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Consolidation: Texas Style

Maybe everything really is bigger in Texas.

by / December 2, 2005
Under HB 1516, the Texas Department of Information Resources (DIR) possesses some important new powers: it can now require agencies to buy hardware, software and IT services from DIR-negotiated statewide contracts; it now oversees the state's consolidated data center equipment and operations; and it will create and operate "state technology centers" to consolidate agencies' IT infrastructure in such areas as network security, electronic grants and telecommunications.

All of this will unfold over the next few months. Agencies and the DIR have until March 31, 2006 to sign contracts setting the terms and conditions under which the DIR will deliver services to agencies. The DIR isn't waiting around for people to come knocking on its door. Its Strategic Initiatives Division already created an interagency working group to plan for creation of the state technology centers.

DIR Executive Director Larry Olson tapped familiar faces in state government to oversee two divisions key to the consolidation's success.

Brian Rawson -- former CIO of the Texas Education Agency -- directs the DIR's Service Delivery Division; and Kim Weatherford -- former director of IT for the departments of Aging and Disability Services and Assistive and Rehabilitative Services -- is heading the DIR's Statewide Technology Operations Division.

Betting on Consolidation
Support for a radical overhaul of the DIR's power -- and a sharp curtailing of state agencies' power to create their own IT environments -- built slowly in the Legislature. In Texas' case, it all started with something as innocuous as call centers.

"Several years ago, the Legislature started down the path of call centers," said Rep. Carl Isett, R-Lubbock, a fifth-year legislator and author of HB 1516. "But there was never any motivation for the agencies to use them. We didn't mandate that agencies use the call centers. As technologies emerged and opportunities continued to come forward, we were always still stymied by the institutional resistance of the agencies."

After examining agencies' use of technology and how IT relates to their core missions, Isett recalled, legislators began separating out business functions that had little to do with those core missions, soon identifying IT as such a business function.

As part of this change in perception, the Legislature kept after the DIR to expand the call centers, and to work with agencies on overall procurement and major purchases in particular, even though the agencies were still autonomous and didn't have to follow the DIR's lead, said Isett.

"We kept telling DIR to effect cost savings through the call centers or disaster recovery centers, and they had no power, really, to do that," he said. "So all they did was ask the agencies louder every year -- after we screamed at them, they would scream at the agencies."

After a series of meetings with the DIR during 2004, legislators grew comfortable with the idea of ITconsolidation, and with draftinglegislation to make it happen, Isett said. This is a politically dangerous area for legislators to venture into.

Observers of California's political climate say the potential for collateral damage from a highly publicized IT fiasco is a big reason legislators got scared of introducing a centralization bill in that state.

Statewide IT consolidation may be risky, but Isett saw the alternative as even worse.

"It was at least, if not more politically dangerous to do nothing," he said. "To not maximize taxpayer resources is, I think, always a politically dangerous place to be in."

In Texas, the sheer number of agencies able to buy IT goods and services with next to no oversight created a significant sinkhole in the state's budget.

"We appropriate them 'x' amount of money for IT, and every year they come back and ask for billions of more dollars," Isett said. "It became more damaging, politically, to us to not control this process. We had one agency of 12 people -- one of our smallest agencies -- come ask for half a million dollars for IT."

Looking In
It's no secret that state agencies value running their own IT shops, and Texas agencies aren't any different. It's also no secret that HB 1516 is state law, and everybody has to get used to the new order.

Victor Gonzalez, CIO of the Texas Department of Agriculture, said he expects the consolidation to make life easier for him as the CIO of a state agency, though the picture is still a bit fuzzy.

"Since it's in the beginning stages, the things that are in scope or out of scope -- meaning the things that will go to the [state] data center -- are still being defined," Gonzalez said. "Until that's done, we're not certain whether our file servers, for example, have to go to the data center or whether it's just application-level servers."

Gonzalez is part of an advisory committee of state agency CIOs, which was created by the DIR to seek input on the consolidation process. That organization represents an important step, Gonzalez said, in easing the tension between agencies' traditional independence, and the DIR's new role and heightened level of authority.

"Given that the legislation passed and there's new leadership at the DIR, people are less reluctant to try to participate," he said. "Also, because of the openness with which the DIR is approaching things, that helps a lot. We're at the point where everybody realizes and recognizes that this is going to happen, and the more we contribute to that cause, the more control we'll have over what happens to every agency."

Gonzalez said he's seen the DIR take a cautious approach to defining the consolidation's scope -- an approach that's working well so far. In an ideal world, he said, agencies wouldn't care about the boxes and who managed them; and anything having to do with the agencies' business, such as applications and application development, would be managed by individual agencies.

