Technology Services

2012 Strategic Resource Alignment Project

October 31, 2012

Executive Summary

In March 2012, The City & County of Denver (CCD) initiated a Strategic Resource Alignment (SRA) project for its Technology Services (TS) Department. The project determined options for sizing and structuring the department to meet desired service levels at sustainable funding levels.

Of the twelve service areas, Emergency Services Technology Support is performing at the targeted service level, but can benefit from future investment (some of which have the potential to be funded through grants).

The other eleven service areas require additional resources to fix “Routine Operations and Maintenance” and “Incremental Change/Upgrades” issues (i.e. the foundation).

Considering alternative models of service delivery can reduce the overall cost curve of technology, but requires a shift in emphasis from capital expenditures to operational expenditures. In other words, continued investment in software and hardware, without a commensurate increase in personnel to implement and manage these capital investments, will continue to dilute effort and result in less-than-expected return on investment (ROI).

The Base Case Scenario (i.e. the status quo) is unsustainable. Continued execution of the Base Case will result in escalating risks, decreased service levels, and a greater future cost liability in terms of risk exposure and required future investment. This scenario will save $2.5 million from 2013 budget (as compared to 2012 after including citywide growth assumptions).

The Sustainable Base Case Scenario requires elimination of targetedexisting services so that resources may be reallocated to meet desired service levels in remaining areas. As in the Base Case scenario above, this scenario includes a $2.5 million budget reduction. This reduction acknowledges no sustained increase in funding and, therefore, that the organization should move towards sustainable service by narrowing scope.

The recommended Pyramid Scenariocan deliver transformational results and may be timed to occur over multiple years (three years is the minimum required to fully execute). This scenario requires increased resources in order to progressively achieve desired service levels along the tactical to strategic continuum. This incremental investment totals $66.2 million over a projected three-year implementation[1], and includes:

  • $14.7 million in recurring annual operating costs once fully implemented.
  • $3.5 million in recurring annual capital expenditures once fully-implemented
  • $22.2 million in “one-time” capital expenditures (those with a depreciable life of 10 or more years)

Just as TS is a product of the Shared Services concept, consolidating federated technology services across CCD into one agency, it may be able to free existing resources by consolidating non-core administrative functions with other agencies specializing in that work.

TS may be able to free resources through increased management span of control in and across business units. A Career Service Authority (CSA) review found that most business units were adequately defined and that span of control issues were largely a result of reduced staffing in those units.[2] However, it appears that TS continued to fill its entire allotment of management positions through promotion and hiring even as production personnel positions are reduced.

TS and the Budget & Management Office (BMO) can free resources by utilizing contractors less, holding managers accountable to supervise and develop internal employee expertise, and eliminating short-term budgetary incentives that lead the Department to hire contractors vs. additional full-time equivalents (FTE).

The project aligns withTS’strategic planning efforts to maximize delivery of technology to CCD agencies and citizens.

Background

In 2005, TS moved from a federated to a centralized model as part of a CCD Shared Services initiative. While this is a sound strategy for an organization of CCD’s size, the execution and resourcing were insufficient, even at 2008 levels. Compounding matters, the organization has downsized since 2008 due to non-strategic budget cuts.[3]

As a provider of scalability and efficiency, most private organizations view technology as a way to reduce expenses elsewhere, whereas in a public government setting technology may be viewed as a way to expand the bureaucracy and expand services. This creates an inherent conflict in translating technology investments into smaller government.[4]

The formal SRA project began in April and ended in July of 2012. The SRA recommendation team consisted of personnel with subject matter and/or analytical expertise. The project team included:

Deputy Chief Information Officer Ethan Wain

City Councilwoman Mary Beth Susman

City Council Director Janna Bergquist

Clerk & Recorder Debra Johnson

Budget Director Brendan Hanlon

Controller Beth Machann

Budget & Management Office Analyst Theresa Wilson

Development Services Manager Kelly Leid

Deputy Manager of Safety Laura Wachter

Denver Human Services Deputy Manager June Allen

Public Works Chief Operating Officer George Delaney

Parks & Recreation Manager Lauri Dannemiller

Mayor’s Office Neighborhood Liaison Michael Sapp

Chief Information Officer Chuck Fredrick and Chief Performance Officer David Edinger led the project. The project was supported by a working group of TS personnel and vendors who contributed significantly to the analysis. Unlike the traditional SRA approach, the technical detail and uniqueness of Denver’s TS Department required the subject matter experts to provide much of the analysis, with objectivity introduced through a variety of clients and other stakeholders.

A series of six meetings were held to analyze the twelve service areas, gauge appropriate service level targets, and identify options for each service level targets. These options were then grouped into seven scenarios, from which one recommendation and two alternatives are presented in this report.

The “13th” service area, Other, includes administrative and support functions not otherwise analyzed (e.g. Finance). This area, and the entire organizational structure, was reviewed separately with Career Service Authority Director Nita Henry, her staff, and a smaller team including CIO Chuck Fredrick.

