Let Entrepreneurs, Not Usual Suspects, Rework Government IT

Ann All

Yesterday I wrote about President Barack Obama's proposed budget for 2011, which includes a suggestion for federal agencies to use cloud computing technologies to centralize some IT services across agencies, thus cutting costs and boosting efficiencies.


A TechCrunch column by Vivek Wadhwa, a senior research associate at Harvard Law School and director of research at the Center for Entrepreneurship and Research Commercialization at Duke University, lays out the incredible scope of the problem, describing a spaghetti of aging legacy systems that are built on computer languages no longer widely in use and that do not communicate with each other. He examines the technology problems of one state, California, which I wrote about in August of 2008, when state controller John Chiang informed Gov. Arnold Schwarzenegger that it would take six months to reconfigure the state's COBOL-based payroll system to reduce the salaries of state employees, a budget-cutting move ordered by Schwarzenegger.


Sadly, says Wadhwa, many other government agencies and private sector companies are in even worse shape than California. (Perhaps that's why so many state governments hire companies to undertake huge transformation projects and rebuild their systems from the ground up, projects which sometimes end badly.)


Wadhwa proposes a bold solution for California: Instead of engaging the usual suspects like IBM, let Silicon Valley entrepreneurs rebuild its outdated systems architecture. He writes:


These entrepreneurs can create new systems for a fraction of the cost of patching up old systems. Take the system that processes unemployment checks. The State has budgeted $50 million to upgrade it. At the end of the day, it will simply have a more maintainable COBOL system if it does business the old way. Instead of the big state contractors who typically bid on and win such contracts, the State should reach out to the Valley's entrepreneurs to rebuild this. ... I'll bet that the Valley's entrepreneurs could build this system from scratch in less than a year for less than $5 million. That's right: for less than a tenth of the cost. You can build sophisticated systems in the Web world for a tiny fraction of the cost and in a fraction of the time required for maintaining those old monsters. The new systems will be far easier to use, and cost relatively nothing to maintain. And we'd be boosting the local economy rather than the coffers of big state contractors with strong political connections.


Think startups can't build systems that meet the security, transaction processing and reliability requirements of government agencies and prviate companies? Twitter, Facebook and Zynga have those same requirements, Wadhwa points out.

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