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Tech Productivity Could Save States $11 Billion, Report Says

The Information Technology & Innovation Foundation has issued a report that shows how state e-government can now fulfill its original promise — cutting government costs through higher productivity.

by / October 13, 2015

State government IT offices could save $11 billion collectively in the next five years, according to a report issued by the Information Technology & Innovation Foundation on Oct. 13. But they have to commit. The 41-page report, called Driving the Next Wave of IT-Enabled State Government Productivity, concludes that now is the time for state government CIOs to take more seriously the idea that they can achieve the same level of IT-enabled efficiency enjoyed by the private sector.

The report outlines the cultural and budgetary environment in state government today, the challenges faced by CIOs in pursuing IT efficiency, and recommendations on how to overcome those challenges. It contains a lot of specific information and recommendations, said ITIF founder and president Robert Atkinson, but it also suggests for government IT leaders a new outlook on what it is they should be doing.

"I think what states end up defaulting to is convenience and a whole set of other things, like 'let's use IT for better knowledge management and make government accessible through multiple platforms and devices,'" Atkinson said. "All that is good stuff, don't get me wrong, but that's a somewhat different agenda than saying 'let's use IT to get rid of 10 percent of the employees in the department of motor vehicles.' That could be a goal, but almost no state thinks about it that way."

In fact, Atkinson said, talking or even thinking that way in state government rarely happens, even though it's politically agnostic and a sure way to save billions.

"If you do that, then legislators and unions and others will try to cut your IT budget, and I think that's a huge mistake," Atkinson said. "I think in the long run, in this post-recession budget environment, if states cannot show that their IT is leading to net present value reductions in net costs for government taxpayers, they're going to have a harder time convincing the states to give them the money to do what they want to do. Increasingly you're going to have to make the case on the cost argument, not these arguments that they've long made them on. It's a new budget environment."

The recession of 2008 brought a reduction in state government employees across all agency types that lasted several years. It wasn't increased productivity that drove employees out of government, the report argues, but a decline in output that forced government to make cuts. The goal of productivity growth, therefore, is paramount, the report states, because state cannot get richer on a per capita basis without it.

The report breaks its one-year cost-savings estimates across government function. Office and administrative support, for instance, could make the biggest cost savings by a factor of 4 percent, or $650 million across all state governments.

Driving the Next Wave of IT-Enabled State Government Productivity Graphic

By state, California could save the most, as much as $1.3 billion, while even the smallest governments, like South Dakota, could save $38 million.

According to the ITIF report, IT can improve productivity in at least five ways:

  1. Reducing non-labor inputs, like material costs. This is accomplished through automation technology, more efficient energy usage, and remote working arrangements that cut down fuel and vehicle costs.
  2. Reducing labor inputs. This is accomplished by either finding ways to make workers more efficient or replacing workers with technology.
  3. Reducing waste, fraud and abuse overhead. Software is growing increasingly sophisticated and capable of detecting fraudulent transactions.
  4. Embracing newer technology to change processes and cut operational costs. Replacing older technology with newer, cheaper technology can reduce costs. Data center consolidation, digitizing paper-based transactions and transitioning to cloud-based services are all popular trends that many state governments have not embraced.
  5. Improving service quality. This method may not result in reduced cost inputs, the paper states, but increased service quality through faster, more efficient citizen-facing applications increases output and ultimately contributes to overall cost savings.

Through the examination of examples and case studies, the paper makes a case for state CIOs to embrace the benefits that can be had with devotion to IT efficiency that goes beyond lip service. Examples of what works and why, examinations of common institutional barriers, and analysis of pitfalls that pioneers faced early on are all included in the report.

The full report can be downloaded in PDF format for free from ITIF.

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Colin Wood former staff writer

Colin wrote for Government Technology from 2010 through most of 2016.

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