If you were to follow the journey of a single grant dollar from federal to state to local jurisdiction, that dollar would travel through a variety of processes, procedures, systems, forms and personalities. In the past, investing in custom grant systems to automate this complex, disparate network has resulted in expensive engagements with a high failure rate. But things are changing.
The public sector has adopted a cloud first IT modernization policy that is rapidly improving financial and program performance. At the heart of this movement is Software-as-a-Service, or SaaS. Why SaaS? Because SaaS, by design, provides one standard software that everyone can access and use. The more governments that use the software the more best practice is built-in. And what truly makes SaaS attractive in this cloud first era is that it can be deployed quickly and affordably - an important characteristic in today's resource constrained environment. So it's no surprise that state, local and tribal governments are looking to SaaS in increasing numbers when modernizing their grants management system.
Standardization Needs SaaS
There is a growing consensus in the public sector grants community that standardization is a critical component to improving grants management and performance across all sectors. Legislation is helping push standardization (Uniform Grants Guidance, DATA Act and GREAT Act) more effectively than in the past. However, standardization efforts require both data AND process to be in sync across the vast ecosystem of grantors, grantees, pass-through entities and their subrecipients to truly maximize grant resources. More importantly, it requires a commitment to change from disparate thinking and independent process design to improved information sharing and centralization. This is why SaaS grant solutions offer the greatest chance of success.
The High Price of Poor Systems
State, local and tribal governments are moving away from custom-built grants management systems in increasing numbers. Failed custom grant system implementations have led to high levels of cost overruns, audit findings, poor public perception, and often cited as a key contributor to the $100+ billion in fraud, waste and abuse, and the $136.7 billion in improper payments.
Grants management must become less complex and more streamlined to truly increase performance and relieve administrative burden on our public servants. Ironically, custom software implementations have a history of being just the opposite. Harvard Business Review and CIO Journal estimates that 68% of custom IT system implementations will be unsuccessful, the average cost overrun is 27%, and 1 in 6 projects is a black swan, with an average cost overrun of 200%, and a schedule overrun of almost 70%.
Myths & Misconceptions
The reality is that practical differences between custom-built software vs. SaaS are not well understood and its costing state, local and tribal governments and their residents. For example, when an RFP requires vendors to build, or highly configure, a system to automate and streamline your grant process, it discourages SaaS solutions and attracts custom software vendors (often calling themselves SaaS). In fact, the General Accounting Office (GAO), in their Information Technology Modernization Report, highlighted the high cost of grant system customization.
Here are 3 myths about custom-built grant software and SaaS grant solutions that you should be aware of if you are a grants manager, IT leader or finance executive in the process of modernizing your grants management system.
1. Customization Myth
In theory, custom-built software is fully customized to your needs and SaaS meets most needs, but it won’t necessarily meet all your needs. In practice, the idea that custom-built software can meet all your business requirements is an illusion. Resource constraints, limited access to best practice and lack of grant process knowledge means that development needs are often prioritized to get started, which is a messy, political process in itself, and rarely do all requirements make the cut. On top of that, most system users only use 10% of features at best. By trying to satisfy the needs of many stakeholders in the organization, it is not uncommon to end up with an overly complex grant management system. This hurts the user experience, limits the efficient utilization of the grant software and requires heavy investment in features that go unused, or does not conform to best practice. So the real difference between custom-built (or highly configured) grant software and SaaS is cost and implementation time, not coverage of business requirements.
2. Total Cost Myth
In theory, custom-built grant management software is expensive and SaaS subscriptions is much less expensive. In practice, custom-built grant software is much, much more expensive than SaaS. These days a mid-level engineer will cost you a minimum of $100,000 per year. A project manager will cost about the same. Even when most of the coding work is outsourced to countries with a lower cost requirements (think India, Ukraine, China), you’ll be spending at least $1 million just to implement your grant software. From there, you’ll also need to pay for maintenance costs, which are usually in the tens to hundreds of thousands of dollars annually, and deal with expensive change orders when a policy or procedural change is required. Last, but not least, none of this takes into account the cost of failure, which typically affects as much as 70% of enterprise development projects. SaaS, on the other hand, distributes the cost of development across many customers so costs are much lower. What’s more, with SaaS, you pay an annual subscription for what you need and leverage system improvements and updates that already follow grant compliance requirements.
3. Implementation Myth
In theory, custom-built software implementation takes years and SaaS takes day or weeks. In practice, custom-built enterprise grant software projects typically take a minimum of 2 years and as much as 7 years, depending on the size of the organization, number of stakeholders, scope of the project, etc. Getting started with SaaS software typically takes a few days to a few months, depending on the complexity of the SaaS software, user training required, etc. For example, Los Angeles, Houston, Denver, Miami and Detroit are all major cities in different parts of the country with different demographics, economies, policies, resources and structures. Yet, when it comes to grants management implementations they were all deployed in less than a year, on budget and all utilize the same SaaS grants management system. And because SaaS provides a standard process, each implementation produced change management best practices for each new implementation. In addition, each improvement request made by one customer was available to all customers. This leveraging of experience and knowledge is what makes this grants network so successful.
- The New Normal: Modernize and Standardize Your Grants System
- Top 10 Reasons to Have a Grants Management System
- Level Up: The 5 Levels of Grant Management Maturity
Any other misconceptions or perspectives on this topic we missed? We want to hear from you! Leave us a comment.