IT shops in smaller jurisdictions join forces to save money and boost efficiency.
The size of the savings
By merging various IT functions, Topeka, Kan., and surrounding Shawnee County expect to shave 14 percent off IT expenses. “That surprised even us,” Topeka IT Director and CIO Steve Tallen says.
There’s a lot for a CIO to like in a small city like Topeka, Kan., which has a population of 122,377. For one thing, the manageable size makes it easy for information technology managers to stay on top of things.
“When I was the head of a large commercial IT shop, I’d have a meeting with my managers every morning, but even so I never felt I had a handle on everything,” recalls Steve Tallen, Topeka’s IT director and CIO. He now manages 15 full-time IT employees. “Here, I have a pretty good feel for what’s going on.”
Otto Doll, commissioner of the Bureau of Information and Telecommunications for South Dakota (population 760,000) agrees. “My full cost for a developer now stands at $45 an hour. I’m talking about senior-level people. Try paying 45 bucks an hour in a big city,” Doll says.
Nevertheless, both say life isn’t always a Norman Rockwell painting. Relative cost-of-living expenses may be low, but even so, hot jobs in urban areas still siphon away talented IT staffers, which leads to key positions open for months at a time.
Personnel shortages aren’t the only challenges faced by CIOs working outside major metropolitan areas such as Chicago, Los Angeles and New York. Small IT shops have to work harder to negotiate price discounts for hardware and software compared to organizations with high-volume buying clout. And when technical support is needed, it may come via phone calls or e-mail rather than from an onsite technician. “Especially here in South Dakota where everybody knows everybody else, we’re used to shaking the hand of the guy we’re doing business with,” Doll says.
But rather than giving in, small-city CIOs are finding creative ways to cope with these challenges. In the process, they’re balancing the best of small-city life with some of the perks that their big-city counterparts enjoy.
Economies of Scale
In Topeka, cost considerations and difficulties in finding trained tech workers are helping to forge a closer working relationship with surrounding Shawnee County. The IT shops are exploring ways to gain the efficiencies that large companies see when they centrally manage applications across an entire enterprise. For example, the Topeka and Shawnee IT organizations hope a single $2.5 million enterprise resource planning system that’s rolling out can serve both jurisdictions. “We want to share as many of the costs as we can,” Tallen says. Although each group will run the application separately on its own servers, expected savings will come from dividing costs for support, training and backup.
If this project succeeds, the city and county may take an even bigger step — formally merging their IT departments, an idea that’s now being discussed. “There are economies of scale we could take advantage of because there’s a lot of duplication in the two shops,” Tallen says. “We don’t need two e-mail servers for instance. Also, their Parks and Recreation Department does the same thing as our Parks and Rec Department. We could share software, support and training.”
Multijurisdictional consolidation is an idea that’s gaining attention across the country, in both small and large markets, says Shawn McCarthy, director of research for government vendor programs at Government Insights, a market research firm. “There’s no reason to have a human resources or financial system for every agency, which may be the way they were built 20 years ago,” McCarthy says. “But consolidation return on investment needs to be tackled formally by CIOs simply because there are costs that many small cities may not be anticipating. Coming up with extra funding out of the gate can be tough if you are in a small jurisdiction with a smaller revenue base.”
Tallen built his business case by investigating a number of other city-county collaborations. “The potential savings surprised even us,” he says. “The costs per constituent are quite a bit less than ours in a lot of cities and counties that have consolidated.”
Tallen believes technology, support and training consolidations could shave $1 million a year off city and county IT expenses from the $7 million in total expenditures now represented by the pair’s separate budgets.
One model for Tallen was Omaha and Douglas County, Neb., which formally joined forces in 2002 when they created the Douglas-Omaha Technology Commission, or DOT Com. Originally an idea proposed by the mayor and the county board members, the merger gained credence when a study by an accounting firm endorsed the idea.
