IT Mod Trailblazers: Insights from Leaders Undergoing Transformation

What is IT Modernization, or IT Mod? Why are government agencies and other organizations investing so much time and energy into it? How do I get started on IT Mod efforts?

These are just some of the questions we hear from leaders embarking on the journey to update their outdated legacy business software and systems. Over the next few months we will start to shed light on answers to these questions by interviewing former and current tech leaders that have experience undergoing IT Mod transformations.

We’ll ask our interviewees to reflect on their successes and failures as well as the valuable and sometimes personal lessons they learned in the attempt to modernize and share advice that can be directly implemented in your organization. Along the way we’ll work with industry vets to address specialized topics relating to IT Mod, such as the tension between Buy vs. Build and Commercial Off-The-Shelf (COTS) packages.

The insights that emerge are not meant to imply there is a one-size-fits-all approach. Every organization, its people, and technological needs will vary greatly. Instead, we will share ideas on how to lead during IT Mod—or any kind of organization-wide change—by highlighting the successful tactics of industry and government leaders and common pitfalls to avoid.

Even those not directly in charge of these initiatives for their organization can learn how to ride the waves of change and be a more effective team member.

What is IT Modernization and Why Does It Matter?

Before we jump into the good stuff—the stories of leaders on the front lines—we wanted to level set on what IT Mod entails.

First, let’s address the concept of modernization in this context. For organizations, modernization is not a one-time event, but a continuous evolution to remain positioned for the future. Given the exponential change in technology being experienced today, it is critical for organizations to embrace and invest in modernization.

This means that the concept of IT Mod can be defined as the advancement of an organization’s existing applications and software with the purpose of aligning them more closely with current and future business and customer needs. Modernization usually occurs when the existing infrastructure or “legacy systems” at the front of daily business operations are outdated, presenting security issues or unmet business and customer needs. Technology is evolving more rapidly than ever before, and we no longer live in a tech environment where software can be bought or built and used for decades to come. We’re in a new state where modernization requires constant and continuous updates.

IT Modernization is an enormous financial, organizational, and cultural commitment, but there is also a strong business case for it. In particular, legacy systems are costly to maintain, and these costs continue to rise. Outdated legacy systems are especially common in large government agencies, with limited budgets that are usually spent on upkeep.

In 2017, Federal IT expenditures on simply operating and maintaining (O&M) current systems cost the American taxpayer an estimated $38.1 billion (find a further breakdown of IT spending on the federal government’s IT Dashboard). From FY 2015 to FY 2018, government IT departments spent 70% of this O&M budget on legacy systems. So, while IT Mod often has a large upfront cost, the long-term benefits can reduce the amount spent on operating and maintenance costs. Other benefits include:

• Increased cybersecurity
• More reliable systems
• Happier and more efficient users and customers
• Strengthened competitive advantage in the marketplace
• Enhanced facilitation of long-term organizational growth

It is important to note that IT Mod projects can be risky if poorly managed. According to a McKinsey & Company survey, 17% of IT Mod efforts can turn into a “black swan” for a company, meaning they become so costly that it threatens the company’s existence. And in general, large IT Mod projects with a budget of $15 million or more run 45% over budget, 7% over time, and cost billions of dollars in various overrun costs. The longer a project is scheduled to last, the more likely it will run over budget and time, which is why many organizations now deploy an Agile approach to software development. We’ll discuss this methodology in more detail later in the series.

Current IT Modernization Efforts

Clearly, IT Mod is a high-risk, high-reward undertaking. However, there has been an outstanding need for organizations to modernize their tech which can no longer be ignored. IT Mod has been a focus of the executive branch since the era of the Clinton administration. And with the Trump administration’s Modernizing Government Technology (MGT) Act in December 2017, the energy and support surrounding IT Mod has increased even more. The MGT Act sets up Centers of Excellence which help federal agencies through modernization and allow these agencies to repurpose unused IT budgets to fund projects. Agencies can also apply for funds from the Technology Modernization Fund. Chief Information Officers (CIOs) are directed to focus on high priority efforts, which are outlined in this White House Report and include transitioning to the cloud, implementing shared services, and improving cyber defense.

Still, some federal employees think these priorities don’t go far enough. In a recent interview, David Powner, Director of IT Management Issues at the U.S. Government Accountability Office, stated that,

“The nation’s most mission critical legacy systems that are costly to maintain and post significant cyber risks due to unsupported software need to be replaced with modern, secure technologies and ultimately decommissioned… The administration’s recent modernization strategy was solid on network modernization, shared services and cyber, but light on tackling these most challenging modernization efforts.”

IT Mod is also front and center in the annual President’s Management Agenda. With this development, and funding finally appropriated for the Technology Modernization Fund, it’s clear this administration sees this as something that must be addressed here and now.

First up on the docket is the modernization of the U.S. Department of Agriculture’s systems. This effort just kicked off Phase 1 of its transformation on April 2 and will serve as a “sink or swim” example of whether large-scale IT Mod is feasible for the government.

What’s Next?

Stay tuned for our first interview in this blog series, which will feature Rob Klopp, the former CIO of the Social Security Administration, who ignited their IT Modernization process and got the ball rolling for other government agencies to follow suit. Rob will provide insights on the Agile approach and what it means for IT Mod. He will also discuss the challenges with moving beyond legacy systems and leading by consensus in change-averse environments. To learn more about successfully managing IT Mod efforts in the meantime, please reach out to yasmeen.burns@theclearing.com.