Public Sector Governance and Accountability Series: Budgeting and ...

350 Stephen B. Peterson
Because IT takes a long time to develop, procure, and implement, it
allows time to start with changes in financial procedures that can be done
quickly. Procedural reform gets the user requirements right, and user
requirements are determining factors in the success of information systems.
A focus on IT as a driver means that more serious institutional issues
are not addressed or can be finessed. Experience from Ethiopia clearly
demonstrates that institutional issues are far more important and far harder
to manage than technical issues.
One reason IT is a driver of reform in aid-dependent countries is that IT
is a conditionality of foreign aid agencies because it is presumed to improve
financial management. The high failure rate of IFMISs suggests that IT is not
a route to improve financial management. It is a negative, harmful conditionality
that imposes inappropriate levels of risk on weak financial systems.
The appropriate strategy is to gradually strengthen weak financial systems
through process change, not innovation.
Lesson 3: No Presumptive Reason Exists to Favor an OTS or a
Custom Solution
The conventional wisdom is that an OTS solution is preferable to a custom
solution. Research has not shown this presumption to be the case (see table
10.2). It is not clear whether the OTS characteristics are related to the high
failure rate of IFMISs. As noted previously, large-scale, complex information
systems (whales) are increasingly believed to be more prone to risk than
small-scale, iteratively developed systems (dolphins). In the case of Ethiopia,
the rapidly changing fiscal devolution combined with the adequacy of the
baseline financial systems meant that a customized, iterative automation
strategy was appropriate from the standpoint of user requirements and
availability of financial resources.
All large-scale financial information systems involve risk, whether developed
by a customized or an OTS solution. The central question for developing
countries is which approach, in principle, best minimizes risk in a given context.
The Ethiopian case suggests that a custom system was appropriate in that
context. The institutional issues required a flexible approach, and custom systems,
by definition, are more flexible. Moreover, a small-scale iterative
approach on the technical side minimizes risk. All told, custom systems are
better in many cases. Research has not related the approach (OTS versus custom)
to the failure of IFMIS. It has been argued that institutional factors far
outweigh technical factors, and institutional factors require a flexible approach
to automation. A custom system by definition is small scale in this sense, and