Saturday, May 5, 2012

OMB gives agencies four months to figure out shared services

Our mission. Benoit Legris
Friday - 5/4/2012, 3:44am  ET
By Jason Miller

The Office of Management and Budget is re-invigorating the Lines of Business initiatives but with a bit of a twist.

OMB issued its Shared Services Strategy Wednesday detailing the steps over the next four months agencies must take to begin chipping away at more than $46 billion in duplicative IT investments. The plan focuses on commodity IT, such as email and storage, and emphasizes both governmentwide and intra-agency shared services.

The LOB initiative, started under the Bush administration, focused solely on governmentwide initiatives, such as human resources and financial management systems.

The end result would give agencies tools to innovate with less money, wrote Steven VanRoekel, the federal chief information officer, in a blog post.

"[The strategy] covers the entire spectrum of IT shared service opportunities throughout the federal government and promotes the use of existing and new strategic sourcing methods where agencies can combine their buying power for similar IT needs and get lower prices and improved service leverage in the process," VanRoekel wrote.

IT Investment category (2013 Budget)                Number of investments            Spending (in millions) 
Information & Technology Management              1,572     $34,661
Supply Chain Management         759         $3,322
Financial Management  563         $2,503
HR Management              662         $2,357
General Government    218         $2,110
Administrative Management      332         $947
Planning and Budgeting                291         $622
Total      4,397     $46,522

VanRoekel said the Shared Services Strategy builds upon the TechStat, recently announced PortfolioStat and the administration's Campaign to Cut Waste initiatives. VanRoekel released a draft strategy in December, asking agency and industry for comments.

"I'm very supportive of having a shared services strategy, but not because I need OMB telling me what I need to do because we've been talking internally about shared services for some time to gain efficiencies and administrative savings, but having OMB push in the same direction helps with momentum," said one agency CIO, who requested anonymity because they didn't receive permission from their agency to speak to the press. "I don't think shared services are new to the government, but the one thing that sets the current discussion apart from the previous shared service providers is while they did have IT systems security, and sort of basic back office functions, where the shared services strategy is going now is expanding beyond that. It's looking at more traditional IT services like data center or cloud or help desk."

The strategy sets a series of deadlines for agencies:

    By Aug. 31 — Departments must submit an Enterprise Roadmap to OMB that includes the agency's commodity IT consolidation plan and LOB Service Plan. A part of this roadmap will be a list of IT assets agencywide to include all IT systems and services that support mission, administrative and commodity IT programs, using the Federal Enterprise Architecture Reference Model taxonomies provided in the common approach.

    Additionally, agencies have to give OMB a synopsis of the agencywide IT investment portfolio review conducted annually using the process described in the PortfolioStat memo issued in March.

    And finally, the LOB managing partners will prepare a "LOB Service Plan" that includes an assessment of each associated IT shared service area and a plan to improve quality and increase uptake in each area by the end of FY 2013. A high-level summary of alternatives is also to be included which incorporates legacy federal IT requirements and agency goals and/or guidance.

    By Dec. 31 — Agencies must complete two OMB-approved IT shared service initiatives in 2012 and report status to OMB.

    By April 1, 2013 and annually afterwards — Agencies must submit an updated Enterprise Roadmap to OMB.

"The Shared-First approach creates new opportunities for industry to provide shared IT services to agencies that are more agile in delivery and more responsive to a wide variety of evolving mission, support and commodity IT requirements," VanRoekel wrote. "The strategy recognizes the need for agencies to gain proficiency in managing or consuming shared IT services and therefore provides an initial focus on commodity IT consolidation opportunities, as called for in the August 2011 OMB memo to CIOs."

