Information Technology: Best Practices Can Improve Performance and
Produce Results (Testimony, 02/26/96, GAO/T-AIMD-96-46).

This testimony discusses how best practices applied by leading
organizations can help improve information management technology in the
federal government. GAO focuses on four key lessons learned from its
ongoing evaluation of strategic information management issues in federal
agencies. First, better data are needed on the government's information
technology investments. Although federal information technology
obligations now total at least $25 billion annually, what the government
is getting in return for these expenditures is unclear. Second,
information technology is characterized by high risk and high return.
Real opportunities exist to boost organizational performance, but the
risk of failure is ever present and must be vigorously managed to ensure
success. Third, repeatable success requires sound management processes
that are applied with relentless discipline. Sustainable and effective
management practices are crucial to successful information technology
projects. Fourth, the challenge is implementation. Most leading
organizations have taken three to five years to fully integrate the
practices into improved management processes. A consensus has emerged
among federal government officials on what the problems are and what can
be done to solve them. Now agency heads must implement more-effective
information technology management processes and reinforce accountability
to produce tangible results.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  T-AIMD-96-46
     TITLE:  Information Technology: Best Practices Can Improve 
             Performance and Produce Results
      DATE:  02/26/96
   SUBJECT:  Information resources management
             Quality control
             Computerized information systems
             Management information systems
             Strategic information systems planning
             Reengineering (management)
             Accountability
             Systems design
             Cost effectiveness analysis
IDENTIFIER:  Information Technology Management Reform Act of 1995
             IRS TeleFile Program
             FTS 2000
             Federal Telecommunications System 2000
             GSA Time Out Program
             OMB High Risk List
             FAA Air Traffic Control Modernization Program
             FAA Advanced Automation System
             TSM
             IRS Tax System Modernization Program
             DOD Corporate Information Management Initiative
             CIM
             NWS Modernization Program
             USDA Info Share Program
             HCFA Medicare Transaction System
             
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Cover
================================================================ COVER


Before the Subcommittee on Government
Management, Information and Technology
Committee on Government Reform and Oversight
U.S.  House of Representatives

For Release on Delivery
Expected at
1:00 p.m.  EST
Monday
February 26, 1996

INFORMATION TECHNOLOGY - BEST
PRACTICES CAN IMPROVE PERFORMANCE
AND PRODUCE RESULTS

Statement of Christopher Hoenig
Director, Information Resources Management
Policies and Issues
Accounting and Information Management Division

GAO/T-AIMD-96-46

GAO/AIMD-96-46T


(510987)


Abbreviations
=============================================================== ABBREV


============================================================ Chapter 0

Mr.  Chairman and Members of the Subcommittee: 

It is a pleasure to be here this morning to discuss how best
practices applied by leading organizations can be effectively used to
improve the management of information technology (IT) in the federal
government.  A huge gap exists between public sector and private
sector capabilities to use information technology to provide modern,
efficient, and cost-effective services.  Narrowing this gap is
possible through improved legislation that requires agencies to adopt
modern management practices and produce results.  As you know, we
have recommended IT management reforms for the last two years that
are grounded in our past audit work and case study research conducted
on leading public and private organizations. 

Recently, we have helped to support significant revisions in laws and
regulations, such as the Paperwork Reduction Act, OMB management
circulars, and--just recently--the Information Technology Management
Reform Act as amended to National Defense Authorization Act for
Fiscal Year 1996.  In some cases, these revisions represent the first
significant changes made to IT-related legislation in over a decade. 
I might add, Mr.  Chairman, that these accomplishments have only been
possible with the interest, commitment for reform, and support from
members of Congress who have pushed for greater accountability for
public tax dollars. 

In the near future as a result of these legislative changes and new
direction from the Administration, agency leaders should begin making
technology investment decisions based on careful analyses of relative
costs, benefits, and risks.  Consequently, Congress should be better
informed of how technology expenditures are being used to address the
pressing business problems of government agencies.  More importantly,
with an investment approach, IT projects should have a better chance
of being initiated, continued, delayed, or cancelled on the basis of
mission or operational performance improvements -- the primary
purpose of deploying information technology in the first place. 

Much hard work lies ahead in implementing new management processes
and making tough, informed decisions on how to best apply available
IT to the government's pressing productivity, quality, and service
delivery problems.  Valuable lessons are plentiful about both
successes and failures in the private and public sector that agencies
can learn from. 

Today, I would like to focus my remarks on four key lessons gleaned
from our ongoing research and our evaluations of strategic
information management issues in federal agencies: 

  -- First, better facts are needed about the government's IT
     investments.  What is known is that federal IT-related
     obligations now total at least $25 billion annually.  What is
     not known is what the government is specifically getting in
     return for these expenditures.  Investment streams of this
     magnitude must be made carefully and with a full understanding
     of what the anticipated and actualized mission benefits are. 

