How the United States and Canada Are Approaching IT Consolidation

After years of talk about cutting costs and eliminating waste, U.S. and Canadian federal governments are making good on those promises as leaders in both countries attack ambitious IT consolidation projects.
February 28, 2012
 

Written by Colin Wood, Government Technology

After years of talk about cutting costs and eliminating waste, U.S. and Canadian federal governments are making good on those promises as leaders in both countries attack ambitious IT consolidation projects.

Last August, Canada announced the creation of a centralized IT agency, Shared Services Canada, which will consist of personnel taken from 44 federal IT departments. The new agency will try to reduce the number of government-run data centers from 300 to just 20 and combine about 100 email systems into one, while serving as the sole IT provider for the federal government. The Canadian government anticipates that the move will save $4 billion out of an $80 billion program budget.

Though the U.S. consolidation efforts don’t include a centralized IT agency, they do target a much larger set of equipment. The U.S. federal government has more than 3,000 data centers that range in size from a couple of computers sitting in a closet to a 195,000-square-foot Department of Homeland Security facility in Alabama scheduled for closure by the end of 2012.

In all, the U.S. Data Center Consolidation Initiative, launched in early 2010 by the Office of Management and Budget, anticipated closing 740 data centers by the end of 2012. Repeatedly finding themselves ahead of schedule, federal officials have adjusted their targets and now aim to close 1,200 data centers by the end of 2015. Some estimates put energy savings at more than 12 billion kWh and cost savings at $5 billion.

Consolidation efforts in both countries are aimed at cutting operating costs and improving quality of service, which they do by reducing duplication and increasing hardware optimization. Efforts to eliminate acres of unneeded data centers and email networks are moves toward embracing industry trends, such as server virtualization and cloud computing. Consolidation plans also point to reduced energy consumption and real estate costs.

The U.S. and Canadian federal governments are each taking their own path to prepare for the future of IT. Both programs have, however, faced criticism and doubts that they will be successful.

U.S. Takes a Federated Approach

Hardware consolidation saves money in the long run by reducing the costs of power consumption, real estate and personnel. But the process of consolidating is costly, and some U.S. agencies, such as the Department of Homeland Security, have faced budget cuts in their consolidation programs, which could hamper progress. And with no centralized agency charged with overseeing IT, there are concerns that a change in management could derail consolidation efforts in the long term.

But for now, things are going well, said Federal CIO Steven VanRoekel. “It’s amazing, especially on the data center side, to see what’s come out of this,” he said. The cost savings in data center consolidation are great, and the U.S. is working on email consolidation too. The Department of Agriculture combined 21 email systems into one and reduced operating costs by two-thirds, VanRoekel said.

Besides cost savings, these consolidation efforts offer flexibility for adopting future technology such as cloud computing, VanRoekel said. The U.S. wants to change how applications are delivered, promote shared services between agencies, and ensure the strongest possible security, he said. Efforts to consolidate data centers aren’t isolated from the rest of government — the idea is to make all of government work more efficiently through better IT practices.

To develop a consolidation plan, the U.S. looked to other countries like Canada and England, individual U.S. states, and the analyst and vendor communities, VanRoekel said. But unlike Canada’s approach, a centralized IT plan was never in the works for the U.S. government. “We definitely looked around everywhere at best practices,” VanRoekel said. “We had never considered the notion [of centralizing IT] for reasons that are beyond the cost-savings aspect. We do a great service to the American IT industry through our purchasing.” A centralized IT agency would hurt the economy too much, he said.

While the U.S. won’t go so far as to create a single email system for the entire federal government, which Canada is attempting, VanRoekel said the current progress is encouraging. When the project began, many data centers were operating at less than 10 percent efficiency; now many are operating at 20 percent, VanRoekel said. The tentative goal is to reach at least 60 or 70 percent usage through consolidation, server virtualization and the adoption of best practices. “We think we can go pretty far,” he said.

But a survey last year of federal government IT professionals found that the complexity of consolidating U.S. data centers may undermine some projected savings of the plan. The study — conducted by MeriTalk and commissioned by IT vendor Juniper Networks — indicates that as the number of federal data centers shrinks, the remaining facilities will need to grow larger and accommodate more systems. Survey respondents, who estimated that their computing needs would grow by nearly 40 percent over the next five years, worried that the cost of managing larger and more complex data centers would significantly reduce overall benefits from consolidation.

The Department of Defense (DoD), which has nearly 800 data centers — far more than any other government entity — represents the largest portion of the federal government’s consolidation initiative. The DoD plans to close 148 data centers by the end of 2012 and is meeting all of its targets, said DoD spokesperson April Cunningham via email.

So far, consolidation has meant cost savings, Cunningham said. “This translates to good stewardship of taxpayer dollars while investing in our nation’s defense. In some cases, IT consolidation allows for the repurposing of labor to other mission-critical activities. It also alleviates some of the work force from ‘additional duties’ to focus on their core competencies,” she said.

The DoD works with the consolidation initiative’s task force to share its experiences with and learn from other agencies, she wrote. The DoD is on track to announce success come the end of 2015, according to Cunningham.

Canada Opts for Centralization

Up north, Shared Services Canada (SSC) represents a different type of consolidation initiative. The new agency will combine IT staff from 44 federal agencies to form a centralized IT department. Modernization of the nation’s email system, data centers and networks is planned to take place during the next eight years. Canadian officials argue that the status quo of decentralized IT management is unsustainable.

