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FORMGEN.160
CITYOFLOSANGELES
INTER-DEPARTMENTALCORRESPONDENCE
0150-08813-0002Date:
October7,2009
To:Chair,BudgetandFinanceCommitteeFrom:MiguelA.Santana,CityAdministrativeOfficer
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Subject:SUPPLEMENTALREPORT-INFORMATIONTECHNOLOGYAGENCYREQUESTTOENTERINTOACONTRACTWITHCOMPUTERSCIENCECORPORATIONFORTHEREPLACEMENTOFTHECITY'SE-MAILSYSTEMSUMMARYOnAugust11,2009,theInformationTechnologyandGeneralServicesCommittee(Committee)consideredareportfromtheOfficeoftheCityAdministrativeOfficer(CAO),datedJuly9,2009,regardingtherequestfromtheInformationTechnologyAgency(ITA)toenterintoacontractwithComputerScienceCorporation(CSC)toreplacetheCity'se-mailsystem.AsproposedbyITA,theCity'sGroupWisee-mailsystemwouldbereplacedbyGoogle's"softwareasaservice"e-mailsystem,whichalsoincludeswordprocessing,spreadsheet,andpresentationpreparationapplications.TheCommitteerequestedthisOfficetotransmitasupplementalreporttotheBudgetandFinanceCommitteewhichaddressesthefollowinginlightofchangeswhichhaveoccurredsincethereleaseoftheoriginalCAOreport:•Anupdatedcost,savings,andfundinganalysis;•Clarificationofthedifferentcategoriesofcostsandsavings;•Adiscussionofthekeychangesinthefinaldraftversionofthecontract;•Adescriptionoftheproposedpilotprogram;and,•Proposedresolutionforthesecurityissues.Afterareviewofeachoftheseissuesandconsiderationofrevisedinformation,thisOfficestillrecommendsthatthecontractbeapprovedandthattheCityimplementtheproposedGooglesystem.Thisreportdrawsthefollowingconclusionsforeachoftheissuesidentifiedabove,whileafullerdiscussionofeachisincludedintheDiscussionSectionofthisreport:
1.Howdothecosts
of
implementingthf1Googlesystemcomparetothecosts
of
thecurrentsystem?
ThefullcostofimplementingtheGoogl~systemasproposedexceedsthecostsofretainingthecurrentGroupWisesystembyapproximately$1.5millionovertheproposedfive-yeartermofthecontract.Someofthesecosts,however,areforserversandstaffthatarecurrentlyusedbyGroupWiseandwhiletheywiilbe-retainedbytheCity,theywillnotbeneededtosupportGoogleandcanbereassignedtopressingneedsinITA.Additionally,theCitywillgetbothdisasterrecoveryandincreasedstoragespaceundertheGooglecontact.WhiletheCitycurrentlyhasnoplanstoimplementtheseitemswiththe
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currentsystem,theyareofsignificantvaluetotheCity.Thebenefitsthatwillbegainedbythisadditionalcapacityjustifythecostsofimplementingthenewsystem.
2.Istheresufficientfunding
to
addressthefirstyearcosts
of
thenewsystem,giventhatimplementationhasbeendelayed?
AsaresultofchangingtheimplementationdatefromDecember31,2009,toJune30,2010,savingsfromcancelingGroupWiseprojectedtobeachievedduring2009-10willnolongerbeachievedandcannotbeusedtooffsetthecostsofthecontract.AsaresultofarequestfromthisOffice,CSChasagreedtoadvancetotheCitypotentialrebatesavingssufficienttooffsettheremaining2009-10shortfall.Thenecessarycontractchangestoimplementthisadvancedrebatehavebeenincorporatedinthecontract,whichisattachedtothisreport(Attachment1).
3.DoestherevisedcontractaddresstheconcernsthatstaffhadregardingthedraftcontractthatwasbeforetheCommittee?
Yes,thefinalversionattachedtothisreportfullyaddressesconcernsthatstaffhadregardinglimitationofliability,indemnification,andearlytermination.ThecontractnowadequatelyprotectstheCity'sinterests.
4.DoestheproposedpilotprogramallowtheCity
to
fullyevaluatetheGooglesystemandcancelthecontractwithoutexcessivepenalty?
