Virginia IT reforms to spur new business
But CIO warns large-scale outsourcing not part of plan
- By William Welsh
- Jan 23, 2003
Virginia's push to centralize information technology management will create numerous opportunities for systems integrators, especially in providing enterprise solutions in security, project management and e-procurement, according to state and industry officials. But Virginia Secretary of Technology George Newstrom said that large-scale outsourcing is not part of the state's technology reform strategy. Although Newstrom did not rule out completely outsourcing some functions, he said he has told Virginia Gov. Mark Warner and state lawmakers that the sweeping IT reform before the legislature can be carried out without outsourcing noncritical IT functions. "We have a great opportunity to do much of this, if not the preponderance of this, by ourselves," Newstrom told Washington Technology in an interview this month. In December, Warner proposed an ambitious legislative package to restructure information technology in Virginia state government. Newstrom said the measures would produce $37.4 million savings in the first year, and at least $100 million savings over the course of Warner's four-year term. The executive branch of Virginia government spends about $450 million annually on IT. If the state legislature approves the measures before it adjourns Feb. 28, the reforms would become effective July 1, Newstrom said. The reforms are as much about improving IT management and state government operations as they are about cutting costs. "I don't want anyone walking away with the notion that the only reason we are doing this is to save money," Newstrom said. The proposed changes would roll three agencies and two boards into one, establish a statewide security program and overhaul administrative systems for finance, planning, budgeting and human resources. The new technology office would be called the Virginia Information Technologies Agency. The changes are designed to remedy what Warner and Newstrom said are substantial shortcomings in the state's technology infrastructure and governance. The state does not have uniform technologies, does not take advantage of economies of scale and does not leverage its IT buying power, Newstrom said. The reforms are "a net plus for industry and companies," he said. The unique combination of Warner and Newstrom, who both have successful backgrounds in technology, is gaining national attention. Warner and Newstrom "are creating an enterprise capability for Virginia that hasn't existed before, [which] holds the promise of improving the efficiency and use of technology to generate considerable savings," said Steve Kolodney, vice president of public-sector services at American Management Systems Inc., Fairfax, Va. The consolidation of the state's IT operations will bring "a dramatic increase in business," said Don Parr, managing director for Virginia at BearingPoint Inc., McLean, Va., formerly KPMG Consulting Inc. Parr said that as if the state proceeds with the reforms, there will be a demand for new technologies as well as processes and solutions that help it function more efficiently. The consolidation of IT functions and oversight will produce opportunities for enterprise solutions in security, access management, help-desk services, project management, e-procurement and enterprise resource planning to carry out the administrative systems overhaul, industry officials said. The legislation now under consideration in separate bills before the state House of Delegates and Senate would exempt the new technology agency from the Virginia Public Procurement Act, but would require it to develop rules that promote fair and open competition, said Judy Napier, Virginia's assistant secretary of technology. The exemption from the act would allow the agency to rapidly respond to the changing nature of technology and award contracts in a timelier manner, which has occasionally been a problem for the state, Napier said. For example, it took the state two and one-half years to award a staff augmentation contract, and two years to award a contract for Palm computers for employees of the Virginia Department of Social Services. Anticipating that the reforms will be voted into law, the executive branch is establishing a transition office and drafting memorandums of agreement with the state's 91 agencies that would provide an inventory of their IT needs and requirements. Newstrom and agency officials are rewriting requirements for some major statewide contracts, such as the staff augmentation contract and the telecommunications contract, to remove what are, in his words, certain "onerous" contracting requirements, such as unlimited contractor liability. Officials already have made at least six changes to the statewide telecommunications contact, which is up for re-bid this year. Proposals for the contract, which is worth about $50 million annually, are due Feb. 21. The contract is scheduled for award this summer, Newstrom said. While some states take steps to outsource functions that are not critical in their IT reform plans, this is not the case with Virginia, Kolodney said. "[Virginia] wants to have a different relationship with its private-sector partners, but it isn't redesigning its technology structure to have a different relationship with the private sector," he said. John Kost, vice president of global public-sector research at the market research firm Gartner Inc., Stamford, Conn., said the Warner administration shouldn't rule out outsourcing as it proceeds with IT reform. "It is not clear to me that the state has all of the resources it needs to accomplish the transition internally," he said. Getting the projected $100 million in savings by 2004 "will require very aggressive management of the transition process," Kost said. It will call for the active participation not only of Warner and Newstrom on a daily basis, but also of agency directors and key midlevel managers. Because of Virginia's one-term limit for governors, the Warner administration doesn't have the luxury of making small changes over time, Parr said. "It needs to be exponential and not incremental change," he said. Kost said procurement and human resources have the potential to derail Virginia's IT reform. "Most of the proposals are no-brainers from a business perspective," he said. "But this isn't just business, it's politics." *Staff Writer William Welsh can be reached at firstname.lastname@example.org.
"We have a great opportunity to do much of this, if not the preponderance of this, by ourselves," said Virginia Secretary of Technology George Newstrom.
William Welsh is a freelance writer covering IT and defense technology.