“We simply cannot persist in maintaining the duplication, inefficiency, low interoperability, suboptimal economies of scale and fragmentation that arise from each department managing its IT independently,” said Liseanne Forand, president of Shared Services Canada, during a speech about the consolidation last fall.

Canada’s technology infrastructure, she said, is aging and uncoordinated. In one government complex alone, there are nine different networks.

SSC is not like any other shared services center that has come before, Forand said. One big difference is that usage of the new agency’s IT services will be mandatory. Another important differentiator is that the agency has the authority to run on an appropriations basis, rather than through cost recovery, Forand said. Third, the agency will be in position to procure IT resources to align with long-range goals.

Eventually the aim is to make SSC a center of excellence, she said.

But it’s a long way from plan to practice. Shared Services Canada already has riled the Professional Institute of the Public Service of Canada (PIPSC), one of the largest labor unions in the country. The PIPSC has for the past six months expressed concerns that Shared Services Canada isn’t cooperating with the union, which represents about 80 percent of the staff to be assigned to SSC.

After a meeting last year between PIPSC President Gary Corbett and Forand, Corbett repeated his concerns in a letter addressed to SSC. “The Institute supports in principle the creation of Shared Services Canada if it is created properly, but [I] caution that the agency will not succeed without consultation with the Institute and the cooperation and support of its members,” Corbett wrote.

He characterized the current strategy to create Shared Services Canada as “naïve.” “Our position is: They’re not ready,” he said. “We don’t think they can achieve what they think they can achieve. A lot of what they are expecting are drastic changes.”

A centralized IT agency for Canada isn’t a bad idea, Corbett said, but it’s a large project that needs a detailed business plan — something that’s lacking at this point. “The politicians made this decision, then they threw together Shared Services Canada to make this happen. They kind of make it up as they go,” he said. “The government basically decided to do this and expect the puzzle pieces to fall into place.”

The problem is that there are employees with contracts who have been promised various things by the government, he said. Combining all these employees into one agency creates all kinds of new issues that must be addressed, he said. For example, employees competing for job promotions now find themselves in a new agency where their seniority or past achievements may not matter. “You’re talking about 12,000 to 13,000 people’s lives,” Corbett said.

Corbett compared the project to the failed seven-year initiative for shared services in western Australia that cost the Australian government $372 million before it was abandoned last year. “When the [Canadian] government stepped in to do this, they didn’t prepare the ground. In six months, we haven’t seen any progress.”

In Ontario, a similar project was relatively successful, and the success was partially due to a no-layoff policy, Corbett said. “In the end, if our members aren’t happy, there will be a natural push back.”

Treasury Board President Tony Clement attempted to assuage layoff concerns in an interview last August on the Canadian TV program Power & Politics. On the show, he said the centralization initiative “won’t reduce necessarily the number of people working for the federal government, but it’ll actually find some savings. […] This is primarily about getting back to a balanced budget, reducing the deficit to zero. […] But it’s also about managing better internally.” Any layoffs would be through attrition,” Clement said.

Shared Services Canada has engaged PIPSC in workshops and formed subcommittees to work on staffing issues as the transition, according to a Shared Services Canada employee.

“With respect to SSC’s relationship with bargaining agents, we recognize the importance of transparent engagement with bargaining agents who represent SSC employees and the important role that bargaining agents can play during this transition process,” the Shared Services spokesperson told Public CIO in February.

Canada Taking Bolder, Riskier Path

Although the consolidation projects in both countries are significant, Canada’s could be more far-reaching, said Gartner analyst Massimiliano Claps. “What the Canadians are doing is potentially more impactful, but much more challenging,” Claps said.

Centralization of IT means a stronger commitment to consolidation, but the U.S. hasn’t necessarily made a mistake in not centralizing, he added. “If you look at it from an execution perspective, it’s good that they’re taking it one step at a time. From a strategic standpoint, it’s not necessary to go all the way to the centralization that the Canadians are doing.”

Shared Services Canada’s creation was partially driven by the fact that Canada does not have many vendors in the cloud market it can draw from, Claps said. “The cloud market in the U.S. is much more mature.”

While states like Michigan, Indiana and Utah led successful consolidation programs, states like Texas and Virginia struggled, Claps said. There is a right and wrong way to do things. “The jury is still out on what the Canadians will be able to do.” And it’s still too early to tell how the U.S. data center consolidation will ultimately affect budgets. “You need a three- to five-year time frame to measure consolidation,” Claps said.

Ideally the next step after consolidation is to spread the efficiencies gained in IT into all other areas of government, said Gartner analyst Jerry Mechling. It’s long been surmised that technology is a vehicle for progress that will allow organizations to work faster and more efficiently — this is the change everyone is talking about. “The Canadians have been pursuing that dream a little more persistently,” he said. “They have a fairly long tradition of using IT for providing services.”

“There are two major barriers between here and there,” Mechling said. “Confusion and conflict.” Confusion stops progress, because people don’t pursue things they don’t understand. And conflict is the real killer — if government work forces don’t want to do something, they won’t, Mechling said. “A lot of times you’ll see good policy but no implementation,” he said. Centralized IT is the equalizer. Officials may come and go, but a permanent body dedicated to running the government efficiently through IT services means a permanent change in how things get done.

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