Managing Technology: Best Practices Can Improve Performance and Produce
Results (Testimony, 01/31/97, GAO/T-AIMD-97-38).
This testimony discusses how best practices at leading organizations can
be used to improve the management of information technology in the
federal government. This is especially important for the Internal
Revenue Service (IRS), whose tax systems modernization effort has been
plagued by problems. GAO makes four main points. First, better facts are
needed about the government's information technology investments.
Although the federal government spends upwards of $25 billion annually
on information technology, it is unclear what the government is getting
for its money. Second, information technology is characterized by high
risk and high return. Information technology can boost organizational
performance, but the risks of failure are ever present and must be
rigorously managed. Third, repeatable success takes sound management
processes that are applied with relentless discipline. Organizations
with successful information technology projects have sustainable and
effective management practices in place. Fourth, the challenge is
implementation. Leading organizations discovered that understanding
these practices was only a first step. For most, it took three to five
years to fully translate the practices into improved management
processes. Similarly, a consensus has emerged among decisionmakers in
the federal government on what the problems are and how to solve them.
Now, agency leaders must effectively implement information technology
management processes and reinforce accountability to produce tangible
results from information technology investments.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: T-AIMD-97-38
TITLE: Managing Technology: Best Practices Can Improve Performance
and Produce Results
DATE: 01/31/97
SUBJECT: Information technology
Strategic information systems planning
Federal procurement
Accountability
Investments
Federal agency reorganization
Chief information officers
Information resources management
IDENTIFIER: IRS Tax System Modernization Program
ISM
IRS Telefile Program
FTS 2000
Federal Telecommunications System 2000
Internet
FAA Advanced Automation System
HCFA Medicare Transaction System
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Cover
================================================================ COVER
Before the National Commission on Restructuring the Internal Revenue
Service
For Release on Delivery
Expected at
8:30 a.m.
Friday
January 31, 1997
MANAGING 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-97-38
GAO/AIMD-97-38T
(511035)
Abbreviations
=============================================================== ABBREV
CIO - Chief Information Officer
FAA - Federal Aviation Administration
FTS - Federal Telecommunications System
HCFA - Health Care Financing Administration
IRS - Internal Revenue Service
IT - information technology
MTS - Medicare Transaction System
OMB - Office of Management and Budget
============================================================ Chapter 0
Members of the Commission:
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. This is an especially important issue at the Internal
Revenue Service (IRS), which faces major problems and opportunities
in its Tax Systems Modernization effort. During several hearings
over the past few months, we have testified before you on our
analysis of these problems, our recommendations for addressing them
and the IRS' progress in achieving adequate solutions.\1
Generally speaking, a large 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 by adopting leading management practices that have been
shown to 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, Office of
Management and Budget (OMB) management circulars, and--just
recently--the Clinger-Cohen Act of 1996 (formerly named the
Information Technology Management Reform Act) as contained in the
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 that these
accomplishments have only been possible with the interest, commitment
for reform, and support from members of the 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, the Congress should be
better informed of how technology expenditures are being used to
address the pressing business problems of government agencies. More
important, 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 sectors 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 3 to 5 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 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.
--------------------
\1 Managing IRS: IRS Needs to Continue Improving Operations and
Service (GAO/T-GGD/AIMD-96-170, July 29, 1996); IRS Business
Operations: Issues in Setting Priorities and Managing for Results
(GAO/T-AIMD/GGD-97-22, November 7, 1996); and Financial Management:
Challenges Facing the IRS (GAO/T-AIMD-97-34, January 9, 1997).
BETTER INFORMATION NEEDED ABOUT
IT INVESTMENTS
---------------------------------------------------------- Chapter 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.\2 This information
is not comprehensive or collected on a governmentwide basis;
therefore, the total amount of annual spending for IT is unknown.\3
For example, agencies with total IT obligations under $50 million are
not required to report them to OMB. The legislative and judicial
branches of government are also 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.
--------------------
\2 OMB Circular A-11, Section 43.
\3 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 0:2
The promise of new information technologies is compelling in the
federal environment where aging systems that are often ill-designed
for changing business or mission requirements prevail. 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 Government Information
Technology Services Board; 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 sectors.
-- 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 7
days to a one-person, 4-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 1 week.
