August 31, 2012 By Wayne Hanson
This report is based on the activities of the Digital Communities program, a network of public- and private-sector IT professionals who are working to improve local governments’ delivery of public service through the use of digital technology. The program — a partnership between Government Technology and e.Republic’s Center for Digital Government — consists of task forces that meet online and in person to exchange information on important issues facing local government IT professionals.
More than 1,000 government and industry members participate in Digital Communities task forces focused on digital infrastructure, law enforcement and big city/county leadership. The Digital Communities program also conducts the annual Digital Cities and Digital Counties surveys, which track technology trends and identify and promote best practices in local government.
Digital Communities quarterly reports appear in Government Technology magazine in March, June, September and December.
How does a CIO respond to a recession and continue to deliver IT services to a city or county and its residents? A spectrum of choices — ranging from staff cuts and service reductions to exploring new service delivery ideas — have been employed recently by CIOs under severe economic duress. Some IT directors were reluctantly forced by economics to change long-established procedures, while others eagerly seized the opportunity to explore new approaches. A few found that they could ride out the storm with minor adjustments. In any case, when economics closed one door, each faced a multiplicity of factors and each reached a decision point as to what to do, which new door to open.
Harold Tuck, for example, former CIO of San Diego County, could be said to be in the “ride it out with minor adjustments” category. The county enjoyed a successful IT outsourcing agreement that was, as Tuck said, “recession proof,” in that it was a contractual agreement. When the prime vendor decided to depart, a partner took over and things continued with a few tweaks, assisted by Tuck, the vendor, the county’s solid financial situation and its long-serving supervisors.
What decision points does he think are most critical in sourcing decisions? “Organizations need to be really honest about what their core competencies are,” Tuck said, “what they do well and what they don’t do well. Technology obviously changes rapidly, new applications come out, and if you lose a key developer to a company, do you have the bench to replace that person? Do you have the ability to pay market rates for the positions that you have? And if the answers to those questions are no, then you need to strongly consider outsourcing.”
CIOs across the nation are asking these same questions. One concept that has taken on new importance in this environment is strategic sourcing. Strategic sourcing is not a new concept, but it has surfaced again, endowed with new life and new possibilities by advancing technologies like cloud computing, shared services, virtualization and the introduction of mobile devices. Fundamentally strategic sourcing involves calculating the most effective and efficient way to obtain needed products and services — and it’s prompting local government leaders to push the boundaries of procurement and public service.
Ron Puccinelli, CIO of Concord, Calif., saw his IT organization decimated by the recession, looked at his depleted bench and saw the writing on the wall. “Trying to build every single thing is no longer physically possible,” he said. “Things are too complex and moving too fast.”
Joe Marcella, CIO of Las Vegas, added political considerations and flexibility as key factors in sourcing. “I need to hold dear anything that is strategic or core competency within my own organization,” he said, “because you have the political piece of it, the policymakers, and sometimes those things are specific to them. Also the delivery to citizens, if I need to control that, then it probably better be close at hand. And if it has to be flexible, we don’t want a contract around it that requires a change order. But if it’s a utility, if it’s nonstrategic, if it’s like ‘doors on Fords’ and I can do it for the same price, somebody else can manage that.”
Phil Bertolini, deputy county executive and CIO of Oakland County, Mich., is a good example of the “eager to explore new ideas” category, and is one of the innovators behind an initiative to bring counties together in shared services offerings over a government-to-government cloud. But when it comes to outsourcing IT, he said maturity is key. “The mature IT organization utilizes sourcing as a tool. So for example, we selectively source out our help desk. We bring contractual people in and they handle that for us. Why is that? It is a very ‘routinized’ function. You can get those kinds of assets — whether they be from a contract house or from someone who does service center or help desk work — they are easy to find and they are lower cost. We also outsource about 30 percent of our development needs, and we do that mostly through supplemental staffing. We bring in contractual staff that has certain skill sets, and then we try to do knowledge transfer to our existing resources.”
In making decisions spurred by a recession, it should come as no surprise that the cost of alternatives would be fundamental to any choice. Harris County, Texas, CIO Bruce High implemented the county’s Total Cost of Ownership (TCO) program about two years ago and applies it to all enterprise IT projects. “It was designed to make people more aware of what they are stepping off into,” said High. “You get a full picture of what it’s going to cost to maintain.
“It’s really just an Excel spreadsheet with a lot of tabs,” High said. “It asks the questions they wouldn’t have thought of when talking to the vendor, such as: ‘Do I need somebody to support this thing? Do I need 18 servers, and does that mean 18 licenses? Do they sell production and backup servers?’” Harris County has even turned down some available grants once the specifics were run through the TCO process. “It wasn’t worth it because the hit of 10 to 12 percent maintenance fees that will be coming out of your operational budget is not going to be sustained by grants,” said High. “It gives the decision-makers good information to make sound decisions.”
Rather than slowing down the procurement process, TCO actually expedites it, High said. The process is fairly simple, he added, and there have been few complaints from users, who appreciate getting some real data on actual costs, and all the questions are asked up front, so they don’t have to go back to the vendor for more information midway through the process. The county provides a template that has premade formulas for the calculations. And on items that aren’t covered by an algorithm, IT staff will help out as needed.
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