By Daniel Benad, group vice president and regional general manager, Oceania, Rimini Street
Government agencies across Australia are investing heavily into digital transformation initiatives and modernising their IT systems. Often these investments are done on top of BAU budgets, so little consideration tends to be made about the costs of the implementation or the upgrade.
Queensland Health is one such example, which spent $135m to upgrade its 22-year-old SAP suite – known as the finance and materials management information system (FAMMIS) – to the modernised S/4HANA.
Cost is less of a consideration with government agencies than ever before, with digital transformation initiatives part and parcel of many state and federal budgets – for instance, almost half of the $1.2bn allocated as part of the Federal Government’s “digital economy strategy” released in May last year was to be allocated to improve “the way Australians use government services online”. The public purse is full these days when it comes to transformative IT spend.
However, while financial cost is not as much of a consideration as it used to be, resources cost is now one of the largest considerations from IT teams, who are often charged with advising procurement teams which opportunities to pursue. For major projects, disruption is now stopping many vendors at the gate, particularly when it comes to enterprise software systems.
First, there is the resource cost of implementation. To cite a generous estimate, for existing customers of SAP, an S/4HANA implementation can be done within six months, which includes testing within the environment, working on the transition and deploying internal IT resources to the project. That is, in a vacuum with everything going right from the get-go. But even then, that same reference from earlier cites that some greenfield and brownfield S/4HANA deployments can take several years.
No environment is equal, and each organisation will have its own challenges with any major implementation, but to again cite Queensland Health’s upgrade, if it goes wrong, it can be extremely disruptive.
The Cost of Disruption
Queensland Health’s upgrade project saw two rollout delays which cost an additional $30m and the issues didn’t stop there. Once the new system went live problems began to emerge immediately, and led to an issue where “$540 million of vendor invoices were paid late” and other issues with staff struggling with new system processes, such as how the new system measured quantity which caused “delays or errors in ordering”. According to some reports, other staff bypassed the system and made orders using manual workarounds.
“Since November last year, the SAP system itself has suffered ‘frequent system freezes, long task running time, and slow system response time’, with ‘29 high-urgency, high-impact system incidents” logged with SAP by April 2020’,” claimed one report. “On eight occasions, staff were unable to access the system.”
It’s not the cost involved which is anathema to many agencies; it’s this level of disruption such as delays, High-Impact System Incidents, staff unable to access the system. So, they had a look at their current system, which does exactly what they need to do, and asked themselves “why would I put our agency at risk of any level of day-to-day disruption?”
Many agencies simply don’t want to move. They see the value in an upgrade as low, but the potential cost in time as a pain point that they’d rather avoid. Simply put, if they don’t upgrade, they’re able to do other things. They know that an upgrade of an enterprise software platform or an ERP, in and of itself, is not a digital transformation initiative. There are benefits to an upgrade, sure, but the benefits are rarely if ever outweighed by the cost of the upgrade and the time needed to implement them.
Organisations are often pushed by the big-name vendors onto a roadmap they don’t desire, which use ‘end-of-support deadline’ threats serving to push agencies onto their ‘latest and greatest’ offering. And they don’t see an alternative but to trust the vendor.
The question is, what can agencies do when faced with an apparent “need to upgrade” from pushy vendors and amid threats of a loss of support from the vendor?
There are several ways agencies can avoid the upgrade altogether.
Take a Look Around: Open-Source Alternatives and Third-Party Maintenance
Take BreastScreen Victoria, which moved to third party support and maintenance of its Oracle platform. Rather than upgrade, they chose to maintain their current system and undertake other high-value initiatives, such as a cloud migration. Furthermore, they were able to do this despite demand for their services increasing and without the need to add more IT staff to meet that increased demand.
Another option is to simply look around, with better low-cost options or open-source alternatives beginning to emerge. Rather than make a full reset, some organisations can choose to migrate some aspects of the platform to these alternatives and take a piece-by-piece approach to the reset.
No longer are the likes of Oracle and SAP the only game in town; Oracle database, for instance, has open-source competition with the likes of PostgreSQL, which is not only low cost, but doesn’t drain internal resources. And these can be done slowly, one by one, without disrupting the entire business by taking an “all or nothing” approach to an expensive and time-consuming ERP upgrade.
When IT departments are charged with picking the best option for their agencies of the future, it’s worth looking at the entirety of the roadmap and whether a massive migration to a new big-ticket ERP or enterprise software platform works for them.
For some, it may, but for many the cost of doing business isn’t the sticker price but the cost to their time. Disruption to BAU is now often what agencies are considering as the swing vote in any system modernisation initiative.
