Managed Infrastructure Services: A

Platform Approach to Public Sector Value

WHITE PAPER
Sponsored by: Accenture
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Dec em ber 2 0 09
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GOVERNMENT INSIGHTS OPINION

At its core, government is a service provider. While many people do
not view the government in this light, consider the vast number of
services that government agencies and ministries provide: information
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management, physical infrastructure provisioning, licensing, inspections,

security, and even education or public health management. Finding and
obtaining a wide range of government services is a rapidly evolving
capability. Key players and compelling service solutions tend to
constantly change and improve. Unfortunately, most government offices
are not structured in a way that allows them to take advantage of best-of-
breed services as soon as they become available.

With that in mind, the subject of this paper is managed infrastructure

services for IT solutions, though the concepts discussed in the
document might apply to other facets of government services as well.
Structuring government as a services management platform, rather
than organizing offices as the main provider of all services for all
people, can provide several benefits. It can free government agencies
to focus on the management role of their core mission, enabling them
to be a highly flexible supervisor of best-of-breed services rather than
a slow-to-respond provider. Progressive organizations are already
moving in this direction, as this paper demonstrates. Managed services
can be a powerful solution, especially for today's extremely complex
IT environments, helping agencies to provide quality infrastructure
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services while simultaneously reducing their costs.

IN THIS WHITE PAPER

This paper explores the concept of government as a platform. It
challenges the traditional views of the functions that government
agencies perform — as well as who performs them. It focuses on ways
to boost public sector value by proposing that government operations,
especially managed infrastructure services, should be approached in an
entirely new way: to view government as a platform that is intended
not specifically to provide all services itself, but instead to requisition
and manage top quality services provided by others.

December 2009, Government Insights #GI220876

Specifically, we are seeing a significant IT trend today in
governments. After several years of focusing their purchasing
efforts on standalone, nearly turnkey solutions for specific government
functions, many government offices are realizing that they
have too many systems and no standardized way to share data
and functionality across those systems. Many realize that they
need to take a different approach. Many now desire to redefine
their enterprise with a focus on running IT as a service.

Such a migration isn't easy, but once the transition is made, it allows
government offices to tap into best-of-breed IT services, via
standardized interfaces and shared centralized databases. This also
includes managed infrastructure services, which essentially takes the
same approach to managing an agency's systems, ranging from
networks and servers to applications, storage, and more.

Because the concept of government as a platform is an emerging

trend, this paper also addresses the issue of government procurement
offices that may not be experienced in purchasing solutions in
this way. Many are accustomed to seeking and selecting discrete
solutions rather than something that plugs into a larger organizational
architecture. The goal of this paper is to focus on the management
of the IT infrastructure as a conduit for multiple high-value
government services.

BACKGROUND
The primary value of IT infrastructure is to get needed services to
end users (citizens) as quickly and efficiently as possible. The primary
reason to upgrade or change an infrastructure, or to change the way
an infrastructure is managed, is to improve services and lower
operating costs. Today, most products and services are refined and
improved by industrializing and commoditizing delivery. When
specific products or services are in high demand, costs are controlled
and quality is improved when the commodity can be offered in a
reliable and repeatable fashion. Government IT infrastructure is vast,
and improving its efficiency is a matter of spending the right time on
the right tasks in order to properly provision the services that
governments need.

Current IT Infrastructure Landscape

IT infrastructure management is a business process that is

important to the day-to-day functionality of an organization's
business operations. Because of this, some governments have been
accepting — sometimes far too accepting — of the cost of their
infrastructure operations and the lack of standardization that has
evolved across their sprawling IT systems. But this also can lead to
substantial spending. Information and technology management and

Page 2 #GI220876 ©2009 Government Insights, an IDC Company

 Because taking a
systems management increased roughly 8% between fiscal years government as a
2008 and 2009. services management
platform approach
has the potential to
Changing this mind-set is, admittedly, a muted priority for many bring government IT
government agencies. But because taking a government as a services more in line with client
needs and market
management platform approach has the potential to bring government conditions, it is an
IT more in line with client needs and market conditions, it is an approach that cannot
be ignored for the
approach that cannot be ignored for the long term. long term.

