2004: Year in Review

From budget angst, CIO turnover and offshore outsourcing to technology's continued advance to sci-fi heights, 2004 gave us a little bit of everything. Here's Government Technology's revisit of the year gone by.

by / December 2, 2004
"May you live in interesting times."

Government IT professionals felt the power of that ancient curse throughout 2004 as they confronted a thorny mix of interconnected challenges.

Governments everywhere dealt with the usual rising service expectations from citizens. At the same time, a lingering economic downturn boosted demand for health and human service benefits, and other forms of "safety net" assistance. Homeland security requirements chewed through public safety budgets, and IT shops devoted more attention to protecting key government functions from computer viruses and spam attacks.

Reacting to these demands on stagnant budgets forced states and localities to consider novel -- sometimes wrenching -- alternatives to business as usual. To varying degrees, jurisdictions consolidated, outsourced, privatized and even offshored IT functions in an attempt to stretch scarce dollars.

CIOs often found themselves at the center of policy tensions and cultural clashes triggered by profound change. The resulting turmoil may account for part of the extensive turnover among top technology officials during 2004 -- particularly in state government, where nearly one-fifth of chief technology positions changed hands.

Still, there's evidence these painful changes ultimately produced stronger IT operations. Top finishers in the Center for Digital Government's 2004 Digital States Survey, such as Michigan and Virginia, invested considerable effort in re-examining and restructuring their IT operations.

Furthermore, technological advances made it easier for government leaders to rip up outdated business models and IT concepts.

Web services and intelligent networks let jurisdictions consolidate similar business functions into single systems, without necessarily centralizing them. Open source applications threatened to turn existing software cost structures on their collective ear. Powerful 64-bit processors and the open source Linux operating system even breathed new life into a mainframe computer market that some had left for dead.

An interesting year, to say the least.

On the following pages, Government Technology magazine examines the people, policies and technologies that shaped government IT in 2004.

-- Steve Towns


By Steve Towns

The state CIO position underwent a significant changing of the guard in 2004, reversing a trend that helped shape public-sector IT for years: the migration of high-powered, private-sector CIOs to government. Roughly one-fifth of top state IT executives resigned, and at least half of those officials were among a wave of government CIOs who cut their teeth at corporate heavyweights before entering public service.

Many of these executives spurred activity that rattled the status quo.

Virginia's George Newstrom, a former EDS executive, led perhaps the largest state-level IT reform effort in the nation, consolidating technology infrastructure and resources from dozens of Virginia agencies under the control of the Virginia Information Technologies Agency. Florida's Kimberly Bahrami, who joined the public sector from Science Applications International Corp., presided over an initiative to outsource operation of the state's Web portal, data centers and IT applications. Tom Jarrett, formerly with Verizon, scrapped civil-service protections for Delaware Department of Technology and Information staff, implementing performance-based pay designed to reward employee productivity instead of longevity.

The list of private-sector transplants also includes Washington's Stuart McKee, who came to government by way of Disney; Michigan's Teresa Takai, from Ford Motor Co.; and New Hampshire's Robert Anderson, from Cabletron. As a group, these officials often pushed the boundaries of conventional government operations, and helped drive adoption of enterprise thinking that's now well accepted in public-sector IT shops.

This year, however, their ranks thinned considerably.

Some turnover stemmed from typical political cycles. With Virginia Gov. Mark Warner's term drawing to a close, Newstrom resigned as the state's secretary of technology in October. Similarly McKee called it quits in June as Gov. Gary Locke's term entered its final months.

But Anderson's resignation in January illustrates the tremendous budget pressure facing public-sector IT officials. Named CIO in February 2003 by New Hampshire Gov. Craig Benson, Anderson lasted less than a year at his post. Charged with delivering $11 million in savings during his first year -- on a state IT budget of roughly $39 million -- Anderson stepped down shortly before he was to present state lawmakers with the results of his cost-cutting efforts.

Indeed, many believe widespread belt tightening continues to diminish the clout of government CIOs. With budget woes dominating discussions among decision-makers, finance directors are re-exerting themselves as key advisers to chief executives, sometimes squeezing CIOs from hard-won seats at the Cabinet table.

Meanwhile, Bahrami's departure may underscore the complexities and hazards of an extreme form of cost cutting: statewide IT outsourcing. She resigned as Florida's CIO in February amid questions over how contracts were awarded for the state's massive MyFlorida privatization initiative. Bahrami's successor, Simone Marstiller, terminated three statewide IT outsourcing contracts in July after investigating the matter, saying it would be best to rebid the services.

Marstiller may be a portent of things to come. She served as deputy chief of staff for Florida Gov. Jeb Bush before taking over as CIO in May. Before that, Marstiller was general counsel for the state's Department of Management Services, even logging several months as interim secretary for the agency. She's among an emerging group of policy-wise and well connected CIOs who may be less immersed in the nuts and bolts of technology deployment than their predecessors.

