There are roughly 47 financial management systems that are considered in need of modernization.

That is down from the 56 that needed updating in 2021.

The reason for the improvements can directly be traced to the efforts by the Financial Management Quality Service Management Office.

“The FM QSMO has really evolved into its role as a broker. So unlike a lot of other initiatives, which were very pointed, FM QSMO is not a provider of shared services. The FM QSMO is a broker, and through its marketplace, we are brokering access to compliant standards-based solutions and services from trusted providers of all types,” said Steve Nulter, a senior business analyst and acquisition advisor in the FM-QSMO within the Department of the Treasury’s Bureau of the Fiscal Service, on Ask the CIO. “Now there’s still a very real need for modernization. So of those 47 installations, 72% are still going to face modernization needs by 2035 so essentially over this next decade. A lot of that is driven by end of product life for current systems that they’re on. Some of that is based on other things like the need to comply with new requirements that have come out, the need to move to the cloud and for other reasons.”

Additionally, Nulter said about 38% of those legacy systems remain hosted on-premise, making it more difficult to potentially update, secure and modernize.

The Office of Management and Budget created the QSMO concept in 2019 with a goal to change the business model for shared services.

The FM QSMO is tasked with four responsibilities:

• Offer and manage a software and services marketplace
• Guide and govern the long term sustainability of those products and services
• Drive implementation of the standards
• Continuously improve

Nulter said over the last five years, the QSMO has matured and grown to now offer access to 20 public and private sector providers, who provide more than 100 financial services products and services. These products and services range from everything from full enterprise level core financial systems to basic operations and maintenance support to accounting operations support, transaction processing and audit support.

“When we launched the marketplace a little under two years ago, we had somewhere around four providers. We had one commercial provider and three federal providers,” he said. “A year ago, we stood at 10, and now, as we stand today, we’re at 20. Year over year, at this point, the marketplace has been doubling in size, and we’re very excited about that variety of providers and that variety of offerings that are available in the marketplace.”

Four agencies made awards in 2024

The increase of options in the marketplace is opening the door to more agencies buying modern financial services.

Nulter said from June through September, four agencies reached award for acquisitions through the marketplace that totaled $183 million worth of contracts.

One recent example is the Patent and Trademark Office in the Department of Commerce, which awarded a contract for a new core financial system and related services.

“That was very significant because we had had some limited use of the marketplace for other FM needs, but USPTO, using the marketplace, was the first to do it for that cloud-based core solution, and then jumping onto that baseline solution that the idea behind all of this,” Nulter said. “Right on the heels of that occurring, we also had the Army’s Enterprise Business Systems convergence group. They had used the marketplace to go through an acquisition process and award a contract for a set of FM support which included work associated with the Army’s larger business systems transformation effort. While it wasn’t buying the core system, it was very much about modernizing and transforming their financial management business systems and some of the support surrounding that.”

The Army’s award was the first from a Defense Department component that used the marketplace.

Nulter said Treasury, the Department of Homeland Security’s U.S. Citizenship and Immigration Services also bought financial management service through the marketplace over the last few months.

Marketplace to continue to grow

While these and other examples show progress, Nulter said there still is a lot of opportunity in the federal sector as evidenced by the 47 financial systems that need to be modernized.

Nulter said the FM QSMO’s priorities for 2025 and 2026 include the continued expansion of the marketplace by increasing the number of providers by 200%.

“That’s an aggressive goal, but it’s certainly something we think we can reach, and using 2023 as the starting point for that. As you can see today, we’re already halfway there, so we’re confident that we will hit that 200% growth in terms of the number of providers by 2026 as expected, and in particular, some of the areas we see there being growth in this next year include additional core financial solutions,” he said. “We have had some engagements with parts of industry, some which have spoken about this at other federal forums and stuff. But we absolutely expect that this time next year we will have more providers, and we will see a diversity even in some of the specific offerings that are included in the marketplace, such as additional core financial systems being available.”

Additionally, Nulter said there are several ongoing agency acquisitions in the process that should come to fruition in 2025.

The FM QSMO also is seeking to improve the user experience of their platform that would improve agency customers’ ability to search for providers, resources and “As part of that continuous improvement, we will continue to maintain, enhance the standards and consistently capture those things that are truly governmentwide needs, so that agencies will have that stuff accounted for as they come and look to leverage the marketplace,” he said.

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