Improving South Carolina's Management and Use of Information Technology
July 1997

SUMMARY (PDF) 

Pursuant to the sunset law (§1-20-10 et seq. of the South Carolina Code of Laws), the State Reorganization Commission asked the Legislative Audit Council to review the efficiency and effectiveness of information technology (IT) systems throughout state government. Overall, we found that the state's IT management has not given adequate emphasis to the interest of the state as a whole. Every agency independently decides what information systems to use, how to procure hardware and software, and how to obtain training for its staff. This approach results in inefficiency and duplication of effort. It also increases the difficulty in coordinating and implementing IT projects that involve more than one agency.

Greater attention should be given to establishing a common technology infrastructure, sharing information, and implementing IT efforts that will benefit the entire state. To improve IT management, we recommend measures to ensure that the interest of the state as a single enterprise is protected. These measures include the establishment of a chief information officer (CIO) position for the state.

However, effective management of information technology in state government calls for an appropriate balance between centralization, control, and standardization on the one hand, and decentralization and agency autonomy on the other. We also identified many areas where agency autonomy for IT management is the most appropriate focus. Agencies need to improve their management of information technology resources as investments. Agencies should make IT decisions based on consideration of costs and benefits, and implement appropriate controls to measure the results of their investments in technology. We found in many instances the basic policies and practices necessary to protect and control the use of the state's resources were not in place. Many of our recommendations are directed to all state agencies.

Our review focused on 61 executive agencies; we did not review institutions of higher education, or the legislative and judicial departments. We concentrated on data processing and emerging technologies; we did not conduct a detailed review of telecommunications or printing and duplication technologies. Our findings are summarized below.

Information Technology Resources
South Carolina spent approximately $282 million for information technology in FY 95-96. The agencies that we reviewed accounted for approximately 69% of those expenditures. Over the past five years, these agencies increased their information technology expenditures by 53%. Spending for personnel increased at a lower rate (20%) than for IT goods and services (69%).

The major costs of information technology are found in the personal computers (PCs), printers, and local area networks (LANs) that exist throughout state agencies. Based on data in a 1997 Budget and Control Board (B&CB) study, the cost of 11 mainframe data centers was just 13% of the FY 95-96 IT expenditures of the agencies we reviewed. These 61 agencies reported owning more than 26,000 personal computers and more than 16,000 printers. Fifty-five (90%) of these agencies reported having at least one LAN for a total of 550.

Our expenditure information captured only direct costs; the indirect costs of owning PCs are substantial and often "hidden." The Gartner Group, an IT consulting firm, estimates that the five-year cost of owning a PC, including equipment, training, usage, and maintenance, is $41,500. Hardware and software costs represent 15% of these costs; administration, support, and user costs make up the rest.

IT Management Issues
The Budget and Control Board has broad legal authority to manage the state's information technology. However, the board's structure has not facilitated a coordinated approach to IT issues. The state's IT resources could be more effectively managed by establishing:

• Overall standards and policies for IT.
• Effective coordination of interagency IT efforts.
• A central source of IT information.
• A process to ensure that the state makes the best IT investments.
• A means to ensure central accountability for IT decisions.

More effective management could be achieved by establishing the office of chief information officer (CIO) at a senior level within the board. In addition, the enactment of legislation addressing the management of information technology could lead to greater statewide coordination in the management of IT.

Agencies often do not know the return they have received on their IT investments. We reviewed eight IT projects in different agencies and found that many agencies do not know the costs of their investments; nor have they established ways to measure the benefits of their IT projects.

The B&CB's information technology management office (ITM) does not adequately evaluate or monitor agencies' IT projects. Better oversight could assist the General Assembly in making funding decisions and evaluating return on investment. Other states target IT projects for review based on budget and risk assessment. ITM should require more detailed information for high-cost and high-risk IT projects. The CIO could establish a system for evaluating and monitoring the state's IT projects.

South Carolina has not developed statewide standards for information technology. Individual agencies determine what hardware and software they use. In our survey only 14 (23%) of 61 agencies reported having IT standards within their agency. E-mail and desktop PC software are two areas that would benefit from statewide standards. Without standards, the state may be spending more than is necessary for IT. Also, a lack of standardization can affect the ability of IT systems to share information.