  -- Second, IT is characterized by high risk and high return.  Real
     opportunities do exist to use it in ways that can boost
     organizational performance.  But, risks of failure are ever
     present and must be rigorously managed in order to ensure
     successful decisions and project completions. 

  -- Third, repeatable success takes sound management processes that
     are applied with relentless discipline.  Our research on those
     organizations that implement IT projects successfully found that
     with rapidly changing technological power and choices,
     sustainable and effective management practices are the key to
     achieving regular success. 

  -- Fourth, the challenge is implementation.  Leading organizations
     found that understanding these practices was only a small first
     step.  For most, it took three to five years to fully
     institutionalize the practices into improved management
     processes.  Similarly, in the federal government, a consensus
     has emerged among government decision-makers on what the
     problems are and what can be done to solve them.  Now, agency
     leaders must effectively implement more effective IT management
     processes and reinforce accountability to produce tangible
     results with IT investments. 

I would like to elaborate on each of these points and then make some
summary remarks. 


      BETTER INFORMATION NEEDED
      ABOUT IT INVESTMENTS
-------------------------------------------------------- Chapter 0:0.1

In the current environment of making government work better and cost
less, there are high expectations of information technology to change
old, inefficient ways of running programs and delivering taxpayer
services.  Most federal agencies are largely dependent on information
systems to deliver services, maintain operations, track outlays and
costs, manage programs, and support program decisions.  Technology
offers government a means to revolutionize the way it interacts with
citizens to streamline service, improve quality, and curtail
unnecessary costs.  Demonstrating these critical linkages to top
government executives is paramount to achieving the necessary
attention, understanding, and support necessary for long-term
success. 

Several facts are well known.  The expectations for technology are
set in a challenging federal environment.  Increasingly, pressure is
being brought to bear on shrinking the size of the federal deficit,
not only by reducing spending but by getting better service for lower
ongoing costs.  IT-related obligations in the federal budget,
exceeding $25 billion annually, may be put under increasing scrutiny
as part of overall discretionary spending. 

Further, technology itself is evolving at a rapid pace.  The industry
reports on this issue are consistent.  Every few years, the
performance-to-price ratio of computer hardware doubles.  New product
cycles in the information technology industry now average months
rather than years.  This rapid evolution produces new
challenges--such as the security of global networks--before current
problems can be fully resolved--such as the replacement of aging,
legacy systems that can no longer meet requirements. 

In this environment of demanding requirements, close scrutiny, and
rapid change, more attention needs to be focused on what is not known
about the government's technology investments.  First, the government
really does not know exactly how much it is spending on IT.  The $25
billion figure represents specific IT obligations reported to OMB by
federal agencies through a special budget exhibit.\1 This information
is not comprehensive or collected on a governmentwide basis;
therefore, the total amount of annual spending for IT is unknown.\2

For example, agencies are not required to report IT obligations under
$50 million.  The legislative and judicial branches of government are
not required to report IT obligation data to OMB.  Additionally, IT
obligations embedded in weapon systems and federally funded research
on computers are also not part of the reporting requirement.  If
included, these figures could significantly alter the size of the
governmentwide IT investment portfolio.  The Department of Defense,
for example, has estimated it spends $24 billion to $32 billion
annually for software embedded in weapon systems. 

Second, most agencies do not capture or maintain reliable information
on projected versus actual costs and benefits of IT investments. 
Without this type of information, it is virtually impossible to
construct a return on investment calculation as a way of
demonstrating positive net gains in cost reductions, improvements in
quality, and reduced cycle time for service delivery. 


--------------------
\1 OMB Circular A-11, Section 43. 

\2 Information Technology Investment:  A Governmentwide Overview
(GAO/AIMD-95-208, July 1995).  For the most part, agencies do not
break out IT obligations as separate line items in their budget
documents, but rather include this information within program or
administrative costs.  The exception may be in the case of major
modernization efforts that rely heavily on information systems, but
this too can vary from one agency to the next. 


      TECHNOLOGY PROJECTS OFFER
      POTENTIAL FOR HIGH RETURNS,
      BUT INCLUDE SIGNIFICANT
      RISKS AND UNCERTAINTIES
-------------------------------------------------------- Chapter 0:0.2

The promise of new information technologies is compelling in the
federal environment where aging systems prevail that are often
ill-designed for changing business or mission requirements.  There
are inherent risks associated with not acting to address these
technology deficiencies, including potential operational disruptions
to vital government services such as air traffic control, income tax
collection, and benefit payments to recipients of health care or
social security. 

