1. Update on IT Consolidation Initiative Presented by Rick Boggs to Commonwealth Technology Council March 27, 2008

2. IT Industry When NASCIO surveyed the 50 state CIOs, IT consolidation was high on their list of priorities. Both public and private enterprises have chosen IT consolidation over cutting core programs to achieve cost reductions. –Nearly 3 out of 5 IT organizations in the world’s 3,500 largest companies are centralized –Both public and private sector organizations chose consolidation strategies to achieve significant reduction in operating costs – saving between 30% and 50%. –Consolidation in various forms is pursued by the Federal government and at least 42 States have undertaken some level of IT consolidation initiatives.

3. COT Definition Consolidation, or Managed Services, as defined by COT, focuses on IT Infrastructure, and may include: –Network consolidation –Service Desk consolidation –Desktop consolidation (desktop, laptop, workstation, network printers) –Server consolidation (Mainframe z/OS, UNIX, Wintel) –Storage consolidation (NAS, SAN, and offline solutions) –Telecommunications consolidation (Voice, data, video, KIH II services) –Asset Management –Security

4. Past Consolidation Efforts KY is ahead of most states with regard to IT consolidation efforts. The following IT services have been consolidated in the Commonwealth for about a decade: –Mainframe services –Wide Area Network (WAN) –E-Mail Since 2006 most, if not all, Commonwealth agencies utilize: –Commonwealth Service Desk –Kentucky.gov web portal The Consolidated Data Center, a fault tolerant, highly redundant computing center, has been upgraded through capital funding at a level unavailable to individual agencies.

5. Kentucky’s IT Consolidation Goals Provide reliable, secure, uniform and improved IT services at the same or lower total cost to the Commonwealth. Transform the redundant IT landscape into a streamlined, efficient, shared-IT-services model. Leverage the Commonwealth’s combined purchasing advantages when negotiating IT contracts. Reduce the Commonwealth’s total “IT Cost per Seat”. Kentucky’s FY05 result was $8,714 per seat. –FY05 total IT spending of $305 million, divided by 35,000 “seats”. –$230 million was spent on IT Goods & Services, as well as another $75 million for 1,350 IT-titled Commonwealth staff. Address retirement issues facing Commonwealth in 2008 by consolidating services. This allows agencies to keep remaining IT employees engaged in the business mission of their cabinet.

6. Kentucky’s IT Consolidation Results In FY06 the IT infrastructures of the following Executive Branch agencies were consolidated: –Finance and Administration Cabinet (includes former Revenue Cabinet) –Transportation Cabinet (KYTC) –Commerce Cabinet –Governor’s Office for Local Development (GOLD) –The year-one effect of IT infrastructure consolidation was an estimated $6 million savings. The net savings were effectively all within KYTC. –Finance and GOLD’s infrastructure costs remained constant while they reaped the benefits of vastly improved equipment and services. –Commerce’s investment in operational infrastructure resulted in improvements to, and in some cases reparation of, an aging infra- structure. For example, over 50% of all Commerce desktops have been replaced while a myriad of other infrastructure components have been replaced or upgraded to meet minimum Commonwealth standards.

7. Additional Accomplishments Renegotiated the desktop contract and saved approximately $250 per unit. Given a 3-year replacement cycle on 35,000 devices the potential savings is $8.8 million ($250 per unit *35K units.) Streamlined over 100 service rates to 35 which focus on core IT competencies, in order to simplify service offerings and billing. Reduced 5 IT service rates, in the 2nd quarter FY07, generating agency savings of $2.8 million for the remainder of the fiscal year. –These same COT rate reductions will generate an estimated $5.7 million in cost avoidance for the agencies in FY08. Refunded approximately $7.4 million to agencies in the form of IT service credits for FY07 COT operations.

8. Projected Consolidated Savings Gartner’s IT Consolidation Assessment (Aug ’06) produced savings estimates of –$18.7 million in annual direct savings –$13.2 million in annual indirect savings (defined as annual recurring non-IT operating expenses resulting from an improvement in support)

9. Projected Consolidated Savings Gartner Breakdown of IT Consolidation Savings Opportunities

10. Next Steps for Consolidation Potential to expand consolidated IT infrastructure services to other Executive Branch agencies. Current administration is pro-consolidation. More detailed discussion of the next steps will occur following the conclusion of the legislative session.