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Kansas IT Audit: Consolidation Will Cost the State More Money

Consolidating and modernizing the state’s IT infrastructure will cost money, says Chief Information Technology Officer Lee Allen, but it is a necessary investment after years of deferrals and course corrections.

Kansas has been through a few iterations of IT consolidation strategies spanning two governors and differing operational philosophies within the Office of Information Technology Services (OITS). An audit presented to the state Legislature on Monday punctuated the measured march OITS has made toward both the unification of staff and modernization of legacy systems.

The report, conducted by the Legislative Post Audit Committee, did not make recommendations for the agency to address, but did raise questions about what lies ahead for the agency financially.

Auditors began looking into OITS in December and completed their findings in May, but had to shelve the audit until the hearing this week. The audit, which combined staff consolidation and IT infrastructure upgrade costs in its analysis, found that OITS’ endeavor would cost the state more money.

Chief Information Technology Officer Lee Allen, who was appointed in July 2018 by former Gov. Jeff Colyer, said in his written reply to the audit that his department was taking a different approach to the management of IT operations.

“When you’re virtually spending nothing to refresh or run a data center today, anything you do to improve that service going forward is going to cost you more money,” Allen told Government Technology. “That’s really where we’re at. That’s the message that I’ve been sharing with the governor’s office and with the legislators.”

He said consolidation and modernization are often lumped together by people unfamiliar with IT operations, saying it is easy to miss the differences between the two, separate endeavors.

“People just kind of meld them together and it’s erroneous, but it’s people that aren’t living in the space like I am that do it,” he said.

Principal Auditor Andy Brienzo said he and other staff assigned to conduct the audit had difficulties locating relevant data on what OITS spends and on department-level personnel whose secondary role is performing an IT service.

“What we ended up doing was relying on the state’s accounting system to the extent that we could and supplementing that with some self-reported data from the agencies we surveyed on labor,” Brienzo said. “Then we reviewed a consulting firm’s report that was put out in December 2015. We also looked at some contracts that OITS has already struck with third-party vendors and given all of those things that’s how we came up with the numbers that you see in the report.”

The auditors wanted to create cost estimates service by service, and the data that best allowed them to do that was from an Excipio Consulting study, which had identified staff according to their IT responsibilities, he said.

Though the data is a few years old, Brienzo said it was the best available to his group to answer the questions posed in the audit: to what extent can executive branch information technology service be consolidated, and what types of challenges have to be addressed? What resources would be required to consolidate executive branch information technology services, how would they be paid for, and how much would consolidation save the state?

“I think the most common assumption about consolidation is that it will save the state money and we found that OITS’ consolidation project probably will not save the state money, but that’s not because of consolidation,” Brienzo said. “The point that I would want to make to ensure people understand is any state IT infrastructure changes in Kansas will probably increase agencies’ IT costs because Kansas has very outdated IT infrastructure that is in need of modernization and that modernization is necessary regardless of how agencies get their IT services from this point forward.”

National Association of State Chief Information Officers (NASCIO) Executive Director Doug Robinson said Kansas isn’t alone in its push for consolidation and modernization.

“Generally, usually, from a business sense, a cost-savings sense, and streamlining and security posture it just makes more sense to begin to move to a consolidated environment,” Robinson told Government Technology. “All of our reports point to those advantages.”

He said it is helpful for states to provide an upfront investment in modernization and that concurrently unifying staff while upgrading IT infrastructure can create more challenges than tackling each separately.

“The discussion around state IT is all about people and money,” Robinson said. “The majority of their spend is on people and so you have to be concerned about the impact on their livelihood and their potential future as a state employee in IT. That has not been an area that is growing. State IT employment has been relatively flat or in some states shrinking.”

An estimate from the audit, based on the Excipio data, stated that if OITS eliminated 232 full-time IT staff, it would limit the increase in total costs to about $2.6 million. The Excipio data tracked 791 state IT employees in Fiscal Year 2016, which would increase the estimate to $38.4 million.

But Allen said in his response to the audit that there has been a reduction of 222 employees since the Excipio study, with a total of 569 IT staff currently.

“We’re within 10 people of what they estimated, but we haven’t consolidated and modernized all the services,” Allen said. “It just leaves it where we don’t have enough people to effectively provide all the services that we should and so that’s a problem for us right there.”

Brienzo said the state has already absorbed any savings from the reduced IT workforce and reiterated that due to the age of IT systems in Kansas, OITS’ endeavors will require an increase in funding approved by the Legislature.

“Kansas has been deferring IT-related expenses for years,” he said. “In reality, the state probably should have been paying more already for IT infrastructure, but because of all those deferrals the state hasn’t been paying as much as it should have been, the infrastructure has gotten outdated, and I think just going forward anything that is more modern and more upgraded is simply, inevitably going to cost more money.”  

Allen said the audit, even without recommendations, did spark support for revisiting how the state uses accounting and financial codes, which in its current use can obscure IT spending.

“A little bit flippant, but you never let an audit go unused,” Allen said. “There are always things that you can use to make the situation better out of these audits if you look at them in the appropriate fashion.

“That’s been an issue for the state for years, so now it gives us a little more ammunition to go in and try to fix that,” he said, adding that such adjustments would add transparency to the process.

Allen said his predecessor was saddled with a savings number that he was told to hit, and at the time the state still operated its own facilities and was responsible for servicing its hardware. The only option available was to outsource and consolidate staff, he said.

“It’s the only flexible spend that you end up with and so that was their target: outsourcing hardware and facilities and consolidating the staff around those to achieve these savings. When I look at it, I see that that approach, in my opinion, is to the detriment of the state,” Allen said.

“We don’t do a good job of maintaining and refreshing those things so those are absolutely spot on, but I think it’s just a disservice to the state to be getting rid of the employees at that point, especially without the services being consolidated,” Allen continued. “We need to make sure we can provide the appropriate level of service and then if that points to some level of retooling of staff or lower staffing numbers then we’ll look at that in the future, but that’s not my expectation.”

Patrick Groves was a staff writer for Government Technology from 2019 to 2020.