A primer on IT consolidation.

• Author: Biddinger, Nadeen

[ILLUSTRATION OMITTED]

Technology decisions are often driven by cost concerns, including the need to reduce information technology budgets. In fact, most long-range predictions for state and local information technology (IT) budgets suggest spending growth of just 3 percent per year through 2015. (1) IT executives have tried a number of ways to stretch those scarce resources while still delivering necessary services.

Over the last three to four years, for instance, it's become more common for organizations to use virtual servers and other technology advances to lower hardware costs, and to provide software through the cloud or a hosted service to reduce or eliminate maintenance costs (see "Making Sense of Cloud Computing in the Public Sector" in this issue of Government Finance Review). They are also outsourcing help desk or network support to a third party, which cuts costs and improves service. Another common tactic is delaying upgrades or new initiatives to extend the life of existing solutions (see "Cutting IT Costs: Distinguishing between Necessary and Discretionary" in this issue of Government Finance Review). Governments are also recentralizing IT assets and consciously choosing hardware and software that are easier to manage and control.

Some organizations are going further, investigating the impact of consolidating data centers and eliminating outdated IT processes. If planned and executed properly, consolidation can decrease costs and boost productivity--although concerns about security, privacy, and the availability of information have to be addressed. Organizations also usually face some resistance from individual departments about data ownership and control of information. Fears of declining responsiveness, flexibility, and customer service to departments are some of the reasons why IT services began and flourished in a decentralized environment to begin with.

Another issue is that despite the benefits consolidation and optimization provide--including a potential return of $2 for every $1 invested over a five-year span (2)--project estimates often create a stumbling block. Sometimes organizations have to spend money before they can save it, so successful consolidation requires both adequate funding and political will.

CONSOLIDATION AND SHARED SERVICES

Shared services and consolidation often go together, but the two are not synonymous. Consolidation focuses on how a government organizes the overall delivery of its own IT...