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IT by the Cup?
How to pay for Fed IT with shrinking budgets? With all the talk of cloud, how’re we IT nerds lining up with the bean counters? Is IT swallowing the new by-the-cup OpEx funding flavor poured out in the President’s FY2013 budget brew?
A recent MeriTalk study, the Color of Money, provides new insight on the much ballyhooed CapEx/OpEx shift in Uncle Sam’s funding. The bean counters get it. Seventy percent of finance pros think OpEx funding will enhance Federal IT and 59 percent assert that OpEx will enable agencies to maintain a better grasp on overall IT portfolios.
IT’s not signing up so fast for the taste test. Just 36 percent of Federal IT pros are considering the OpEx funding jump. Remarkably, just 21 percent of IT pros are oblivious that a CapEx/OpEx switch is possible - let alone encouraged - in the President’s FY2013 budget.
Clear as Mud…
So, I hear you say, what qualifies as OpEx? Can agencies just lease the servers instead of buying the kettle? The short answer - depends…
You need to look at the Financial Accounting Standards Board - FASB 13 - regulations to make sense of it. And good luck. FASB 13 tells us leases need to be reported as capital expenses if:
1. It Ain’t Depreciating Quickly: The present value of the lease payments is at least 90 percent of the fair market value of the asset at the start of the lease
2. Agency Gets the Asset: Lease transfers ownership of the asset to the lessee by end of term of lease
3. Too Long: Lease term is 75 percent or more of the estimated economic life of the asset
4. Too Aggressive a Depreciation Schedule: Lessee can purchase the asset at a price below fair market value when the lease expires
And, if that’s not clear, you can take comfort from the fact that FASB is currently rewriting the standards for lease accounting.
Who needs FASB anyway? I hear you say. Sure you’re aware that Federal agencies have their own Statements of Federal Financial Accounting Concepts under the Federal Accounting Standards Advisory Board (FASAB). That said, flip to concept five in your handy dandy FASAB handbook and you will learn that CapEx vs. OpEx is tied up in a discussion about what constitutes a Federal asset. Don’t worry though, those guidelines are expected to change in the near future too.
Reading the tea leaves from the study, we IT nerds need to sit down for a cup of coffee with the bean counters. The White House has to clarify and educate if the CapEx/OpEx directive is to become more than coffee talk. And, last but not least, we need clearer guidance on what qualifies as OpEx - this stuff is confusing. Change is hard - but we’re headed into a fiscal desert, and OpEx is the only tipple to slake IT’s thirst. Time to hold the nose and drink up - we’ll soon get used to the new taste.
FDCCI: The Numbers Game
Recent GAO report on FDCCI surfaces new stats - and gives long odds on the program achieving real savings. FDCCI is the program that cried wolf. Who isn’t tired of hearing how many data centers we have? How much we can save? How much we have saved?
But, here’s the beauty of it. Don’t like the numbers? Never fear. Wait a week or two - they’ll change again.
Change, Change, Change
Here’s the latest from GAO’s report. Almost 2,900 data centers. Last report from OMB it was 2,800. Plan to close 1,186 by 2015 - up from 106 per OMB’s last testimony. That leaves us with just 1,714. However will we make do? Here’s the bottom line, GAO tells us Feds believe they can save $2.4 billion through data center consolidation - optimistic, but short of OMB’s $3 billion or $5 billion savings estimates.
Black Eye for OMB and GSA
If I’m OMB and GSA - I’m more than a little red faced over this report. You see, GAO generated these numbers by reviewing agencies’ plans and talking with the experts in the field. This is a look under the covers at what’s really going on inside FDCCI - and, it ain’t pretty.
But, let’s cut beneath the counting and see what GAO says about agencies reporting against OMB guidelines. To net it out - or consolidate if you will - GAO’s report says agencies are thumbing their noses at OMB. They’re failing to report, they’re missing deadlines, and they’re rejecting OMB’s standardized cost model.
Of 24 agencies, just three submitted complete data center inventories. Only one submitted a complete plan. Thirteen did not provide a full master program schedule for consolidation. Twenty one did not fully report their expected savings.
Not What, But Why?
The question here is not what are agencies doing, but rather why are they doing it - or not doing it as the case may be?
Here’s the rub. While I have not seen OMB’s cost model, every agency data center lead I’ve talked to has said it is totally divorced from reality. And, I’ve spoken to a lot of them. Why doesn’t OMB publish it so we can all take a look? Where’s open government when you need it?
Why are agencies failing to make real progress in consolidating data centers? Well, that’s because it costs money to do this - and there is none. The deadlines are not realistic. The savings that were sold to Capitol Hill are not attainable - especially if there is no capital investment fund.
The parting shot in GAO’s executive summary speaks volumes.
“In light of these successes and challenges, it is important for OMB to continue to provide leadership and guidance, such as - as GAO previously recommended - using the consolidation task force to monitor agencies’ consolidation efforts.”
Maybe GSA and OMB should attend the next Data Center Exchange meeting? The breakfast on September 13 brings together Federal data center execs to talk about developing a government-wide data center marketplace. An open platform for agencies to buy and sell data center space - that actually might save some money.
Five Ring Circus
It’s official. The IOC just announced that Victoria’s Secret will dig in against the SI Swimsuits in beach volleyball in Brazil… I have to ask, NBC why so much beach volleyball? How many times did we need to endure Misty May flick gang signs to the camera?
What about the commentary overall? Shut up sometimes? Didn’t you want to choke that guy crowing about how McKayla Maroney was gold in the gymnastics vault before the competition began? Did he learn nothing from Titanic?
