It's no secret that some legacy federal IT systems have grown into digital behemoths that seem to be eating the U.S. federal information technology budget. It's also important to stress that digital transformation (DX) becomes increasingly difficult if less money if available to actually make the transformation.
Our recent analysis of civilian agency IT budgets helped highlight just how pervasive the problem has become.
Legacy IT: Over 77% of the IT budget and Growing
This research was conducted while putting together this document: Business Strategy: Government Federal Civilian IT Forecast, 2016–2020.
Across all agencies, average spending on "operations and maintenance" of IT systems (which essentially means support for legacy systems), is 77.7% of agency budgets, versus 22.3% for development and enhancement. Eight years ago, this division was closer to 66% for legacy systems. Since then, the amount of money spent on maintaining older systems has crept steadily upward.
Those spending the most on maintaining existing systems include the following.
- Army Corps of Engineers - 96% of its $459.8 million budget
- Nuclear Regulatory Commission - 93% of its $156.5 million budget
- Agriculture Department - 90% of its $3.2 billion budget
- Veteran's Administration - 88% of its $4.4 billion budget
In a nutshell, greater spending on legacy systems means that more money is being channeled into supporting older existing systems while less money goes toward the development and installation of new solutions. This legacy expense creep is an important issue, since supporting new development is very important not only to help agencies work to transition toward cheaper commodity IT, but also to help them take advantage of advances related to the Internet of things, flexible mobile applications and location-aware IT solutions.
A Few Outliers Help Skew the Numbers
Besides the budget numbers mentioned above, it's also worth looking closely at the Department of Health and Human Services. While the HHS's legacy IT Budget of 73% does not place it within the top 10 agencies for legacy IT spending (from a percentage standpoint) the spending at HHS does dwarf other agencies when you realize that over $8.8 billion is being spent on legacy systems. And of that $8.8 billion, The Centers for Medicare and Medicaid Services accounts for nearly $6.5 billion. It's by far the highest-priced system across all federal civilian agencies. About 66.7.% of that $6.5 billion is budgeted for operations and maintenance.
Other expensive federal IT systems include VA's Enterprise IT Support program ($1.2 billion) and the VA's Medical IT Support efforts, ($1.1 billion).
Efforts to Combat the Trend
The expense of supporting legacy IT definitely is on the mind of Federal CIO Tony Scott, who last spring requested a pool of $3.1 billion – to be specifically dedicated to upgrading older systems. Known at the time as the “Information Technology Modernization Fund,” the White House formally proposed legislation to fund the program. But the dollars have not yet materialized.
It does look like the Rep. Will Hurd’s (R-Texas) Modernization Government Technology Act, which the House Oversight and Government Reform Committee approved Sept. 15, could finally provide the necessary funds. But the proposal still needs to clear the Senate, and as the new fiscal year starts, the funding remains in limbo.
So for now, the problem persists.
In the meantime, opposition to the legacy system money pits continues to grow, and the challenge of dealing with it is being recognized. Rob Klopp, CIO at the Social Security Administration, wrote an interesting five-part blog on the challenges of modernizing the IT infrastructure of a large federal agency.
We do believe the legacy system issue will eventually be addressed because it has to be addressed. It's very much the elephant in the federal IT budget room.
We will continue to track the legacy systems issue in the months ahead, and we look forwarding to hearing other's folk's thoughts on how the issue should be handled.