A Time for Change

Meanwhile, a new opportunity has appeared recently for U.S.

government agencies. There is stimulus money to be spent, thanks to
the American Recovery and Reinvestment Act of 2009 (ARRA).
Between $110 billion and $125 billion of ARRA's $787 billion
spending plan could be targeted at IT systems and computer and
networking improvements.

New money means that agencies need to make some tough decisions Spending IT budgets
on realigning their
on how they will spend those funds. Spending IT budgets on infrastructures to
realigning their infrastructures to serve as the foundation for better serve as the
foundation for better
long-term services, and service provider flexibility and choices, could long-term services,
be one of the most important decisions that government agencies and service provider
flexibility and choices,
make. could be one of the
most important
Government agencies need to find the best way to deploy technology decisions that
government agencies
solutions that will scale better and cut costs. Technology solutions, if make.
properly designed, allow government agencies to take advantage of
competitively priced features such as virtualization, software as a
service, and more. This approach helps government agencies to be
more service focused, and it allows them to integrate best solutions
from multiple providers.

It is IDC Government Insights' opinion that proper management of an

organization's IT infrastructure can create a powerful conduit for
multiple high-value government IT services. Relying on experienced
providers of managed infrastructure services is a way to boost public
sector value by proposing that government operations should be
approached in an entirely new way.

SITUATION OVERVIEW

Government IT: Under Pressure to Perform

All levels of government remain under pressure to improve service

delivery. This pressure is driven by not only the need for public safety
and emergency response but also faster citizen adoption rates of
emerging devices. Citizens and the private sector increasingly are
relying on the government to ensure security and continuity,

©2009 Government Insights, an IDC Company #GI220876 Page 3

communicate through shared information and interaction, and integrate
service delivery. Government organizations are under scrutiny to
increase IT investment value and deliver more accurate and
comprehensive information. Government-wide accountability and
reporting programs are becoming more broadly implemented.
Meanwhile, the underlying IT infrastructure is becoming a sprawling
environment that is increasingly complex, expensive, and resource
intensive to maintain, thanks to a host of factors.

Today, for instance, government agencies are facing substantial

upgrades to existing systems as more government employees than ever
are working at home or on the road. Business continuity dictates that
government workers should be able to access key systems when out of
the office. This means that government IT infrastructure needs to
expand in new ways, and system upgrades can be expensive if new
servers, new applications, and new client-side software are needed.

The types of devices to be managed are also expanding. For remote

workers, the long-term shift includes new types of computing devices,
ranging from laptops or tablet PCs to PDAs, BlackBerrys, and smart
phones to networked arrays of data-gathering sensors. It also includes
new ways to report on that data. The situation is exacerbated by the
ongoing need for data sharing, such as the Department of Homeland
Security's efforts to enable the sharing of justice data across multiple
platforms. That same need is present at multiple agencies, for multiple
citizen needs.

In the meantime, there is a strong ongoing trend toward application,

system, and datacenter consolidation across the government. This
includes a growing interest in shared service centers that are built
around specific lines of business, such as financial management,
human resources (HR) management, health architecture, and more.

For all of these reasons, in-house management of the IT environment

is becoming increasingly challenging and costly. Even more
imperative, in-house management can compete for resources with the
core business operations within the agency, essentially taking the focus
off of more pressing and strategic needs.

New Opportunities Emerge

Fortunately, government agencies have a great deal of flexibility when

it comes to how they structure their IT systems. A rapidly (or even
moderately) scaling infrastructure does not have to mean higher costs
and internal complexity. Working with an expert infrastructure
managed service provider can offer government enterprises improved
reliability, managed risk, specialized expertise, and potentially lower
IT costs.