Theexpandedimplementationscheduleallowsforatwotothreemonthpilotperiod,andtherevisedearlyterminationlanguageprovidesthattheCitywillbereimbursedforsubscriptionfeesthatareunusediftheCitychoosestoterminatethecontractforconvenience.
5.HavethesecurityissuesraisedinthepriorCAOreportanddiscussedintheCommitteemeetingbeenresolved?
SincethepriorCommitteemeeting,GooglehasannouncedanewproposalforprotectingsensitivegovernmentdatathatisconsistentwiththeapproachpreferredbythePoliceDepartmentandtheCaliforniaDepartmentofJustice.ThePoliceDepartmentissatisfiedthatthesemeasureswilladequatelyaddressitssecurityconcerns.FormalapprovalfromtheDepartmentofJustice,however,canonlybegainedthroughitsreviewoftheactualfunctioningofthenewsystemduringthepilotperiod.
Conclusion
ThisOfficepreviouslyrecommendedproceedingwiththeproposedcontract,recognizingthattherearerisksinvolvedwithanysignificantchangeofthisnaturebutstatingthatthebenefitsfromtheproposedcontractsmitigatetherisks.Wecontinuetosupportthisrecommendation,particularlyinthatwewereabletonegotiatetheadvancedrebatetocoverthecostsofimplementationtoreplacethelostsavingsduetoimplementationdelays.TheCAOwillestablishaworkinggrouptooverseethetransitiontotheGooglesystemandtoaddressadditionalissuesthatariseduringimplementationatthemanagementlevel,includingconcernsraisedbyotherCitydepartments.
RECOMMENDATIONS
ItisrecommendedthattheCouncil,subjecttotheapprovaloftheMayor:1.NoteandFilethereportfromtheOfficeoftheCityAdministrativeOfficerdatedJuly9,2009,regardingthiscontract;
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2.ApprovethecontractdatedOctober2009(Attachment1)withComputerSciencesCorporation,Inc.,forthereplacementoftheCity'se-mailsystemwithGoogle's"softwareasaservice"productthatincludeswordprocessing,spreadsheet,andpresentationapplications,intheamountof$7,250,000,foratermofthreeyearsfromthedateofexecutionwithtwoone-yearrenewaloptions,subjecttotherevisionoftheagreementtoreflecttherebateadvancedescribedinthisreport,andsubjecttothereviewandapprovaloftheCityAttorneyastoform;3.AuthorizetheGeneralManager,InformationTechnologyAgencytoseekreimbursementforqualifyinghardwareandsoftwarepurchasedbytheCitypursuanttothe2006classactionantitrustsettlementagreementwithMicrosoftuptothefullremainingbalanceof$1,507,209,tobereceivedbytheCityasaGeneralFundreceipt;4.InstructtheGeneralManager,InformationTechnologyAgency(ITA),uponreceiptoftheMicrosoftsettlementagreementfunds(Recommendation3)torequesttheOfficeoftheCityAdministrativeOfficertorecommendthroughitsFinancialStatusReportatransferfromtheReserveFundtoITAinanamountuptothereimbursementsreceivedasrequiredtofundthiscontractafterallotherpotentialfundingsourcesidentifiedinthisreporthavebeenexhausted;and,5.InstructtheInformationTechnologyAgency,withtheassistanceoftheOfficeoftheCityAdministrativeOfficer,toidentifyadditionalfundingasmayberequiredifthesourcesidentifiedinthisreportareinadequateforthe2009-10costsofthiscontract.
FISCALIMPACTSTATEMENT
ThetotalbudgetaryimpactofimplementingtheGooglesystemin2009-10wouldbe$5,976,205.Ofthisamount,$1,951,260isforadditionalexpendituresnotincludedinthe2009-10Budget,including$1,754,760forGoogleimplementationande-mailsubscriptions,and$196,500forinfrastructureupgrades.TheseunbudgetedexpenditureswillbeaGeneralFundobligation.ITAhasidentified$1,687,209thatcouldbeusedforthisproject,comprisedofsavingstotaling$180,000fromits2009-10Budgetandadditionalfundingof$1,507,209froma2006classactionantitrustsettlementagreementbetweentheCityandMicrosoft.CSCagreedtoadvancetheCity$250,000infuturerebatestocoverthemajorityoftheremaining2009-10balanceof$264,051.TherecommendationsinthisreportareincompliancewiththeCity'sfinancialpolicies.
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