Fewer than half of the 61 agencies we surveyed reported having written policies for the management of information technology. We identified system security, back-up and off-site storage, and disaster planning as key areas where policies are needed to ensure the protection of the state's information resources. Also, written policies for local area networks would help to ensure that LANs are managed consistently and have appropriate controls.

System Integration, Training, and Procurement Issues
The Budget and Control Board is planning to consolidate 11 of the state's mainframe data centers into one new center to be built and operated by the state. According to officials, this consolidation will bring many benefits, including cost savings, development of IT standards, and a sound disaster recovery plan.

Agencies have their own information systems for financial and personnel management because the central state systems do not include all the information and functions that agencies need. It is inefficient for each agency to obtain its own systems for tasks that are common to all agencies. Some states have implemented integrated information systems for administrative functions.

Evidence indicates that agencies are not doing enough to ensure that staff have appropriate IT training. Research suggests that the cost of undertraining may be three times as much as that of training. However, on average, the agencies we surveyed reported spending less than one percent of total IT expenditures for training. Also, the state does not coordinate training or offer centralized information about training opportunities.

Governments are increasingly privatizing IT services, such as management of mainframe data centers, software development, maintenance, and training. South Carolina's privatization efforts have been limited. States should carefully evaluate privatization options, considering costs and benefits. The CIO could examine statewide IT functions to determine where privatization might be beneficial.

The office of information resources (OIR) provides mainframe computer services to 30 state agencies. However, OIR's rates have not been consistently based on the cost of services. Four agencies received reductions of between 33% and 81% from the amounts they would have been charged based on usage; the 26 agencies that paid based on their actual usage subsidized these four agencies. With the potential data center consolidation, it is important that OIR's rate structure be consistent and defensible.

The agencies we surveyed reported spending more than $10 million for annual maintenance contracts for their IT equipment and software. Agencies should reconsider the costs and benefits of having onsite maintenance contracts for their PC workstations. Some agencies reported substantial savings from providing maintenance for this equipment in other ways.

Use of Emerging Technologies
We reviewed several "emerging" technologies and their use in South Carolina and in other state and federal governmental entities. We assessed the possible benefits and drawbacks from use of these technologies.

Electronic commerce is the use of computers and telecommunications to conduct business transactions. The state could achieve cost savings through increased use of electronic commerce. South Carolina agencies make purchases using a very paper-intensive and slow process. They could reduce costs and improve service if they used governmental procurement cards (credit cards) for these purchases. Based on the experience of entities that have used procurement cards, the state could realize from $800,000 to nearly $10 million in annual savings.

With electronic data interchange (EDI), information or electronic versions of forms are sent from one computer to another without creating paper documents. South Carolina has been at the forefront of using EDI for tax filing and for delivering food stamp benefits. However, the state has not taken action to use EDI for purchasing, an application where other states have realized substantial savings. For the state to realize benefits from EDI functions between agencies, direction and coordination are needed at the state level.

Geographic information systems (GIS) have many potential uses in government. The Department of Commerce obtained a GIS system in response to its customers' needs for information about potential industry sites. The Department of Natural Resources also has a sophisticated GIS system for which applications are not yet fully developed. South Carolina needs better coordination of its GIS systems.

Multimedia kiosks are one method governments use to provide information or services to the public. However, kiosks may not offer the cost benefits of electronic commerce. The experience in other states suggests that the benefits of kiosks may come at a high price.

Benefits from other emerging technologies may depend less on the merits of the technology than on how the technology is implemented in an agency. Imaging creates pictures of paper documents which can then be stored and retrieved on a computer. The imaging application at State Retirement Systems has involved a redesign of work processes, while the application at the Office of Insurance Services uses imaging essentially as an electronic filing cabinet.

We also reviewed applications of advanced telephone (voice) features and video technology at several agencies. These technologies offer benefits to agencies, and we found evidence that some agencies, such as the Department of Corrections and the Board of Technical and Comprehensive Education, have planned their investments in video to measure benefits and savings.