Does the U.S. Federal government spend too much money for its Information technology solutions? Short answer - yes. But the reasons are complicated and not easy to fix. Compared to other industries, the mission of government is unique, which can make an apples-to-apples comparison of IT budgets a bit of a challenge.
Still, we here at IDC Government Insights wanted to know – how much does the U.S. federal government spend on IT per employee? And how does this expense ratio stack up against other industries?
We pulled the data together in a document called An Asset Management Enigma – U.S. Agencies Spend nearly four Times More on IT per Employee vs. Industry Average.
The title of the document helps tell the story.
On average, the U.S. federal government does indeed spend significantly more on information technology, per employee, than other industries. (Keep in mind that we are talking about all agency employees, not just IT staffers). Here's how it stacks up.
- Currently the federal government spends an average of about $39.2 thousand dollars per employee on a wide range of IT solutions.
- The average for IT spending per employee, across all other industries (excluding government and education), is just under $9.9 thousand. The all-industries average comes from IDC's US IT Budget Benchmarks program, which collects multiple IT statistics across all industries
To be fair, some agencies do display greater IT efficiencies than others. For example, the Veterans Administration (VA) weighs in at a moderately efficient $13.0 thousand annually per employee. At the other end of the scale, the Department of Health and Human Services (HHS) spends over $187.5 thousand per employee. One driving factor is that HHS is dealing with many older legacy systems.
Per-employee IT spending as a KPI
We believe ongoing measurement of IT cost per employee can help government agencies put an important stake in the ground when it comes to evaluating what they spend on IT and how they can work toward greater efficiencies in their investment decisions. It's one of many key performance indicators that can help federal agencies measure themselves against their peers.
We also took a look at why spending might be so high in government. Improved asset management could be the key to improving performance.
IT asset management is an ongoing challenge within the federal government. Improving the management of things like over-procurement of software licenses, unused hardware capacity, and redundant and aging systems (many of which are highly customized) could hold the key for substantial cost savings. This, in turn, could help drive down per-employee IT costs. Improved asset management also prompts agencies to do a detailed costs analysis of all systems. Many agencies will find that it's just a few large programs, which continue to nurse along aging legacy systems, that significantly boost the overall IT cost per employee at their agency.
Asset management related to information technology is such a hot topic that Government Accountability Office (GAO) has issued multiple reports in recent years calling for improvements to how IT is monitored, procured and administered. For example this May, 2016 report: GAO-16-468 specifically took agencies to task for spending a steadily increasing amount of their IT budget on older legacy systems. It called upon IT managers to identify and prioritize work on legacy IT systems that need to be modernized or replaced.
Clearly there is enough evidence that federal agencies can better manage their IT assets, which in turn could help bring down IT costs that are significantly higher than the industry average. When it comes to citizen service, that kind of proactive IT management is very much what the government needs.