Navy’s IT Consolidation Efforts Reveal the Truth About IT Spending – It’s Everywhere!

Published: February 21, 2013

BudgetForecasts and SpendingNAVY

In the summer of 2011 the Navy announced that they were cutting IT expenses on business-related systems by roughly 25 percent. As one might expect, this pursuit set off a process of investigation into where such cuts could be made. Nearly two years later we are now learning that the Navy has discovered they have been spending a whole lot more on IT systems, hardware, software, and services than they knew about: roughly $2-to-$3 billion more!

In a recent news article, Department of the Navy's deputy CIO, Janice Haith, gives a frank account of how the Navy internal assessments have uncovered a huge amount of IT infrastructure and applications that had been previously unknown to the CIO’s office – even after years of consolidation efforts under the Navy Marine Corps Intranet (NMCI) program and others. The revelation includes:

• Networks – Identified 302 legacy and excepted networks that will need to be migrated to NGEN or retired by March 2014 or they will be rolled into NGEN.
• Servers –  32,000 servers currently identified, compared to the original estimate of 6,000.
• Data Centers – 210 existing data centers, compared to the original estimate of 100. Navy’s goal was to get down to 25.
• Applications –42,000 applications in the Research, Development, Test and Evaluation (RDT&E) area and 27,000 residing outside programs of record, compared to the original estimate of 15,000 distinct software applications. Navy is still assessing applications used for warfighting.
• Software Licenses – Unclear at the headquarters level as to exactly which and how many software licenses the Navy owns. Consolidation of software licenses began in earnest last year when the Navy signed a large enterprise-wide licensing agreement for Microsoft products. The Navy expects to sign a similar agreement with Oracle in the future and reports that they have 17 other major providers in line.

On-Budget vs. Off-Budget IT Spending

It has been no secret that a significant portion of what the federal government spends on IT is not accounted for in the official IT budget submitted by agencies and reported by OMB. For years CIOs have expressed their challenge at managing and supporting IT infrastructures that are purchased and set-up outside their purview and they do not always hold sway over every office and program within an agency (until something breaks and they’re asked to help fix it.) The Navy’s ongoing quantification of this fact just shows the magnitude.

According to Haith, the Navy had estimated its overall FY 2011 IT budget was around $7 billion, but after further investigation it figured the number was more like $9 billion. For fiscal 2013, they are estimating a spend of $11 billion. Both of these re-evaluated estimates are significantly different than the Navy’s originally reported OMB IT budget submission, the Exhibit 53. (See table below.)

 

Implications

The bottom line is that there is a huge amount of IT purchasing that takes place outside of the CIO’s office and beyond traditional IT programs. My colleagues and I make this point whenever we comment on the federal IT spend and where potential opportunities exist. As technology permeates more operational areas and systems – including weapons, communications, energy, industrial controls, buildings, transportation, etc. – we see spending on IT products and services that fall outside official IT budgets. Therefore, any realistic assessment of an agency’s IT spending must reach beyond its official OMB Exhibit 53 submission.

In our latest annual Federal Information Technology Market forecast for FY 2012-2017, completed in June, before the current sequestration and other budget planning exercises were known, we estimate that Navy’s FY 2013 spending on all vendor-supplied IT products and services across all areas will be approximately $16 billion.

Haith’s disclosure shows the ongoing challenge of changing organizational cultures when it comes to reporting, use of cloud technologies and the need to invest in the right technologies to achieve long-term savings. There are opportunities to find for the savvy solutions provider, even in an uncertain environment.