Date      Action   Owner
March 1, 2012    Identify two IT areas for migration to a shared service approach by Dec.31, 2012.              Agencies
Aug. 31, 2012     Submit an Enterprise Roadmap to OMB that includes the agency's Commodity IT Consolidation Plan (IT Asset inventory is optional in 2012) and LOB Service Plan.             Agencies and their managing partners
Dec. 31, 2012      Agencies complete two OMB-approved IT shared service initiatives in 2012 and report status to OMB.                 Agencies
April 1, 2013 (and annually)          Submit an updated Enterprise Roadmap to OMB              Agencies and their managing partners

The strategy also stated OMB is working with the Federal CIO Council's Shared Services Subcommittee to establish and maintain an online IT Services Catalog. OMB said it will launch this catalog in fiscal 2012 and will provide agencies with a list of available services and contract vehicles, as well as contact information for managing partners and suppliers.

New strategy complements LOB initiatives

An OMB spokesperson said in an emailed statement that "this shared services strategy is complimentary but begins at a different starting point. We are starting this strategy with agency-specific implementations of commodity services (like email, mobile contracts, etc.) and will, over time, look for opportunities to take sharing between agencies. This strategy is also an enterprise architecture framework for assessing architectures across these different types of implementations."

Reaction to the strategy has been fairly positive. Most current and former federal officials say the need to move to shared services has never wavered and adding some more emphasis to it has been a long time coming.

"The intention of the strategy seems to be a focus on flexibility," said Tim Young, a former deputy administrator for e-government and IT at OMB and now a senior manager for Deloitte Federal Services. "Agencies simultaneously must measure performance and capabilities of the existing LOBs and improve them so more agencies adopt them over time. Additionally, it encourages agencies that don't use shared services to develop intra-agency shared services to consolidate at a more local level."

Young said the idea of changing the culture internally to get used to shared services is part of the "crawl, walk, run" approach.

"The current strategy forces agencies to make two moves to eventually insource or outsource IT shared services," he said. "The first move is intra-agency, and then down the road presumably they will make a decision to consider insourcing those functions to governmentwide shared services provider like DISA or Interior's National Business Center. Or, they could potentially outsource the services to commercial vendors who provide shared services on broader and more global scale. This approach is softer or a more paced approach to adopt shared services."

Needs more input from business owners

One senior government official, who requested anonymity because they didn't obtain permission from their agency to speak to the press, said the missing piece so far is getting the business people, such as the agency deputy secretaries, CFOs and chief acquisition officers involved

"The LOB initiatives were more organized with agency lead," the official said. "The new effort is more focused on agency decisions and the strategy identifies ways to move in the shared services direction."

The official added conversations are just starting among the business and IT folks, and that will help push the initiative forward.

Mark Forman, a former OMB e-government and IT administrator and now founder and president of Government Transactions Services, said the goal of the strategy is to drive results, not create another report for agencies to develop.

"One of the things that's really important for OMB as they finalize this memo is not to lay out as a result you produced a report or piece of paper, but there is some business basis for the type of result they expect the agencies to receive," Forman said. "It is an improvement in productivity? It is a reduction in expenditures on customizing finance systems and back office systems? There are clear ways to set goals for agencies if you are going to give them the flexibility to figure it out themselves."

Forman said agencies already have the authority to consolidate internally, and the strategy doesn't give them enough guidance.

He said the centralized repository of existing shared services will be a key piece to this effort.

"The big gains are not in IT shared services. It's not a data center that gets consolidated. The big gains are in crushing the redundant, fragmented programs in the areas that have come out in the [Sen. Tom] Coburn (R-Okla.) studies GAO has been doing. I'm really impressed there is recognition of that in these memos."


Federal CIO VanRoekel details his 'first' priorities

OMB launches PortfolioStat to reduce commodity IT spending

EXCLUSIVE: IT budget guidance muddies OMB's shared-service plans

Tuesday, May 1, 2012

IBM Nudges U.S. Workers Toward Early Retirement

There is a role with us as we look to partner with customers. Benoit Legris

Exclusive: Thousands of Big Blue employees may be eligible for new program under which they can work reduced hours for less pay, and become immune from layoffs, if they agree to retire by late 2013.