The opportunities for using technology to improve cost effectiveness
and service delivery in government are immense.  While the return of
these investments are not yet proven, examples of how technology can
be a powerful tool include: 

  -- reducing public burden, such as IRS' Telefile project that
     allows taxpayers to file 1040EZ tax returns via touch-tone
     phones;

  -- reducing operating costs, such as data center and
     telecommunications consolidation projects being conducted by the
     Department of Defense and now OMB on a governmentwide basis, as
     well as post-FTS 2000 implementation, and governmentwide E-mail;

  -- creating choices and alternatives for the delivery of government
     services, such as electronic benefit transfer payments,
     information Kiosks, agency home pages on the Internet, and
     electronic data interchange between government vendors and
     agencies;

  -- increasing the responsiveness and timeliness of services, such
     as the Social Security's highly rated telephone customer service
     program. 

  -- improving the value and impact of government information, such
     as the international trade and environmental data index projects
     being conducted under the auspices of the National Performance
     Review; and

  -- increasing the integrity and reliability of government
     information systems, such as reducing health care fraud through
     better software detection methods and enhancing the security of
     federal data through implementation of better internal controls. 

But there are also risks associated with taking action to implement
new information systems.  Our reviews of major modernization efforts
have shown that the introduction of newer, faster, cheaper technology
is not a panacea for flawed management practices or poorly designed
business processes.  Business needs must dictate the requirements and
justification for the type of technology to be used. 

To ensure this occurs, program units in agencies must carefully
analyze the processes or procedures that are being modernized.  When
processes are reengineered in concert with the power of information
technology, significant results can be achieved.  Let me illustrate
with a few select examples from both the public and private sector. 

  -- Liberty Mutual reports that cycle time for the issuance of
     insurance policies averaged 62 days, even though the actual
     determination time took less than 3 days.  Upon close
     inspection, management discovered inherent process and support
     inefficiencies, such as up to 24 different handoffs of the
     policy paperwork, separate appeals processes for both sales and
     underwriting, and separate computer systems for each department. 
     By combining process redesign with a more powerful, integrated
     information system, Liberty was able to reduce cycle times by
     one-half, eliminated virtually all policy handoffs, and was able
     to significantly reduce appeals to policy denials. 

  -- IBM Credit Corporation reports that the process to approve
     credit for IBM customers of computers, software, and services
     was redesigned from five steps and an average cycle time of
     seven days to a one-person, four hour process -- a 90 percent
     improvement in cycle time and hundredfold improvement in
     productivity.  Again, better designed and integrated information
     systems were part of the total solution. 

  -- Eastman Chemical found that maintenance staff were spending as
     much as 50 percent of their time finding and ordering equipment
     parts.  By combining process redesign with a computerized
     maintenance information system, Eastman Chemical reports it was
     able to cut by 80 percent the time needed to find and order
     materials.  As a result, maintenance productivity has risen
     sharply and the company is saving more than $1 million every
     year in duplicate inventory costs. 

  -- The Department of Interior's Bureau of Reclamation has concluded
     that mission rescoping has resulted in a focus on water
     resources management rather than building large public works
     projects.  The Bureau reports that reengineering and better use
     of technology has resulted in a grants approval process being
     reduced from 15 steps over 6 months to 5 steps and one week. 
     Similarly, fish ladder design and funding approval processes
     have been streamlined from 21 steps taking over 3 years to eight
     steps taking just 6 months. 

Nonetheless, just as technology can help produce impressive success
stories, it can also become the focus of costly business failures. 
Dramatic, captured results can be few and far between.  A recent
research study conducted by The Standish Group on private and public
sector organizations in the United States confirms this troubling
trend.\3 According to the research, IT executives report that
one-third of all systems development projects are cancelled before
they are ever completed.  This statistic highlights the reality of
the complexity in planning, designing, and managing successful IT
projects. 

IT executives participating in the Standish Group research also
reported that only 16 percent of all IT projects were considered
successful--that is, judged to have accomplished what was expected
within the budget anticipated at the outset.  In addition, of those
IT projects that are completed, only about 42 percent of the largest
companies are successful in meeting their initial objectives.  In
addition, the study's participants reported that over 50 percent of
IT projects exceed their original cost estimates by almost 200
percent.  These statistics serve as a stark reminder that information
systems projects carry high risks of failure if not carefully managed
and controlled. 

Although no comparable data is available that focuses exclusively on
the federal government, our work on specific systems projects has
found a cascade of problems--ranging from poorly defined
requirements, poor contractor oversight, and inadequate system design
to managerial and technical skill deficiencies--have led to project
terminations, delays, or suspensions of procurement authority.\4

In addition, three agencies with oversight responsibility--GAO, OMB,
and GSA--have identified problems that selected systems development
efforts or IT operations are having.  Each agency has constructed a
corresponding "high-risk" list to help focus top management attention
on the problems and implement effective remedial actions.  Of the 18
agencies and departments representing over 90 percent of total
federal spending on information management and technology, nine have
IT projects or areas of IT management on one or more of these high
risk lists.  Table 1 lists the eleven agencies and projects that are
currently on high risk lists. 