Similarly, fish ladder design and funding approval processes
have been streamlined from 21 steps taking over 3 years to 8
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-sector and
public-sector organizations in the United States confirms this
troubling trend.\4
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 that a cascade of problems--ranging from poorly defined
requirements, poor contractor oversight, and inadequate system design
to managerial and technical skill deficiencies--has led to project
terminations, delays, or suspensions of procurement authority.\5
GAO has reported regularly on the urgent need for basic management
reforms in the federal government.\6 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, multiyear projects.
For example, over the last decade, the IRS has been attempting to
overhaul its timeworn, paper-intensive approach to tax return
processing. As we have previously testified before this commission,
in 1995 we identified serious management and technical weaknesses in
the modernization program that jeopardize its successful completion,
recommended many actions to fix the problems, and added IRS'
modernization to our high-risk list.\7 Since then, IRS and Treasury
have together taken several steps to implement our recommendations,
but much remains to be done. At stake is the over $3 billion that
IRS has spent or obligated on the modernization since 1986, as well
as the additional $3 billion that IRS plans to spend through the year
2000.
Inadequate project management and poor contractor oversight have also
contributed greatly to systems development problems. Over the past
15 years, the Federal Aviation Administration's (FAA) ambitious air
traffic control modernization, which is expected to cost $34 billion
through the year 2003, has experienced cost overruns, schedule
delays, and performance shortfalls. These problems led FAA in 1994
to restructure the $7.6 billion former centerpiece of the
modernization--the Advanced Automation System. That system failed
because FAA did not recognize the technical complexity of the effort,
realistically estimate the resources required, adequately oversee its
contractors' activities, or effectively control system requirements.
FAA has made some progress since then. However, much remains to be
accomplished. For example, systems comprising the modernization have
long proceeded without a complete systems architecture--or
blueprint--to guide them, leading to unnecessarily higher spending to
buy, integrate, and maintain hardware and software. Also, FAA's poor
cost estimating processes and cost accounting practices leave it at
risk of making ill-informed decisions on critical multimillion, even
billion, dollar air traffic control systems. We have recommended
that FAA develop and enforce a complete systems architecture,
implement a technology management framework as outlined in the
Clinger-Cohen Act of 1996, and, finally, institutionalize processes
for project cost estimation and managerial cost accounting.\8
We are also finding that many agencies have not instituted
well-defined investment control processes 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 is
one of the most critical new claims-processing systems being put into
government today. When the system becomes operational, 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 has found that HCFA is attempting
to resolve a series of problems related to requirements definition,
project management, and project cost/benefit. 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--which must be addressed early to keep risks at acceptable
levels.
--------------------
\4 Charting the Seas of Information Technology Chaos, The Standish
Group International, 1994.
\5 Government Reform: Using Reengineering and Technology to Improve
Government Performance (GAO/T-OCG-95-2, February 2, 1995); Improving
Government Actions Needed to Sustain and Enhance Management Reforms
(GAO/T-OCG-94-1, January 27, 1994); and Information Resources:
Summary of Federal Agencies' Information Resources Management
Problems (GAO/IMTEC-92-13FS, February 13, 1992).
\6 Improving Government: Actions Needed to Sustain and Enhance
Management Reforms (GAO/T-OCG-94-1, January 27, 1994); Government
Reform: Using Reengineering and Technology to Improve Government
Performance (GAO/T-OCG-95-2, February 2, 1995); Government Reform:
Goal-Setting and Performance (GAO/AIMD/GGD-95-13OR, March 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); and Government Reform: Legislation Would Strengthen Federal
Management of Information and Technology (GAO/T-AIMD-95-205, July 25,
1995).
\7 Tax Systems Modernization: Management and Technical Weaknesses
Must Be Corrected If Modernization is To Succeed (GAO/AIMD-95-156,
July 26, 1995); Managing IRS: IRS Needs to Continue Improving
Operations and Service (GAO/T-GGD/AIMD-96-170, July 29, 1996); IRS
Business Operations: Issues in Setting Priorities and Managing for
Results (GAO/T-AIMD/GGD-97-22, November 7, 1996); and Financial
Management: Challenges Facing the IRS (GAO/T-AIMD-97-34, January 9,
1997).
