return on investment (ROI) is different than total cost of ownership (TCO), particularly in terms of enterprise applications. ROI calculations often only include up-front costs.
Harder to calculate are the post-implementation costs in managing change. And managing change remains as the top challenge identified in achieving the goals of ERP. ERP solutions based on outdated technology are likely to be rigid, making adapting to change expensive. Architectural agility to accommodate change is important to everyone but for ERP buyers faced with frequent or massive changes, it is absolutely essential.
UNIT4’s solution is a quite natural fit in this case. UNIT4 actively seeks ERP buyers faced with frequent or massive changes, or those it refers to as “Businesses Living IN Change (BLINC).” It prides itself in the solution’s ability to easily adapt to business change. This should be important to the UK Government for two very different reasons…
The public sector is not immune to business change. In fact it faces more than its share of changing regulatory requirements, financial management-driven change, as well as the need for new or changed business processes.
The second reason is that the DfT is only the first of several departments to be supported. Other departments will likely present new, previously unanticipated requirements. This represents additional change, but also requires flexibility if the ERP is to become the standard across these different departments.
Two very good reasons for selecting a solution that specializes in post-implementation agility.