What's The ROI On Federal IT Spending?

InformationWeek Government - June 11, 2012

InformationWeek Green

We all know how much the federal government spends on IT--$79.5 billion in fiscal 2012--but what's the return on that investment? Unfortunately, no one seems to know.

The White House provides detailed breakdowns of where all of that money is going--$38.2 billion to the Department of Defense, $7.0 billion to Health and Human Services, and so on. And the Office of Management and Budget's IT Dashboard offers visibility into the status of Uncle Sam's major tech investments, including how closely they're tracking to schedules and budgets. But the IT Dashboard provides no data on savings realized or other measures of return.

I asked federal CIO Steven VanRoekel about this subject during an on-stage interview at InformationWeek's Government IT Leadership Forum in Washington on May 3. VanRoekel said there are several reasons that business-like ROI calculations don't work in government. Agencies don't have sales or stock prices as points of reference, and when IT investments do lead to efficiencies and savings, they're often recirculated into other initiatives within the same agency--not dropped to the bottom line.

VanRoekel is a proponent of reinvesting IT-derived savings back into new tech investments. The proposed federal IT budget for FY 2013 is $78.9 billion, a 0.7% decline from the current year. That makes four years in a row that federal IT spending has been flat. If agencies want to fund new technologies, they have no choice but to squeeze the money from existing budgets. VanRoekel calls it "cut and invest."

Even with that approach, however, we don't know how much money has been cut or reinvested. We should.

Run The Numbers

Agency CIOs have shown they can itemize IT savings when they're asked to do so. An OMB report on the federal TechStat program, released in December, showed $931.7 million in "cost implications" associated with 295 agency-led IT project reviews. That breaks down like this: $455 million in savings from eliminated duplication; $153.9 million chalked up to improved governance; $151.5 million tied to reduced scope; $120.5 million from terminated projects; $30 million saved through accelerated delivery; and $20.8 million not spent on halted projects.

The feds have created dashboards for many other measures of government performance, so why not an IT savings and ROI dashboard that provides this kind of valuable information as it relates to the entire federal IT budget?

I argued in favor of a cost-savings dashboard six months ago, and the time has now come to do something about it. Last month, OMB director Jeffrey Zients issued a memo to agency leaders instructing them to use "evidence and evaluation" in preparing their budget submissions for FY 2014. A dozen states have begun evaluating programs based on evidence of their ROI, Zients said, and he encouraged federal agencies to do the same. In fact, OMB is more likely to fund budget requests that do so, he said.

Savings dashboards could also provide visibility into the hard-dollar benefits of government-wide tech initiatives such as data center consolidation, cloud computing, shared services, and mobility.

And open government. When President Barack Obama issued his open government memo one day after taking office, he wrote that openness would promote "efficiency and effectiveness" in government. But even here, where transparency is the goal, we have no way of knowing if he's right.

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John Foley, editor of InformationWeek Government, can be reached at [email protected].