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Readers might notice there was no Spring Edition, due to preparation for the GFOA conference in Atlanta, Georgia this year. Fletcher & Fletcher attended and previewed the improvements made to our User Interface over the past year. We were quite pleased by the reactions we received from attendees - it makes all the hard work we put into the application worthwhile. Thanks to all that attended the GFOA this year!
There has been a large amount of fascinating articles in the realm of budgeting and governing in general over the past few months. The discussion of which I hope will promote conversation within your own departments. |
| Build vs. Buy Software & Support | |
In the economic downturn, jurisdiction's contracted with software vendors are analyzing where they can cut costs. Jurisdictions without software are considering making home-grown systems rather than contract out for software. These sites feel the reductions made by building software themselves could save them costs in the long run.
It is a hard answer for those that need to cut budgets while limiting a reduction in services. Many jurisdictions contract softare vendors for software and services they themselves cannot provide. Contracting vendors is important to reduce government expansion into areas that would cost large amounts of money to create and support. The total cost of ownership of the contracted party should be the driving factor in the decision to hire or contract. When a jurisdiction creates the budget, they should budget for the total cost of software and services in the same manner as they would budget for the staff they would have hired to replace those services.
Now let's consider software development and support based on the decision to hire and build in house. Should a jurisdiction build their own software from scratch, they would need to hire a team of developers to create it. Once this software was created, the IT department could handle maintenance, but a developer would still need to work part-time to handle bugs and fixes for a period of time. Once the system was stable, IT department staff would need to be available to handle support issues. When the software became outdated in 5-10 years, the jurisdiction would have to hire developers to convert the project to a better programming language and start the process over again. This process could cost at much as $180,000 the first year for developers and an additional $60,000 for a full-time IT staff member to help maintain the product. Total Cost over 5 years: $420,000.
Now let's consider the initial cost and maintenance cost of hiring the contractor. Assume the same first year cost, $180,000, and a 20% maintenance fee based on that price. Let's assume no other variable costs are in play. If you compare the cost of maintenance between the two options, paying that annual maintenance fee is less than hiring that IT staff member to provide support. Comparatively, the cost of the maintenance fee ($36,000) is your cost for an unlimited number of labor hours over the entire year of service. Also, you get upgrades to better versions of your software without needing to hire developers to improve your software. Total Cost over 5 years: $324,000
Also, if a company provides support at a fixed price the company will likely exceed labor-hour value of hiring in-house IT to do the support. An employee cost a set number of labor hours for each year, divided between a number of projects. The number of hours he can devote to one piece of software cannot exceed a certain limit before you must hire another IT staff member. However the potential for support hours requested under a maintenance contract will likely exceed the capacity for that IT staff. In some cases the contracted support staff might be able to remotely fix a problem faster than your IT staff.
In the end, when considering cuts, it is important to remember the human element of the equation on all sides. It can be hard to put a face to off-site support staff you would be cutting. However, relationships made with long-time contractors should be valued as much as those friends you see everyday. Government jurisdictions and small businesses have always worked together to help one another and build partnerships that build the community as a whole. In the face of adversity, the relationships contractors have made with the government entities matter more than ever. The ultimate decision of what costs should be cut should never be taken lightly. |
| Innovations from the Public Sector | |
Russ Linden, author of Leading Across Boundaries: Creating Collaborative Agencies in a Networked World elaborated a very poignant example of how it is never too late to evolve from outdated business practices and move into the new era. Using the transformation of business culture at the Virginia Retirement Fund as an example, he highlights actions taken by the new commissioner that whipped an agency in turmoil into a model for public and private businesses.
By the time you read through half the article, you might ask yourself "What are the qualities of a good agency that I could apply to my own agency?"
They key qualities are:
- Transparency. Strict hierarchy, while important, should not stop the transfer of knowledge. It is important that all involved members of a project, no matter the duties/responsibilities, be aware of the skillset required other members of their team. In order for a team to properly coordinate, they need to know the abilities of all around them and they need to have open lines of communication between them. Expand other team members breadth of knowledge to include new responsibilities within the project, not limiting them to just what their job title might be.
- Culture. Change is not hard it just takes a consistent effort over a long period time. You have to foster a culture around it, develop daily practices that enforces it and plan for its growth into the future. No one idea is important until a large group of people come together around it - so be sure people know it is a critical issue and why. Let people know it's time to get on the bus for change
- Empowerment. Similar to transparency, be sure everybody feels confident and secure in their ability to suggest ideas for improvements. If your team feels like they can't do anything but what they are told to do, you could be missing out on the insight they offer from years of experience at their jobs. Sometimes the best ideas come from those on the ground with first-hand experience. Make sure your team members are encouraged to share their thoughts and ideas to make your workplace better.
- Technology. The use of technology makes it far easier to empower and change the culture of your agency. The Internet has tools to help coordinate meetings, create web conferences, track online calendars, create message boards, share informative videos, provide online training, allow virtual classrooms and so much more. The opportunity for education is abound and flourishing on the digital network. Technology makes things transparent, is its own culture, and empowers one of its billions of users. This is the greatest tool available for leaders to begin a movement to change the way agencies work.
This example can apply to broad organizational change or even just minor changes in business practices that help foster at least two of these key qualities. Any agency that doesn't consider any of these qualities to be top priority, private or public, will be at risk of becoming outdated and inefficient.
The moden age requires agencies to encourage and foster development between departments, between areas of expertise and even between high ranking and low level employees. Agencies cannot afford to disregard the suggestions of their workers, no matter the position or ranking. Every business, private or public, could take the principles laid out in this example to heart. |
| Latest GFOA & NASBO Research | |
Spring 2010 Fiscal Survey Of States
Inflationary Indices in Budgeting
Managing the Salary and Wage Budgeting Process
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| Featured Quote | | "Indeed, a significant IT gap has developed over the past decade and a half between the public and private sectors - and that is a big part of the productivity divide between the two. Closing this IT gap is key to boost efficiency and make government more open and responsive to the wants and needs of the public."
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-Peter Orszag (OMB Blog June 8th)
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