Nov 22 2016

Centralized IT Procurement Saves States Time, Money

Technology leaders from New York and New Jersey say breaking down silos between agencies creates procurement efficiencies.

A mess of IT procurement issues — redundant software purchases, inconsistent pricing and disjointed maintenance schedules among them — arise from the tiered nature of state and local governments.

Consider Kentucky: With its 120 counties, each making individual IT purchases, it’s easy to see how quickly simple inefficiencies become costly problems.

But IT leaders from New York, New Jersey and a handful of other states believe they’ve found an effective solution: centralized IT procurement. Here are three benefits that, they say, make the whole undertaking worth it.

1. Increased Purchasing Power

As the chief technology officer of New Jersey and head of the state’s Office of Information Technology, Dave Weinstein leads the effort to make OIT the central IT service provider for the entire state.

The change means that multiple agencies will no longer have separate licensing agreements with the same vendor. Weinstein says that’s important because fragmented licensing put agencies at a disadvantage.

“They all start and end at different times, and there’s a lot of fluctuation in terms of price,” he says about the agreements. “So we’re not necessarily realizing our purchasing power as a single entity, which is the state of New Jersey.”

2. Significant Cost Savings

The story is similar in New York, where Mahesh Nattanmai serves as executive deputy CIO of the NYS Office of Information Technology Services. In 2011, Nattanmai’s office took control of IT spending for all 50 agencies in New York, saving the state between $10 million and $20 million, he says.

Part of that savings comes from the state’s unified approach to cellphone contracts. When agencies still held individual contracts, Nattanmai says, they not only paid different rates but also frequently incurred extra charges for running over their minutes.

“When we consolidated, we negotiated having these cellphone lines as a pool, so on average, nobody was going over their allocated minutes within the pool,” he says. “That helped us reduce the cost of cellphones and gave us a very predictable line item in our budget.”

3. Streamlined Processes

With statewide IT contracts in place, Weinstein and his team have been able to raise the OIT’s minimum approval threshold from $5,000 to $50,000. The increase reduces the likelihood that OIT will become a bottleneck for purchasing.

“We’ve done a lot of work on the front end so that procurement only gets to me if there’s a reason I need to approve it,” he says.

Weinstein and his team also established a robust system architecture review process that’s required anytime an agency pursues a new solution or a significant modification to an existing one. SAR helps ensure the procurement process moves along smoothly, as long as the solution in question is compliant with current OIT standards and practices.

As an added benefit, centralizing IT procurement has simplified maintenance renewals in New York, Nattanmai says: “We don’t have 50 different payment dates for one product; instead, we do one quarterly payment.”

The Future of IT Procurement

New York’s and New Jersey’s successes indicate that centralization could transform state and local IT procurement, and Meredith Ward, senior policy analyst with the National Association of State Chief Information Officers, predicts the procurement model will catch on. "As state CIOs continue to look for ways to improve the IT procurement process, cross-boundary collaboration — state, cities, counties, etc. banding together to save costs — is something we will see more of."