IT Cost Reduction Comes with Risk

The fiscal situation and IT push within the Obama administration is sending a signal across all levels of government that a sea change is coming.
by | August 31, 2010 AT 9:00 AM

The Obama administration is touting the ability of IT to find efficiency savings. "Closing the IT gap is perhaps the single-most important step we can take in creating a more efficient and productive government," Office of Management and Budget Director Peter Orszag told an audience at the Center for American Progress earlier this summer. "Indeed, I would say the IT gap is the key differentiator between our effort to modernize government and those that have come before."

But as anyone familiar with government IT projects knows, these large undertakings are fraught with risk. Federal CIO Vivek Kundra recently wrote a memo that put IT risk management in the spotlight:

Federal information technology (IT) projects too often cost more than they should, take longer than necessary to deploy, and deliver solutions that do not meet our business needs.

The federal landscape is littered with IT projects that dragged on for years, produced little and cost a bundle, including the FBI virtual case file mess and the IRS fiasco of the 1990s. The strategy now appears to be to identify these wounded beasts and put them out of their misery earlier rather than later. As Kundra's memo puts it:

[W]e are undertaking detailed reviews of the highest risk IT projects across the Federal Government to address these systemic problems. In order to justify future funding for these projects, agencies will need to demonstrate that project risks can be reduced to acceptable levels.... Projects which do not meet these criteria will not be continued.

What is true at the federal level is also true for state and local governments, who have likewise suffered long, costly meltdowns of major systems. At times, frustration with the dysfunction of in-house operations has led to outsourcing efforts, but not all of these have happy endings. The Indiana welfare outsourcing didn't end well, and the latest problem in the news is the meltdown of an $863 million IT outsourcing contract between IBM and the state of Texas. According to a story in the Dallas Morning News, recriminations are flying both ways.

The trick is to identify dysfunctional projects early and stop them cold.

Despite the challenges, IT is simply too valuable a source of innovation to give up on, especially given the scope of our budget crisis.

One possible cost saver is the use of public cloud computing, which enables the downsizing of data centers.

The Obama administration appears headed in this direction already. Earlier this summer, President Obama issued a memo directing agencies to submit plans on how they will consolidate or reduce existing data centers over the next five years. According to Obama:

[M]any of the properties necessary for the Government's work are not operated efficiently, resulting in wasted funds and excessive greenhouse gas pollution. For example, over the past decade, the private sector reduced its data center footprint by capitalizing on innovative technologies to increase efficiencies. However, during that same period, the Federal Government experienced a substantial increase in the number of data centers, leading to increased energy consumption, real property expenditures, and operations and maintenance costs.

As with all IT undertakings, there are risks here as well, particularly in the area of data security. The potential for "leakage" is a serious concern, but the benefits of moving into the cloud are enormous -- which explains why public IT leaders are excited about the cloud.

One of the unintended consequences of the IT boom of recent years has been the multiplication in the number of channels through which citizens can interact with government. While it sounds nice that you can pay a parking ticket over the phone, by fax, by mail, online or on your PDA, in reality these multiple channels are costly and inefficient. I've written on this idea before (Changing the Channel). Government has already consolidated and reduced channels for government-to-business services, but it hasn't really taken a hard look at cutting down the number of citizen channels -- which could be a great source of cost reduction.

Clearly, the fiscal situation and IT push within the Obama administration is sending a signal across all levels of government that a sea change is coming. Despite the somewhat scary history of IT projects in government, such innovation must continue.

But be wary. Not all projects are going to go well, and state and local governments can take some cues from the fed's leadership on risk management. Though it can be politically hard to do, pulling the plug early on a struggling IT project might be the smartest IT initiative of all.