Introduction:
This article reviews the landscape and trends seen in government technology contracting and the changes it is driving in government partnership and budgeting requirements. Increased technology consulting is required and will grow to need partnerships from internal departments and decision-makers for that increased investment. The trend of increased complexity, diversity and specialty technology needs continues to require increased outside expertise to be successful. The many federal, state, and local compliance requirements also require increased third-party review and support to ensure compliance and evolving information security needs. These increased professional costs outpace the normal government revenue growth and technology budgets requiring ongoing new investment in partnership with our departments and agencies. We additionally need better partnerships with our service providers that understand this financial challenge, help provide creative technology and sustainable cost solutions, and help take the long view of success in providing consulting and technology services to government
The government technology contracting landscape:
Every decade, technology brings a wave of innovation and systems renewal that drives increased dependency on technology for daily operations. Technology support has evolved to an operational technology model as more IP devices and the Cloud/SaaS environment moves us into full technology dependency. Services and department work can completely shut down if there is a technology outage, with decreasing capability to provide services manually until the system is back online.
Increased diversity and complexity of the technology landscape require a spectrum of outside expertise to implement and maintain solutions. The expectation for self-service solutions for the communities we serve is driving new or expanded technology. The expansion of specialized operational technology across all services requires specific expertise that can’t always be maintained with internal staff. Cloud and Software as a Service (SaaS) models are externally contracting a larger percentage of support and maintenance efforts to service providers.
The legal and specialized landscape for meeting multiple federal, state, and local compliance requirements (CJIS, PCI, HIPAA, NERC, etc.) often requires outside expertise or services and the absolute need for independent audits and reviews.
Cyber and information security requires multiple external expertise and oversight services. There is significant growth in the need for contracted evaluation, testing, monitoring, response, and implementation of needs for cybersecurity that have and always will exceed the capacity of internal staff.
These factors continue to drive an increased need for external expertise and contracted support. This trend of increased year-to-year technology consulting expenses will continue to grow for the next decade.
Budgeting and government revenue/cost economics:
The government technology budget model has not fully kept pace with increased technology requirements as additionally invested over the past few years through one-time grant sources. Many of these added services have an ongoing operational cost.
Increased diversity and complexity of the technology landscape require a spectrum of outside expertise to implement and maintain solutions.
Additionally, the ongoing move of capital expenses to operational year-to-year expenses, especially for software, has caused challenges to how government funds larger projects. When you move to an operational Cloud/SaaS model, you have a one-time benefit of accrued capital amounts for implementation and conversion to the SaaS model, but that new model is much more per year to maintain. This can mean large budget increases that exceed normal budget growth.
Government more than ever is cost constrained and lives under a fixed income and revenue growth in the low single digits. When the country is in an economic slowdown, it can be flat or negative growth. This does not easily translate to the private sector pricing models with higher year-to-year percent increases for the same service. Government just doesn’t have it to spend through normal budget growth and that means we must cut a level of service somewhere else. As we have more SaaS and Cloud models with a larger annual cost, something must be eliminated elsewhere.
CARES and ARPA or other grants as one-time sources have helped innovate and provide needed online services but these added services have an ongoing cost. As we get to years 2 and 3 past these one-time grants those costs must be accounted for in the operational budget. The return to normal budgets increased capital to operational cost transition, and slow-down in the overall economy are three challenges for the government to sustain the higher levels of technology-enabled services adopted over the past few years.
Department and agency partnership on technology investment needed:
CIOs must work even closer with department and agency leadership for existing and new technology-based initiatives. In a perfect world, the departments and agencies we serve would continue to acknowledge and invest at these higher percentages.
What this means is deeper engagement and understanding of the evolving business needs, how technology can support and bring better cost offsets, and a true commitment from both executives (technology and business) for a co-investment plan that is outcome-based versus percentage increase or decrease based. I know we are getting better at partnerships, and this needs to continue as the line between “business” and “technology” continues to converge. We need to plan, budget, and invest together, not simply review each other’s plans and provide commentary on them.
We need to understand this fixed-income reality applies across the organization. Even if we get higher ongoing technology investment for a Cloud or SaaS service, that means the department’s budget has less for other operations. It is important to understand that this ultimately is how every government budget process goes and that more investment in one area means less or none in another. Our communities have increased needs across the spectrum of government services, and technology investment needs to be measured along with operational investment.
What government needs from those that provide contracted services and expertise:
Contracted service providers need to understand that ROI is slightly different for the government. We do make business cases every year showing how a technology investment can increase service levels and/or reduce labor costs. In most cases, this is done to build capacity without increasing staff versus shifting or eliminating staff. We are environments with strong unions and longer-term workforces than you see in the private sector. The government is getting better at organizational change but would submit it always take us longer. For government contracting, this means we need help in taking the long view. Projects with great ROI and/or immediate benefit are always easier to fund. The larger ones require a thoughtful process with many stakeholders and committed external partners over the long term to help get us to that better outcome for our communities at an investment curve we can afford.
Better understanding by our contracted service providers of the financial landscape helps us build better contracting models. The ability of our external partners to take the long view to help the government succeed and more actively advise both technology and business executives on sustainable cost models and budget solutions will help meet the increased technology investment needed.
Conclusion:
The government has achieved some amazing things over the past few years, driving great improvements in technology and Cloud investment that now need to be sustained in our operational budgets. In understanding that we will need increased contracted services, we must work ever closer with those service providers and our departments and agencies to creatively invest in this technology and provide a sustainable way to plan and budget for technology in the future.
