Merging IT Systems Causes Problems for States and Localities

Why are states and localities having so much trouble merging their IT systems?
by | September 2010

On a side street adjacent to the central corridor that runs through Springfield, Mass., sits a vacant, 100-year-old high school -- that's about to get a major makeover. By May 2012, the state will have spent $110 million converting the brick and stone building, known as Technical High, into a massive data center that will serve as a critical backup to the state's main data center in Chelsea, Mass., about five miles from Boston.

Once complete, these two facilities will be the only data centers the state will own and operate. These were consolidated down from Massachusetts' previous 83 centers that ranged in sizes, and housed information and processed data for nearly 100 agencies. Similarly the state operated numerous local area networks, e-mail systems and countless software programs, some redundant and all expensively maintained by an army of technology workers and private contractors.

But following an executive order issued in 2008 by Gov. Deval Patrick, the state has begun consolidating the hardware, software, personnel and organizational structures that absorb more than $1 billion annually in expenditures. Former state CIO Anne Margulies (who left the state this month to become CIO of Harvard University), calls the consolidation a "reinvestment" in the state's IT assets that take advantage of economies of scale. This allows Massachusetts to unite an enormous amount of technology that, over the past two decades, has built up into structures and management organizations that can be run more cost effectively.

Massachusetts is part of a growing wave of state and local governments heeding the call to consolidate. The trend is not new, but given the current budget situation across state and local government, the pressure to collapse, merge and combine IT into a meaningful, manageable and cost-effective operation has only grown stronger in the past few years.

The spate of announcements concerning consolidation have focused relentlessly on numbers: cost savings, reductions in physical space and energy consumption, and roll-ups of e-mail systems, indicating a substantial shrinkage of what was once a bewildering array of IT systems. Left unsaid, for the most part, is the human factor: How will consolidation impact the IT workers and agency CIOs, many of whom have been working in government for decades? And how will they respond to the vast re-engineering of their jobs? At one time, these professionals provided the e-mail, networking and data services that each agency needed. Now they must think of themselves as customers of these newly centralized services. In effect, their traditional function has been significantly diminished while their new roles as "enterprise" IT workers and managers will grow, though in ways not fully understood.

"Managing the work force element is probably the biggest factor in the success or failure of a consolidation initiative," says John Miri, who spent years working for the state of Texas. "Managers often expect their staff to set aside their own careers, which is unrealistic. No one ever won a war by ordering kamikaze missions."

The Call to Consolidate

If you mention IT consolidation to executives in the private sector, you'll get a blank stare. Been there, done that. In the business world, consolidation simply had to be done in order to stay competitive in the global marketplace. Corporate America tackled the job, for the most part, during the first half of the decade. Not so in state and local government, where decentralization and autonomous funding streams have allowed IT and all the electronic pipes that link computer programs and the people who manage them to grow like weeds.

By the middle of this decade -- after e-government had failed to deliver a new era in governing -- the focus shifted to one of its core problems, namely the escalating cost of IT and the diminishing return on investment. With states and localities spending in excess of $92 billion annually on computers and related services, according to the Center for Digital Government, public officials began questioning where all the money was going. The answer, in large part, was fairly straightforward: For years, states and localities had acquired technology haphazardly, leading to significant overcapacity and under utilization.

At the same time, technology itself was changing. Advances in software such as virtualization (which allows servers -- the workhorses of information processing -- to act as if they have many computers inside of one box) reduced the need and cost for so much computing horsepower. The Internet also matured, making it possible for agencies to run everything from e-mail to sophisticated computer programs without needing the actual computers to reside in the same physical location.

Clearly government no longer needed the entire high-tech infrastructure it had acquired and could use it much more efficiently through consolidation. By 2007, the National Association of State Chief Information Officers (NASCIO) reported that 62 percent of state governments were implementing or planning IT consolidation. The shift was belatedly underway. With the arrival of the Great Recession of 2008 and 2009, work on consolidation accelerated.

But something wasn't quite right. Word began to spread in the government IT community that measures of success -- better performance, lower costs and improved services -- were not being met. When Colorado undertook to consolidate its technology systems and services, it looked at how other states fared and issued a report in 2008 (Colorado Consolidation Plan) that found only a few were making widespread progress. Experts and consultants who help governments consolidate IT talked of three things: malicious compliance, rogue staffers bent on halting consolidation, and an overriding culture of fear that significantly slowed progress.