"The things that get a little hairier are file server and e-mail, calendaring and all those sorts of products, because you want to maintain flexibility in granting folder privileges, for example," Gonzales said. "Yet you want to make sure you're not paying too much for that service."

A Different DIR
As agencies and the DIR create new working relationships, another interesting question the consolidation raises is what came first -- HB 1516 or a new DIR?

Olson took the job of both Texas CTO and executive director of the DIR in April 2004. He had been out of the public sector for several years after serving as the first CIO of Pennsylvania from 1995 to 1999, where he orchestrated data-center consolidation and moved state agencies to a common e-mail platform, among other cost-saving efforts.

Pennsylvania reported saving $270 million in IT infrastructure expenditures because of consolidation efforts, Olson said in one of his first reports to the Texas Legislature -- and Texas can save even more money.

But the consolidation is about more than saving state government money, he said.

"The biggest benefit is the ability for us to really strengthen our common efforts to build an IT enterprise for Texas," Olson said. "Once we start working closer together between agency and agency, that is the foundation that will allow us to move so much further as a state.

"It's going to be the most long-term benefit," he continued. "In the past, agencies have worked together, but it's been on a piecemeal basis. HB 1516 moves us aggressively to that shared environment and common infrastructure that's going to benefit everybody."

Gonzalez said there's no question the DIR of 2005 is a different animal than the DIR he's observed over the five years he's worked for the Department of Agriculture.

"The old DIR was there to provide standards and guidance, but not really to get into the business of IT for each agency," Gonzalez explained. "This DIR is like a more centralized IT department that actually runs everybody else, which isn't necessarily a bad thing. It's just very different from what used to occur. Now, with HB 1516 passing, the DIR has the authority to do a lot of the things it had been wanting to do -- which is save the state money by consolidating IT."

A piece of legislation like HB 1516, which clearly defines the DIR's sphere of influence, gives the department the necessary firepower to make things happen. The bill establishes a DIR different than its predecessor, while sending a message to other agencies that the Legislature is serious about IT consolidation, and is quite willing to give the DIR a big stick.

That means a lot in Texas, observers say, because the Legislature wields substantial power. The governor's office is fairly weak in that no cabinet of department heads reports to the governor -- because there is no cabinet -- and governing boards oversee state agencies, giving them a large degree of independence.

Still, Isett said the bill wouldn't have passed the Legislature if members weren't confident in Olson and the DIR, and extremely frustrated with state agencies.

"Every one of these agencies, regardless of size, was running their own show," Isett said. "The question had to be asked: Do they have the resources internally to make good business decisions?"

At first, Isett said, the Legislature had serious questions about the soundness of agencies' business cases for IT initiatives and purchases; the level of thought behind those initiatives; the degree of interaction, interoperability and compatibility between agencies' IT systems; and whether agencies could share databases or software services.

"None of those questions were being asked on any IT purchases," he said. "We simply didn't have good control, and we didn't enter into good contracts. We're trusting DIR with a great responsibility, and historically, they haven't always demonstrated that that trust is well founded. But I think that under the current management, DIR has really shown it is ready to handle this kind of responsibility."

Managing Centrally
In his first report to the Texas Legislature, A Foundation for Change: Leveraging a Statewide Technology Infrastructure, Olson said 90 percent of the nearly $2 billion invested annually in IT resources by state agencies and universities is spent on an agency-by-agency or project-by-project basis.

Based on results from surveying agencies on spending patterns, the DIR's report estimated that more than 60 percent of the state's annual IT expenditures go to buying basic operational infrastructure, such as IT operations, user support services and back-office enterprise applications.

That pell-mell IT spending caught the attention of Texas legislators and created widespread support for HB 1516's IT centralization strategy, said state Sen. Robert Duncan, R-Lubbock, who sponsored the bill in the Texas Senate.

Duncan, who's been a member of the Senate Committee on Finance since 1999, said he's heard myriad appropriations requests for IT, all of which shared no connection or commonality.

"There's never seemed to be any real program on how to maximize the state's buying power, as well as the efficiencies that can be achieved by uniformity and expertise in evaluating needs," Duncan said. "Where we have seen problems in the past is when the people doing it didn't have the expertise, nor did they have the ability to learn from the mistakes others have made."

Despite learning hard lessons over the years on how agencies should approach IT procurement and projects, he said, Texas suffered because those lessons weren't shared between agencies. The state needed a centralized IT agency to play that role and force agencies down a common path.

"We set the DIR up earlier to do that, but never gave the agency the ability or power to have the weight they needed to get things done properly," said Duncan. "Those of us who've had experience with this, we've seen the mistakes that have been made. We'd rather have one agency accountable for IT.

"You'd rather have one agency to call upon whenever you're having IT problems, as opposed to 20 agencies," he continued. "Whenever you start trying to dig into an issue, it gets so complex that you have trouble weighing between what the stories are as to why an IT project failed or what the problems were. If we can have an agency that's savvy and accountable for all of it -- to the members that made a lot of sense."

