U.S. government agencies spend an overwhelming amount of their annual information technology budgets simply to maintain old and out-of-date systems. As a result, the amount of money available for investing in modernizing IT keeps shrinking, thus depriving vendors of major marketing opportunities at the federal level.
The official federal IT budget has remained at about US$82 billion per year for several years. However, that figure does not cover all agencies — intelligence and the U.S. court system are notable exclusions — and some estimates project annual IT spending above $100 billion.
The relatively small amount of funds available for investing in modern IT has a compounding effect: The longer new investment is postponed, the greater the cost of operating older systems. Thus, agencies lose the chance for greater efficiency and productivity, and the cycle keeps repeating itself.
High Maintenance Costs
Dell Federal, which sponsored the survey, released the results last month. It was conducted by PSB, which polled 100 federal IT managers in May.
The high cost of using and maintaining outdated hardware and software — also known as “legacy IT” — is a persistent problem for federal agencies.
“The alarming percentage of critical applications running on legacy IT systems, as revealed by our survey, aligns with many of the concerns currently being voiced by government leaders and agency customers alike,” said Steve Harris, general manager of Dell EMC Federal.
Among other significant results of the survey:
- More than half of the respondents (53 percent) said their agency used software or operating systems no longer supported by the vendor.
- The operating systems most often cited as out of date included Windows 7, Windows 8 and Windows Server, each of which has passed its end of life.
- Those polled listed infrastructure systems (46 percent) and file storage/collaboration systems (39 percent) as most in need of modernization or replacement.
Operational programming is not the only aspect of the legacy issue. Asked to identify the oldest hardware and infrastructure items currently in use, 72 percent of respondents to the Dell survey cited desktop computers. They were followed by servers (70 percent), network routers (67 percent), network switches (55 percent) and laptops (49 percent).
Legacy Costs Affect Employee Productivity
The legacy issue is a major factor contributing to the similarly high cost of federal IT operations calculated by a cost-per-employee indicator developed by IDC Government Insights.
The U.S. government spends $39,000 per employee, on average, on a “wide range of IT solutions,” according to a report IDC released last month.
However, the average “across all other industries — excluding government and education” — is just under $9,900, the report notes.
The public service nature of government operations, versus the primary goal of profit in the private sector, accounts for some of the disparity between federal and corporate IT costs, acknowledged IDC Research Director Shawn McCarthy, author of the report.
Still, the cost-per-employee ratio signals that federal agencies need to improve IT performance, he said.
“Clearly there is enough evidence that federal agencies can better manage their IT assets, which in turn could help bring down IT costs that are significantly higher than the industry average,” McCarthy maintained.
“All industries have slight differences and demands. Cost per employee, or CPE, is one of several key performance indications that can help CIOs judge whether they are meeting the needs of their organizations and not spending too much to do so,” he told the E-Commerce Times.
“Others can include things like end-user satisfaction, reducing security breaches, measuring productivity increases and more. I wanted to stress CPE for this study because it’s often overlooked, and it can be a good early warning that things may be going off track,” McCarthy explained.
“One reason government IT spending comes in much higher than other industries is that agencies often are limited to particular choices, like having to buy off specific contracts; having to hire workers with specific qualifications, training and previous government experience; and sometimes being locked in by detailed union requirements,” he pointed out.
Regarding the legacy issue, “another challenge is that governments often find themselves nursing along older systems because they may not receive enough funding to tackle a full rip-and-replace scenario,” McCarthy noted.
In fiscal 2016, “a surprising 73 percent of the federal IT budget was targeted at operations and maintenance of existing systems versus new system development, while eight years ago, that was closer to 66 percent,” he said.
Solutions to Improve Performance
Fixing the system will be a challenge. The Obama administration offered a possible solution earlier this year, proposing a $3.1 billion revolving fund that agencies could tap for investments, later funneling the savings resulting from IT modernization back into the fund to sustain the program.
The House Oversight and Government Reform Committee earlier this month approved a compromise proposal called the Modernizing Government Technology (MGT) Act. It modifies the Obama plan for establishing a government-wide IT investment fund, and includes a second component for agencies to self-fund IT investments by reprogramming agency funds or using other internal sources to sustain IT investments.
While enabling adoption of various IT innovations, the text of the bill specifically mentions the implementation of cloud technology as a major goal.
“We don’t have to be stuck in the Stone Age,” said Rep. Will Hurd, R-Texas, a key sponsor of the legislation.
“A move to growing technologies like the cloud can help keep our information secure, while saving billions of dollars. It’s time to stop wasting tax dollars and move government into the 21st century,” he said.
“Efforts like the revolving fund for IT modernization could make a significant impact on government’s ability to innovate. If agencies have access to these funds up front, smart investments in automated, flexible and scalable solutions can position agencies to rebalance the disparity between maintenance spending and investment in innovation,” said Cameron Chehreh, chief technology officer at Dell EMC Federal.
“The IT modernization fund is one of multiple proposals that have the potential to power smarter government technology investments and support a future-ready government,” he told the E-Commerce Times.
The first step for improving IT asset management is for agencies to take inventory of those assets and develop priorities for replacing the oldest systems first.
“If an agency finds that its budget goes mostly into long-term maintenance of highly customized systems, it may be time to examine start-over and greenfield options, suggested IDC’s McCarthy
“Building a new system in the cloud with new programming tools can often be a cost-effective alternative,” he said.
“One quick hit is to work hard to improve asset management. Agencies often pay for software licenses they don’t use. They buy online storage before they need it, and so forth. Careful review can uncover substantial cost savings,” McCarthy observed.
“Return-on-investment analysis is key. Every major program should do a review that puts a stake in the ground and declares what their cost of doing nothing will be. What will the annual cost be, and what ongoing investments do they now face — such as operating system upgrades, retiring older machines, and so forth. That’s the point against which they can measure other alternatives,” he said.
“Agencies need to be willing to make a big investment one year if they want to move to a greenfield approach,” McCarthy said. “It can be very challenging to pry money loose from Congress, but without a willingness to invest in a new system, agencies are forced to keep nursing along their older systems.”