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The Defense Department is in the midst of a massive effort to transform its business operations, spending more than $2 billion per year to modernize its business systems environment. More than half of this spending is focused on just a dozen systems implementations of enterprise resource planning technology.
As with ERP efforts at many government agencies, the DOD deployments represent the cornerstone of efforts to streamline business process execution and increase enterprise-level visibility for information management. These capabilities are critical to enabling an agile workforce and supporting an increasingly agile military.
DOD’s ERP implementations are among the largest and most complex ever undertaken. They represent unprecedented size and scale, and need to be deployed to a workforce that spans back-office base activities to forward-deployed military operations. Success is predicated on a number of critical factors that are typical of any large-scale program.
Two related areas that stand out are change management and governance.
Organizations in both the public and private sectors often make the common mistake that ERP implementations are focused on information technology, allowing CIO organizations and their contracting partners to drive the effort. IT is certainly the backbone of these deployments, but the real benefit — and challenge — is based on the ability of the organization to embrace the business changes necessary to take advantage of new tools. ERP systems and fundamental business process and management change go hand in hand. If they don’t, success will be extremely limited.
Change occurs at a number of levels with ERP systems implementations. Within DOD, we have found that change management tends to center on the senior leaders in organizations — a perfectly appropriate focus because insufficient top-down support is a death knell to any ERP effort. We also focus extensively (and appropriately so) on the training aspect of change management at the worker level, ensuring that the system users are sufficiently prepared to use the new tools.
Where we need to expand our change management efforts is with the middle management layer — the layer that is often the make-or-break element of our ability to execute business operations. This group often needs to change the most, and change not only the way it executes its business but also the way it thinks about its business.
Modern ERP systems are particularly desirable in that they automate end-to-end business process execution — not just individual functions that then must be integrated with other systems, but complete end-to-end processes. Most organizations (both public and private) are not organized around end-to-end processes. Rather, they’re organized around individual functions. That organization model tends to strongly influence behavior in terms of how we work, who we work with and what we expect of our workforce. This narrow perspective must change if ERP implementations are going to be successful and desired benefits achieved.
Procurement managers need to understand that what they do will have a direct bearing on the ability of the accounts payable teams to perform their business function. All business managers across the spectrum need to understand that what they do will have a direct bearing on the back-end accounting that ultimately is used for financial reporting and accountability. That’s not just accounting managers but all business managers.
Within DOD, we are working to implement these end-to-end business enablers to achieve fundamental improvements in the areas of internal controls, process efficiency and enhanced information visibility. The department will achieve those benefits only if its managers change the way they think about DOD’s business — away from the narrow focus on functions to the broad focus on processes.
This kind of change does not occur naturally. Getting systems users to adopt new screens for data input is an easy change to manage compared with changing the way they think about their individual roles in end-to-end process execution. Senior management needs to drive this perspective early on and take specific steps to inculcate the changes deep into the organizations.
To take advantage of enterprise resource planning systems to drive fundamental business transformation, organizations need to bring their functional groups together to determine the optimal footprint for grouping those functions within more modern systems. DOD, like many organizations, has had mixed results in this regard, and those results manifest in what I call “functional ERP implementations” that tend to focus on a narrow set of business functions and not on end-to-end business processes.
The result of this approach is a lot of automation around the same way we do business today, with a whole lot of expensive integration custom built to make the end-to-end processes work. Not only is this an extremely expensive approach to business modernization, it is also highly problematic in terms of effectively reconciling activities across many connected systems. A philosophical premise for successful ERP implementations is to maintain the entire life cycle of a transaction within a single system to the greatest degree possible.
ERP systems were designed to perform optimally under this construct. To achieve our desired transformational results, however, any large government agency must bring its functional communities together to govern these end-to-end solutions as true process partnerships. This is hard to do in any organization, let alone those of the size, scale and complexity of the U.S. military departments. But we must figure out how to do so — how to change the way we govern our businesses — if we expect to achieve the desired results.
DOD has recognized that it cannot continue to rely on 30-year-old, nonstandard, noncompliant business systems to effectively support a modern military workforce and its accompanying modern business workforce. The department is also learning that to truly transform business operations, it needs to change the way it thinks about how it governs and executes that business. Only then will we achieve the benefits of our investment in these new ERP systems.
One of the Defense Department’s most successful ERP implementations to date has been at the Defense Logistics Agency, which rolled out a suite of applications through the Business Systems Modernization program.
BSM was much more than a systems implementation. DLA’s leadership recognized that the system was an enabler to fundamentally change the way the agency ran its business overseeing supplies and logistics for agencies across DOD. As part of the effort, DLA leaders made specific changes to the organization’s structure and even changed the position descriptions of virtually all of the employees.
Those are steps that send a clear signal that an organization is not just installing a new system but rather using an information technology effort as a catalyst for true business process and management change.