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FCW : August 15, 2013
Commentary | KRIS VAN RIPER AND B E N J A M I N K N O P F KRIS VAN RIPER is a managing director and BENJAMIN KNOPF is a senior analyst at CEB. In an era of budgetary constraints, regulatory mandates and calls for modernization, agency IT leaders need to think creatively about how IT investments can effectively drive mission outcomes. Lack of visibility into relative IT spending levels can lead to subjective project funding processes, which create misalign- ment between IT expenditures and agency goals. CEB has researched publicly available IT spending reports to benchmark and compare agency investment patterns. Our analysis has produced several insights that agencies should consider as they think about strategic planning and portfolio management. In scal 2012, on average, more than 80 percent of IT spending in the U.S. government was allocated to operations and maintenance (O&M), which refers to the projects and costs needed to sustain existing IT assets at their current capability and performance levels. That means less than 20 percent of IT spending was allocated for development, modernization and enhancement. DME projects sup- port innovation and lead to new IT assets and systems, or they modify existing IT assets to substantively improve capability or performance, comply with legislative or regulato- ry requirements, or meet a request from agency leaders. By comparison, in the private sector, 68 percent of spending on average is allocated to O&M proj- ects and 32 percent to DME. Thus, government agencies are spending a relatively larger share of their IT dollars supporting the IT systems of the past rather than investing in the technologies of the future. Based on our interviews with IT leaders, we believe the ratio of spending on legacy systems versus future innovation could get even worse in the next several years as IT leaders are forced to make post-sequestration budget cuts. It is usually easier to cut spend- ing on proposed projects rather than turn off existing systems that have uncertain interdependencies and entrenched user constituen- cies. Therefore, new projects will be squeezed from budgets while maintenance spending will continue to grow. However, the Federal IT Acquisi- tion Reform Act under consider- ation in Congress could provide CIOs at major civilian agencies with additional levers to address the balance of funding between DME and O&M. The legislation would increase the authority for CIOs to deliver portfolio simpli cation strat- egies to reduce spending on O&M through steps such as data center consolidation, elimination of over- lapping government websites and enterprisewide contract consoli- dation. It could also help increase funding for DME by giving CIOs additional resources for invest- ments in new cloud computing capabilities. Finally, the act requires strengthened efforts for information exchange with industry to adopt best practices for IT acquisition and portfolio management. Although the legislation might yield signi cant changes for CIOs, the good news is that CEB s review of agency IT spending data conclud- ed that some agencies are already strategically allocating resources to the activities that generate the high- est business value. In particular, those progressive IT organizations: • Work with business partners to establish and consistently apply a set of standard portfolio prioritiza- tion criteria. • Evaluate the life cycle costs of legacy systems to help business partners identify candidates for retirement. • Increase the value of existing sys- tems through judicious investments in usability, process design, training and integration. Agencies can learn from those high performers by identifying their best practices and sharing them across the federal government. ■ The key to better IT portfolio management Federal leaders need to balance their spending on operations and new projects to support strategic IT priorities and budget plans Lack of visibility into relative IT spending levels can create misalignment between IT expenditures and agency goals. | 12 August 15, 2013 FCW.COM
July 30, 2013
August 30, 2013