Last December, Robert Read and I published a four-part blog post series on a concept that we call Agile Share-in-Savings. The basic idea behind Agile Share-in-Savings is to marry the underutilized procurement practice of share-in-savings contracting with modern agile delivery practices in order to finance the federal government’s way out of its legacy-systems crisis.
One strong counter-argument that we have heard is that what is not needed is an injection of net new funding, but rather more efficient use of existing funds, which agile alone can provide.
Let us think about this argument in terms of numbers and IT economic behavior.
Right now the federal government spends about $80B annually on IT, with about 75% (or $60B) of that going toward operations & maintenance activities. That means about 25% (or $20B) is available for legacy modernizations now. That should plenty, particularly if cost-efficient methods such as agile are used, right?
Looking at this from a macro perspective, the answer really depends on how much and how quickly that annual amount of $20B could pay down the decades’ worth of accumulated “IT debt,” which we are willing to guesstimate runs north of $200 billion.
You might think that is too crazily high, but imagine all the instances over the years in which the thousands of existing systems out there needed to be refactored, re-architected, re-platformed, upgraded, etc. but were not in favor of slapping on new features, building new systems, or being neglected altogether. That is a lot of accumulated IT debt, and by that we mean all the money that should have been spent to keep the escalating costs of changing, operating, and maintaining those systems down — but was not.
Given the probable size of this accrued debt, and the reality that a good portion of the “available” 25% would likely be siphoned off to support new requirements anyway, we do not think it would be enough to dig agencies out of the hole expeditiously.
Now the points/counterpoints of this argument could get pretty nuanced. Without a functioning model of the government’s IT debt and other data, it is hard to say who is right. Ultimately, our theory is that the “available” 25% is not enough and some external fusion of cash is needed. But if none or not enough from Congress, then from where?
That is where our Agile Share-in-Savings concept comes into play. And we think it dovetails nicely with the proposed Modernizing Government Technology Act bill, which allows agencies to establish a working capital fund and “bank” savings in that fund for reinvestment in other IT modernization initiatives. That is a critical element for maximizing the financing potential of Agile Share-in-Savings.
Regardless of where the concept of Agile Share-in-Savings goes from here, we are thrilled that it has been part of the debate thus far on how to modernize federal IT. We will continue to push the concept and encourage the federal community to test it out. Afterall, IT share-in-savings contracting has proven to work in the past.