Tech Trail Boss

A little more than two years after becoming chief technology officer for Texas, Larry Olson's plan for more efficient IT spending is taking shape in the Lone Star state.

Olson, Pennsylvania's CIO from 1995 to 1999, was charged by Texas leadership in May 2004 with applying an enterprise approach to the state's decision-making and purchasing power, all of which were distributed among roughly 250 state agencies that annually spend $2 billion on IT.

With his plan partially in effect, consolidated IT purchasing has increased, Olson said. The Texas legislature in 2005 mandated that all state agencies buy IT commodities through the Information Resources Department.

But yet to lift off is Olson's single largest undertaking: consolidate all data center operations for the 250 agencies. The state is reviewing proposals and expects by December to award what market research firm Federal Sources Inc. has estimated will be a $700 million contract.

Olson spoke with Staff Writer Ethan Butterfield about the transformation of the Information Resources Department, and the state's new enterprise approach to IT.

WT: What have you accomplished since you took the job in May 2004?

Olson: One of the first things I got involved with was reorganizing the agency to focus on what I thought were some of the more critical areas. One was the consolidation of all the procurement, contracting and customer service into one new organization called "service delivery."

We also established a dedicated division for IT security. I felt that was clearly going to be one of the critical areas.

WT: What is the status of the data center consolidation? Have you chosen a vendor?

Olson: We're on schedule to complete and sign an agreement by December. The [responses to our] requests for proposals have come in, and we're going through our evaluation, due diligence and clarifications phases with the two big teams [led by IBM Corp. and Northrop Grumman Corp.] that have proposed. We're in the process of scoring and will begin a more detailed due diligence in the next couple weeks, which moves us to a best-and-final offer mid-fall.

WT: How is the consolidated purchasing initiative going?

Olson: We've been focusing on much more aggressive procurements ? negotiating them ourselves instead of relying on people out of state to negotiate for us. As a result, our prices have come down. If you compare 2004 [when Texas spent $520 million on joint IT purchases] to what we did in 2005 [$660 million], we had about a 20 percent increase in sales.

For fiscal 2006, which closes in about two months, we're on track to exceed $750 million dollars, which is about a 19 percent increase over last year. We've negotiated directly with all the major hardware manufacturers, and that is somewhere around 75 percent of our total sales.

WT: Who do you sell to?

Olson: House Bill 1516 only requires state agencies to buy commodity IT purchases through us. But 83 percent of our sales come from outside state government. Our biggest customer base is K-12 education in Texas, it's about 55 percent. Local governments, cities and counties throughout Texas, are somewhere around 20 percent to 25 percent of our sales. Then there are the universities and state government.

WT: What were some other initiatives?

Olson: We have signed an agreement with IBM to deliver messaging and identity management services as host-ed managed services out of IBM's data center in Dallas.
We've implemented the Texas Project Delivery Framework. It allows for agencies to do their own project management methodology, but identifies five gates that everybody has to go through. It starts off with business justification, and ends with benefits realization. It really ties the agency's IT side to its business side.

WT: Have you undertaken any other initiatives?

Olson: Yes, we've also received direction from the legislature to see how we can increase the opportunities for Historically Underutilized Business program companies, mostly minority and women-owned businesses. So we created a HUB coordinator, which the agency has never had before. Then we negotiated a landmark agreement with the Texas Association of HUBs, to find ways to increase communication and collaboration between industry and what we're doing at the Information Resources Department.

WT: What major IT procurements is your department doing?

Olson: We're evaluating a procurement for enterprise resource planning services. It involves financial, contract management and also [constituent relationship management]. The scope was to propose solutions that were managed services, hosted solutions. Not the typical approach. We wanted to test that out on our own and see the value. A lot of agencies and the cities and counties are asking for that kind of approach instead of the traditional buy, own and operate model.

We're also finalizing a new staff augmentation contracting agreement for which we're in the final stages of evaluation and should be signing contracts in the near future with about 100 companies to get them on a kind of renewal of our contracts.

WT: What IT consolidation projects have you awarded over the last 18 months?

Olson: Messaging was a big one. It's gone exceptionally well. We have more than 40,000 seats signed up already, and we expect over the next couple of months to exceed 60,000 seats.

WT: How much have your purchasing consolidation initiatives trimmed from Texas' annual IT spend?

Olson: The data center consolidation isn't complete now, so I can't really reflect any change. We have an effort ongoing to develop a tighter way to monitor the IT spend, Planned Procurement Schedules, that all agencies have to complete. It's a 12-month outlook on what they're looking at buying in hardware, software and services. And that gets refreshed every six months.

WT: What's the payoff?

Olson: It helps my service delivery group to really look at what's the anticipated spend out there, and then to use that in their negotiations with vendors. From May 1, 2004 to June 30, 2006, my department reported savings of $91.3 million [from the procurement schedules]. Of the total, $58.7 million has already been realized.

Staff writer Ethan Butterfield can be reached at ebutterfield@postnewsweektech.com.