Continuing resolutions. Sequestration. Furloughs. We are all being inundated with the gloom and doom of what’s next in government. No matter what budget Congress enacts to extend the CR set to expire Sept. 30 — if any — the focus for agency chief information officers will remain on cutting costs, the proverbial “doing more with less” and how to salvage or fund programs to meet the mission. Similarly, the federal chief financial officer community will be focusing on the overall cost of agency operations and how to reduce dollars while maintaining working, productive programs. In regards to agency information technology systems, leaders are focused on keeping systems and programs running with operational expense (OpEx) funds, with little room to invest in capital expense (CapEx) activities.
In my government career, I’ve worn both the CIO and CFO hats. I empathize with my colleagues working to reconcile their budgets. In a time of uncertainty, making the right financial decisions becomes paramount. Although there is no one-size-fits-all easy solution, I would like to offer one recommendation that has the potential to lead to significant near-term cost savings and the ability to re-appropriate funds to other mission-critical initiatives. The answer lies in the code.
Many of the largest mission-critical IT systems are written in COBOL (Common Business-Oriented Language) and reside on mainframes. In our time of rapidly evolving technological advancements, COBOL is often considered outdated — but COBOL runs many of the most secure, dependable applications we use daily. The average American interacts with a COBOL-based program 13 times a day, such as while using an ATM. COBOL applications manage the care systems of 60 million patients every day. COBOL platforms are the foundation of financial systems that support 30 billion transactions per day. And, in government, large systems across the Social Security Administration, Office of Personnel Management and Air Force and the Homeland Security, Veterans Affairs and Agriculture departments, to name a few, are run by COBOL.
COBOL is considered a legacy program language, and so too are the systems supported by this language. However, the majority of these systems are still highly effective. They contain vital information and business processes that support agencies’ missions. The cost of operating these legacy systems, however, is often massive — approximately 70 percent of annual IT budgets. But, rewriting legacy systems is often more risky and costly, taking years of development time. What agencies require is an evolutionary modernization strategy. Instead of jumping right into the development of a new system, they must take strategic steps to ease the transition — steps that lead to efficient and effective modernization.
Modernizing systems to contemporary platforms will enable agencies to not only meet objectives, but also respond rapidly to mission changes by embracing modern architectures, reducing cost and risk. The decision to modernize or rewrite has often been placed on the IT systems manager. In the current economic environment, this must be elevated to the C-level and must include collaboration between the CIO and CFO to ensure technical capability meets budget obligations.
In my experience, a complete replacement/rewrite often runs six to 10 times higher than current system costs and takes years, while a modernization effort typically runs two times higher and takes only months but generally provides about a 50 percent decrease in operations and maintenance costs post modernization — leading to real cost savings. This is a fundamental transformation in moving from an OpEx to a CapEx delivery model, meaning any upfront investment in a modernization effort will add value — in this case, a significant reduction in operating costs. For example, a Defense Department agency reduced its $12 million annual mainframe costs by more than 60 percent by modernizing applications.
It makes sound financial, business and technical sense to ensure that mission-critical functions, and the legacy systems that support them, continue to be developed, enhanced and improved. As the stewards of technology and finance across the government, CIOs and CFOs play a vital role in the cost savings paradigm. They must collaborate to ensure they are not authorizing programs that involve years of requirements building, development and implementation, resulting in an agency incurring years of significant upfront costs and decreased net savings in the long term. They must take a stand by embracing legacy migration to provide real, tangible cost savings that can be realized in Year One. That is something a CIO and CFO can hang their hats on.
Bob Suda is president of Suda and Associates. He served 32 years in the federal government, including as associate administrator and director of the Transportation Department’s John Volpe National Transportation System Center in Cambridge, Mass.; as Agriculture Department associate CIO for integration and operations; and at the General Services Administration as deputy CFO, Office of IT Solutions assistant commissioner and Federal Technology Service CFO. He can be reached at email@example.com.