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A properly implemented managed solution has the potential to:

● Optimize IT utilization and streamline service delivery

● Ease the way for future expansion

● Promote cost savings and a fast return on investment (ROI), which

in turn enables clients to reinvest in other higher-value projects

● Lower the cost of acquiring IT goods, services, and nonpersonnel-

related IT expenses

● Help quickly address compliance issues and manage reporting

requirements

● Increase IT and business process audit ability and risk management

Today, managed services, particularly those offered as cloud-type

solutions, can be turned on and off like a utility. End users know their
costs up front, and they don't pay for unused systems. Managed
services also help shepherd end users toward an improved level of
system (and sometimes even application) standardization.

One function that has successfully made the transition to shared

services and the managed infrastructure services model is human
resources management. Human resources management, and associated
standardized processes across government agencies, is becoming
increasingly important to government executives. In the United States,
it is one of the key funded presidential lines of business. And as a
backdrop to all of this:

● Program managers are clamoring for as close to a real-time view as

possible for their systems and data.

● Business managers are pressing for enterprise cost savings through

consolidated, standardized software licensing; space reduction for
datacenters; and lowered energy consumption.

● CIOs are seeking better standardization through enterprise

architecture requirements that apply to computers, software,
networks, and more.

● CIOs are seeking faster development times for new systems,

especially as demands ramp up to create new services as workers
expand out into the field.

● Key goals for cost trimming are platform standardization and

solution standardization, which eventually lead to infrastructure
standardization where many end-user applications are service
based.

©2009 Government Insights, an IDC Company #GI220876 Page 5

Together, all of the opportunities and challenges outlined above create
a tipping point of sorts. There are new IT services opportunities
emerging in the federal market and in many state and local markets. In
order to launch these projects quickly, many offices will strongly
consider managed service solutions. Now is the time that agencies
need to make important decisions about ongoing system upgrades
versus managed services that come with specific application
performance and service-level promises.

A Seismic Shift for Government Business

Processes

IDC Government Insights foresees a substantial shift over the next few This is a radical and
substantial shift, and
years where many government organizations will focus on IT government agencies
innovations and architectures as tools versus just discrete solutions. are cautious, seeking
evidence that the
This decision will drive substantial changes to their IT investment government as a
decisions. This is a radical and substantial shift, and government services management
platform approach is
agencies are cautious, seeking evidence that the government as a the right one.
services management platform approach is the right one.

At its core, this discussion is about how to best establish the

management solution that each government agency needs to provide to
its constituents. After all, it's the responsibility of the managers of each
agency to ensure that they are offering the best possible services in the
best possible way, no matter whether those services are provided
internally or through external service providers. A services
management platform approach gives government agencies the
opportunity to become more than just providers of services via their
own staff. Instead, it gives them the leverage to select and manage
best-of-breed solutions, be they internal or external.

Does this approach work? It certainly has worked for industries outside
of government. Consider the following examples from the automotive
industry. The German automotive company Porsche contracts with
Valmet Automotive Inc. of Finland to fully manufacture some of its most
popular models. Yet, in 2012, Porsche will move that production to a
different manufacturer, Magna Steyr of Austria, because it reportedly
prefers the flexibility and development assistance offered by the Austrian
company. Likewise, Mitsubishi has done full auto production work for
Chrysler, Nissan, and others. Back in the IT and government realms,
Accenture was able to increase flexibility and speed to delivery by
developing and hosting the IT infrastructure for the systems used in
delivering HR services to the Transportation Security Administration.
And the state of New York uses a major IT service provider to host and
operate the infrastructure related to its health insurance management. In
fact, there are many examples where government agencies have seen
cost savings and measurably higher levels of performance when they
elected to manage a relationship with highly skilled service providers as
opposed to managing the complex IT systems themselves.

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There are many other examples of organizations that prefer to contract
key portions of their business process and infrastructure in order to tap
into best-of-breed solutions and better economies of scale. The only
real issue is whether this approach improves the experience of the end
users, which, in this case, are the citizens. In some ways, only the
citizens themselves can answer this question.