                                Table 1
                
                      IT Areas and Systems at Risk

                            GAO High      OMB High      GSA Time Out
Agency/IT Project           Risk Series   Risk List     Program\a
--------------------------  ------------  ------------  --------------
Federal Aviation            ï¿½             ï¿½             ï¿½
Administration: Air
Traffic Control
Modernization/Advanced
Automation System

Internal Revenue Service:   ï¿½
Tax systems Modernization

Department of Defense:      ï¿½
Corporate Information
System

National Weather Service    ï¿½             ï¿½             ï¿½
Modernization

Department of Agriculture:  *             ï¿½             ï¿½
Info Share Project

Department of Justice:      *             ï¿½
Information Systems
Security

Department of State: IT     *             ï¿½
Operations and Security

GSA: Oversight of Major     *             ï¿½
Systems Development
Efforts Within GSA

Securities and Exchange     *             ï¿½
Commission: Management of
Systems Development
Projects

Veterans Benefits           *                           ï¿½
Administration: Claims
Modernization

Patent and Trademark        *                           ï¿½
Office Modernization
----------------------------------------------------------------------
\a GSA has also conducted information resource management reviews
that have touched on several of these agencies and programs. 

*Note:  Though not designated as high risk, GAO has issued reports
related to these efforts. 

GAO has testified regularly on the urgent need for basic management
reforms in the federal government.\5 Systems development efforts
often fail due to inadequate management attention and controls. 
Despite the visibility and oversight focus on many large systems
development efforts, agency management has often been ineffective in
reducing the risks associated with large, multi-year projects.  For
example, in our July 1995 review of IRS' Tax System Modernization, we
found an absence of effective information management practices--such
as IT investment selection, control, and evaluation processes--which
were placing selected modernization projects at risk of failing to
meet critical business needs.\6 The absence of these practices places
executive level understanding and support of the technology project
in jeopardy and reduces accountability for project success. 

Inadequate project management, poor contractor oversight, and a
shortage of staff with appropriate technical skills have also
contributed greatly to systems development problems.  After investing
over 12 years and more than $2.5 billion, the Federal Aviation
Administration (FAA) chose to cut its losses in its problem-plagued
$6-billion Advanced Automation System (AAS) by either cancelling or
extensively restructuring elements of this effort to modernize our
nation's air traffic control system.  Our work showed that AAS'
problems were attributable to FAA's failure to (1) accurately
estimate the technical complexity and resource requirements for the
effort, (2) stabilize system requirements, and (3) adequately oversee
contractor activities.\7

We are also finding that agencies have not instituted a well-defined
investment control process to manage the quality of systems
development efforts and monitor progress and problems at an executive
level.  Our recent analysis of the potential risks associated with
the Health Care Financing Administration's (HCFA) Medicare
Transaction System (MTS) illustrates this problem.  MTS, though small
in comparison to larger modernization efforts in other agencies, is
one of the most critical new claims-processing systems being put into
government today.  When the system becomes operational in 1999, HCFA
expects it to process over 1 billion claims annually and be
responsible for paying $288 billion in benefits per year.  Although
MTS is in its early development stages, our work last November found
that HCFA is experiencing a series of problems related to
requirements definition, project schedule, and project cost.  Some of
these are classic symptoms associated with the fate of other large,
complex systems projects--extensive delays and schedule compression
early in the project along with ill-defined systems requirements and
objectives. 


--------------------
\3 Charting the Seas of Information Technology Chaos, The Standish
Group International, 1994. 

\4 Government Reform:  Using Reengineering and Technology to Improve
Government Performance (GAO/T-OCG-95-2, Feb.  2, 1995); Improving
Government:  Actions Needed to Sustain and Enhance Management Reforms
(GAO/T-OCG-94-1, Jan.  27, 1994); Information Resources:  Summary of
Federal Agencies' Information Resources Management Problems
(GAO/IMTEC-92-13FS, Feb.  13, 1992). 

\5 Improving Government:  Actions Needed to Sustain and Enhance
Management Reforms (GAO/T-OCG-94-1, Jan.  27, 1994), Government
Reform:  Using Reengineering and Technology to Improve Government
Performance (GAO/T-OCG-95-2, Feb.  2, 1995), Government Reform: 
Goal-Setting and Performance (GAO/AIMD/GGD-95-13OR, Mar.  27, 1995),
Managing For Results:  Steps For Strengthening Federal Management
(GAO/T-GGD/AIMD-95-158, May 9, 1995), Managing For Results:  Critical
Actions for Measuring Performance (GAO/T-GGD/AIMD-95-187, June 20,
1995), Government Reform:  Legislation Would Strengthen Federal
Management of Information and Technology (GAO/T-AIMD-95-205, July 25,
1995). 

\6 Tax Systems Modernization:  Management and Technical Weaknesses
Must Be Corrected If Modernization is To Succeed (GAO/AIMD-95-156,
July 26, 1995). 