\8 Air Traffic Control: Complete and Enforced Architecture Needed
for FAA Systems Modernization (GAO/AIMD-97-30, February 3, 1997); Air
Traffic Control: Improved Cost Information Needed To Make Billion
Dollar Modernization Investment Decisions (GAO/AIMD-97-20, January
21, 1997); and Aviation Acquisition: A Comprehensive Strategy is
Needed for Cultural Change at FAA (GAO/RCED-96-159, August 22, 1996).
CONSISTENTLY APPLYING
MANAGEMENT PRACTICES IS
IMPORTANT TO SUCCESS
---------------------------------------------------------- Chapter 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.\9 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 1 illustrates the set
of management practices we found in the leading organizations we
studied.
Table 1
Strategic Information Management Best
Practices
Decide to Change Direct Change Support Change
---------------------- ---------------------- ----------------------
1. Recognize and 4. Anchor strategic 9. Establish customer/
communicate the planning in customers supplier relationships
urgency to change IT needs and mission between line and
practices goals information management
professionals
2. Get line management 5. Measure the
involved and create performance of key 10. Position a Chief
ownership mission delivery Information Officer as
processes a senior management
3. Take action and partner
maintain momentum 6. Focus on process
improvement in the 11. Upgrade skills and
context of an knowledge of line and
architecture information management
professionals
7. Manage IT projects
as investments
8. Integrate the
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 2 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.
--------------------
\9 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 0:3.1
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 0:3.2
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.\10
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.
--------------------
\10 USDA Restructuring: Refocus Info Share Program on Business
Processes Rather Than Technology (GAO/AIMD-94-156, August 5, 1994);
Social Security Administration: Major Changes in SSA's Business
Processes Are Imperative (GAO/T-AIMD-94-106, April 14, 1994);
Veterans Benefits Administration: Further Service Improvement
Depends on Coordinated Approach (GAO/T-AIMD/HEHS-95-184, June 22,
1995); and Business Process Reengineering: DOD Has a Significant
Opportunity to Reduce Travel Costs by Using Industry Practices
(GAO/T-AIMD-95-101, March 28, 1995).
ESTABLISHING A STRATEGIC
INFORMATION MANAGEMENT
PROCESS
-------------------------------------------------------- Chapter 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 0:3.4
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 0:3.5
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, while participating
in their selection, implementation, and final evaluation of
results achieved;
-- 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. 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
helps 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 2 summarizes some of the
primary discrepancies.
Table 2
Management Approaches in Leading
Organizations Versus Typical Federal
Agencies
Best Practice What a Leading What Many Federal
Management Area Organization Does Agencies Do
---------------------- ---------------------- ----------------------
Decide to change --Quantitatively --Fail to benchmark
benchmarks against performance
Initiate, mandate and standards and industry --Delegate IT issues
facilitate major leaders to technical units and
changes in information --Evaluates current staff
management to improve performance and --Sustain management
organizational opportunities for rates of turnover that
performance improvement hinder true ownership
--Holds program and accountability
managers and
stakeholders
accountable for IT
decisions
Direct change --Evaluates existing --Justify or purchase
mission critical IT products and
Establish an outcome- processes before services before
oriented, integrated applying IT evaluating existing
strategic information --Directs scarce IT business processes
management process resources towards --Lack accountability
high-value, high and disciplined
priority uses decision-making for IT
--Carefully controls investments
and evaluates IT --Fail to rigorously
spending through monitor the results
specific cost and produced by systems
performance measures investments
Support change --Maintains up-to- --Perpetuate outmoded
date professional skill base with
Build organizationwide skills in technology inadequate training
information management management and hiring of new
capabilities to --Establishes clearly expertise
address mission needs defined line and IT --Fail 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 0:4
The 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.
In May 1995, 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 Clinger-Cohen Act of 1996.\11 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. 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.\12
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,\13 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, investment
analysis, and IT performance measurement that we expect to distribute
in the near future.
--------------------
\11 National Defense Authorization Act for Fiscal Year 1996, Public
Law 104-106, Division E.
\12 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.
\13 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 0:5
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 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.
-------------------------------------------------------- Chapter 0:5.1
This concludes my prepared testimony. We look forward to working
with this commission in its efforts to improve the public's return on
investment in information technology through management reform at the
IRS. I would be glad to answer any questions you may have at this
time.
*** End of document. ***