How to Improve the Health of Your Agency's IT Portfolio

Kris van Riper is a practice leader at CEB and Nelson Wolf is a research analyst at CEB.

While many experts have discussed the growing importance of technology to government and citizen services, federal budget statistics suggest there is plenty of progress left to make. Despite a widespread focus on innovation and modernization of legacy systems, IT budgets have been stagnant over the past several years.

In fact, spending directed toward development, modernization and enhancement innovations has actually decreased by $7.1 billion since 2010, a decline of 28 percent, according to data published by the Office of Management and Budget.

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A lack of resources isn’t the only obstacle agencies currently face on the way to innovation. Federal IT organizations also encounter difficulties in making the most of their spending. The Government Accountability Office has frequently reported on issues within federal IT management and in 2015 added “improving the management of IT acquisitions and operations” to its high-risk list.

Regulatory reforms such as the Federal Information Technology Acquisition Reform Act have tried to address this by centralizing accountability with the department chief information officer and attempting to mitigate risks. However, the evidence is currently limited as to the effect these reforms will have, or the time frame they’ll need to have a sizable impact.

At CEB, we recently analyzed federal agencies’ IT data, as published by OMB on the IT Dashboard site, to assess portfolio health, spending and performance. This analysis gives a unique perspective into the current state of federal IT and the issues agencies currently face.

As federal IT departments work with their mission partners to provide services to citizens, what strategies can they use to address these challenges?

1. Segment modernization investments for risk mitigation and value creation. Operations and maintenance spending accounted for 76 percent of federal IT spending in 2016, an increase from 68 percent in 2010. OMB recently released proposed guidance for public comment that establishes a plan for agencies to modernize and upgrade IT systems.

While many IT departments seek to free up resources for modernization, progressive organizations segment their modernization investments to define the purpose for each investment. One agency divides its DME investments into two categories—risk mitigation and value creation—with distinct business cases for each. This strategy allows the agency to maximize the effectiveness of its investments in new capabilities while setting cost and service quality and risk mitigation levels to acceptable thresholds for other investments.

2. Implement agile and incremental development practices. In its high-risk list, GAO cited the tendency of failed IT projects to use a “big bang,” waterfall approach, which delays the delivery of functionality. However, many agencies have made limited progress in adopting agile and incremental development practices. We’ve found only 62 percent of all major investment projects deliver functionality at least every six months.

While agile is an effective tool for reducing project failure, it also plays an integral role in maximizing the value of each investment by promoting flexibility and prioritizing benefits. One transportation company focuses on having its agile teams deliver benefits streams—small pieces of usable software that can begin fulfilling a value proposition—instead of projects. If a project is stopped, this iterative approach allows the company to add value quicker and incur less cost than the waterfall approach.

There is a long list of uncertainties for federal IT organizations given the upcoming administration transition, the prospect of Congress passing new IT modernization legislation, and regulations such as FITARA continuing to take hold. However, by using these strategies to improve their IT portfolio health and performance, agencies will be better prepared to take on the challenges that lie ahead.