AGENDA #6a
BUDGET WORKING PAPER
TO: W. Calvin Horton, Town Manager
FROM: Bob Avery, Information Technology Director
SUBJECT: Technology Committee Cost Savings Measures
DATE: April 27, 2005
At the Town Council Public Forum on Budget and Related Items conducted on March 23, 2005 the Technology Committee presented a budget recommendation that included both a strategic plan and cost-saving measures for the FY 2005-2006 budget. This memorandum is provided in response to the list of 10 proposed cost saving measures.
COMMITTEE RECOMMENDATIONS AND STAFF RESPONSES
Committee Recommendation 1: A recommendation for additional expense accounting categories is presented as a worksheet noted as "TC Strategic Plan - Expense Categories,” which accompanied the submission of the Technology Committee Strategic Plan. The Technology Committee offers to work with Town staff to refine and develop this list as needed, and incorporate these additional categories in the coming fiscal year so that the level of expense detail required to support cost-saving measures such as those recommended below will be available in subsequent years.
Staff Response: Over the past nine months as the technology committee has worked to develop a strategic plan and in particular to develop an infrastructure strategic plan, the Information Technology Director and the Finance Director have both worked with the committee to provide budget allocations and costs for a number of technology related items. As this review proceeded, it became clear that there were a number of areas where the accounting categories were either too broad in scope or the entries were inconsistent between departments.
To provide better definition of technology expenses, the budget development process for the FY 2005-2006 budget included additional accounting object codes and instructions to departments for allocating budget expenses. We believe this reclassification will improve our ability to identify and manage information technology costs. The list of categories presented by the committee on March 23 goes beyond the steps we have taken and would be difficult to accommodate in the current budget plan. We will assess the benefits of both the newly instituted category codes and instructions in the coming months. We will also assess the ability to include additional material accounting categories suggested by the Technology Committee.
Committee Recommendation 2: Recommend the deferral or modification of planned computer hardware replacement and upgrade purchases (per the current 3-year replacement cycle policy) for the coming fiscal year. During this coming budget year, the Technology Committee will work with Town staff to examine current purchasing practices, replacement cycle policies, hardware and software standards, deployment methods, migration strategies and alternatives for hardware and software financing, and make appropriate recommendations. Information provided to the Technology Committee by Town staff indicates estimated savings by this action of $20,000 in the first year and $50,000 per year within three years.
Please note: 1) Critical expenditures which may be identified in emergency services and other areas are not intended to be deferred by this action, and Council and Town staff should continue to see that critical needs in this area are met, and; 2) The Technology Committee expects that a modified replacement policy and its attendant expense/projected savings will be re-introduced in the 2006-07 budget cycle.
Staff Response: I concur with the recommendation to conduct a study during the coming months to determine whether a change to the computer buying cycle is appropriate for those purchases planned for FY 2005-2006. If changes are deemed appropriate it would provide time to extend warranties on existing equipment and prioritize items that can be shifted to an extended replacement cycle. Computer systems are important to the services the town delivers and careful consideration should be given to any changes that may affect the performance and maintenance of this equipment. Six years ago when we put the three-year replacement cycle in effect there was rapid change in the year-to-year performance and capabilities of the computer systems we purchased. In the past couple of years this pace of change has slowed and it is reasonable to expect that the computer replacement cycle can be extended. It is also reasonable to expect that a replacement cycle may need to vary depending on the equipment. There are differences in the usage and environmental conditions to which some of our computers are subjected. One example is our mobile data terminals which are used in patrol cars; these systems are used 24 hours a day, seven days a week, under more demanding conditions than a typical desktop system. Extending the lifetime of these systems beyond three years may not be practical.
Committee Recommendation 3: Recommend the development of a pilot project for the use of open source software to replace existing licensed software operating systems and applications. This pilot project will determine what savings might accrue from such a move and will identify the costs and intangible factors that must be considered in such a strategy shift. Part of this pilot project would include the development of cost/benefit, ROI, lifecycle costs, skills assessments and/or feasibility studies as a logical first step to establish a benchmark for evaluating the relative success of the pilot project.
Staff Response: Open-source software is openly available software that does not require licensing costs. It can usually be obtained by a download from the internet. A description of open source software distribution standards developed by the Open Source Initiative is attached. Although the software is free, there can be any number of associated costs for such items as development, programming, and maintenance support. Many companies redistribute the software for free but remain profitable by providing maintenance and development support.
Open source software can be applied to a number of applications that the Town uses. For example, the library is currently operating its new web site using open-source software tools such as MYSQL database and the PHP programming language. Conducting a pilot project is a logical step in determining a number of factors such as application availability and usability, implementation and maintenance support requirements, and cost and benefit analysis.
One of the first steps would be to identify a department or workgroup and a particular application that would be appropriate to use as model for the rest of the Town. Many of the Town departments use specialized database software that is developed and supported by a commercial software vendor. Most of these vendors have converted their applications to support Microsoft SQL database software and have not yet developed applications that run on open source software. On the other hand the library has developed their web site application from scratch and thus has a greater degree of flexibility in its implementation.