By Paul McDougall   InformationWeek
May 01, 2012 01:50 PM

In a move that could see thousands of employees exit within two years, IBM has instituted a program to offer U.S. workers who are approaching retirement age an option through which they can reduce their hours by almost half while retaining 70% of their pay. In exchange, the employees must pledge to retire by the end of next year.

As an added inducement, workers who participate will be immune from layoffs during their time in the program, which is voluntary. Called Transition to Retirement, the program is the latest sign that IBM wants to continue to reduce its U.S. headcount while building staff levels in developing, low-cost countries like India and Brazil as it seeks to diversify internationally and meet aggressive earnings targets.

IBM managers were informed about the program this week through an internal memo, obtained by InformationWeek. "We are announcing a new approach called Transition to Retirement, a one-time, voluntary program designed to balance the needs of our retirement-eligible employees in the U.S. with the needs of our business," the memo states.

Under the program, IBMers who "are at or near retirement eligibility in the U.S." can receive 70% of their full-time pay while working 60% of their normal hours. They'll also continue to receive benefits and 401k contributions and will be "exempt from any resource actions that may occur during the Transition to Retirement Period," the memo states. "In return, all participants agree to retire on or before December 31, 2013."

[ Is IBM running out of steam? See: IBM's First Quarter: Where's The Growth?. ]

An IBM spokesman confirmed the program. The spokesman said eligible workers include those with 30 or more years at the company, regardless of age, and those who by Jan. 1, 2014 will be at least age 55, with 15 or more years at IBM. Older workers with fewer years of service are also eligible.

"The goal is for retirement eligible employees to have a conversation about retirement," said IBM's spokesman. "For IBM, the success measure is being able to prepare for and predict when retirement eligible workers might choose to exit. It gives our U.S. business managers the opportunity to start building skills behind what we know are going to be some very strong skills leaving the business."

The spokesman declined to say what the program might cost or how many IBM employees are eligible, but the number could easily be in the thousands, given Big Blue's history of employing so-called "lifers." IBM chairman Sam Palmisano, who was CEO until January, joined the company in 1973.

Word of the program comes as IBM is moving to reduce its U.S. headcount as part of a campaign to globalize its operations. It laid off more than 1,800 U.S. workers earlier this year, according to Alliance@IBM, a group that advocates for IBM employees. The group estimates that IBM has cut U.S. headcount by 29%, to about 95,000 workers, since 2005. IBM's does not comment on the size of its U.S. workforce. Globally, it employs about 433,000 workers.

The company has told shareholders it will deliver earnings per share of $20 per share by 2015, a number that some analysts say means IBM needs to aggressively manage costs over the next few years. But if it cuts too deep, customer service could suffer. IBM has said it expects to earn $15 per share in the current year.

The company has been moving heavily into offshore locations to tap the rich supply of lower-cost, skilled workers in Asia, Eastern Europe, and South America. It's also looking to sell more into emerging markets as Western economies slow.

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Thursday, April 26, 2012

Oracle Customers Rankled by Product Roadmap

This is why we created a company that partners with customers to reduce costs not ring them out! Benoit Legris

Oracle customers are frustrated with high maintenance fees they’re paying for support of software they’ve acquired, and which they feel aren’t justified by promised new product features. And frustration is building as the company is perceived to be investing more heavily in areas, like cloud, that are of strategic importance to Oracle, rather than on promised upgrades.

This isn’t exactly new; in 2010, a survey showed 42% of customers were dissatisfied with the quality of Oracle support and 58% were dissatisfied with the cost. And all grousing aside, its customers aren’t going anywhere, in part because they don’t feel like they have more appealing alternatives, and because the software is considered reliable.

But there appears to be a deepening resentment fueled by the sense that the company is leveraging its market strength and forcing customers to upgrade to products Oracle wants them to buy. A study commissioned by Oracle released in March itself reveals that 73% of customers cited “end of support” for existing products as their reason for upgrading to a new Oracle product. [You can download the PDF.] Customers and analysts also argue their maintenance fees aren’t going towards changes, such as improved user interfaces that would make the software easier for non-technical employees to use, they need.