It's not that politically savvy CIOs are new. Several of the earliest holders of the title -- Massachusetts' John Thomas Flynn and Michigan's John Kost, for example -- clearly knew their way around a state capitol. But policy skills may be growing in importance, given the challenges facing today's CIOs and the difficult environment in which they'll be attempting to solve them.

There's increasing talk that CIOs don't need to be technologists because the position's nature is changing. Project management skills and people skills now mean more to a CIO than IT skills, the argument goes, particularly as CIOs surround themselves with chief technology officers, chief security officers, chief architecture officers and other specialists.

As it has since the position's inception in the mid-1990s, the role of the CIO continues to evolve -- and provoke debate. Only time will tell if the latest changes are structural or merely cyclical. For now, it's safe to say the role is being shaped by the demands of the moment and the unique histories of the place.


By Shane Peterson

Intense policy discussions took place in 2004, and though it's difficult to rank such issues in terms of importance (given the subjective nature of policy positions), it's much less difficult picking the issue that got the most ink.

1. Offshore Outsourcing
2004's biggest policy story actually started in late 2003.

Offshore outsourcing hit the pool of American consciousness like a brick. Suddenly it was the topic everybody wanted to talk about. And talk they did. They bashed the private sector for sending call center jobs overseas. They criticized the efficacy of globalization. In short, people cranked up the heat under elected officials.

Government Technology's April cover story looked at offshore outsourcing in the public sector. There were the usual polarized opinions any contentious topic creates -- and a significant amount of legislative action. Lawmakers in more than half the states introduced bills banning state government agencies from using offshore personnel in IT contracts.

At the federal level, legislators introduced a bill in Congress in early March aimed at deterring U.S. companies from outsourcing jobs overseas. The Defending American Jobs Act of 2004, sponsored by 50 lawmakers, proposed to cut federal grants, loans and loan guarantees for companies that lay off U.S workers in favor of employees abroad.

On the other hand, several government agencies said they contracted with IT firms using offshore workers with good results. A Texas agency said the practice shaved nearly $2 million from the cost of one IT project.

2. Tight Budgets
Budget pressure again was on the minds of government IT officials in 2004.

Economic news, overall, seemed to brighten. More than half the states predicted surpluses by the close of the fiscal year, according to a report by the National Conference of State Legislatures. The cumulative state budget gap -- which stood at $21.5 billion a year earlier -- had narrowed to $720 million, according to the organization. But improving finances didn't necessarily trickle down to state and local IT shops, many of which continued to struggle with stagnant resources and rising workloads.

Still, that rising workload ultimately may hold some encouraging news for technology professionals. A growing number of city and county CIOs said they were approached by agency directors and business managers interested in using automation to help them survive their own slashed budgets and staff reductions. So 2004 may be the year IT became viewed as less of a problem and more of a solution in many organizations, particularly local governments.

Governments also reacted to shrinking budgets in a variety of other ways.

For instance, Government Technology's January cover story highlighted the value of partnerships between CIOs and lawmakers. In this case, Wisconsin Sen. Ted Kanavas and state CIO Matt Miszewski teamed up to centralize IT resources and implement shared systems -- strategies that saved the state millions of dollars.

3. Homeland Security
Homeland security complicated the state and local budget picture by chewing through government resources.

The biggest expense came from complying with the Department of Homeland Security's (DHS) changes to the nation's threat level. A shift from yellow to orange means more personnel on the street guarding critical infrastructure, and those personnel cost money -- money states and cities somehow had to come up with.

Groups such as the National League of Cities lobbied the federal government to revise its funding methods for disbursing homeland security dollars. In March, the DHS created the Task Force on State and Local Homeland Security Funding -- made up of state, local, municipal and tribal leaders -- to address the funding issue. The DHS said it took that step after recognizing the current system did not efficiently distribute homeland security funds.

Government Technology's February cover story examined shortcomings in the homeland security funding process -- and found plenty of problems. States complained money came too slow from the DHS. Localities claimed states held the money once they got it from the feds. High-profile states, such as New York and California, said they were shortchanged by the DHS funding allocation formula.

The DHS made strides throughout the year, however. Our September issue detailed the department's Regional Technology Integration (RTI) initiative, which provides funding for interoperable communication systems. Anaheim, Calif., and Cincinnati were the first of four regions announced to pilot the RTI program. They received $10 million apiece for their projects.

State and local governments also devoted significant attention to cyber-security. Aside from the usual host of worms, viruses and Trojans infecting the Internet, governments worried about other threats -- such as servers being taken over by outsiders. This happened to Arkansas in July when persons unknown used an FTP server in the state's Highway and Transportation Department to host online videos of Osama bin Laden and other terrorism-related materials.