\7 Advanced Automation System:  Implications of Problems and Recent
Changes (GAO/T-RCED-94-188, Apr.  13, 1994). 


      CONSISTENTLY APPLYING
      MANAGEMENT PRACTICES IS
      IMPORTANT TO SUCCESS
-------------------------------------------------------- Chapter 0:0.3

It is important that federal executives learn from leading
organizations that have been successful in applying and managing
technology to thorny business problems as well as opportunities for
change.  To help federal agencies improve their chances of success,
we completed a study of how successful private and public
organizations designed and implemented information systems that
significantly improved their ability to carry out their missions. 
Our report describes an integrated set of fundamental management
practices that are instrumental in producing success.\8 The active
involvement of senior managers, focusing on minimizing project risks
and maximizing return on investment, are essential.  To accomplish
these objectives, senior managers in successful organizations
consistently follow these practices to ensure that they receive
information needed to make timely and appropriate decisions. 

Executives in leading organizations manage through three fundamental
areas of practices.  First, they decide to work differently by
quantitatively assessing performance against leading organizations
and recognizing that program managers and stakeholders need to be
held accountable for using information technology well.  Second, they
direct their scarce resources toward high-value uses by reengineering
critical functions and carefully controlling and evaluating IT
spending through specific performance and cost measures.  Third, they
support major cost reduction and service improvement efforts with the
up-to-date professional skills and organizational roles and
responsibilities required to do the job.  Table 2 illustrates the set
of management practices we found in the leading organizations we
studied. 



                                Table 2
                
                 Strategic Information Management Best
                               Practices

    DECIDE TO CHANGE        DIRECT CHANGE           SUPPORT CHANGE
--  ------------------  --  ------------------  --  ------------------
1   Recognize and       4   Anchor strategic    9   Establish
    communicate the         planning in             customer/supplier
    urgency to change       customers needs         relationships
    IT practices            and mission goals       between line and
                                                    information
2   Get line            5   Measure the             management
    management              performance of key      professionals
    involved and            mission delivery    10
    create ownership        processes               Position aChief
3                                                   Information
    Take action and     6   Focus on process        Officer as a
    maintain momentum       improvement in the      senior management
                            context of an       11  partner
                            architecture
                                                    Upgrade skills and
                        7   Manage IT projects      knowledge of line
                            as investments          and information
                                                    management
                        8   Integrate the           professionals
                            planning,
                            budgeting, and
                            evaluation
                            processes

----------------------------------------------------------------------
The power and the attraction of these practices is that they are
intuitive and straightforward.  And when used, they can help produce
repeatable success.  Some of our case study organizations experienced
dramatic improvements, such as

  -- the proportion of IT projects completed on-time, within budget,
     and according to specified requirements going from 50 percent to
     85 percent in two years,

  -- a 158 percent increase in workload being handled with the same
     level of staffing because of redesigned processes and modern,
     integrated information systems, and

  -- a 14-fold increase in benefits returned from information systems
     projects--from 9 percent of that projected to 133 percent of
     that projected. 

But, as experience shows us, the challenge lies in the discipline and
rigor with which they are consistently applied by organizations. 

Rather than discuss each practice individually, let me focus on a few
key ones and highlight their importance in the context of an overall
strategic management framework. 


--------------------
\8 Executive Guide:  Improving Mission Performance Through Strategic
Information Management and Technology--Learning From Leading
Organizations (GAO/AIMD-94-115, May 1994). 


         INVOLVEMENT AND
         COMMITMENT FROM TOP
         LEADERSHIP
------------------------------------------------------ Chapter 0:0.3.1

In the information age, top executives have the responsibility not
only to define business goals, but also to initiate, mandate, and
facilitate major changes in information management to support the
achievement of these goals.  Top executives must get personally
involved in understanding the relative costs, benefits, risks, and
returns associated with information technology investments they are
making decisions about and allocating resources to.  Unless top
executives make these linkages, meaningful change can be slow and
sometimes impossible. 

     Driven by budget constraints, one chief executive in our case
     study sample benchmarked existing systems development
     capabilities against industry standards.  The CEO discovered
     that the company was getting only a small fraction of expected
     benefits from systems investments, while taking twice as long
     and spending four times the resources compared to an industry
     standard.  To correct this, the CEO fostered partnerships
     between business unit managers and IT professionals that focused
     on building information systems with measurable benefits. 
     Within 3 years, some tangible payoffs from this approach were
     occurring.  Returns on IT investments rose from $2 million to
     $20 million per year, applications development and productivity
     improvements increased steadily, and staff resources were moved
     from maintaining existing computer applications to more
     strategic reengineering development and support. 