Oracle declined to respond directly to questions about its maintenance-fee practices, product improvements and other issues raised in this article.

Oracle sells software suites with customer, financial and human resource management applications, including E-Business Suite. The company also offers software from PeopleSoft and Siebel, companies Oracle acquired in the last decade, that perform many of the same functions.

In addition to acquiring the software, customers pay an additional 22 cents per year for every dollar they spend on software licenses in fees for upgrades and bug fixes which can amount to hundreds of thousands of dollars to millions of dollars a year.

Oracle raises those the maintenance fees customers pay by three percent or four percent each year of their license contract, a sort of inflation the company charges for upgrades, said Forrester Research analyst Duncan Jones. So for an implementation costing $1 million – not an uncommonly high amount for this type of application – customers in the first year would pay $220,000 in fees, $226,600 the next, and so on, Jones said.

This fee is waived in some cases where customers get their maintenance put on hold for a year or two as part of an additional license purchase, he said. Oracle did not comment.

These software license updates and product support fees comprised over $4 billion, or 45% of Oracle’s $9 billion in third quarter sales through February this year. Oracle aggressively enforces its support revenue stream, customers said.

iRobot CIO Jay Leader, who pays in the “mid-six figures” annually for maintenance on a multi-million-dollar license forOracle’s E-Business Suite, said those fees aren’t translating into expected improvements to existing products. “I’m paying for them to build products to attract new customers for functionality that is of no value to me,” said Leader.

Oracle declined to respond specifically to this issue, instead providing CIO Journal with a list of features and functions [PDF] it added to E-Business Suite in 2010. These included performance, security, and stability upgrades, along with access to support engineer-moderated discussions.

Customers seem to be growing concerned that they’re not not getting their money’s worth. John Glowacki, the former CTO and corporate vice president at CSC who left his company in February, said customers don’t like feeling that they’ve paid for something several times over, and aren’t seeing significant improvements in the product, especially “when you’re getting into millions of dollars in fees.”

Another CIO, speaking anonymously because he feared his comments would aggravate Oracle as he negotiates with them, said if customers drop Oracle maintenance for any reason, and then want to upgrade their existing implementation, they have to repurchase the application at full price all over again.

To be sure, SAP, Oracle’s main competitor in business applications, also charges 22% for its maintenance fees. That’s higher than the 18% to 20% industry average other software vendors charge their customers. And Oracle customers agree the applications perform as well as expected. Oracle makes its software price lists public online, but it contractually forbids customers from revealing their actual contract costs, said Jones, the Forrester analyst.

Customers enter into contract terms with Oracle with open eyes, and many plan accordingly. Dave Corchado, CIO of media company iCrossing, says his company knew what they were getting into and put in place a timetable for transitioning to Amazon services before costs got higher than the company was willing to pay. “They’re clear on their expectations on dealing with them,” he says of Oracle.

Other Oracle customers believe the company isn’t augmenting its applications to keep up with the evolution of online software. James Szmak, CIO of the Juvenile Diabetes Research Foundation, said the stodgy screens on software for accessing time management and other business functions haven’t been upgraded in years. Szmak, who has been an IT executive at large technology companies like Hyperion and Cisco, also lamented the maintenance costs his organization pays.

“The annual charges for a small non-profit like us are embarrassing,” he said.

Joshua Greenbaum, principal analyst for Enterprise Applications Consulting, said Oracle “has just not met either the deadlines or the functional requirements customers hoped it would.”

For instance, he said, Oracle hasn’t created industry-specific applications for Fusion, the application suite to which it’s trying to get customers to migrate. Manufacturers using a version of PeopleSoft customized for their industry won’t have an equivalent in the new product, he said.

Oracle declined to comment.

“There’s a sense at the end of the day that Oracle is not in it for their customers, they’re in it for their shareholders, and this is reflected in a lot of the experiences customers are having around renewals and maintenance fees,” Greenbaum said.