Besides pure curiosity, why should the public care about these old systems?

One reason is that they have a real impact on delivering services to citizens. Doug Robinson, the executive director of NASCIO, called old UI systems the “poster child” for why modernization is important. The economic recession caused an overwhelming spike in unemployment claims, and the increased demand crashed states’ back-end databases and websites. New York, Florida and Ohio were among the states that fell victim to the surge. A modern system, perhaps using cloud computing, would’ve been able to cope with that elasticity and scale, Robinson said.

Old systems running on ancient programming languages also struggle to accommodate changing business requirements or legislative mandates. Modifications can require weeks or months of programming time — causing delays that can draw the ire of lawmakers and the public. California’s Employment Development Department experienced the real-world consequences legacy systems can have, when in 2009, Congress repeatedly extended the length of time individuals could draw unemployment benefits. Each extension required line-by-line coding changes in the department’s 1970s-era UI system. During one particularly complex change, unemployment checks were delayed for weeks as COBOL programmers toiled over the modifications.

Money Matters

Billions of dollars are needed to modernize states’ computer systems. One phenomenon that’s happening — given that budgets are stretched thin — is that unemployment insurance (UI), Medicaid Management Information Systems (MMIS) and enterprise resource planning (ERP) are competing for funding, said Dave Andrews, who leads Accenture’s state and local government ERP practice.

The sputtering economy has put more workload onto UI systems simply because more unemployed workers are seeking benefits. MMIS reform also is viewed as a bigger priority than it once was because of the Barack Obama administration’s focus on health-care reform.

Consequently back-end systems like ERP might be a lower priority right now in the eyes of lawmakers. For this reason, Andrews said ERP might be the third in line behind UI and MMIS, which are citizen-facing. Roughly a third of the states haven’t modernized their ERP systems since the mid-1990s, Andrews said. Those states want to upgrade their ERP, but they don’t have the money to do so.

No matter where money is spent, many state CIOs are clamoring for change on how the systems are funded by the federal government. Specifically states want more “administrative flexibility” on the requirements attached to IT dollars spent on federally funded, state-administered programs like UI and MMIS. The Obama administration recently ordered federal agencies to review these rules and alter them where appropriate.

Doug Robinson, executive director of NASCIO, said funding rules should encourage collaboration, but the current rules have the reverse effect. States now receive less federal funding if they share systems. It’s relatively easy, in some cases, to get the upfront capital from the federal programmatic agencies for a new system, Robinson said, but trying to replace them is tougher because of the funding rules. That’s one reason states are holding on to aging systems.

Utah CIO Steve Fletcher said the feds should find a way to let states share technology, therefore cutting costs for everyone. “There should be a better way to approach this rather than build it 50 times, because it’s pretty much the same system in all 50 states. Build it once and distribute it,” Fletcher said. “They don’t incentivize states to do the sharing.”

Another drawback of old systems is security. Assuring the code on a legacy system can be done, but it’s difficult. They were built before the advent of the Internet, so they were never intended to be connected online. “So you have that classic ‘lipstick on a pig’ situation where you put that Web service presentation layer in front of an old legacy environment,” Robinson said. “That can cause added complexity and offers weaker security than a modern application portfolio with seamless security built in since day one.”

Andrews and Russell added that legacy systems also don’t have the functionality needed to provide good data reporting, and have a tendency to hide data so that it never finds the light of day. Old systems can hinder government transparency. “We have data across all these disparate systems, but because they’re old and because we haven’t implemented newer technologies that have this functionality, it sits in those systems,” Russell said, “and we’re not able to pull the data to make better business decisions on behalf of providing services.”

“Technology is a predictor for how we do business, and if we’re not changing that technology, then we do business the same way we’ve always done it,” she added.

The Future

The appetite for upgrades to legacy systems appears to be present. An annual survey of state CIOs released in October from NASCIO said that more than half of the respondents were planning to replace their state’s legacy MMIS as health-care reform continues forward. But this effort will require major federal funding, according to NASCIO, and “getting those funds from federal government with its own budget problems could be problematic.” The Center for Digital Government’s MMIS survey found that five states are in the RFP planning process and six states said they will be completely replacing their existing legacy MMIS.

A 2009 Gartner research brief reported that some type of ERP activity was under way in 27 of 37 states surveyed, whether that be planning or a recent implementation. States were planning to spend from $30 million to $120 million on ERP, depending on the scope of the project and the state’s size. But some of these ERP projects were put on hold as states ran into financial hardship the past few years. Now there are two or three RFPs coming out each year, suggesting that ERP implementations have slowed.

The will is there, so what does the future look like? The consensus seems to be that states can no longer afford to develop new systems or modernize existing ones on their own.

The price tag is too high, and it takes too long. Furthermore, state-to-state, their systems share most of the same functionality, so developing systems that are shared among multiple states is feasible. A new model centered on “multistate consortia” is emerging that may be the way forward for replacing MMIS, UI and other big-ticket systems.

A few years ago, in the wake of the recession that stretched state UI systems beyond their limits, the U.S. Department of Labor awarded seed money to study the feasibility of shared UI systems that could be used by multiple states. The money also went toward writing requirement sets and laying the groundwork for states to work together. That effort has now reached the development phase after the Department of Labor awarded $128 million in September to three consortia of states that are planning to share a single UI system.

The consortia are arranged geographically. Arizona, Colorado, North Dakota and Wyoming are working together, as are Georgia, North Carolina, South Carolina and Tennessee. A third consortium is also starting among Maryland, West Virginia and Vermont.

When you combine four states, the collection of expertise gets them to the critical mass they need for a successful project. There’s very rarely one state that has enough staff versed in COBOL, Java and Oracle — but together, they do. “They have demonstrated that the pulling together of resources has had an enormous benefit — it really has,” said Lou Ansaldi, technology director of the Information Technology Support Center, which is affiliated with the National Association of State Workforce Agencies.

Matt Williams  |  Associate Editor