Change-resistant IT workers and the departmental CIOs who led them were one problem. Entire agencies were another. Some would resist the call to consolidate because they felt their mission was too unique and special to allow their computers and networks to be unified with the rest of government. Other agencies, often the largest, would refuse to join the effort altogether.

"The larger agencies, with lots of federal funding and autonomy, would try to ride it [the consolidation] out," says Bill Bott, former deputy state CIO of Missouri, "and in the end, insisted on controlling their environment and would not get on board." Bott, who led a major consolidation effort while working for the state, estimated 10 percent of the agencies took this stance, refusing to go along and change, while another 80 percent sat on the fence, neither resisting nor aiding the transition. "We ended up with about 10 percent of the agencies truly wanting and willing to change how they used technology."

Similar problems cropped up in other states and were reflected in the same 2007 NASCIO report, which warned that the top two challenges to consolidation were "work force resistance to change" and "agencies' desire to remain autonomous."

State CIOs Taking the Consolidation Lead

If government IT consolidation were a war -- and it often sounds like one at times -- then California CIO Teri Takai is its most decorated general. The one-time IT executive from the Ford Motor Company led one of the first wide-scale consolidation efforts back in 2005, while she was CIO of Michigan. She succeeded, but there were battles and wounds. "We underestimated the agency resistance," she told Public CIO magazine in 2006. "I have agencies that are working the Legislature about what's wrong with what I'm doing."

Today, Takai is once again leading the troops into battle, this time in California, where Gov. Arnold Schwarzenegger has issued an executive order to consolidate IT throughout the state's executive branch of government. Unlike in Michigan, where all IT workers and agency CIOs report directly to the state's central IT office, which controls the state's entire IT budget, California has taken a more federated approach. Takai's office oversees what the 130 departments and agencies do in terms of consolidating the state's digital infrastructure, and it helps to establish the structure and direction they need to move toward. "But I don't own the budget," she points out.

Given her years of experience in this field, Takai takes a nuanced, almost reflective point of view on what she's doing. But make no mistake, the stakes are high. Energy consumed by technology must be cut by 30 percent, the state's data centers must physically shrink by 50 percent, and the entire executive branch must use a shared e-mail service by 2012. In addition, Schwarzenegger wants to see cost savings -- lots of it.

Cutting costs can happen in numerous ways, but Takai is focusing on the many private contractors the state has relied on to fill gaps as demand for special skills exceeded what was available in the work force. Back east in Massachusetts, Margulies took the same approach, cutting back on contractors and investing in the state's IT work force, bringing their skills up to date and giving them an incentive to ride out the consolidation wave and stay in government.

Miri, now an independent consultant and senior fellow at the Center for Digital Government (a subsidiary of e.Republic Inc., which publishes Governing), is not surprised that CIOs are using this tactic to rein in expenses. When IT workers hear "cost savings," they see it as a code phrase for job reductions. Margulies doesn't even mention the term and instead talks about investment in people and assets for Massachusetts.

But Miri worries that CIOs may go overboard trying to wring savings by eliminating private contractors. "Some contractors are doing singularly critical jobs on short term projects. To replace them with full-time employees, even if at lower salaries, could prove expensive over the long term. Hiring a full-time employee is a 20 to 30 year commitment, and the fully burdened cost is higher than most managers realize." He also questions the wisdom of promising not to eliminate any jobs at all in order to keep the workforce happy. "Telling workers there will be zero job cuts tends to make them ignore the project entirely," he said.

Communicating Changes to Colleagues

Ultimately one of the surest paths to consolidation success among workers is perhaps the most basic: communication, and lots of it. In both of her CIO jobs, Takai has used a blitz of newsletters, town hall meetings and other techniques to get the word out on happenings. Missouri initially took a more conservative approach, but when rumors about job cuts spread too quickly, Bott and his team reversed tactics. "We ended up over-communicating with staff, IT directors and agency CIOs," he says.

The most important people the top CIO must reach are their counterparts in agencies and departments. In some ways, agency CIOs undergo the biggest change as their traditional duties diminish. But according to Bott, if you can tell them that while the grunt work of maintaining networks and e-mail systems will disappear, they will be able to concentrate on higher priority things that directly impact their department's bottom line.

"It's a new dynamic in the workplace as their role shifts from manager to leader," Bott says. "That's important because the demand for IT in government far exceeds what can be delivered. To cope with that, you need leadership across the board."


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