Consolidation Trends in Government A Review of Current ...

Consolidation Trends in GovernmentA Review of Current Initiatives

Robert L. WomackDirector, State and Local Government

April 26, 2005

Why Consolidate?Selected Case Studies

3 © 2004 Computer Associates International, Inc. (CA). All trademarks, trade names, services marks and logos referenced herein belong to their respective companies.

Why Consider Consolidation?“Texas state government currently offers an insufficient level of shared IT infrastructure for agencies to leverage. When a business need arises, agencies fill the gap with independent solutions, resulting in overlapping and redundant technology assets. The potential for multi-agency solutions that effectively respond to those business needs is lost.Through targeted and realistic consolidation of commodity IT services and resources, the state can develop a shared technology infrastructure that maximizes its investment in three distinct areas:

- Increased Cost Effectiveness – The state can spread the cost of service over multiple agencies, fully leveraging the state’s purchasing power.

- Improved Service Delivery – A shared IT infrastructure allows for development of deeper IT skills and provides better services and lower cost to the end user

- Greater Focus on Core Missions – When agencies are relieved of the burden of managing tactical IT issues, they will be better positioned to quickly act on opportunities that directly accelerate the agency mission and service to citizens.”

Source: A Foundation for Change: Leveraging a Statewide Technology Infrastructure, Texas Department of Information Resources (DIR), May 28, 2004, p. 1.


Cross-Sector TrendsBusiness decision makers demanding IT transparency

- Spending accountability- Mapping IT initiatives to business initiatives- A better way of allocating IT costs to Business Units

Insource/outsource analysis for all IT services- Service cost benchmarking

Changing industry regulations- Business Software Alliance (BSA)- Environmental Protection Agency (EPA)

Increased recognition of IT’s criticality to the business- Increased responsiveness- Consistent service-level delivery

Increased utility computing offerings from vendorsAdoption of IT Infrastructure Library (ITIL) best practices


Federal Consolidation InitiativesIn June 1998, the National Aeronautics and Space Administration (NASA) awarded seat management contracts to seven prime contractors under its Outsourcing Desktop Initiative for NASA (ODIN) government wide contract. In July of that same year, the GeneralServices Administration (GSA) awarded contracts to eight prime vendors under its own government wide seat management contract.As reported in a 2002 General Accounting Office (GAO) report [4] on desktop outsourcing, the six agencies that had implemented seat management under these contracts reported that the use of seat management contracts allowed them to:

- Improve information technology management by standardizing hardware and software;

- Improve end user support;- Enhance mission support by freeing up staff time that was previously

dedicated to desktop management functions; and- Upgrade their desktop technology on a more timely basis.


California’s IT Consolidation - Goals

More efficient, standardized systems capable of supporting multiple agencies;Reduced redundancy and variation within the state’s technology infrastructure;Reduction in cost for common infrastructure services;Enhanced ability for data sharing;Improved ability to successfully leveraged IT procurements;Enhanced security and privacy measures for the storage and distribution of electronic data;Improved core technology support for all state agencies and departments; andMore effective utilization and management of technology personnel.


California’s IT Consolidation - Specifics

Proposed (March, 2005) creation of a Department of Technology Services (DTS) to manage:

- the state’s consolidated general purpose data center- consolidated voice and data network operations.

Proposed DTS Organization- Division of Engineering- Division of Operations- Division of Business Development- Division of Administration- Division of Security- Office of Network Services


Other California Consolidation Initiatives

The California Performance Review (CPR) that was completed in August 2004 includes recommendations for several initiatives related to consolidation of IT support services. In recommendation SO31 the CPR recommends that state agencies move to “virtual desktops” as a means of saving money on PC client hardware and support services. The virtual desktop solution would provide Internet browser-based access to applications that run on server computers, thus reducing the total cost of ownership for each virtual seat managed desktop from about $5,000/year to $1,000/year.


Other Consolidation Initiatives

In addition to the recommendation to move to a virtual desktop, the CPR recommended in SO/30 that a statewide information technology Help Desk be created. Other states like New York, Florida and Wisconsin have used statewide help desks as a means of consolidating some IT services. In June 2001 the New York Office of Technology created a help desk to provide services to 4 state agencies and a number of local government agencies, educational institutions and not-for-profit organizations.


Texas’ “Foundation” VisionInfrastructure components under consideration for

consolidation under Texas’ “Foundation” Vision

3. Enterprise Applications

A. Messaging and

Collaboration

B. Financial Systems

1. Data Center Consolidation

A. Facilities

B. Mainframes

C. Servers

D. Storage

2. Statewide Network

A. Network Systems

B. Network Circuits and Equipment

C. New Network Technologies

4. IT Support Services

A. User Support

B. Processes and

Procedures

Source: A Foundation for Change: Leveraging a State Technology Infrastructure, State of Texas DIR, May 28, 2004.