One of the objectives behind this proposal is that the Town would eventually replace all Microsoft software with software that is based on open source licensing structure in order to lower licensing cost. Savings would be based on eliminating all upgrade or maintenance options for existing Microsoft software. This is not an easy task. The Town currently uses Microsoft software as the basic operating system for all servers, desktops, and laptops, as the general desktop application software (email, word processing, spreadsheet and presentation), and as the primary database software for most vendor supported database applications. The Town has acquired licensing rights to use the Microsoft software over a period of time and is currently operating under a software assurance agreement with Microsoft that allows automatic upgrades of all software to the current version. The FY 2005-2006 budget provides the final payment for this three-year agreement which remains in place until February 2007. At that point the Town has the option to continue (renew) this agreement or to let the agreement lapse. If the agreement lapsed, the Town would have the right to continue to using all the software at the version that is current at that time. The Town could continue to use the software, at no additional cost, for as many years as the Town chooses to do so. There would be a savings to the budget at that point because the Town is no longer paying for upgrades. Any costs associated with introduction of open-source software would then be a reduction of that savings. Thus one of the objectives of the pilot project is to produce a model that provides an accurate measure of the cost versus savings for the choice between open-source or existing software.
Committee Recommendation 4: Recommend an RFP for consultant review of virus defense, e-mail retention policies, backup and recovery processes and standardized disk images. The overall effect should be increased user satisfaction and lower IT help calls (IT Director reports at least 70% of all calls are related to these issues.)
Staff Response: The topics in this recommendation are being addressed by the Information Technology Department and the need for a general consultant is not currently anticipated. Over the past year there have been a number of instances in which Town users have required specialized assistance because of a computer virus attack, spy-ware or ad-ware problems, file loss, or e-mail problems. At one point these issues did account for the majority of the helpdesk calls. The Information Technology Department corrected the specific problems and also conducted a review of the software necessary to alleviate these problems. The existing antivirus and backup and recovery software was updated under the existing support agreements and a hardware fault in one of the backup tape drive systems was identified and corrected. Since that time the majority of user complaints have been related to spam and spy ware issues. The IT department is currently investigating software solutions as well as services provided by specialty vendors to correct the spy-ware and spam concerns. We hope to have these solutions in place soon.
Development of formalized documentation for a number of our customary practices and daily routines does have a long term benefit and will be pursued.
Other Committee recommendations such as use of imaging processes to install new desktop computers will require further investigation because of the variation of client software needs between departments. We have not identified sufficient time savings to warrant the cost and effort necessary to implement such a process. We will continue to explore this option.
Committee Recommendation 5: Provide a line item for technology spending for the new Town Operations Center which will identify actual projected costs which then become subject to review.
Staff Response: The technology costs for the Town Operations Center are covered by three separate budget processes. The construction contract will provide for building wiring, site-wide wiring for voice and data services, underground conduits, alternate power sources, and security and surveillance equipment. A supplemental budget will provide for the telephone system and emergency operations center equipment. Standard office equipment, which includes desktop computers, is provided by the annual budget and will simply be moved from the old site to the new site. A separate line item for technology spending is not required and would complicate the accounting structure that is already reporting by functional areas, funding sources, and areas of responsibility.
Committee Recommendation 6: The TC recommends the review, by the TC, of all IT expenditures in all departments as suggested in the Infrastructure Strategic Plan. Until this year, technology expenditures could not be tracked in any departmental budgets. In this year’s budget, a number of new budget codes have been instituted (telephone, network/data communication, computer use, software licenses, web services, computer small equipment.) The Infrastructure Committee has recommended an even finer granularity for consideration, as previously noted and included in the “TC Strategic Plan - Expense Categories” worksheet.
Staff Response: This item has been addressed in recommendation 1.
Committee Recommendation 7: Look into whether the development of a method for town citizens to pay fees and taxes online will increase revenues, decrease costs, improve cash flow or simply provide a convenience to the citizens of Chapel Hill.
Staff Response: We will strive to accommodate this recommendation during the coming year. Changes to our financial management system are in progress in order to accommodate support for the inspections and permits process. We hope to have on online access to inspection permit information available by the end of this summer. When that is in place we will pursue online payment for that and other fees.
Committee Recommendation 8: Minimize utility expenditures (e.g., evaluate options for Voice over IP to reduce telephone costs, develop and/or enforce energy-saving policies and other such strategies.)
Staff Response: We are taking a number of steps to minimize the utility expenditures. We recently renegotiated local and long-distance contracts with the telephone carriers to gain a reduction in cost for these services. We are planning to install Voice-over-IP telephone systems at the Town Operations Center and when feasible at Town Hall. Efforts to reduce energy costs include the use of LCD monitors and our standard practice of powering down computers at the end of the workday.
Committee Recommendation 9: Analyze how technical training is done with the goal of streamlining it.
Staff Response: This process is currently in progress. The Human Resources Department has recently filled the training coordinator position and is beginning a department by department evaluation of training needs.
Committee Recommendation 10: Replace legacy systems (e.g., database systems underlying websites.)
Staff Response: Our process has been to replace legacy database systems, which typically did not function well on a network, with newer database systems that are designed to support both network and web site applications. This effort is still in progress. The two oldest systems used by the Inspections and Housing departments will soon be replaced. The Town's web site will also undergo significant changes in the next few months.