In September, the Department of Defense unveiled plans to work with the New York State Office of Cyber Security & Critical Infrastructure Coordination to enlist states and other governments in a new national information-sharing center. The Multi-State Information Sharing and Analysis Center (ISAC) is one of many centers established by government and private-sector officials under the 2003 National Strategy to Secure Cyberspace.

The summer issue of Government Technology's Public CIO profiled William Pelgrin, the man behind the success of New York State's Office of Cyber Security & Critical Infrastructure Coordination. Pelgrin drove the grassroots multistate ISAC used by nearly all states and the District of Columbia. He and his staff put the ISAC together from scratch and invited other states to participate -- all in a decidedly ad hoc manner. Pelgrin said he believes that's part of the reason the ISAC quickly attracted participants.

4. Consolidation
Budget pressures also touched off intense IT consolidation efforts. Sometimes those efforts followed Virginia's lead -- the state blazed a trail in 2003 when it began orchestrating a massive consolidation of agency IT departments into one, centralized IT shop.

New Mexico Gov. Bill Richardson signed an executive order in late March calling for internal consolidation of state executive agency IT resources -- meaning all IT employees will report to a single organization. The order mandated consolidation of redundant IT services -- such as e-mail, accounting systems, data centers and network security -- across agencies. The state General Services Department will manage the consolidation effort.

Similarly, Rhode Island Gov. Donald Carcieri signed an executive order in April creating an Information Technology Division within the Department of Administration that centralized management of dozens of consultants, hundreds of computer applications, 250 servers, 280 employees and the operation of more than 8,000 desktop computers.

Texas followed a similar path. In May, CIO Larry Olson announced a drive toward a statewide technology infrastructure throughout 2004 and into 2005.

Other consolidation initiatives focused on functional areas, such as data centers, and data and communications networks. Michigan, for one, targeted contractor elimination as one way to consolidate services. Instead of paying myriad contractors to perform a wide range of IT work, Michigan sought state employees who could do the work and ease the headache of managing dispersed contractors.

Finally, research conducted by the Center for Digital Government hints that more agencies may attempt to consolidate without centralizing.

"Old-style consolidation always meant you'd smash agencies together to create one superagency, and then all IT applications would go live at the central IT shop," said Paul Taylor, chief strategy officer for the Center for Digital Government.

Now states and localities are consolidating similar business functions into single applications, but those applications may be housed anywhere in the organization. For example, a jurisdiction with multiple taxing authorities may consolidate all tax processing at the agency with the strongest tax processing system and best ability to support it.

For this to succeed, however, significant changes to agencies' business processes are required. This is not something agencies expressed enthusiasm for in the past, though the current budgetary climate is forcing administrations to skip the soft talk and grab the big stick.

5. Internet and Wireless
Policies involving the Internet and wireless communications received attention, as states and the federal government tried to sort out several complicated issues.

In mid-February, the FCC said voice over Internet services (VoIP) should remain minimally regulated.

The ruling came in a case involving Free World Dialup service provided by a company called Pulver.com. Several state public utilities commissions signaled in late 2003 that they believed states had the right to regulate companies like Pulver because those companies provide a telephone service.

The FCC disagreed.

"In today's order, we declare the Free World Dialup offering of Pulver.com to be a service subject to exclusive federal jurisdiction," said FCC Chairman Michael Powell in a statement about the Commission's declaratory ruling.

The Internet Tax Nondiscrimination Act -- which bans taxes on Internet access -- kept Congress busy early in the year. The Senate passed its version of the bill in April (the House did so in late 2003), and President Bush is expected to sign a final version of the bill once it emerges from conference committee.

The FCC also settled a long-running dispute over interference in the 700 MHz and 800 MHz frequency band. Public safety agencies have long complained that wireless carriers operating in these frequency bands wreak havoc with radio communications. After some hemming and hawing, the FCC stepped in and settled the matter in 2004.

The FCC required Nextel to give up rights to some licenses in the 800 MHz band and all of its licenses in the 700 MHz band. In exchange, the FCC said it would modify Nextel's licenses to give the carrier the right to operate on two 5-MHz blocks in a different part of the spectrum.

The plan makes an additional 4.5 MHz of 800 MHz-band spectrum -- the equivalent of 90 new two-way channels -- available to public safety, critical infrastructure and private wireless users, the FCC said, including 10 channels for public safety/critical infrastructure interoperability.

State and local governments had their share of differences on Internet-related issues. The biggest fight of 2004 erupted over the ability of publicly owned utilities to offer Internet services to interested customers. Many local governments contend that publicly owned utilities are the only way their residents can receive high-speed Internet services. Some states, however, view the practice as competition with the private sector, arguing that as such, it falls under the regulatory reach of state public utilities commissions. Several states passed legislation expressly forbidding publicly owned utilities from offering such services.


