Driven by an increasing emphasis on efficiency and desire to improve mission effectiveness, federal organizations are looking to their information technology (IT) organizations to deliver greater value at lower investment levels. To accomplish this, many federal IT organizations are embracing cloud and other innovations in technology and delivery approaches which provide greater flexibility and scalability to a broader user base. This confluence of requirements and capabilities is accelerating the ability of federal IT organizations to extend solutions and services beyond the reach of their own agency.
The delivery of services to a broader, multi-agency user-base represents a substantial opportunity for federal IT organizations with significant benefits to all parties. If established and delivered successfully, the sharing of systems and solutions results in a material reduction of development and operating investments and risks for all parties. In addition, the service model approach substantially increases spending and usage visibility associated with the offered solutions and services enabling customers to better understand their true IT costs. Shared systems and solutions can also reduce the environmental impact of computing infrastructure while furthering the establishment and implementation of broader technical and business standards across the federal landscape.
To successfully establish one or more technical solutions or services to customers outside of an IT organization's own agency, the IT organization must address a number of planning and implementation tasks including the development of a compelling business case, preparation of its infrastructure and organization, and development and marketing of its offerings.
Developing a Business Case
A key component of planning for the marketing and delivery of technical solutions and services is the development of a business case for any investments required. In addition to the standard components of the business case, including the option, cost/benefit, and risk analyses, the IT organization must consider a number of organizational and political aspects associated with the endeavor, including:
Internal Positioning and Approval
An agency offering services to other agencies is not a new concept - many federal agencies exist in their entirety to support the efforts and activities of other agencies. As an extension of existing missions, requirements, and delivery mechanisms, virtually all agencies possess some level of existing capability and statutory authority to offer IT solutions and services to other federal organizations. Securing internal approvals to proceed, consistent with traditional business case approval paths, often rests with effective communication and positioning of the intent as an extension of the areas of the organization already supporting other agencies in some capacity.
OMB Review and Approval
In addition to internal approvals, the organizations must prepare for review by, and discussions with, the Office of Management and Budget (OMB) in order to proceed. The key component of OMB discussions will likely center on budget impacts, the mechanisms of fund transfer, and how the approach works within OMB’s broader federal IT strategy. For example, offering a niche application or system on a pilot pay-as-you-go basis will likely result in a more straightforward approval than if an organization is proposing to offer hosted financial systems for agencies.
Organizations should strongly consider structuring support contracts or tasks under existing contracts as closely to the pricing and metric model of the service offering. In some cases, the impact of adding customers to an existing system may represent little if any additional technical support or administration. However, in cases where a material external support component is required, IT organizations should try to build in the same variability and payment structure it is extending to its external customers.
Preparing the Organization
Prior to approaching potential customers and rolling out services, organizations should carefully consider a number of key activities to prepare for its role as a service provider, including:
Preparing the Infrastructure
A key success factor associated with extending services to other agencies is developing and implementing an infrastructure that is comprised of as much variable cost as possible. The ability to minimize upfront investment and shift operating expenses to a model that varies based on need and usage is a critical component of preparing an IT environment to operate as an efficient shared services organization. For example, computing power, storage, and database licensing, which typically represent sizable upfront investments, can be procured or licensed as hosted solutions on a pay as you go basis based on usage. In addition to minimizing risk and lowering budget barriers, the approach enables an organization to bypass the initial price estimation and cost recovery issues of early customers which so often plague extended service models.
Additionally, the private sector, similar to public-private partnerships in the capital projects space, represent an ideal lever for standing up, marketing, and delivering services to external customers. In the case of the Department of Interior’s National Business Center (NBC) for example, private sector service providers to NBC are responsible for generating a lot of demand for NBC’s solutions and services based on shared interests. In many cases, even the prospect of sales from future demand from external customers can enhance the competitive pricing of IT vendors for an IT organization.
From a provisioning standpoint, many organizations invest heavily in automated self-provisioning mechanisms from the outset in order to reduce the labor intensive nature of standing up new customers or users for an existing customer. In reality, these investments often have little if any payoff based on actual volume and while demonstrating a certain level of sophistication to potential customers, also add material upfront investment which must be amortized across the customer base. Organizations should instead examine self-provisioning periodically as a cost reduction mechanism based on a simple ROI analysis.
Preparing the Business Functions
Another critical aspect of extending technical solutions to external customers is the establishment of ancillary business functions including metrics collection, billing, and customer support for example. Although these capabilities should evolve over time with the level of sophistication and activity of the shared services, establishing baseline capabilities prior to approaching organizations and bringing them on board will minimize the classic ‘service letdown’ associated with the realities of relying on someone else’s back-office functions as opposed to services that represent the front-offices of those who provide services for a living.
Another key aspect of business preparation is investing in one or more ‘relationship’ managers. Another critical mistake organizations make is relying too heavily on IT personnel to interface with business customers about business problems such as service provisioning, billing issues, or service levels. Organizations that lack relationship-focused resources often fail in capturing and retaining customers based on the lack of investment in customer-focused resources.
In addition to deciding which solutions to provide to external customers, how much to charge, and what are appropriate service levels, an organization must decide what agreement structure to offer. In the case of new services, organizations should consider using low or no risk agreement structures to the extent possible. Free trials and straightforward opt-outs are possible and do not violate federal regulations when structured appropriately. By offering lower risk trial models where possible, an organization will significantly lower the threshold customers must cross to try the solution(s) over the ‘go-it-alone’ route.
Rolling out Solutions
When rolling out solutions, embrace the route of ‘one’ - one customer, one system, one site, etc. By moving incrementally, both the IT and customer organizations can adjust to the shared services concept and operating model and eat the learning curve in smaller chunks. Higher profile failures can also derail early progress and result in a broader pull back by both organizations’ leadership.