More Money, More Problems?

Not to sound greedy, but getting more money is never a bad thing. But it also raises questions such as, what should be done with that money? Where are our priorities?

The Obama Administration recently released its 2016 budget proposal, and the good news is that there were significant increases in IT spending allowances. But where will the money actually go? The national budget is no simple topic to comprehend, but thankfully Shawn McCarthy, Research Director at IDC Government Insights, sat down with Christopher Dorobek for the podcast DorobekINSIDER to help us understand how it all works and where the money will end up.

A couple of agencies in particular would be the biggest beneficiaries if the budget goes through. The Department of Health and Human Services received the biggest funding increase – a 45% increase, in fact. Most of that money will be going to the Centers for Medicare and Medicaid Services (CMS), specifically the Medicaid Management Information System. The next biggest chunks of funding will flow to IT services at the Department of Veterans’ Affairs.

So what will be done with this new money in its new respective homes? Surprisingly, with a few key investments allowed by the higher budget, more money could be saved further down the road.

According to McCarthy, developing new systems, rather than maintaining or improving the old ones, should be a priority. He explained that much of the time, upgrading old systems can cost as much as twice as much as building new IT systems. However, he said that there tends to be a misunderstanding that new systems equal big bucks.

Additionally, McCarthy said that consolidating systems and developing shared services will be enabled by the budget hike. “We have 5,000 HR systems; why do we have that many? Let’s start consolidating,” he said. “At one point they were saying let’s get it down to fifty. That hasn’t happened, but they have gotten it down to a few hundred as opposed to a few thousand.” And hopefully, with a little bit more money from the 2016 budget proposal, that number will continue to drop.

“The same goes for geographic information systems and SharePoint systems,” he continued. “Let’s start consolidating the licensing, let’s start saving some money.”

Many people take presidential budget proposals pretty lightly because, supposedly, they are rarely fully realized or implemented. However, according to McCarthy, that’s not so much the case for the IT portion of the budget, and it often comes to fruition. “What I find is that the IT budget is not affected as radically as the president’s budget when it comes to thumbs up or thumbs down,” he explained. So, there’s a good chance that the proposed changes will actually happen.

What does this mean for IT providers? According to McCarthy, they should concentrate their efforts to provide cloud services to the government. “IT services is taking more and more of a bite, and cloud falls under that because it’s a service that’s provided,” he said. “So if you’re a software provider, that’s how you’re going to reach the government going forward, more and more.”

So, things will change for IT services due to budget increases and the greater ability to spend strategically. More money maybe doesn’t mean more problems, but more opportunities!