DoD ESI's successful new approach for enterprise resource planning

CHIPS, Fall, 2004 by Chris Panaro

The Enterprise Software Initiative The Department of Defense (DoD) Enterprise Software Initiative (ESI) is a joint Defense Department project to leverage the buying power of the DoD for commercial information technology products and services. By consolidating requirements and negotiating Enterprise Agreements with vendors, the DoD realizes significant Total Cost of Ownership (TCO) savings in services, software acquisition and maintenance. The ESI goal is to develop and implement a DoD-wide process to identify, acquire, distribute and manage enterprise information technology (IT) assets.

In the next five years, it is estimated that DoD will invest over $12 billion on commercial-off-the shelf (COTS) software and related services to automate business systems and operations. Considering that the 2004 Standish Group Chaos Report estimates that over 70 percent of IT projects are late, over budget or fail, the focus on best practices in the acquisition and implementation of these software applications is critical.

With the mandate of the Clinger-Cohen Act to "develop and use best practices in the acquisition of information technology," the DoD has become a leader in leveraging buying power and implementing best practices in program management.

In late 2001, the DoD Logistics Domain made a significant commitment to adopt and deploy commercial best practices in the acquisition and implementation of COTS business application software. The "Log Domain" gathered program managers and experts from DoD Enterprise Resource Planning (ERP) and supply chain programs to form the Program Implementation Group (affectionately termed the "PIG").

The PIG was chartered to capture and deploy best practices so that all programs will benefit from the lessons learned and overall experience of the group. The group immediately recognized the benefit of using the experience of industry representatives to gather commercial perspectives on major software implementation projects. Among the many tools it shares, the PIG developed an Enterprise Integration Toolkit (EI Toolkit), illustrated in Figure 1, to provide a roadmap, tools, templates and checklists for programs to use when embarking on a COTS IT project.

[FIGURE 1 OMITTED]

The Web-based toolkit includes sample business cases, Request for Proposals (RFPs), contracts, status reports and hundreds of other tools to use through an entire program life cycle. The EI Toolkit can be accessed by government personnel at http://www.eitoolkit.com/. Already, the toolkit has been discovered and used by other government agencies, including the California Department of Motor Vehicles, Alberta, Canada and the Australian Navy.

One immediate benefit of the toolkit is the ability to share common software objects needed to interface ERP software with other DoD systems. If an object has been developed by one program, another program can leverage that investment and use the object for its operations. This has resulted in considerable savings already since the budgeted costs of an ERP project typically allow up to 40 percent of the total cost for software objects.

Collaboration throughout DoD

With a common mission to use the buying power and expertise of the Defense Department, the ESI has been negotiating DoD-wide software license and maintenance agreements since 1998. Obtaining deep discounts off GSA Federal Supply Service prices, ESI has saved the Defense Department more than $1.5 billion by securing terms that help even the smallest program reap the benefits of DoD's cumulative buying power.

After years focused on software license and maintenance agreements, ESI joined forces with the PIG to tackle the contracts that demand the largest percentage of a COTS IT program budget--software implementation/systems integration.

In a typical commercial IT project involving COTS packaged software, $5 is spent for a systems integrator for each $1 spent on software license fees. Based on an Office of Management and Budget (OMB) 2003 finding, the government ratio is as high as $15 to $1. ESI brought to the table its expertise in negotiating enterprise-wide purchases--and the PIG brought its collective expertise in ERP and supply chain software implementations.

Fixed-Price Services

The result of this cross-organization effort is a contractual structure that follows the phases and steps of implementation methodologies proven in more than 18,000 business systems projects. The Enterprise Agreements were awarded in May 2004 to five systems integration firms: Accenture LLP, BearingPoint, Computer Sciences Corp., Deloitte Consulting LLP and IBM. The agreements permit any DoD program to order fixed-priced services that follow a vendor's phased methodology and include descriptions of tasks, deliverables, acceptance criteria, duration and price.

The agreements provide a full range of services including: configuration; integration; installation; data conversion; training; testing; object development; interface development; business process reengineering; project management; risk management; quality assurance; and other professional services for COTS software implementations.