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State CIOs Eye Consolidation, Outsourcing To Cut Costs

A yearly survey of state IT officials found that two-thirds expect their IT budgets to shrink in the next three years.

State government CIOs said they are seeking a variety of cost-savings and efficiency measures as they struggle to meet the demand for new services under stricter IT budgets, according to an annual survey.

The 2010 state CIO survey -- released by the National Association of State Chief Information Officers (NASCIO), TechAmerica and Grant Thornton -- found that CIOs in general are implementing many of the usual cost-cutting measures, such as consolidating applications and data centers, to deal with tightened budgets.

About two-thirds of CIOs surveyed in 2010 said they face lower IT budgets in 2011 through 2013, according to the survey. Only 13 percent expected an increase and 23 percent said they expected the budget to remain relatively steady.

To try to do more with less, CIOs are thinking a little outside of the box, implementing shared services and managed services models as well as outsourcing of IT operations to scale back.

Half of the CIOs surveyed said they outsource some of their IT infrastructure, while two out of five outsource IT applications operations. Twenty-seven percent plan to expand the existing scope or amount of outsourcing, and 19 percent plan to introduce it for the first time.

North Carolina, is a recent example of a state that, when faced with a multibillion-dollar budget deficit, is embracing IT outsourcing. The state is searching for an outside consulting firm to help it guide a reorganization of its technology operations that will outsource much of its IT work and consolidate other operations as a way to cope with a deficit of $3 billion.

CIOs also are eyeing emerging technologies like cloud computing and social media to improve efficiency and save money, according to the survey.

As they try to make changes to accommodate budgets and increased service demands, CIOs are finding their jobs challenging for a number of reasons. They cited IT governance as a key problem due to an imbalance between accountability and authority, according to the survey.

Managing IT portfolios and procurement also are worrisome for CIOs. The former in particular is thorny issue; in 60 percent of the states surveyed that have an active portfolio-management process in place, CIOs rated those processes an average "C" grade.

Procurement also is an area that CIOs said needs to reform, with executives seeking a more commercial contracting process that allows them more freedom to get the best products and solutions rather than merely the cheapest, according to the survey.

The survey is based on 40 responses representing governments from 39 states and the District of Columbia. CIOs were polled from mid-April to the end of June 2010.

The survey addressed views on IT portfolio management, IT investments and budgets, statewide IT business models, procurement, project management practices, and emerging technologies.

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