In Washington D.C. this week, federal IT leaders gathered and identified the following factors to be considered in allocating modernization funds: vulnerability of IT assets to cybersecurity threats; how critical the systems or applications are; and, whether the people using the systems have special knowledge that needs to be imparted to others.

75% of any federal IT budget goes directly to maintain and operate legacy systems, and any remaining IT budget has such a back log, you may never see a dime of it for modernization. If you follow our blog posts, you know we understand how tight federal IT budgets are, and you know that helping federal agencies and organizations save on federal IT spending by identifying and exploiting opportunities for efficiency is important to us. So, it won’t surprise you to know that we have been following along as the federal IT community discusses and tests different models for creative ways to fund modernization, or upgrade projects. Consider the following:

Share-in-Savings Model

In the 2000’s we saw share-in-savings contracting, where a federal agency launches a project with little upfront funding, and the contractor is paid down the road with the savings generated. The contractor has an incentive to provide maximum savings quickly and the agency sees lower risk in initiating the contract. These contracting initiatives have been limited to energy savings in government buildings, and haven’t been substantively tested within the federal IT realm.

Now, the IT community is discussing revival of this model, combining it with agile software development. Vendors might be nervous to invest in a massive federal modernization project. However, what if you break it up? For example, move small chunks of code to a modernized cloud system, realizing quick savings, with a quick return for the participating vendors.

Central Service Model

Another exploration within the IT community is the idea of shared services. Modeled after the central IT and chargeback model, used by many large corporations, a federal agency would be created to provide shared IT services to other federal agencies. With multi-tenant applications, services would be provided to other agencies, akin to licensing software. Agencies would need to commit to taking the difference between what they spend on those systems today and fees that they would pay for the service, to drive potentially significant savings.

These savings could then be used to fund modernization throughout the rest of a portfolio (that isn’t being served by the shared services). This shared agency would be providing its services without the profit motive, which should make it much more competitive than going to commercial enterprises for the same services. It also should allow for enough scale within the federal government, hopefully reducing oft- observed duplication of effort (and thus cost).

Do you have another model for using modernization savings to fund future project ideas? Let us know – it’s a conversation worth having.