Foundation Savings Areas

Initiative Initiative Name Savings Results Savings Potential Complexity Timeframe

1A DCC - Facilities $74 Excellent Average Medium

1B DCC - Mainframes $32 Good Difficult Long

1C DCC - Servers $196 Excellent Difficult Medium

1D DCC - Storage $37 Superior Average Short

2A Network $29 Good Basic Short

2B Network Circuits and Equipment $29 Good Basic Medium

2C New Network Technologies $235 Good Average Medium

3A Messaging and Collaboration Systems $7 Good Basic Short

3B Financial Systems $38 Good Difficult Long

4A User Support $85 Excellent Difficult Long

4B Processes and Procedures ?? Good Basic Short


The Transformation in IT

HIGH

Remove Waste, Reclaim Capacity, Manage Demand

Consolidation / Standardization

Capacity Dynamically Sourced

Virtualization and Provisioning

Management as a discipline

Asset optimization

Service-oriented architectures

Tran

sfor

mat

ion

Tran

sfor

mat

ion

LOW

Today 2005 2006 2007 2008 2009 2010Today 2005 2006 2007 2008 2009 2010


Today’s Challenges with IT

Too much complexityLots of laborUnder-utilized capitalVulnerable infrastructureHard to set service levelsUn-gated demand

Inefficient, Unresponsive, Unaligned

Consolidation Value Proposition


Reduce cost- Asset optimization- Operating costs- Capital expense

Manage risk- Security- Data - Corporate compliance and IT governance

Ensure infrastructure is always on, never seen

Cost

Risk

Availability

50%

.001%

99.999%


Reduce Cost: Operating CostsCustomer Results

JPMorgan Retirement Plan Services

Save $3M annually due to business process automation

Intelligent Finance (Halifax plc)Save over $3M annually due to application life cycle change management

Sallie MaeOver 300% increase in PC admin productivity in 2 years

81% of IT Spending is Non-Discretionary

0%10%20%30%40%50%60%70%80%90%

100%

IT Budget Allocation

Source: Gartner, “Management Update: Enterprises Should Assess How Their IT Spending Stacks Up,” Barbara Gomolski, Aug 2003.

Maintenance and AdminStrategic Projects

Shift investment towards strategic projects


Industry

Avg. IT Capital

Budget % of Revenue

Avg. IT Capital Budget

Communications 2.67 48,300,054

1,902,155

6,894,688

242,470

16,952,752

31,510,743

8,792,565

5,624,114

Petroleum 0.86 63,493,014

Services 1.23 4,165,879

Transportation 0.7 1,618,624

Utilities 0.81 9,338,984

All Industries 1.25 19,453,198

Retail 0.63

Wholesale 0.93

Education 0.96

Financial Services 1.65

Government 1.65

Healthcare 1.61

Manufacturing (Discrete) 0.68

Reduce Cost: Capital ExpenseCustomer Results

AliantReclaimed 73% of storage capacity

Fortune 50 Global Financial Services Firm

Saved $6.7M in 2 years due to better IT asset management

Source: Gartner 2003 IT Spending and Staffing Survey Results, Oct 2003.

Reducing capital expense by 10% saves $6 million over 3 years


Manage Risk: SecuritySecurity Incidents Have

Reached an All-Time High(number of security incidents

as reported to CERT/CC)

Source: Carnegie Mellon Software Engineering Institute / CERT Coordination Center 2004 (website).

Customer Results

MSFT TechEd 2004Zero viruses, zero successful intrusions, and 99.92% network up-time despite over 98,000 intrusion attempts

Walter ReedSaved $1.8M over 3 years by automatically identifying vulnerable IT assets and deploying security patches

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

1998 1999 2000 2001 2002 2003


Manage Risk: DataData Growth Exceeds Management Capacity

Customer Results

Arizona ElectricCut backup time by 50% while volume of data under management grew by 100%

Southern WineZero storage-related downtime in past year

Data grows 50-70% annuallyStorage admin capabilities improve 20-30% annually

Backup/Recovery Failures Common

5-20% B/R jobs fail nightlyAddressing B/R failures consumes 2/3 of storage management resources

Source: META Group, “Proactive Data Protection: The Best Defense Is a Good Offense,” Phil Goodwin, Apr 2004. The Storage Manifesto, Fred Moore, 2002.

Ensure Infrastructure Availability


Industry Sector Revenue/Hour

Energy $2,817,846

Telecommunications $2,066,245

Manufacturing $1,610,645

Financial Institutions $1,495,134

Information Technology $1,344,461

Insurance $1,202,444

Retail $1,107,274

Pharmaceuticals $1,082,252

Banking $996,802

Food/Beverage Processing $804,192

Consumer Products $785,719

Chemicals $704,101

Transportation $668,586

Utilities $643,250

Healthcare $636,030

Electronics $477,366

Multi-Industry Average $1,010,536Source: META Group, “How Safe Is the Business? Perception/Reality Disconnect,” Rob Schafer, Feb 02.

