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Four Paths to IT Consolidation

What works in one state doesn't necessarily work for its neighbor.


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Ellen Perlman

Ellen Perlman was a GOVERNING staff writer and technology columnist.

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Commented November 3, 2009

Ironic that this article is published extolling consolidation as a cost saving vehicle and progressi...

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For decades now, we've heard about the need for governments to consolidate their information-technology resources, with a handful of states such as Pennsylvania and Michigan showing the way. In many cases, however, snails have zipped past states that have been pondering the expensive, time-consuming process for years.

But in a time when dollars are scarcer than ever and states are looking for ways to become more cost-efficient, CIOs and other officials may have more firepower for starting IT consolidation projects, or speeding existing ones along. Most states now are implementing or planning data-center consolidations, according to a survey by the National Association of State Chief Information Officers. In January, we wrote about Colorado's IT consolidation.

Politically, states have found varying ways to get the process moving. "A Tale of Four States" was not the title of a session on IT consolidation at NASCIO's annual conference in Austin last week, but it might as well have been. Each state has a different story to tell on how to get it done, and what works in one state doesn't necessarily work in the next.

Georgia went the outsourcing route, but that's not an option in highly unionized Massachusetts. In Florida, the legislature was behind the big consolidation push, while in West Virginia there was no legislation, just a determined CIO's office egging agencies on with service agreements and metrics to prove the value.

The Florida legislature was so adamant that IT consolidation move forward that it passed legislation to get it done in 10 years. While one of the biggest obstacles to consolidation pretty much everywhere is agencies' fear of relinquishing control, Florida lawmakers have a big stick to wield over recalcitrant agencies that refuse to accept the inevitable: the ability to slash their budgets big-time.

"Resistance is futile," said the state's Chief Information Officer, David Taylor. "They will consolidate."

Florida is in the early stages. So far, it has picked the low-hanging fruit, concedes Taylor, eliminating two mainframes by combining three into one. Another project will consolidate e-mail so that the state's 150,000 e-mailboxes -- now using 35 domain names -- will all end up under one domain.

The big test comes in July, when three major data centers will take over the staff and the equipment of the state agencies that up to now have rented space in the data center but have continued to run their own IT. Once the data centers, which each have their own boards of directors, take over, they will sell those functions and services back to agencies.

All three data centers will be providing the same mission and functions of storage, hosting and running mainframes. So, in a dog-eat-dog business way, those data centers will be competing: If one manages to provide the services at a much lower cost, it could retain all the business and drive the other two out. But all three could stay in the game if they all run well. "Hopefully it will lead to happy customers," Taylor says.

In Massachusetts, it was Governor Deval Patrick who provided the consolidation leadership with an executive order this past February requiring consolidation within the executive branch. The goals are to create efficiencies, improve digital security and align agencies' IT resources with their business strategies and priorities.

With 150 agencies each in control of its own IT resources, there has been little coordination, economies of scale or volume purchasing. Massachusetts executive-branch agencies are pooled into eight "secretariats," and Patrick's order requires that the agencies' technology, including staffs and budgets, be consolidated at that level.

Massachusetts' CIO, Anne Margulies, said the goal now is to consolidate 183 data centers to two and 24 e-mail systems to one. And, she said, from now on the commonwealth will only fund shared applications, either in a secretariat or across the enterprise.

Under the governor's order, Massachusetts must be "substantially complete" by 2012, although the state has yet to define just what is meant by "substantially complete," Margulies said. For anyone who would like to follow Massachusetts on its journey, a wiki site to lays out where the commonwealth is, where it's going and where it came from.

West Virginia's consolidation effort didn't have the force of the governor or the legislature behind it, and there was plenty of reluctance by agencies to give up control over resources. But the state's IT department was able to show agencies how costs had escalated over the years and explain how consolidation would help get those costs under control. Collaborating with agency heads, the IT department completed consolidation with two large agencies in February 2007. That gave it more metrics to show, and nine of the state's 10 largest agencies now have consolidated, moving their technology employees to the IT department.

Consolidation has progressed via service-level agreements that are renegotiated every few years. Now, "we're not seeing resistance," says Kyle Schafer, CTO. The state has been able to reduce IT staff by 85 full-time employees in the agencies that were consolidated. And those agencies saw a 13 percent reduction in the costs of hardware and software over four years. On the other hand, said Schafer, agencies that were exempted from consolidation or hadn't yet gone through it saw a 17 percent increase in staffing over the same period.

Although a 13 percent savings accrued to agencies that have consolidated, only 9 percent of it goes back to them. The rest goes to the IT department to reinvest. As for customer approval, there was a 92 percent satisfaction rating of the IT department's performance by state employees.

Georgia's first consolidation attempt, spearheaded by the Georgia Technology Authority starting in 2000, did not get off to a good start. There was bad will among customers and agencies that lives on to this day, said Patrick Moore, GTA's executive director and the state's CIO.

That initial effort was canceled by GTA after Governor Sonny Perdue took office in 2003. The state's primary data center finally was moved out of a leaky office in the state archive building. The governor hired a chief operating officer and chief financial officer from the private sector to bring "best practices" to the state overall. GTA led an assessment of the 12 agencies that represented 80 percent of the state's technology spending and shared the results with the governor and his executive team. They decided to outsource the IT of those 12 agencies, the bulk of the executive branch.

The reason for going the outsourcing route, said Moore, was that the state simply did not have the in-house capability to fix what ailed its technology. It didn't have the ability to attract talent and was facing a lot of retirements. To make the business case for outsourcing, "we said it was all about risk" to the state's operations, Moore recalled. The state faced too much risk from a major outage or other catastrophe and didn't have the time or resources to make the changes needed to lessen that risk. The CIO and the governor's office were able to make the case that leaving things as they were would result in disaster.

Last November, the state signed an eight year, $873 million contract with IBM for IT infrastructure services, including data center and storage consolidation. The state also signed a five-year, $346 million contract with AT&T for managed network services, such as telephone and Web conferencing. IBM took over the state's equipment in April. So far, the company has conducted a comprehensive inventory of all IT assets in the 12 agencies, consolidated 21 help desks to one, implemented an online application for ordering equipment and services, and this month is starting to refresh end-user computer equipment.

Next up is a new billing system. Also starting this month, agencies will be able to see exactly how much of a particular service they're using and what it costs, so they can make better decisions.

When the GTA started down the consolidation road, it understood that it had to make the financial and technological case for the major change, Moore said. Otherwise, he said, "we knew we would never win over hearts and minds."


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