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Tech CEOs Offer Deficit-Busting Ideas

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How Private Sector Best Practices Can Save Taxpayer Money.

Every armchair pundit has suggestions for how the Obama administration can cut the large and growing budget deficit. CEOs of several prominent technology companies got an opportunity to share their money-saving ideas at the White House on Wednesday, offering suggestions they said could cut deficits by $1 trillion over the next decade.

 

Members of the Technology CEO Council, including IBM's Sam Palmisano, Intel's Paul Otellini, Motorola's Greg Brown, Micron Technology's Steven Appleton, EMC's Joseph Tucci and Applied Materials' Michael Splinter, offered several technology-fueled suggestions, some of which they have successfully employed at their own companies. Surely not coincidentally, they also sell many of the products and services used to deliver these solutions.

 

Their eight suggestions, contained in a 10-page report on the Technology CEO website:

Consolidate IT infrastructure. The council thinks the federal government could shave up to 30 percent off its annual $76 billion expenditure to maintain IT assets by "reducing IT overhead, consolidating data centers, eliminating redundant networks and standardizing applications."

 

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IBM says it cut its overall IT expenses in half over the past five years through consolidation and standardization. It has lowered annual operating expenses by up to 40 percent by consolidating data centers. EMC says data center consolidation and adoption of cloud computing have helped it save $104.5 million over five years, including an estimated $80 million in capital equipment cost avoidance and $19 million of operating cost reduction thanks to increased data center power, cooling and space efficiency. The council also cited savings achieved by state government agencies. For example, Washtenaw County, Mich., saved some $2.5 million by consolidating IT infrastructure and applications. (At least some of that savings probably came from eliminating outdated, unused apps.)

 

Streamline government supply chains. Some government agencies, including the Postal Service and the Department of Defense, are introducing methods such as Lean Six Sigma to improve their supply chains. The government could save more than $500 billion over the next 10 years if it applied similar techniques across all of its supply chains and cut costs by up to 20 percent. A Lean Six Sigma project is under way at the Department for Work and Pensions, the UK's largest central and civil government department. Motorola saved $1.2 billion a year with a major supply chain transformation project. As I've written before, I think the government's convoluted procurement process needs a major overhaul.

Reduce energy use. New building-management technologies could help the federal government cut energy costs in 1,100 data centers and 3.1 billion square feet of office space, according to the council's report. Advanced fleet-management systems could lower federal energy consumption by up to 20 percent by reducing the size of the PC fleet, among other things. Voice, video, document-sharing and collaboration tools could cut travel expenses by up to 20 percent a year. Total potential savings: $20 billion over 10 years. Again, virtualization and consolidation can yield energy savings. (I expect the federal government might even be able to shutter some of the existing data centers.)

Move to shared services for mission-support activities. Previous projects show how this can work. When the government consolidated 26 payroll systems to four, the Environmental Protection Agency reduced payroll costs from $270 to $90 per employee, saving $3.2 million a year, and the Department of Health and Human Services reduced costs from $259 to $90 per employee, saving $11 million a year. Likewise, when the government consolidated travel systems, the Department of Labor reduced its costs from $60 to $20 per travel voucher and reduced processing time from about seven to about three days. If the government could expand these kinds of shared-services programs, it could save $50 billion over the next decade.


Apply advanced business analytics to reduce improper payments. The federal government issues nearly $3 trillion annually in payments, including food stamps, Medicare payments and tax refunds. The Office of Management and Budget estimates improper payments cost the government $98 billion in 2009 ($54 billion in Medicaid and Medicare alone). Analytics could help the government better identify fraud, mistakes or shifts in demand, generating an incremental $200 billion over 10 years.

Reduce field operations footprint and move to electronic self-service. There are more than 10,000 federal government forms in 173 different agencies that could be automated to allow citizens and businesses to conduct their business with government online, according to the report. Reducing the citizen-related field operations of the federal government and automating the government's form processing could generate $50 billion in savings over 10 years. Similar efforts in Australia and Canada yielded annual savings of $765 million and $292 million, respectively. More self-service options should make it easier for more federal employees to telework, another council suggestion. As I've written before, the government hopes

Monetize the government's assets. Selling or leasing unused assets or facilities is among the suggestions offered in this category.The council estimates the government could save $150 billion over 10 years.


Better project management and real-time course correction. Introducing practices such as business process management and organizational change management could improve the success rate of government projects. The council apparently has the same difficulty estimating ROI for these kinds of initiatives as many companies do. It offers no projected savings for this category.

We've heard some of these suggestions before, of course. Closing some of the fed's data centers and using cloud computing technologies to centralize some IT services for federal agencies were As I've written before, to follow through on these kinds of ideas. Maybe that organizational change management will pay for itself, (and then some) after all.

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