         FOCUSING ON IMPROVING
         BUSINESS PROCESSES
------------------------------------------------------ Chapter 0:0.3.2

New technology alone will not improve performance or solve
operational problems.  It is merely a tool--albeit a powerful
one--that supports work processes and the decisions surrounding those
processes.  If the work processes are inherently inefficient, then
technology will not have substantive impact.  Accomplishing dramatic
improvements in performance usually requires streamlining or
fundamentally redesigning existing work processes.  Information
technology projects must then become focused on improving the way
work is done rather than simply automating existing, outmoded
processes.  As we have seen in the federal government, initiating
information systems development projects to replace old technology or
automate processes in and of itself is often a poor project
justification.\9

     In one company we examined, long customer waits and unacceptable
     error and rework rates were threatening successful business
     growth.  Business unit executives and information technology
     professionals worked together to redesign existing work
     processes and systems.  As a result, a customer process that
     used to involve 55 people, 55 procedural steps, and a 14-day
     service delivery was reduced to one person, one phone call, and
     one step with a 3-day service delivery. 

Applying technology to new business processes cannot be done in an
organizational vacuum.  It requires careful consideration of the
technical platform, or architecture, of the information systems.  If
several process improvement efforts are pursued in an unintegrated
fashion, they may result in the creation of many new information
systems that are isolated from each other.  Such fragmentation can
seriously inhibit the organization's ability to share information
assets or leverage the benefits of new technology across the
organization.  The importance of developing and managing an
integrated information architecture is one reason why sound strategic
information planning is so critical. 


--------------------
\9 USDA Restructuring:  Refocus Info Share Program on Business
Processes Rather Than Technology (GAO/AIMD-94-156, Aug.  5, 1994),
Social Security Administration:  Major Changes in SSA's Business
Processes Are Imperative (GAO/T-AIMD-94-106, Apr.  14, 1994),
Veterans Benefits Administration:  Further Service Improvement
Depends on Coordinated Approach (GAO/T-AIMD/HEHS-95-184, June 22,
1995), Business Process Reengineering:  DOD Has A Significant
Opportunity to Reduce Travel Costs By Using Industry Practices
(GAO/T-AIMD-95-101, Mar.  28, 1995). 


         ESTABLISHING A STRATEGIC
         INFORMATION MANAGEMENT
         PROCESS
------------------------------------------------------ Chapter 0:0.3.3

Strategic planning often is depicted as "visionary" thinking or
"where we want to go, whether we can get there or not." In the
federal government, strategic management at the enterprise level is
often a well-orchestrated paper chase responding to bureaucratic
requirements and short-term crises, rather than an integrated,
institutionalized process that focuses on producing results for the
public.  Conversely, in the leading organizations we visited,
strategic business and information systems plans were always grounded
in explicit, high-priority customer needs.  Planning, budgeting,
program execution, and evaluation are conducted in a seamless
fashion, with the outputs of one process a direct input into the
other.  Most importantly, strategic goals, objectives, and direction
are used to actually manage and evaluate the performance of the
organization. 

     In one state revenue collection agency we examined, they decided
     to use the external customer--the taxpayer--as the focus for
     rethinking and redesigning its services.  Using customer focus
     groups, comprised of individual taxpayers, small businesses, and
     large corporations, they redesigned the revenue collection
     process.  Information systems and technology were used to
     maintain customer profiles to assist the agency in responding to
     questions, problems, and special situations for each taxpayer. 


         LINKING TECHNOLOGY
         INVESTMENT TO PERFORMANCE
         MEASUREMENT
------------------------------------------------------ Chapter 0:0.3.4

Getting the most out of scarce resources available to spend on IT is
another key to success.  Executives expect meaningful bottom-line
improvements in the outcomes of key business process changes and
applications of information systems and related technologies.  For
this reason, leading organizations carefully measure the performance
of their processes, including the contribution that technology makes
to their improvement.  Senior management is personally involved in
project selection, control, and evaluation and uses explicit decision
criteria for assessing the mission benefits, risks, and costs of each
project. 

     One leading organization we studied uses a "portfolio"
     investment process--based on decision criteria for assessing
     costs, benefits, and risks--to select, control, and evaluate
     information systems projects.  As a consequence of more
     carefully scrutinizing proposed benefits and measuring actual
     performance results, the company realized a 14-fold increase in
     the return on investment from IT projects within 3 years. 

The key to this investment approach is the ability to identify
early--and avoid--investments in projects with low potential to
provide improvements in program outcomes.  Without this focus,
organizations can easily become entangled in a web of difficult
problems, such as unmanaged development risks, low-value or redundant
IT projects, and an overemphasis on maintaining old systems at the
expense of using technology to redesign outmoded work processes. 