Vic Stannish, DOT Com’s CIO, cautions that budget savings weren’t the prime goal. He believes IT consolidations can help public officials provide faster access to information and more efficient services for constituents through more modern applications and hardware infrastructures. “The real value is the standardization of services that we can provide to city and county departments and subsequently to the citizens,” he says.
DOT Com is now consolidating a vehicle maintenance application, after merging telephone systems across the city and county. The group is also taking an enterprise approach to e-mail with a common Microsoft Exchange platform that is expanding to replace the county’s IBM Lotus Notes implementation.
“The real value will come in the sharing of contact lists and calendars,” Stannish says. “If the mayor wants to set up a meeting with folks in the county, today it can’t be done electronically. When they’re consolidated, it will be like the mayor is setting up a meeting with somebody next door.”
But for all its benefits, consolidation presents unique challenges. Stannish struggles to get both groups to agree on a common approach when each uses competing applications. “That’s a very difficult job, but you absolutely have to come to some agreement that this is the way we are going to go and these are the reasons why we are going this way,” he says. “Otherwise you will not achieve the benefits of consolidation.”
A formal IT authority such as DOT Com, however, can help mitigate differences. For example, the city and county agreed on vehicle maintenance applications after DOT Com considered the individual needs of both groups and then recommended a new program not being used by either party.
“DOT Com takes the responsibility of bringing the stakeholders together and determining how important everybody’s requirements are. Nobody gets exactly what they want. There has to be teamwork, and we work at that pretty hard,” Stannish says.
DOT Com also created committees to evaluate consolidation opportunities in target areas such as finance, purchasing and human resources. Committees consider enterprise applications that might be appropriate for city and county needs and then meet with department staff to discuss potential efficiencies and cost savings.
The committees also tackle technical stumbling blocks, which can arise when years of tight budgets contribute to obsolete infrastructures incapable of running new enterprise applications. “If your house is showing the wear and tear of not having been painted for five years, it may cost you a little bit more” to remodel it, Stannish says.
ANSWERS TO THREE SMALL-MARKET CHALLENGES
PROBLEM 1: Because they buy relatively small numbers of commodity products such as desktop PCs, small-market CIOs get little or no volume discounts.
Solution: Seek out state and federal contracts that can offer initial price breaks, then try to negotiate even better deals with suppliers. “We use the State of Kansas contracts as starting points, and sometimes competition with the major manufacturers will save us a few dollars,” says Steve Tallen, Topeka’s director of information technology and CIO.
After asking two computer manufacturers to submit competitive bids for a recent purchase, Topeka saved an extra 10 percent compared to the published state contract price.
PROBLEM 2: Too few experienced IT people exist in a small labor pool. Similarly, newly trained programmers often leave smaller markets in search of higher salaries in big cities.
Solution: Rather than hiring young programmers and investing in their training, Topeka maintains ties to former developers by hiring them as independent contractors as projects arise. “When you add up the recruiting and training costs, it’s cheaper for us to go with a contractor who is skilled right off the bat. And you don’t have to worry about losing them later,” Tallen says.
To attract experienced workers, South Dakota created the Dakota Roots Website, dakotaroots.com, which matches employers with expat South Dakotans who might like to return.
PROBLEM 3: Vendors balk at making onsite service calls in geographic locations far from major metropolitan areas.
Solution: Spend extra time negotiating the details of service level agreements, including special service requirements for essential systems. “It’s one thing to say that you have a service agreement for your laptops, but it’s quite another to say in the agreement that every notebook will be fixed within two days”, says Shawn McCarthy, director of research for government vendor programs at Government Insights, a market research firm. “There are a million different ways you can configure the agreement depending on the size of the organization and how mission-critical each system is. But the overriding approach is to make sure you get what you need in very detailed form within the contract.”
Benefits Beyond Savings
- Standardization of services for departments and citizens
- Speedier access to information for decision-makers
- Ease of online collaboration
- Simpler systems management