The functions that governments provide are needed by citizens, not

government agencies. Thus, it shouldn't matter who owns, manages,
and upgrades the products and services that are needed as the
government provides its various service functions, as long as the
required services are provided, and provided well.

Challenges and Concerns

On the flip side, it can be a challenge for organizations to work toward

full consolidation of network and infrastructure resources, and they
may find internal pressure from employees who don't want to give up
control or who feel that managed services may force them into a one-
size-fits-all type of solution. These employees may have very detailed
questions about service-level agreements for uptime, security, and
overall performance.

Other concerns may include:

● Uncertainty about the level of solution customization that may be

available

● Questions about budgetary issues and internal challenges that they

may face with trying to justify outside service procurement

● Lack of understanding of how managed services work and what a

services partner's capabilities are, including confusion about things
such as an open source path versus a proprietary path or system
response time

And, as mentioned earlier, government procurement officials may not

be trained to purchase managed solutions in quite this way. For this
reason, government offices need to make a commitment to educating
all employees, including procurement managers, in the platform-
centric approach to government services.

These issues have to be addressed and answered up front in order to

get full buy-in from both IT staff and government workers. It helps
ease concerns if all stakeholders can gain a clear picture of what's
happening in the current managed infrastructure market. Case studies
of other government organizations' services management success
stories, especially for managed infrastructure services, can be effective
tools for communicating the benefits of the approach and educating
stakeholders.

©2009 Government Insights, an IDC Company #GI220876 Page 7

For example, Accenture has helped the Defense Logistics Agency
(DLA) manage its costs and raise its performance during the
successful modernization of its highly complex, mission-critical
system — a system that supports 8,000 users and encompasses more
than 300 interfaces and 46 external partners. At the same time, DLA
has reduced its cost recovery rate from 22.1% to 14.4% and its
logistics response time from 21 days to 15 days, thereby achieving
$72 million in cost savings from legacy systems and enabling $500
million in additional cost reductions.

Additionally, a major federal agency contracted with Accenture to

design, build, and run a solution to process tax credits for over six
years and counting. Accenture's staff and partners provide day-to-day
processing using multiple delivery centers. A few good success stories
such as these can help agencies change their orientation toward
managed infrastructure services.

Building a Services Infrastructure

As time goes on, organizations will need to be able to support both

internal and external IT services. This is a key principle behind the
idea of government as a services management platform. Agencies can
select the service providers that offer the best prices and functionality.
It will be increasingly important for government agencies to work with
IT services partners that can plug into an organization's standardized
infrastructure.

Governments are starting to follow the lead of top commercial

enterprises that have acknowledged that integrating managed
infrastructure services often not only allows their organizations to stay
viable and current but also helps them cut costs and provides an added
sense of system flexibility. Solutions can scale as needed. Government
agencies need to weigh solutions and applications and adopt only those
that better and more rapidly fit process changes, rather than adapting
business processes to fit these applications.

Government ROI: A Unique Breed

Government organizations need to expect IT investments to be heavily
scrutinized, measured, and analyzed. As such, getting a handle on the
ROI of migrating to managed infrastructure services is key. Estimating
value for infrastructure migration in a government agency has to take
into account many things. While cutting costs and reducing system
redundancies is important, it's not all about cutting expenses.
Improving citizen services is paramount, especially as savvy citizens
increasingly demand 24 x 7 access to functions and the ability to do
online transactions, data submissions, and payments.

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To respond to the growing number of people who look online for tax-
related information and electronic filing options, the Internal Revenue
Service (IRS) determined that it needed to improve taxpayer and tax
professional service and reduce both site maintenance costs and time-
consuming content management processes. Accenture worked with the
IRS to build a new Web site and help desk in just five months. The
swift response helped the IRS to create a more reliable source of
information for 120 million users. Additionally, the site has never
experienced downtime, and it is robust enough to meet the increased
demands of the tax season.