         ESTABLISHING AN EXECUTIVE
         LEVEL FOCUS FOR
         INFORMATION MANAGEMENT
------------------------------------------------------ Chapter 0:0.3.5

Leading organizations have found that one important means for
establishing a clear organizational focus for information management
is to position a Chief Information Officer (CIO) as a senior partner
with the organization's top executives.  The position itself is not
the solution.  What matters is the influence that the right person
can bring to bear on strategic management issues and IT's role in
both helping resolve existing performance problems and capturing
potential from new opportunities.  An effective CIO should: 

  -- serve as a bridge between top executives, line management,
     support staff, and IT professionals,

  -- advise top executives and senior managers on the worthiness of
     major technology decisions and investments,

  -- work with managers to understand and define the role of IT in
     helping achieve expected business or program outcomes, creating
     a joint partnership with line management to achieve successful
     project outcomes,

  -- design and manage the system architecture supporting the
     business needs and decision-making processes of the
     organization, and

  -- set and enforce appropriate technical standards to facilitate
     the effective use of information resources throughout the entire
     organization. 

     In one of our case study organizations, prior to establishing a
     CIO, the cost of maintaining and enhancing existing systems
     consumed nearly all the organization's IT budget.  There was no
     one to focus senior management attention on critical information
     management and technology decisions.  Once an experienced CIO
     was put in place, technology investment decisions became highly
     visible and line executives were held accountable for the
     business case underlying these decisions.  The CIO focused on
     improving the speed, productivity, and quality of IT products
     and services. 

A key CIO responsibility is to promote a productive relationship
between the users of technology and the information management and
systems staff who support them.  Managers in leading organizations
recognize that they are customers of IT products and services.  They
assert control over the funding of IT projects and take
responsibility for understanding and helping to define the technology
needed to support their work.  The IT professionals then act as
suppliers, working to support efforts to meet clearly defined
management objectives, make critical decisions, and solve business
problems.  This requires facilitation, mediation, balance, and
consensus--particularly when weighing the needs of individual
business units with the corporate needs of the organization.  The CIO
can help make this process work smoothly. 

If the management focus of leading organizations who are successful
at applying technology to business needs and problems are compared
with typical management practices found in federal departments and
agencies, major differences appear.  Table 3 summarizes some of the
primary discrepancies. 



                                Table 3
                
                    Management Approaches in Leading
                  Organizations Versus Typical Federal
                                Agencies

Best Practice           What a Leading          What a Typical Federal
Management Area         Organization Does       Agency Does
----------------------  ----------------------  ----------------------
Decide to change        ï¿½ Quantitatively         Fails to benchmark
                        benchmarks against      performance
Initiate, mandate and   standards and industry   Delegates IT issues
facilitate major        leaders                 to technical units and
changes in information  ï¿½ Evaluates current     staff
management to improve   performance and          Sustains management
organizational          opportunities for       rates of turnover that
performance             improvement             hinder true ownership
                        ï¿½ Holds program         and accountability
                        managers and
                        stakeholders
                        accountable for IT
                        decisions

Direct change           ï¿½ Evaluates existing     Often justifies or
                        mission critical        purchases IT products
Establish an outcome-   processes before        and services before
oriented, integrated    applying IT             evaluating existing
strategic information   ï¿½ Directs scarce IT     business processes
management process      resources towards        Lacks accountability
                        high-value, high        and disciplined
                        priority uses           decision-making for IT
                        ï¿½ Carefully controls    investments
                        and evaluates IT         Fails to rigorously
                        spending through        monitor the results
                        specific cost and       produced by systems
                        performance measures    investments

Support change          ï¿½ Maintains up-to-       Perpetuates outmoded
                        date professional       skill base with
Build organizationwide  skills in technology    inadequate training
information management  management              and hiring of new
capabilities to         ï¿½ Establishes clearly   expertise
address mission needs   defined line and IT      Fails to delineate
                        management roles and    line management and IT
                        responsibilities        professional roles and
                                                responsibilities in
                                                major system
                                                development and
                                                modernization efforts
----------------------------------------------------------------------

      IMPLEMENTATION OF
      GOVERNMENTWIDE IT REFORMS
-------------------------------------------------------- Chapter 0:0.4

Congress has provided clear direction to move the debate from whether
to change information management practices in the government to what
exactly to change and how to do it.  Significant changes in law have
already occurred that represent major, positive steps forward in
pushing for greater top management responsibility and accountability
for successful IT outcomes and provide the impetus for improvements
in agency management approaches. 

Last year, the Paperwork Reduction Act was revised to include many of
the fundamental management practices endorsed by our research.  For
example, strategic IT planning provisions explicitly call for
linkages between agency business plans and IT projects.  This
strategic planning is to be anchored in customer needs and mission
goals.  Moreover, the agency head is now directly responsible for
ensuring that IT-related activities directly support the mission of
the agency.  Additionally, IT projects are to be managed as
investments, with a process put in place to maximize the value and
assess and manage the risks of major IT initiatives. 

In addition, OMB has revised its Circular A-130--the primary
governmentwide policy guidance for strategic information management
planning--to require agencies to (1) improve the effectiveness and
efficiency of government programs through work process redesign and
appropriate application of information technology, (2) conduct
benefit-cost analyses to support ongoing management oversight
processes that maximize return on investment, and (3) conduct
post-implementation systems reviews to validate estimated benefits
and costs. 

