Governments that want to transform to cloud/SaaS models for ERP face a critical roadblock: funding and financing. That’s because SaaS solutions in the cloud use few, if any, government-owned assets. In on-premises ERP models, governments would use bonding authority to pay for the hardware, software and implementation services. But in SaaS, without the acquisition of capital assets, traditional public-sector capital financing vehicles, such as tax-exempt bonds, notes and certificates of participation, can’t be used. Further, governmental accounting guidance on the treatment of these arrangements remains unresolved. While GASB’s May 2019 Exposure Draft would allow governments to capitalize initial implementation costs of SaaS and Cloud implementations, the guidance would not take effect until 2021, so states wanting to finance SaaS implementations before this effective date would need to operate under the current rules.
Three ways for governments to build the funding streams necessary to jumpstart and sustain investment in cloud-based systems:
- 1. Deploy analytics to identify, quantify and harvest immediate business value.
Analytics can help identify and unlock “trapped value,” providing funding to support the business case for the transformation project.
Governments can use analytics to mine for “wins” that can yield benefits even before kicking off a major systems overhaul. Search for opportunities to streamline processes, modernize payment policies and optimize cash flow. Tools, such as the Accenture Government Business Transformation Toolkit, can help harvest value that can be used to finance the early stages of an effective cloud transformation. Governments have identified millions of dollars in savings and/or increased revenues using these types of tools.
- 2. Implement a robust benefits realization framework and plan.
Developing a compelling business case on the front end of a significant investment helps build enthusiasm and support. But too often, once the resources are obtained, these business cases are forgotten, and large projects fail to earn the return on investment that is promised.
A robust business realization framework is critical to sustainable funding for the journey to cloud. So is a clearly executed benefits realization plan—with concrete targets, action plans and ongoing monitoring of improved key performance indicators (KPIs) that will yield the promised benefits.
- 3. Take advantage of industry cloud platforms.
As public-sector enterprises journey to cloud, they will require ongoing financial commitments of operating funds. That means IT investments will be competing against other claims on scarce general revenue funds. Innovative models that use an industry cloud platform where the costs of implementing, operating and maintaining the solution are borne by a third-party provider over a multi-year period.
Industry cloud platforms can enable governments to offload the burden of getting the system up and running. Furthermore, they can help ensure the ERP is operating securely and efficiently over the long run while maintaining functional and technical currency.
The benefits of industry cloud platforms
Less risk and cost
With industry cloud platforms, the government entity would be “onboarding” to a running instance of the system. As such, governments enjoy reduced risk of system delay or failure as well as lower implementation costs. That’s because they adopt the vast majority of business processes—focusing attention only on the small proportion of government requirements that require adaptation.
More predictable and manageable cashflow
By using industry cloud platforms, governments can enjoy a stable and predictable total cost of ownership spread across a long-term service period, such as 10 to 15 years. This can alleviate the cashflow “peaks and valleys” of conventional on-premise IT implementations. By “smoothing” cashflows, governments can more easily budget operational funding without needing an injection of substantial sums at the project start.
Lower total cost of ownership
Comparing the total cost of ownership (TCO) of traditional on-premises ERP with an industry cloud ERP, the cloud model incorporates savings on interest expenses and savings from the reduced complexity of “onboarding” the government to an existing service.