At the U.S. Department of Education's Federal Student Aid department,

Accenture helped to design, build, and implement the Common
Origination and Disbursement (COD) system. With Web-based
capabilities to streamline, centralize, and integrate operations of two
disparate, aging legacy systems, COD allows Federal Student Aid to
receive student aid data and disburse over $33 billion in federal grants
and loans to over 6,000 schools. Additionally, the Federal Student Aid
department, through an extension of Accenture's contract to provide
continued operations and maintenance support, has realized savings
from improved productivity, efficiency, and customer satisfaction.

Government agencies will not transition to any managed services that

cut back on the current level of services that they provide to citizens,
and they are likely to consider only those that significantly increase the
functionality that they can offer.

There may be hundreds of variables for such measurements, but the

bottom line is about both cutting costs and improving services. One
very basic calculation for return on investment can be stated as ROI =
[(payback – investment)/investment)]*100. In this case, ROI is the
total amount of money saved after an investment in a specific solution.
Investment relates to the amount of resources put into generating the
given payback.

The lists that follow include items that a systems manager typically
has to consider. You may have several of your own line items to add to
these lists as well.

Pot ent ia l Co st s to Ev alu at e

Cost can be loosely grouped into three main areas: technology, people,
and facility.

Technology costs may include:

● Initial investment in hardware or monthly lease payments

● Annual software license costs plus periodic upgrades (for operating

systems, applications, and system or network management)

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● Per-user license cost for an operating system or applications (if
structured that way)

● Network bandwidth charges

● Additions to overall infrastructure costs, including router ports,

switch ports, and cabling

● Cost of data backups, business continuity investments, and storage

● Migration costs associated with a move to a new platform

Costs associated with staffing and people may encompass:

● Labor costs, including installation, configuration, maintenance, and

ongoing business management of an application or service
(Measure both new hires and percentage of time to be dedicated by
existing staff.)

● Staff training needs

Facility-related or other costs to consider are:

● Interest costs associated with any loans

● Electricity costs associated with new machines or server rooms

● Cost of dedicating a portion of a datacenter or server room (space

rental, construction, rewiring, etc.)

Pot en t ia l S av in g s t o Ev a lu at e
When looking to identify areas of savings, be sure to take into account
the following:

● Have software licensing costs decreased (including the elimination

of per-CPU or per-user charges)? Across how many years?

● Were you able to retire any existing servers or other machines?

● Can one of the solutions let you squeeze more life out of your
existing hardware, substantially reducing your up-front
investment?

● Have you been able to trim staffing and management costs? If you
are able to trim them, you also can cut costs fast. [Worth
measuring as part of this process is the average salary of certified
administrators for various types of products.]

● Will one solution give you better options to scale your system up
or down with minimal new investment?

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● Is one of the solutions less likely to lock you into a proprietary
format in the coming years, giving you more flexibility to try other
solutions?

● Will one choice or the other allow you to retain valued workers,
helping you avoid the cost of training new personnel?

● Did you consider allowing end users to select their own operating
platform, provided they can justify it and it is compatible with all
existing systems? This leeway helps trim some user training costs.

When Is Your Agency Ready?

Agencies are probably more prepared than they think for the transition
to managed infrastructure services. If they have a robust network in
place, and some level of Web services, they likely have the basics of
what they need. This is good news, but there is still work to be done,
and agencies still need to do a larger assessment of their readiness. For
those that are considering embarking on or that are about to embark on
this path, we offer the following counsel on how to get started:

1. Prepare your employees. This includes system managers, program

managers, and technical support people. It also includes the
executive leadership of your organization. They will need to be
champions of your managed services strategy if it is going to get
broad buy-in. Are decision makers accessible to you? Who is
accountable to them?

2. Know your system architecture. Visit and inspect both your own
systems and datacenters and any potential service provider's
facilities to confirm that the proper bandwidth, capacity, and
system availability are present.