By Shane Peterson

The IT industry continued rolling out new products at a torrid pace in 2004. Predicting which of them will have the biggest impact on government is a risky endeavor. Throwing caution to the wind, we think these four technologies may change how government does business.

1. Redefining Broadband
Two technological advancements could produce big changes in how governments interact with constituents: Broadband over power lines debuted in Manassas, Va., in January, and a WiMAX wireless WAN was tested by Houston County, Ga., in May. Countywide deployment was expected by the end of 2004.

The concept of delivering broadband Internet services via power lines has been kicked around for several years. Two cities in Scotland served as test beds for broadband over power lines in mid-2002. In early 2003, a surge of news stories detailed the improvements in the technology and its imminent market readiness.

Since Manassas, several U.S. cities made the news in 2004 for offering broadband over power lines -- Menlo Park, Calif.; Cincinnati; and Rockville, Md. The FCC is a big fan of the technology, although the agency was looking into complaints that the technique creates interference problems with some radio frequencies.

WiMAX, interoperable wireless WAN technology based on the 802.16 standard, could have a big impact on rural areas by providing a wireless extension to cable and DSL lines, and spanning the last mile of broadband connectivity.

WiMAX provides as much as 31 miles of linear service area range and allows users to get wireless broadband connectivity without needing a direct line of sight to the base station. The technology also provides shared data rates up to 70 Mbps -- enough bandwidth to simultaneously support more than 60 businesses with T1-type connectivity and hundreds of homes with DSL-type connectivity using a single sector of a base station. A typical base station has as many as six sectors.

Mesh networks are another technology that made noise in 2004. Cerritos, Calif., generated lots of buzz in early 2004 when it blanketed the city with a mesh network to create citywide Wi-Fi coverage for residents at less than $40 per month. City officials were quoted in news articles saying they turned to mesh networking because they couldn't persuade cable or DSL providers to offer broadband Internet access.

Mesh networking relies on Wi-Fi cells or nodes that continually monitor data transmissions between them and their immediate neighbors. The nodes assemble themselves to create a spontaneous network and use their monitoring abilities to create the best path between nodes for data transmission and back to the wired network that provides backbone access to the Internet.

2. Mainframes, the Sequel
The venerable mainframe roused itself from purported oblivion to become a hot commodity in 2004. Once left for dead, mainframes owe their resurgence to the evolution of other technologies, such as 64-bit architectures, Linux and virtualization (the ability to create copies of operating systems and divide the mainframe's memory into virtual computers that each run one copy).

The "new" appeal of mainframes came as enterprises discovered the client/server approach means spending money on a bunch of servers that, due to their sheer numbers, cause maintenance headaches for IT staff.

3. Open Source Gains Ground
In 2004, growth occurred in a technology that could have a massive impact on the public sector -- open source software.

Once dismissed as "shareware" or "freeware," open source software made significant inroads to the public sector during 2004. The critical mass came from Massachusetts' Enterprise Open Standards Policy, which officially took effect Jan. 13, 2004, but was laid out in an internal memo in late 2003.

The policy announcement generated plenty of ink in the mainstream media, which generally interpreted it as an attack on Microsoft. The policy states, "existing IT systems will be reviewed for open standards compatibility and will be enhanced to achieve open standards compatibility where appropriate. Open standards solutions will be selected when existing systems are to be retired or need major enhancements."

Open standards and open source don't mean the same thing, but it's a very short road between them -- much shorter than the road connecting open standards and proprietary software products. The formalization of this policy, seemingly a simple action, means a great deal for legitimization of open source software. Other states now can watch Massachusetts and see for themselves what happens.

In March, a group of seven states -- including Rhode Island and Massachusetts -- and four municipalities formed the Government Open Code Collaborative. GOCC members manage a code repository freely available to other governments and government agencies. This isn't the first time governments have collaborated, but it's a new way of working together.

4. ESB Eases Integration
Last, but certainly not least, the term "enterprise service bus" (ESB) cropped up in IT publications.

The first wave of stories examined the emerging technology, which uses a messaging platform as a middleman between systems and applications, as opposed to point-to-point solutions that previously enabled data sharing between systems. Later articles described how early private-sector adopters capitalized on ESB's potential to drastically simplify integrating the usual lot of discrete systems producing their own data or doing their own thing in the overall enterprise.

Overlooked was an early adopter in the public sector -- Wisconsin took to the technology as quickly as its commercial contemporaries. The state's Division of Enterprise Technology (DET) became interested in ESB technology in May 2003, finalized procurement in December 2003 and deployed an ESB in February 2004 -- a fairly aggressive timeframe for government.

Wisconsin's DET estimates that ESB technology -- which uses XML and Web services to simplify information exchange among incompatible applications and hardware platforms -- saved the state millions over competing enterprise integration strategies.
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