CIO Newsletter and Technology Update

September 1999
Volume 2, Issue #8

Every business has assets - buildings, people, capital, and equipment. . In today???s world, it could be argued that information, and information technology, are among the most important assets that a company manages. The same can be said of government assets.

If, for example, you were going to build or lease a new building you would need to make that decision carefully and ask several questions. How many square feet will it be? What is the cost per square foot? What is the interest rate for the loan on the building? What will be the monthly maintenance costs after the building is completed? Does the building design meet the agency's specifications and business needs?

We also take a similar approach to our human resources. For instance, we would not hire an employee by pulling a number out of a hat. Instead, we would look at the proper salary range for the new job and find out what the market is paying. Also, we would want to make sure that the work the person will do is worth the cost of the salary and benefits we will be paying.

Information technology assets - our hardware and software systems??? must be managed in the same way. Yet too often in the past, in both private businesses and government organizations, information technology has been simply a black box. We put money in, and we get something out. We can cross our fingers and hope that enough of our needs are met to justify the cost of creating, maintaining and upgrading our systems.

Unfortunately, some organizations do not even know what technology assets they have because tracking the inventory is inaccurate or not present. Inventory systems where they do exist may be found in many different databases.

Some agency directors and executives may not have in the past, required the same accountability over the management of information technology assets as they have for their buildings or human resources. One possible reason for this may be that it is difficult to measure the benefits from technology. There are also a number of complexities associated with technology that our managers and leaders are sometimes asked to take on faith. We put money into the IT division with the hope of getting back out what is needed to run the agency or business. When we don't get what we want we are often given answers in a jargon we do not understand nor frankly sometimes care to learn. So once again technology is treated as a "black box." We know we need it but we are not sure about what parts of it we can understand and trust. Finally, we wonder if we can really get the kinds of reports and tools we need to manage these assets in a more effective and informed way.

Whatever the reasons in the past, businesses in the private sector are realizing that they can no longer treat information technology (IT) as a "black box". Their information technology systems are becoming competitive weapons, and strategic to the success of their company. Consider the case of Barnes and Noble: tens of thousands of stores; strong revenues and profits; the clear leader in retail book sales. But a competitor, Amazon.com, with zero stores, who knew how to leverage the latest Internet technology correctly sent them into a tailspin from which they may never fully recover. Chief Information Officers (CIO???s) now sit at the same table with the CEO???s, CFO???s, and COO???s of corporations, shaping the business strategy and managing the important information and technology assets of the business. The same is happening, and needs to happen, in government at all levels. In your departments, the IT director if they are not already there, should be at the same table as program and division directors, shaping strategies for servicing your customers, helping you leverage information technology assets strategically, and running the business of your department efficiently.

How do we more effectively manage these information technology assets? If you have a financial investment account, or 401K account, you know that you get a monthly statement about your financial "portfolio". This report tells you how your portfolio of investments is doing. What interest they earned, distributions, how much of your portfolio is one type of investment vs. another, etc.

We have recently created just such a management tool for the information technology assets in your department, division, or agency. It allows you to keep an inventory of all your information technology assets??? the systems, hardware, software, and people who maintain and support the systems. It allows you to track how much these systems cost to develop and build, and how much they cost each year to maintain. It allows you to track the costs to support and maintain the PC???s, networks, and other equipment your department has, and what you spend each year to upgrade them. It allows you to compare how you are doing this year vs. last year??? is it costing us more to support our networks or less? The name of the tool is "Plan-IT"??? a web-based reporting and tracking tool that anyone in your department can access??? IT managers, division directors, anyone. It has a variety of reports that can be printed to see what your current portfolio of IT assets looks like, and costs. Custom reports can be created by the CIO???s office if you need them. It provides help in identifying up front, before a new system is developed, what the risks and benefits to your agency will be. It can help in making strategic decisions with regard to technology??? could we cut costs by consolidating our application efforts instead of having them spread across several divisions? Would it be cheaper to outsource our local area network support? Do we have some databases that should be combined together so that they are cheaper to maintain and provide greater ability to share information across division boundaries?

There are three basic components to the portfolio of IT assets for each department, and that we are asking departments to enter into Plan-IT??? the basic infrastructure that supports their applications (desktop PC???s, networks, support personnel), their existing IT systems (hardware and software systems that are in place and are operating and what it costs to run them each year), and new projects??? new systems or applications or databases that are being built or are proposed to be built, and what it will cost to build them.

Some of the departments and divisions have asked why we are asking them to go to the work of entering all this information into Plan-IT about their IT systems and projects, and why we are making them create the ties between this system and their data processing expense codes in the state accounting system, FINET. The answer is simply this: you can???t manage these information technology assets the right way if you don???t know what they are costing you to run each year. By tracking expenditures (current expenses and capital outlays) for IT and associating them to specific IT systems or projects, we will not only have your projections for how you intend to spend your IT budget (how is the pie divided up?) at the first of each fiscal year. We will also be able to roll up costs from FINET and see at the end of the year what was actually spent on these projects and systems. You will be able to make better projections for the next year as to what your IT assets will cost to run, and you???ll be able to make better decisions as to how efficiently manage your portfolio of IT assets.

We want to shine a little light into the black box. And yes, there are those that will say: "Hey, wait a minute, let???s not let any light in there, we don???t want any funds that we???re spending on IT to identified or understood better. Someone might target them for cuts." But I say just the opposite will happen??? if we can???t account for what is happening in the black box, it is easier to target those funds for decreases. However, if we can clearly show how the assets are being managed, what our portfolio is, and where those monies are being used and the benefits of having those systems in place, that they???re not being wasted, and that we are carefully managing these important assets (as opposed to throwing money into a black box), we will have much better ground to stand on to argue for the continued funding of these information technology assets, and a greater ability to manage the funds wisely as we should.

The IT directors and managers in each department have been receiving training in the use of Plan-IT. The CIO???s office is in the process of meeting with each of the departments, and reviewing the portfolio of IT assets and projects in each department. We will continue to make changes to Plan-IT to make it more usable, and more clearly defined and understood. If you have questions about how to leverage this tool, please ask us. Bob Woolley, in the CIO???s office, or myself, will be happy to help you with any questions or suggestions you might have.