3. Look for applications that may be heading toward retirement in a

year or so. Do they face a high potential investment and new
knowledge acquisition with a low return on investment? These
applications could be your first candidates for transition to
managed services.

4. Confirm your technology platform. Are your systems' Web

services capable? Do your employees have the right Internet access
and the right Web browsers or client-side software to access other
systems?

5. Talk with potential service providers about transferring older data

sets, or ask how they can help manage existing databases and
resources on your current machines.

6. Be aware that applications requiring special technology skills are

harder to move to a managed service.

©2009 Government Insights, an IDC Company #GI220876 Page 11

7. Evaluate the size of your applications. Large applications are better
suited for managed services than those that may have only one or
two application or system managers in place. Smaller applications
won't necessarily carry the right economy of scale.

8. Do a full assessment of your architecture, storage management

software, and storage resource management solutions.

9. Make sure that your IT department can support the changing

requirements that will come from managed services and that it can
fully interface with the service provider's managers.

FUTURE OUTLOOK
IDC Government Insights believes that more agencies will adopt the
government as a services management platform approach. The call to
action for government agencies is to start defining their IT
management needs for the immediate future while investigating
whether managed infrastructure services can play a role in their long-
term improvement plans. We believe that such managed infrastructure
services can actually be a pivot point for making these improvements.

Over a much longer time horizon, managed infrastructure services are

likely to include things such as system virtualization, cloud services,
and even fully managed datacenters. These complex solutions, when
properly managed, can significantly cut operation costs. But
organizations need to make significant system and management
adjustments to get there, starting with a steady enterprise migration
toward a service-oriented architecture.

CONCLUSION
The key high-value issue for agencies is as follows: Taking a platform Government's real
challenge isn't to
approach to IT services allows agencies to do a cost/benefit analysis of continually upgrade
multiple service providers and discover better price points and extended its existing systems.
Instead, the challenge
services. In general, this approach can be more cost-effective than is to discover the
spending the majority of their time managing a complex IT value in its existing
infrastructure and seeking ways to reduce costs internally. Government's systems, limit dead-
end systems and
real challenge isn't to continually upgrade its existing systems. Instead, upgrades, and
the challenge is to discover the value in its existing systems, limit leverage current IT
investments in new
dead-end systems and upgrades, and leverage current IT investments in ways that will benefit
new ways that will benefit the full enterprise and meet long-term the full enterprise and
meet long-term
business goals. At a time when government agencies are under business goals.
significant budget and funding pressures, many have discovered that
working with highly skilled infrastructure service providers and
managers is a crucial foundation that can help make this happen.

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Another advantage of managed infrastructure services is that they also
can help promote a standardized way of calculating ROI. Standardized
systems tend to have set pricing structures so that buyers know what
they are getting for their money. Highly customized systems can be
black holes when it comes to both initial development costs and
ongoing maintenance costs, as new functionality needs to be added to
meet emerging government needs. This could be very valuable as
government facilities prepare to transfer some of their systems to cloud
computing. Cloud-based IT services have great potential for long-term
IT savings, but only if an agency is properly aligned to take advantage
of them.

Government as a platform for managed services, especially managed

IT infrastructure services, is a powerful new way to look at how
agencies should approach both IT and the support they offer to
citizens. Properly executed, this approach caries great potential to cut
costs and improve service reliability while also putting governments in
a more flexible long-term position for choosing the best solutions for
their IT challenges. That makes this the solution to watch for the long
term.

By taking a platform approach to IT services, government can take

advantage of and effectively adapt best practices in service
management and governance from leading service providers. By
applying these practices, government often can reduce the complexity
of its IT infrastructure and have a smaller but optimized infrastructure
services environment. Investigation and evaluation of industrialization
of services and delivery should be on government's agenda as this
approach has the potential to greatly enhance government's ability to
support the different agencies and their unique requirements while
limiting the complexity and footprint of IT.

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Copyright 2009 Government Insights, an IDC company. Reproduction

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©2009 Government Insights, an IDC Company #GI220876 Page 13