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Tech CEOs and the Trillion Dollar Savings: They Do Not Tell the Whole Story

by Andrea Di Maio  |  October 7, 2010  |  1 Comment

In a widely publicized report (see also press release), the Technology CEO Council (the US IT industry’s public policy advocacy organization) proposed seven initiatives that would help the US federal government to save over 1 trillion dollars between today and 2020.

The Council is formed by the top executives of IBM, Dell, Intel, EMC, Motorola, Micron Technologies and Applied Materials. According to its web site, it is dedicated to advancing policies that ensure and promote innovation and US competitiveness through technology leadership.

Let me  start by saying that a clear, coordinated message by some of the largest technology companies in the world addressed to the largest technology spender on Earth is both welcome and very important.

The initiatives mentioned in the report are the following, listed in decreasing order of impact (savings for the next ten years are in brackets):

  1. Streamlining government supply chains (more than 500 billion $): this could be achieved by greater focus on supplier management and procurement process improvement and reform.
  2. Applying advanced business analytics to reduce improper payments (200 billion $): this could be achieved by adopting new analytical techniques.
  3. Consolidation of IT infrastructure (150 to 200 billion $): this could be achieved through a combination of data center consolidation, virtualization and adoption of cloud computing
  4. Monetize the government’s assets (150 billion $): this would be achieved by  selling surplus facilities as well as moving some agencies from being subject to the appropriation of general revenues to become statutorily dependent on the fee income.
  5. Reducing field operations footprint and move to electronic self-service (50 billion $): this would be achieved by accelerating the deployment and adoption of e-government services.
  6. Moving to shared services for mission-support activities (50 billion $): this could be achieved by focusing on areas like  IT, finance, legal, human resources or procurement operations.
  7. Reducing energy use (20 billion $): this could be achieved by using building management technologies, advanced fleet management systems, as well as voice, video, document sharing and collaboration tools.

These numbers are certainly impressive and the domains listed in the report are all areas where the US federal government has been working quite actively over the last several years.

As the report recognizes, the Federal Sourcing Initiative has been looking into improving procurement by applying strategic sourcing for over 5 years, but anticipated benefits have not been realized.

The consolidation of the IT infrastructure has been one of the Lines of Business initiatives since the first Bush administration, but apparently issues still need to be resolved. Of course technologies like virtualization and cloud computing can help, but – as I have observed several times in this blog – they do not necessarily go in the direction of greater consolidation and centralization. What should the US government and individual agencies do differently to achieve those targets?

The same applies to shared services. The report mentions a few success stories, but somewhat overlooks the struggle and the considerable total cost of ownership of shared services in many jurisdictions, mostly caused by governance issues and the lack of understanding about where to draw the boundaries between centralized, shared and decentralized. Incidentally, the IT industry could concretely help by sharing the onus of developing more standardized solutions rather than expecting government to build successful shared governance models.

The call for more e-government is pretty straightforward, but it forgets how the rush toward more automation that many vendors (including some on the council) have encouraged has led other parts of the world (namely Europe) with overcapacity and low uptake. On the other hand, the report does mention teleworking, which would seem to me as a far more interesting source of savings in a federal context, but for some reason it does not add it to the 1 trillion saving figure.

Also selling and monetizing government assets is fine, but I wonder whether this should be accompanied by a call for lowering tax rates. In fact, I doubt people and businesses would see very favorably the obligation to pay fees for services that were previously covered by taxes. As far as selling assets to the private sector, I guess this requires a private sector that is ready to invest and take risks. The recent history of the US and European economies show quite the opposite.  The report should include an offering by the Tech CEO Council or some of its members to bid for some of the assets (how about consolidated data centers?), but it does not.

Last but not least, there is no mention of how to save money by consumerization or commoditization. What about stopping investing in corporate infrastructure and let employees pick and choose the technology they feel more comfortable with, at their cost, in return for greater work flexibility and teleworking opportunities? What about ditching some of the expensive application overhauls and explore the use of consumer and open source solutions? What about opening the market to smaller vendors as well as to individual developers? What about pushing some of the government infrastructure into the public cloud?

Well, I guess these savings are probably more difficult to quantify (although the report comes up with some bold figures already), and – more importantly – the council includes vendors that have little to no interest in seeing government move along the true commodity and consumer path.

The report provides a much needed stimulus to both policy makers and government executives to pursue these traditional cost optimization avenues more aggressively, even if some of the advice is understandably self-interested. It would be great to see vendors like Google, Amazon, Apple, Samsung and others that play in the consumer/commodity space come up with some additional, possibly more radical suggestions on how further slash the cost of technology and better use technology to help government save money.

Category: public-value-of-it  

Tags: cost-cutting  symposium  us  

Andrea Di Maio
Managing VP
15 years at Gartner
28 years IT industry

Andrea Di Maio is a managing vice president for public sector in Gartner Research, covering government and education. His personal research focus is on digital government strategies strategies, Web 2.0, open government, cloud computing, the business value of IT, smart cities, and the impact of technology on the future of government Read Full Bio

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