Potential Revenue Loss Due to DowntimeCustomer Results

Sol Meliá (world’s largest resort chain)

200% increase in online sales due to highly available web-based system

Dexia-Banque International de Luxembourg

250% performance increase with 99.8% uptime

Large Global Mining / Manufacturing Company

Saved $3.7M in one year due to avoided system downtime

One day of down time costs $24 million

A Theoretical Basis for Shared Services

IT “On-Demand”


The ITIL Process Model

Business, Customers, Users

IncidentManagement

ProblemManagement

ChangeManagement

ServiceDesk

ReleaseManagement

ConfigurationManagement

SecurityManagement

Service LevelManagement

AvailabilityManagement

CapacityManagement

FinancialManagement

IT ServiceContinuity

ManagementService DeliveryService Support


“On-Demand” Computing Maturity Model

Manual and fragmented management across infrastructure components

Manual and fragmented management across infrastructure components

4 - Business-Driven

1 - Active2 - Efficient

3 - Responsive

Automated but fragmented management systems

Integrated management systems; ability to manage by fact

IT managed as a business; capacity sourced dynamically

- Monitor- Self-Service

- Measure Usage- Financial Mgmt.- Chargeback

- Define- Commit- Monitor

- Deliver - Support


Level One — Active Management

In level one, IT management is largely piecemeal and manual across various applications and infrastructure components. IT reacts to problems, but is largely unable to proactively prevent them. Organizations in level one should focus on the following capabilities to advance their maturity:

- Standardize IT management processes- Integrate management functionality across silos- Automate system monitoring and management.


Level Two — Efficient ManagementIn level two, data capture and analysis capabilities reach across the enterprise. Root cause analysis enables fast problem identification. However, automated system responses are not enabled and workflows are not defined — thus, problem fixes and changes must still be executed manually.Organizations in level two should focus on the following capabilities to advance their maturity:

- Automate problem resolution and define workflows for automated system actions- Implement technologies to automatically map IT to the business- Implement virtualization and provisioning functionality to enable resource-sharing- Automate metering and measurement of IT usage to support chargeback.


Level Three — Responsive ManagementIn level three, system actions are automated. Workflows for problem fixes and changes are defined throughout the IT infrastructure. However, administrative approval is required to initiate any action.Organizations in level three should focus on the following capabilities to advance their maturity:

- Fully automate all IT processes based on business policies- Address organizational alignment supporting IT automation- Financially and strategically optimize use of IT for business advantage.


Level Four — Business-Driven ManagementIn level four, automated actions and problem fixes are initiated without human intervention, based on business policies and SLAs. Infrastructure management is fully automated, self-healing and self-managing. Reporting tracks system responses for informational and analytical purposes, and people are involved only at the policy setting level.Level four is characterized by several organizational and technological changes:

- Policies impacting management of the IT infrastructure are set by the business staff, not the IT staff

- Costs of the IT services required by all business processes are fully understood and transparent

- The IT infrastructure has complete self-monitoring capabilities, including policy auditing

- Resources are shared automatically among all areas of the organization (IT silos now extinct)

- Integrated management of all aspects of the IT infrastructure is achieved through standards-based, open solutions.

IT Service Management and Shared Services


Asset Repository: Job 1

Centrally manage all management information- Discover and inventory all hardware, all

software- Administer people (users, rights,

privileges)- Define and manage policies- Map assets to business processes- … and a whole lot more


Asset Optimization – Solving Business Problems

The benefits of asset optimization are large:- Ensuring software license compliance- Contract and lease management- Procurement optimization- Asset retirement- Vendor auditing and risk management- Correct allocation of assets

And once you know what you own, you can manage it by:- Improving operational efficiencies- Proving data protection- Securing it- Understanding its life cycle- Setting service levels and financial controls


IT Service ManagementManage IT Like a BusinessService support and delivery

- Help desks and knowledge bases- Service catalogs

Manage by business process- Auto discovery and correlation- Service-level management

Define, monitor, measure

Financial administration of IT- Budget and planning- Cost allocation and reconciliation- Billing and chargeback- Integrated into ERP


IT Service Management – The Result

IT Service Management lets you manage IT like a business

Companies today take cost divided by employees!!!


Intelligence

Do you know?How many assets you have?License exposure / audit risk?What databases are not backed up?Underutilized storage?Consolidation opportunity?What assets are vulnerable?Risks based on a business process?Machines that have the most incidents?And a whole lot more …

Intelligence ProductsAsset IntelligenceService IntelligenceStorage IntelligenceLife Cycle IntelligenceNetwork IntelligenceMainframe Systems Intelligence


Asset Intelligence


Summary

Consolidation initiatives a response to both IT costs and perceived lack of alignment with enterprise goals.IT planners benefit greatly by considering the ITIL framework inthinking through the “how” of IT consolidation.Given continuing demands for driving efficiencies in government through both use of IT and reduction in IT costs, consolidation and similar initiatives will be a continuing theme across the states.


Contacts

Contacts for more information:- Erin Sullivan

VP, State and Local Government – 908-531-0128

- Matt MullinixAccount Director, Comm. of Kentucky – 317-705-9291

- Bob WomackBusiness Development Director – HLS – 617-733-5741

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