How about those incessant human interest stories? Why not use air time to cover the athletics? And, isn’t the Olympics primarily about track and field? How did we ever end up with so much field hockey, badminton, and handball - not to mention volleyball? Did anybody work out the rules of handball?
When covering the track events, would it be too much to ask for a heads up on the distance? How about covering all of the runners in the race - not just the Americans? Why so much coverage of Lolo Jones? I get that she's pretty, but what about covering Dawn Harper and Kellie Wells, the two American ladies that actually won medals in this event?
Sure there were high points. Michael Phelps. Gold in gymnastics. The women’s soccer. But, this is a global contest - and wouldn’t it be nice if we covered the best athletes from around the world - not just the prettiest Americans, Usain Bolt, and Mo Farah?
All told - no medal for NBC’s coverage. And the parting shot? Making people endure a whole hour of Animal Practice to see The Who at the end of the closing ceremony. What’chu talkin’ ‘bout Bob Costas?
And, speaking of the closing ceremony, let’s close where we began - the opening ceremony. What were the Brits thinking? I actually watched the ceremony in London. The city echoed with the sound of the home team slapping each other on the back. Apart from QE2 and 007, the rest was incomprehensible. They might as well have performed the whole thing in Cockney Rhyming Slang - http://www.youtube.com/watch?v=2HngRt7guls. Danny Boyle - might I suggest subtitles for your next production?
Turn That Frown Upside Down
MeriTalk puts out lots of studies. Cloud. Cyber security. Data centers. Big data. You name it, we’ve got the vital stats. But the downloads from the latest study stopped me in my tracks. You see, when almost every cabinet-level CIO downloads a study in the first week it’s published, you know you’ve struck a chord.
Unlike most MeriTalk studies, our latest, the Customer is Always Right, doesn’t tell us what IT thinks. Instead, it shines a light on what IT’s customers think of IT. Guess that’s why Federal CIOs have been pointing, clicking, and downloading.
So, what’s the skinny? Well, that depends on if you’re a half-full or half-empty person.
First, it gives us the Fed Fab Five - the top five agency IT departments as ranked by IT customers. Drum roll - like every good beauty pageant, let’s proceed in reverse order from five to one. Energy. Army. DHS. Treasury.
And, the number-one rated IT department in the Federal government. Wait for it. The Department of Labor. Congratulations Michael Kerr. Unless I’m wrong, this is the first ranking of IT that wasn’t scored by IT - and clearly some agencies are doing a great job.
But it’s not all swimsuits and bouquets. There’s some cold water too. For starters, just 46 percent of Fed execs view IT as an opportunity. Thirty two percent view it as a cost - and 22 percent are unsure whether it’s a cost or opportunity. A $78 billion budget line item with a 46 percent customer approval rating is a precarious position in a down economy. Further, none of the IT transformation megatrends show up as priorities for Fed execs. In fact, agency execs view IT as a support vs. transformational function - 56 percent see IT as a work horse supporting daily agency operations.
Less than a quarter of Fed execs say their agency uses IT to provide analytics to support decisions or identify areas for savings and increased efficiency - and these imperatives top Fed execs’ list of priorities. Hardly surprisingly, Fed execs believe that IT can do better - just 48 percent believe their agency leverages its IT department to the fullest extent.
So, here’s the half-full position again - it’s time to turn that frown upside down. Fed execs want more from IT - which is good for IT. Considering customers’ recommendations on how to improve Fed IT, it’s neck and neck at the front of the suggestion line - 54 percent of Fed execs want new tools and an overhaul of outdated IT systems and processes, respectively. Thirty seven percent want new mobile solutions. Significantly, leaders assert that IT should be involved earlier in leadership planning and they recommend more meaningful collaboration between IT developers and their customers.
Let’s face it, the first step to enlightenment is self awareness. IT can’t transform government efficiency without Fed execs’ support. CIOs’ interest in the study shows digitals get the drift. And, speaking of CIOs and the study, register to hear Nitin Pradhan, CIO at Department of Transportation, talk about the study on a webcast at 1 p.m. EDT on Thursday, August 23. Nitin’s customer-first approach is sure to put a smile on your face.
Greece and the Oracle
Just got back from Athens. Dad’s 70th - chasing antiquity. Stopped in on the Parthenon, Thermopylae, Sparta, and the Oracle at Delphi. Asked the Oracle, what’s in store?
But first, a little about Hellas - that’s what the Greek’s call themselves.
First thing you notice, it’s hot. Not D.C. hot - more like Africa hot. It’s a wonder anybody works at all. Don’t kick the dead dogs - they’re just resting.
Second, there are no young people - there are old people and infants. All the people of child-bearing age have gone elsewhere to find work.
Third, cash is king. Shopkeepers and hoteliers are allergic to plastic - it leaves a nasty tax trail.
Last, it’s not that Greeks are lazy - they’re just beaten. If there’s no way up, the smart man lies down. And, save your lectures - and don’t mention Merkel or bankers...
What wisdom did the Oracle impart?
One, Europe’s really a mess. It must unravel to cure itself. The Euro’s dead. When people are more interested in meting out blame than working out how to put food on the table, the future goes hungry.
Two, government is difficult. Charting a course between austerity and economic stimulus is like navigating between Charybdis and Scylla - a riddle for the Sphinx.
Three, America isn’t perfect - but it’s good to be home. We need to be honest about our problems. Don’t want to compromise - Hellas shows us great societies have crumbled before…