Centralizing power into a stand-alone IT agency is a move that's bound to cause some angst in state agencies. When legislation creating the Department of Information Technology (DOIT) in California was first introduced, other state agencies called in outstanding political favors to ensure the bill was weakened just enough to limit DOIT's reach.

"There probably was a little bit of behind-the-scenes objections because agencies don't like to lose their autonomy," Duncan said. "That didn't really emerge as a killer, and quite frankly the mood of the Legislature this session was to ignore that sort of turf-building. The Legislature was pretty independent of those types of specific complaints by agencies."

Though it's true Texas has been extremely fragmented in its technology management, there has been an shift in philosophy over the last three years that set the stage for HB 1516, said Dustin Lanier, the DIR's director of strategic initiatives. The shift started with SB 1701 in Texas' 78th Legislature, he said, a 2003 bill that sought to broaden the DIR's role in managing agencies' IT and telecommunications projects.

The state has been pushing for consolidation for some time, but lawmakers wanted to make sure the state would have a chance to succeed.

"Texas has taken a slightly different path than some of the highly centralized technology governance models," Lanier said. "What I think differentiates what is going on in Texas is a clear commitment that DIR will focus on the areas of common interest and support agency independence to fulfill their unique missions through applications and process automation. HB 1516 is a shared responsibility for Texas government to act on efficiencies when they are present, while preserving flexibility for agencies to act on their unique missions. We will consistently calibrate with state leadership to ensure we are focused on the right outcomes at all times."

Liking What They See
Because the consolidation is so new, it's too early to determine its impact on agencies' day-to-day operations. But agencies do recognize the pluses and minuses of the ongoing consolidation effort, said Adam Jones, associate commissioner for Operations and Fiscal Management of the Texas Education Agency (TEA).

For the TEA at least, Jones said, IT consolidation means offloading the big utility computing functions -- data centers, server administration and network administration -- to the DIR.

"Agencies are quite often dependent on heroic efforts by staff," Jones said. "They get to the point where they're understaffed, where they rob infrastructure to handle more mission-critical functions in program areas, and effectively outsourcing big functions can pay huge benefits to us."

Outsourcing such functions does unfortunately come with a little negative baggage. Jones said it will take some time to overcome the natural apprehension to looking outward for assistance, because agency staff are used to relying on their colleagues for network support or related help, and a degree of comfort is built into knowing help is a couple of doors down the hallway.

But Jones said he's concerned about something else entirely.

"I'm much more nervous about flight risk," he said. "I'll probably lose some good network administrators before DIR can fully consolidate those services for us. When people get nervous about their jobs, it's likely that I'll lose really good folks with institutional knowledge, and either have to not replace them or have to augment them with outside contractors -- which might be at some expense."

Still, the DIR is taking sufficient time to do its homework regarding agencies' concerns, Jones observed, and isn't strong-arming agencies during the negotiations over the service contracts.

"I do like what I see, and that is an agency seeking a lot of input from the agencies that are going to be impacted by its actions, which is something you don't always see in government," he said.

The DIR is also taking its time in determining which functions may or may not wind up under its control. At first glance, agencies will retain application and development staff, and the DIR will absorb agency IT staff members who run basic functions common to all agencies.

"Then there's some folks in the gray area, like database administration," Jones said. "Some of those folks will stay with agencies. Some of those will not. DIR has gone back agency-by-agency, looking more precisely at what made sense to outsource, and what didn't."

Enterprise Blueprint
Who gets to do what is something best decided by everybody affected, said Olson, and it's natural for agencies to wonder which functions they'll lose and which they'll keep.

"This isn't something DIR makes a decision on," Olson said, adding that an interagency work group has been meeting with agencies to discuss the issue. "We have to have that involvement from the agencies -- let's all agree what's in the box when we define data-center and disaster-recovery services. We're fleshing those details out now."

Olson said agencies have wanted to move toward a consolidated IT environment, but were frustrated by the lack of a plan from which all participants could work. The Texas Association of State Systems for Computing and Communications and similar groups worked hard to try to build an enterprise approach, he said, but those outside-in efforts weren't matched inside state government.

The message Olson and his five division directors are putting out to agencies is that this consolidation isn't going to take the form of a set of mandates handed down from on-high.

"This is not about increased authority for DIR," Olson said. "It's about increased responsibilities and shared responsibilities with us and the state agencies. We have to do it together. It's not a DIR-down kind of thing. If we do that, it's going to fail, and we won't have that infrastructure of the future to really build on.

"It's clear to us, and I think to all the agencies, that we have to work together very closely as we move forward in all these different areas."

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