Steve Foster, President and CEO of Colorado Technology Association, reviewed the analysis to provide an external technology perspective. Given the criticality of security, Mr. Foster recommended a Security Advisory Board comprised of local security experts to advise Technology Services on its potential buildup of this area. David Suppes, Chief Operating Officer of Denver Public Schools, also provided critical feedback, particularly in the area of budgeting and prioritization. Mark Pray, CIO for the City of Aurora, and Molly Rauzi, former CIO of Technology Services, also reviewed the draft report and provided feedback and input. All perspectives were incorporated into the final draft of this report.

Methodology & Research

The SRA project scope is based on maximizing technology services as detailed in the TS strategic plan ( in the Strategic Plan section). The SRA sought to identify the best paths to achieving desired service levels. These service level definitions were derived from the 2011 Gartner IT Service Delivery Process Assessment (Attachment A). On a five point maturity scale (0 is low, 5 is high), CCD scored 1.85 (slightly lower than the average for peer state and local governments of 2.33). For SRA purposes, the goal is generally a 3.0 or higher maturity for each service area. This rating translates into sufficient service levels for an organization of CCD’s size and practice (government services). Higher levels may be sought in particularly critical areas (e.g. Public Safety) or when achieving those levels is possible without significant incremental cost (e.g. Collaboration, where the cost between a 3.0 and 4.0 maturity is the same). When possible, service levels are also expressed in terms of annual percentage time in service (e.g. 99.9% up time).

Gartner considers CCD a Level One (aka. Ad Hoc) organization, describing this state as follows:

“A Level 1 organization does not specify processes and leaves the determination of the right approach to individual contributors; thus, it does not have much repeatability, if any. Every time a certain activity is performed, the team starts anew or "from scratch." There's no learning and no real enhancement, and any improvements are made by specific individuals. When they move on, so do the improvements. A Level 1 organization depends on individual workers, because they will get the work done no matter how many times they have to do it or how long it takes.”

CCD’s current maturity may be explained, in part, by its historical spending, which has lagged peer state and local governments (SLGs). However, because technology is inherently scalable, one might expect both metrics to fall as city size increases (e.g. it takes only one records management system for the Police Department regardless of whether the force size is 1,000 or 2,000 officers). So it is unclear whether this benchmark is truly comparable across all cities. On the other hand, there is little evidence that very large cities such as New York or Los Angeles spend less per capita than Denver.

To the extent IT spending is a measure of investment toward future potential, similar to research and development within the pharmaceutical industry, CCD is significantly lower than average. CCD spends just under 3% of its operational expense on technology. In context, other state and local governments spend 3.6% and the national average across all sectors is 4.5%.

Denver is not the only city grappling with the question of how to create a sustainable technology enterprise. San Francisco’s Information and Communication Technology Fiscal Plan for 2011-2016 calls for an incremental investment of $338 million over five years (

Service Areas

As part of the SRA process, TS analyzed its services across 12 main functional areas. The functions performed by 311 and Channel 8 are relatively uncommon and are difficult to benchmark, so are generally excluded from these types of comparisons. There are significant interdependencies across the service areas, with three being completely independent by nature (Media and Video; Consulting) or by design (Emergency Services). The three foundational areas of Security, Infrastructure, and Connectivity are necessary for the successful maturity of the remaining areas.

Interdependencies by Service Area

The SRA team rank ordered the service areas according to the perceived need for incremental improvement. [5] The purpose of the chart on the following page is to provide a sense of scale between the Base Case and Optimized scenarios. The areas are sorted left to right by ranking.

  • The current budget amount (blue) represents the total annual spending (operating and capital expenditures).
  • The incremental spending (red) represents the total cost (operating and capital expenditures) to optimize this service area, as if it were possible to reach the optimized state immediately. Note: this is for comparison purposes only, as it is not possible to reach the optimized state immediately and a portion of the optimized state would create incremental ongoing expenditures.

Allocation of Spending by Serivce Area

Note: SRA Team average ranking is in parentheses next to the service area name.

Comparisons of Base Case to Optimized scenarios for each service area are below, based on their status as:

  1. Independent: not-interrelated with other service areas.
  2. Foundational: provides basis for success in other areas.
  3. Dependent: unable to reach desired maturity without strong foundation.

Multiple options exist for each service, and these options are frequently cumulative – that is, they may be combined to reach the optimized state. Service area options are standalone options unless otherwise noted.

Emergency Services (Independent) provides secure, reliable, and scalable radio and dispatch services for Police, Fire and Emergency Medical Services. This includes support to the 911 Communications Center for maintenance of the Computer Aided Dispatch systems and agency mobile command vehicle support.

The Base Case for Emergency Services is close to optimized, but there are several improvement options:

  1. Using Federal grant funding tied to homeland security initiatives, increase mobile bandwidth from 58Kbps to 10Mbps, enabling increased functionality such as video in police patrol cars. This funding is unsecured and matching requirements may exist. CCD Administrative costs would increase by approximately $150,000 annually. This service increase could potentially be distributed to other CCD agencies. Approximately $10 million in grant funding is being pursued by TS.
  2. Increase radio replacement from every 14 years to every seven years at an incremental cost of $1.845 million per year. Benefits include greater interoperability, especially with non-Denver emergency agencies, and reduced service calls which may result in cost savings.

