The Office of Management and Budget got its first glimpse into whether agencies would be able to cut 10 percent of their IT budgets, and how they would like to reinvest at least 5 percent of it in fiscal 2014.

While the White House still is creating next year’s budget, agencies used the initial round of PortfolioStat sessions to identify 98 areas where they thought they could save real money by consolidating IT systems or by implementing better buying processes.

Steven VanRoekel, the federal chief information officer, said agency PortfolioStat strategies focus on a discreet set of commodity IT investments, but the spirit of cutting to invest is coming through.

“The mentality of let’s cut the bottom of our list off, the things that are least effective or are duplicative and let’s take part of that and feed the top of the list so we can invest in innovation, so we can invest in cost savings, efficiencies and effectiveness of our employees or services that touch citizens, is there,” VanRoekel said in an exclusive interview with Federal News Radio. “That mentality is what PortfolioStat is intended to drive.”

OMB’s 2014 budget guidance from August asked agencies to target six types of technology projects for a total reduction of 10 percent in spending, but also offer ideas for how they would reinvest 5 percent of those cuts into mission-critical IT programs.

The administration wants agencies to utilize the PortfolioStat approach inside their Investment Review Boards to identify where those savings and reinvestments could occur.

Billions in potential savings

OMB introduced PortfolioStat in April to help agencies have a more complete view of where they are spending money and where are potential opportunities for consolidation. VanRoekel’s memo set several deadlines in 2012, including developing a strategy for consolidating commodity IT by Aug. 31 and transitioning two commodity technology services to a shared service provider.

OMB received strategies from 26 agencies and estimates they will save $2.5 billion over the next three years.

“What we identified as a really big area of opportunity for us is looking across not only at individual projects and mission-based things as we’ve been doing in the past to great effect through our TechStat process, but instead expanding that view across the whole of an agency’s portfolio and looking left to right to say where is there duplication, where are there things where we should be doing more efficiently and effectively,” VanRoekel said. “The number $2.5 billion really represents that notion and finding real opportunity in that space.”

Big footprint

VanRoekel said all 98 of these areas would provide real dollar savings, not just cost avoidance. He said OMB eventually would release details of agency plans, but needs to address some budget sensitivity issues first.

“Where there is a big footprint and investment in federal IT is where we see the biggest opportunities,” he said. “Desktop computing, which is a huge footprint in the federal sense, there is a lot of opportunity out there. Email is another one. Mainframes and servers, there’s a lot of infrastructure costs in that denominator, so we are seeing the percentages pretty high. Mobile is also one that is emerging as an opportunity area where we see agencies with dozens, with hundreds and, in some cases, over a thousand mobile contracts where there is a strategic sourcing motion, but efficiency motions around things like device management.”

He said other areas include telecommunications, Web infrastructure and identity management systems as well as further down on the list human resources and financial management systems.

VanRoekel said agencies also are starting to look at the mission side for consolidation opportunities. But like TechStat and many of the other initiatives, he said agencies are taking the “crawl, walk and run” approach. This first PortfolioStat effort is in the crawl stage for most departments.

“What we learned in the process is agencies fall on a broad spectrum,” VanRoekel said. “There are agencies who are highly decentralized and where there exists a lot of duplication. You’ve got agencies who have done a pretty good job of rationalizing commodity computing, so they have one email system and one way to buy a computer. The next level up is around app rationalization and lines of business so people who have said they are doing multiple things across the agency that are very common, let’s do the one and scale it across the agency. The last stage PortfolioStat uncovered for us was a service-oriented agency. One that enterprise architecture and other services are provided from central IT so it gives a lot of control and ability to customize out on the edges, but controlled in a centralized way.”

Moving up the maturity model

He said with agencies at different places of maturity, the goal is to drive them toward that last stage where there is centralized control over at least commodity and maybe some mission areas.

OMB will expect agencies to run PortfolioStat sessions at least annually as they prepare their budgets. VanRoekel said the plan is to institutionalize the process, and expand it over the next year.

“I think version 2, not only will we continue the momentum on version 1 and continue to drive consolidation, because that can’t happen overnight, but also start to dig into this shadow IT stuff and think about how are we affecting efficiencies and effectiveness across the whole of the organization and into the mission areas,” he said. “In the future, we will be looking at how we continue to enhance the plans we’ve done before, how do we make it a yearly exercise that feeds this notion of cut and invest strategy in the budget, and how do we look at moving agencies up this maturity model to make sure we are all heading to road where we are all completely rationalized on the commodity side and we are taking advantage of the higher purpose of apps and services, and then look for opportunities to share governmentwide as well.”

VanRoekel added OMB will share lessons learned from the PortfolioStat sessions and follow up with agencies on how they are meeting the milestones in their strategies.

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