Tuesday, July 1, 2008

Managing Government Technology Like Your Investments

When Mayor Adrian Fenty appointed me to his Cabinet as Chief Technology Officer for the District of Columbia, I asked a simple question: Why can I find the real-time stock price and performance of any publically traded company with a few keystrokes, but I can’t get solid information on the performance of technology projects in the government?

My answer was to create a “Wall Street” model to manage the $950-million-plus District technology portfolio as a portfolio of stocks. Each project is a “company,” its team is company management, its schedule and financial status are captured in market reports, and customer satisfaction is the market reaction. The model allows us to balance riskier strategic IT investments with more conservative ones and rebalance the portfolio whenever necessary. The model also fosters government transparency and accountability--we deliver accurate, real-time performance data to government officials and citizens using web reports, podcasts, and YouTube videos.

I built a team of five Portfolio Managers to run the Wall Street model according to three core principles:

Apply the Efficiency of the Stock Market to IT Governance
In an environment of shrinking budgets, rising energy costs, and growing citizen expectations of government, evaluating the performance and promise of IT projects continuously and accurately is critical. With the Wall Street model, we can make fast and sound decisions to “buy,” “hold,” or “sell” an IT project—i.e., invest more financial resources or change management to improve performance, maintain the current resource level, or cancel a failing initiative.

Capture Quantitative and Qualitative Data
The IT stock model incorporates both quantitative and qualitative analysis to provide a holistic picture of the investment. Quantitatively, the Portfolio Managers analyze vital project statistics including schedule, spend against budget, and return on investment. Qualitatively, the Portfolio Managers evaluate the management team, customer satisfaction, and current project-related events to ensure a deep, integrated understanding of the project’s drivers and results.

Treat Taxpayers like Investors
We define the Portfolio Managers’ roles as guardians of taxpayer funds. Ultimately, these managers must ensure that all District agencies spend taxpayer dollars wisely and well on technology investments.

Here are a few cases where we turned “Dogs” into “Stars” by rebalancing our IT investment portfolio:
District Intranet: The District planned to invest $4 million to develop a government-wide Intranet—but with outdated technology. I withdrew the $4 million and switched the technology to free, flexible open-source software. The only cost was $10,000 for a server. The result: a cost reduction of 97.5%.

Report card system: The District planned to build a costly new complete automated report card system for the DC Public Schools. But the holistic stock market evaluation revealed that secondary schools already had automated report cards. So I switched to a much smaller $160,000 investment to install a primary school report card system and integrate it with the existing secondary school software.

DC-Net: DC-Net is a state-of-the-art fiber-optic DC government network that delivers high-bandwidth, high-reliability voice and data services to District agencies. A year ago, the project was a perfect example of excellent technology badly managed. Every month it ran a deficit, it had not added new customers at the planned rate, and costly contract staff sat idle. I changed the management, dismissed the contract staff, and re-invested the funds in a smaller group of less costly, more focused District employees. The result: a consistent monthly surplus since June 2007, renewed customer growth from 15,800 phone numbers as of June 1, 2007 to 21,580 phone numbers as of June 5, 2008 (37% in a year), and high customer satisfaction.

The genius of the American stock market is to put capital to the most efficient use, continuously redirecting funds from low-performing companies to high performers. Our IT stock market model infuses the same efficiency in government, assuring citizens the highest and best use of the tax dollars they entrust to us.