Differences in Government Agencies for ERP Market Essay

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ERP

Irby's report on ERP at the different levels of government highlights that there are two different approaches -- the software approach and the consulting approach. To consider the differences in how governments use these, the differences between them from an end user standpoint need to be understood. In a software approach, the client buys the software, and there is only a limited revenue stream annually thereafter. Thus, much of the cost of the ERP is up front, and the client can amortize over several years, as a capital expenditure. Consulting-based ERP is generally considered to be an operating expense. The cost of such service is lower up front, but higher each year thereafter. Both software and services firms are among the top ERP vendors, according to Irby's report. The federal government makes much higher use of consulting-based services, while local and state governments prefer the software-based approach.

Irby argues that one of the prime factors in driving this difference is operational, rather than accounting. The difference, he argues, stems from the complexity of federal government operations. The federal government is much larger than state or local governments, and there is need to conduct ERP across very large departments. These "larger and more complex silos of data and systems," Irby argues, make consulting services more valuable.

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At smaller levels of government, the client can simply purchase and implement the software, but may not require as much ongoing support for this software as is required at the federal level. Further, Irby claims, "the potential costs of widespread disruption and the need for sufficient cross-department coordination" are responsible for driving the consulting approach. The cost issue is questionable -- it's a matter of relative scale and a smaller absolute disruption at a smaller agency may be viewed as more catastrophic if it is a bigger relative disruption. However, the complexity argument holds merit.

A further consideration lies with the product life cycle. The largest agencies are the early adopters. Thus, big cities have invested in ERP years ago, and many still use the same system in which they invested ten or more years ago. These are not major markets anymore, and the buyers for ERP among small government bodies today tend to be smaller buyers, who are much more oriented towards the software-based approach, because their operations are relatively lacking in complexity. The adoption curve will eventually swing back to larger civic….....

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