A Primer on IT Consolidation

By Biddinger, Nadeen | Government Finance Review, October 2011 | Go to article overview

A Primer on IT Consolidation


Biddinger, Nadeen, Government Finance Review


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Technology decisions are often driven by cost concerns, including the need to reduce information technology budgets. In fact, most long-range predictions for state and local information technology (IT) budgets suggest spending growth of just 3 percent per year through 2015. (1) IT executives have tried a number of ways to stretch those scarce resources while still delivering necessary services.

Over the last three to four years, for instance, it's become more common for organizations to use virtual servers and other technology advances to lower hardware costs, and to provide software through the cloud or a hosted service to reduce or eliminate maintenance costs (see "Making Sense of Cloud Computing in the Public Sector" in this issue of Government Finance Review). They are also outsourcing help desk or network support to a third party, which cuts costs and improves service. Another common tactic is delaying upgrades or new initiatives to extend the life of existing solutions (see "Cutting IT Costs: Distinguishing between Necessary and Discretionary" in this issue of Government Finance Review). Governments are also recentralizing IT assets and consciously choosing hardware and software that are easier to manage and control.

Some organizations are going further, investigating the impact of consolidating data centers and eliminating outdated IT processes. If planned and executed properly, consolidation can decrease costs and boost productivity--although concerns about security, privacy, and the availability of information have to be addressed. Organizations also usually face some resistance from individual departments about data ownership and control of information. Fears of declining responsiveness, flexibility, and customer service to departments are some of the reasons why IT services began and flourished in a decentralized environment to begin with.

Another issue is that despite the benefits consolidation and optimization provide--including a potential return of $2 for every $1 invested over a five-year span (2)--project estimates often create a stumbling block. Sometimes organizations have to spend money before they can save it, so successful consolidation requires both adequate funding and political will.

CONSOLIDATION AND SHARED SERVICES

Shared services and consolidation often go together, but the two are not synonymous. Consolidation focuses on how a government organizes the overall delivery of its own IT services, taking existing organizations, service, or applications and combining them into a single operation. This is typically mandated by executive order. In this model, the government still owns and manages the computing environment. Shared services, on the other hand, focuses on delivering a particular service or services in the most efficient and effective way, generally by combining the delivery with another governmental unit. The difference is subtle, and it is certainly possible to do both at the same time. (3)

Service-level agreements factor into both consolidation and shared services models. Pricing services based on uptime or response time agreements is often a poorly understood concept; careful consideration is needed to provide the proper incentives to make sure the provider of the services meets its commitments.

The decision to consolidate or offer targeted shared services depends on political factors, economic factors, the current technology infrastructure and architecture, the current IT staffing model, and the needs for each individual service area. Exhibit 1 shows characteristics of consolidation. (4)

Typical goals for a consolidation effort include:

* Greater access to information, resulting in improved decision making.

* Improved economies of scale for procurement.

* More affordable maintenance of infrastructure and equipment.

* Enhanced delivery of services through centralized data repositories and portals,

* Improved security. …

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