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 we’ve heard is that an injection of new funding is not needed, but rather more efficient use of existing funds, which agile alone can provide.
Let’s 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 be 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’re willing to guesstimate runs north of $200 billion.
You might think that’s 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 weren’t in favor of slapping on new features, building new systems, or being neglected altogether. That’s 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 wasn’t.
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 don’t think it’d 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’s hard to say who’s right. Ultimately, our theory is that the “available” 25% isn’t enough and some external infusion of cash is needed. But if there’s none or not enough from Congress, then from where?
That’s 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’s 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’re thrilled that it’s been part of the debate thus far on how to modernize federal IT. We’ll continue to push the concept and encourage the federal community to test it out. After all, IT share-in-savings contracting has proven to work in the past.