Media & Video Services (Independent) provide public meeting coverage and comprehensive video and media production and distribution. This enables City agencies to train their staffs more efficiently, demonstrate government process and transparency to residents, and encourages civic participation. It "tells the story" of CCD, creatively and comprehensively meets the communications needs of City agencies.

This service area has borne significant cost cutting over the last several years, as citizens have prioritized it below other CCD services. In other words, the Base Case has changed significantly from previous years. Several options exist to reach the optimized state:

  1. Sustain Internship Program to maintain current video productions, including partner short and long term projects; produce three Mayoral video projects per week; push video content to multiple distribution pathways. $58,500 annual costand an ROI of 137% versus outsourcing this function, mostly due to use of interns.
  2. Provide audio-visual support at City agency events for Facilities Management at multiple facilities(Base Case equals 5 per month). $4,400 annual cost and an ROI of 137% based on Facilities Management recovery of custodial staff time.
  3. Create training/testing videos for City staff (10 per year) and produce short-length videos with agency partners to communicate with the public. $79,500 annual cost and ROI of 117% based on freeing 360 hours of CSA training time and a 2% decrease of 311 calls.
  4. Create a Special Projects Team to focus on all non-meeting video productions, including special events and promotional coverage. $219,000 annual cost (inclusive of options 1-3) and ROI of 96% by 0.5% increase in revenue from CCD-owned venues and lowering the production of grant-funded videos (currently outsourced) from $150/hour to $48/hour.

Consulting Services(Independent) provide the needed resources and expertise to estimate, evaluate, and implement technology solutions, including:

–Management project requests and evaluating the ramifications and costs of projects with respect to technology, industry practices, and other projects within CCD.

–Management of implementation of the project with respect to costs, resource, and status.

–Managing ancillary project resources needed for successful completion.

Consulting services is about planning before doing. Independent research suggests that, initially, the cost of fixing a bug at the requirements stage is nominal. But as the software moves along in its life cycle the cost of fixing a bug increases dramatically. Bugs are relatively easy to fix at the initial development stage when a bug is no more than a change in notion. At the design stage, however, the relative cost can increase five times what it wasat the requirements stage. At the code stage, the cost to fix a bug can increase ten times. By the time the application is operational, the cost to fix a bug can increase 150 times.

Based upon CCD’s recent history at completing projects on time and on budget, and the number of existing projects in various states of limbo (e.g. Parks and Recreation point of sale system, Multi-Jurisdictional Assessor/Treasurer system), that enhancing Consulting Services could lead to a significant ROI.

Several options exist to optimize Consulting Services:

  1. Convert contractproject managers (PM) to in-house PMs. If 75% of contractor PMs were converted to in-house positions, TS could save approximately $195,000 per year. Under this model the PM cost would be $2,015,000 per year with a net gain of 2 additional PMs. Assuming spending stays near Base Case levels, ROI is 3% but PM capacity would increase from four to six FTE for the same cost. Side benefits include retaining knowledge internally by using in-house resources. Alternatively, PM’s could be converted with capacity held constant, creating a greater ROI.
  2. Mature the project intake process by hiring system analysts (both Innovation Fund projects and smaller scope projects). There are no systems analysts to scope new project requests. TS currently utilizes higher cost PMs to do this work for smaller projects and the Business Process Improvement (BPI)Team performs this work for Innovation Fund projects, creating several unneeded handoffs between TS and BMO and pulling BPI capacity from process improvement work in agencies. The annual cost is $315,000 for three Systems Analysts (SAs). The ROI is difficult to calculate, but the key idea is to push costs of change to the left on the chart above.
  3. Mature the project solution architecture by converting the existing contract solution architect to in-house personnel, add two additional FTE (incremental cost of $183,000). Also, purchase enterprise architecture toolset (one time cost of $400,000 plus $80,000 per year maintenance). This investment will result in 100% of project requests, requests for proposals, and requests for information will be properly vetted early in the process, saving rework costs later
  4. Mature account management function with agencies, identified by Gartner as a specific area of concern to address. There are no dedicated account managers, and agencies are currently staffed by TS managers two to four hours per month (at staff meetings, individual meetings with agency technology leads, etc.). The cost of four FTE is $420,000, and would provide for:
  5. Single point of contact to clients, with bandwidth to follow-up on client issues.
  6. Improved Shared Service model, similar to the Career Service Authority (CSA), with service delivery practices embedded in the agency.
  7. Better understanding of clients’ business models, enabling TS to enhance business partnerships and become more proactive.

Security & Access Services (Foundational) provide protection and compliance of systems and data through protective services, access control, and auditing. Services also include investigating security incidents, documenting root causes, and proactively developing mechanisms to remove risk. These services provide both education to CCD staff and protection of current systems from intrusion and unauthorized use. In the event of security incidents, forensic analysis is conducted to determine the root cause and, potentially, the people involved.