Systemic problems with DoD ERP strategy and implementation, warns report

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An independent assessment of Defense Department enterprise resource planning projects casts heavy doubt on their likelihood of success.

The unlimited distribution assessment (.pdf) was prepared by the Institute for Defense Analyses and is dated February 2011.

The report doesn't only question the execution of ERPs, which have generally run significantly over budget and behind schedule. It questions the ERP strategy itself, calling on the Pentagon to curtail the further deployment of the systems in cases where no significant user base already exists, pending a review of elements including a "clear definition of the problem the ERP is attempting to solve."

Dissimilarities between the Defense Department and private sector mean the integrity of military ERP implementations are compromised from the start, since it is an "invalid premise" to believe that commercial off-the-shelf ERPs have the capability to meet all DoD needs, even should the software be customized and business processes alerted to conform with the ERP, the report states.

The existence of processes without analog in the private sector has led the department to require that ERPs integrate with legacy systems. But that undermines the fundamental value proposition of an ERP in the first place--the full integration of processes.

Report authors also say the DoD has confused its goal of attaining financial statement audibility with ERP implementation. An ERP can indeed create transactional traceability and enforcement of referential integrity across dependent data elements. "However, this is not the way the systems are being implemented," the report says.

Among other things, there is no real federation across multiple ERP implementations, and transactions aren't contained within a single organization and so not a single ERP. But leadership on data standards is missing, since functional domain leaders generally believe that in order to obtain and trust data, they must have a hand in controlling the source and the processes that produce it, the report says.

That distrust has also led particular function domains to dictate details of process execution "with the assumption that it is efficient for all units to do business exactly the same way, regardless of mission and the authorities of the operational commanders."

Achieving auditability may also be a challenge because military services are counting on ERP implementation to force changes within their organizations, whereas an organization's willingness to change behavior and processes is a prerequisite for ERP success, authors say.

ERP project sponsors lack authority to achieve business process changes, and sponsorship by the financial management domain creates that weakness since "the span of control required of the sponsor is well beyond that of the leaders of the financial domains."

At the military service level, the only leaders with the authority and accountability to implement the necessary amount of change and enforce agreement between disagreeing parties would be the secretary and the service chief and their immediate deputies, report authors say. Moreover, they would have to be personally engaged in the process, since delegating their authority has been shown not to work.

But report authors also say that subordinates need to be able to push back on decisions and discuss them without being accused of fomenting dissent. The command-and-control approach of the military has led to a situation where program managers are "unable to deliver a completely factual version of their status to leadership if it contains any element that could be considered significantly negative." Status reports get increasingly sanitized as they go up through the hierarchy and so become less and less accurate. "By the time it reaches senior leaders, there are no problems."

Report authors call on the Pentagon to drop its goal of producing comprehensive financial statements, since matters such as valuation and depreciation are calculated in the private sector as part of a tax strategy--which have minimal operational value to the DoD. More meaningful than that would be a cost accounting approach, the report says.

For more:
- download the report, "Assessment of DoD Enterprise Resource Planning Business Systems" (.pdf)

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