Most notable is the Information Technology Management Reform Act of
1996 that has been passed as an amendment to the Fiscal Year 1996 DOD
Authorization Act.\10 Not only does this legislation effectively
build upon management and strategic planning themes in the Government
Performance and Results Act and the Paperwork Reduction Act, it also
contains some of the most significant changes made to IT planning,
management, and procurement in decades.  Agencies are required to use
capital planning and investment processes for reaching decisions
about IT spending, rigorously measure performance outcomes of IT
projects, and appoint Chief Information Officers to ensure better
accountability for technology investments.  In addition, the
procurement process has been streamlined to allow agencies more
flexibility in buying commercially available products and awarding
contracts.  Collectively, these changes in law and regulation should
make it clear to agency leaders what the Congress and the
Administration intend to be done differently in investing and
managing information and technology. 

Just as important as the "what to do" is the "how to make it happen."
Agency managers need new methods and tools that will help facilitate
fact-based discussions and analyses of proposed IT investments. 
Toward this end, we have developed a strategic information management
assessment guide used in five agencies and departments to
date--Housing and Urban Development, Coast Guard, IRS, Pension
Benefit Guaranty Corporation, and the Bureau of Economic Analysis.\11
This analysis has been used to identify management strengths and
weaknesses and to construct corrective action plans.  Several of
these agencies have reported that the implementation of new
management processes in concert with our best practices framework has
helped save several millions of dollars by consolidating systems with
business function redundancies, and cancelling questionable low-value
IT investments.  Other agencies have conducted self-assessments on
their own, and we are in the process of obtaining feedback on their
results. 

OMB has also published an IT investment analysis guide\12 , which
provides agencies with a structured management process for reaching
decisions about selecting, controlling, and evaluating IT investment
projects.  Finally, we are developing more detailed management
assessment guides for business process reengineering and IT
performance measurement which we expect to distribute in the near
future. 


--------------------
\10 National Defense Authorization Act for Fiscal Year 1996, Public
Law 104-106, Division E. 

\11 Strategic Information Management (SIM) Self-Assessment Toolkit,
Exposure Draft, Version 1.0, U.S.  General Accounting Office,
Accounting and Information Management Division, October 28, 1994. 

\12 Evaluating Information Technology Investments:  A Practical
Guide, Office of Management and Budget, Executive Office of the
President (OMB Publication 041--001-00460-2, November 1995). 


      CONCLUDING REMARKS
-------------------------------------------------------- Chapter 0:0.5

Mr.  Chairman, two key factors will inevitably affect changes to the
government's approach to information technology management.  First,
government leaders must facilitate success.  Never before has there
been such a sense of urgency to improve how the government is
managing and acquiring its information and technology assets.  Where
possible, success stories both inside and outside of the federal
government must be shared and senior agency managers must learn from
them. 

The second key factor affecting long-term improvement to IT
management in government is reinforcing accountability for results. 
In this regard, focused and consistent direction, advice, and
oversight is needed from the Congress, the Executive Branch, and
central oversight agencies.  It is essential that the federal
government's IT portfolio be visibly monitored in the oversight
process.  Agencies should be required to produce performance
baselines, report on all IT obligations and expenses, show projected
versus actual project results, and establish a proven track record in
managing and acquiring systems technologies.  Oversight flexibility
should be increasingly earned as demonstrated capability to deliver
increases. 

With proper incentives and encouragement, agency managers can be
expected to surface problems early and move towards management
resolution before huge sums of money are expended.  Budget and
appropriations decisions as well as oversight hearings can focus on
anticipated risks and returns of IT projects, interim performance
results, and final evaluations of long-term improvements to program
outcomes, service delivery, and cost effectiveness. 

This Subcommittee can play an important role in promoting new,
effective management practices throughout the government by: 

  -- providing oversight and guidance to federal agencies in
     implementing the IT-management related provisions of the
     Paperwork Reduction Act and the Information Technology
     Management Reform Act--similar to the very effective role you
     have played in overseeing the implementation of the Chief
     Financial Officers Act;

  -- focusing oversight attention on high risk IT projects and
     initiatives, such as your upcoming hearing planned on IRS's
     financial management reforms and Tax System Modernization
     project;

  -- identifying and focusing agency attention on new systems
     development efforts that are demonstrating signs of managerial
     or technical problems early in their life cycle before huge sums
     of money have been spent, such as your recent hearing on HCFA's
     Medicare Transaction System; and

  -- highlighting the importance of emerging information technologies
     and management techniques that can be effectively applied to the
     federal government. 

Mr.  Chairman, this concludes my prepared testimony.  We look forward
to working with you and the Subcommittee in your efforts to improve
the public's return on investment in information technology.  I would
be glad to answer any questions you or other members of the
Subcommittee may have at this time. 


*** End of document. ***