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With the Association for Federal Information Resources Management, GCN recently convened a roundtable of experienced practitioners, vendors and observers to assess long-term trends for federal information technology deployment. Key excerpts appear here.

Participants were Larry Brandt, program manager for digital government at the National Science Foundation; Janet Caldow, director of the IBM Center for Electronic Communities in Washington; G. Edward DeSeve, partner and national industry director for federal services at KPMG Peat Marwick of New York; Harold Gracey Jr., then acting chief information officer at the Veterans Affairs Department; Sallyanne Harper, assistant comptroller general at the General Accounting Office; David Lehman, chief technology officer at Mitre Corp. of Bedford, Mass.; Harris Miller, president of the Information Technology Association of America of Arlington, Va.; and Mary Mitchell, deputy associate commissioner of the General Services Administration. GCN editorial director Thomas R. Temin moderated the roundtable. To read the whole roundtable transcript, go to www.gcn.com and click on GCN Interview under Current Issue.

TEMIN: Welcome to the National Press Club. I am Tom Temin, Editorial Director of GCN, as you know. It is nice to see a lot of familiar faces. There's a couple of people I haven't seen in a while, and some I haven't met. So welcome.

As you know, this event is sponsored by GCN and the Association for Federal IRM, kind of an annual event for them.

TEMIN: Having gotten through 2000, the date code thing, and having an impending change in administration, we thought -- "we" being AFIRM and GCN -- we would want to do something where we could take a blue-sky look at what is ahead beyond all the current turmoil to where long-term trends are going, and what that might mean for policy, and then eventually towards agency missions, and getting further down the inverted pyramid, toward the deployment of information technology.

You all have been chosen because, between Mike, Bob and I, we know you to be smart, intelligent, knowledgeable, and articulate on those topics.

So with that, why don't we begin by just going around the room. Who you are, your background, and what you're doing these days. We'll start to my left with Ed.

DeSEVE: Thanks, Tom.

I am Ed DeSeve. I am the National Industry Director at KPMG, which means I worry about assurance services, consulting services, and tax services that affect both civilian and the DOD side of the federal government.

CALDOW: I'm Janet Caldow. I'm Director of the Institute for Electronic Government at IBM.

We're kind of a think tank within IBM, focused on public sector, government, health care, and education, do a number of research projects each year, host a lot of people through our downtown Washington facility, and focusing on many of the issues that I think you're interested in.

GRACEY: Harold Gracey. I'm the acting CIO at the Department of Veterans Affairs, my third federal agency, thirtieth year of federal service. I'm worrying about delivering service in this shrinking government.

LEHMAN: Dave Lehman, Chief Technology Officer at Mitre. Mitre is a company that runs three federally funded research development centers for the government, one for the IRS, one for the FAA, and one for the Department of Defense.

MILLER: I'm Harris Miller, President of the Information Technology Association of America. We are a national trade association representing about 26,000 IT companies.

We also have a program which focuses on government in our so-called Enterprise Solutions Division, both on federal and state and the local marketplace, and many of the biggest companies that sell into the federal marketplace, as well as the smaller companies, belong.

We also have a leadership role in a couple of areas that I think are relevant today. We did the first study on the IT work force shortage globally, and we're about to produce another one on Monday, which I'll talk about later this morning in terms of the preliminary results from that survey, which I think will blow some of your socks off in terms of how bad the shortages are now.

HARPER: I am Sallyanne Harper. I am the Chief Information Officer and Chief Mission Support Officer for the General Accounting Office for all of 90 days.

I had a prior career at the Environmental Protection Agency, and before that with the Naval Air Systems Command. I am responsible for the management administration functions at the GAO.

BRANDT: I'm Larry Brandt. I run an $8-million-a-year program at the National Science Foundation, called Digital Government. Our aim is to facilitate and support collaborative projects between the university research community and government agencies. And if you don't think that is a culture gap, then -- I've been at NSF since 1976. It's a wonderful place to work.

MS. MITCHELL: I'm Mary Mitchell. I'm the Deputy Associate Administrator for the Office of Electronic Commerce inside of governmentwide policy. It's our job to work across government on a number of things.

We have been actively involved in the Access America programs, particularly for students, as well as things like grants and streamlining the grants process, and other sorts of more foundation work, like the work in public key infrastructure and digital signatures.

Prior to being at GSA, I came from the National Institute of Standards and Technology, primarily working on enabling technology. One of my areas was supply chains, worked with the private sector for a number of years on that topic, and then with the advanced technology program on really emerging R&D, IT solutions.

TEMIN: My opening question is: How deeply can we go or should we go, or maybe is the whole direction wrong toward outsourcing so many of the technical or even managerial functions that career civil servants have done traditionally?

DeSEVE: I think outsourcing is yesterday's news. I think it's an old question. What we're seeing with the Internet and other enabling technologies is that customers are doing the work that used to be done by government clerks, and will continue to do so.

The trend is, and I could use VA as an example, but Harold can do that better than I can. Let's use Social Security as an example. The trend will be to have people interact directly with systems, not go through a set of intermediaries.

So it will not be an outsourcing in the sense of having new clerks replace old clerks, but it will have empowered customers getting information, doing the transactions on the Internet, and in a variety of other ways.

I really believe that that will be the same kind of outsourcing as credit card processing has been to travel payments.

One of the great outsourcing devices was the IMPAC card. The IMPAC card eliminated the need for lots of people who used to do payment processing along the way. So I think we are asking the wrong question when we look at outsourcing, by and large.

Having said that, and I'll shut up in a minute, but with the idea of partnering rather than outsourcing, where the federal government will find ways to work with industry, we have allowed some new procurement models out there.

There's a company that works with the Postal Service. And they bid the Postal Service the free process of change of address. They do the change of address process for the Postal Service for nothing.

Now, is that outsourcing? Well, I think so, but it's not traditional outsourcing. It's not replacing this set of people with this set of people. So I think there are new models for partnering, as well as for individuals acting directly with the federal government, that will make the traditional outsourcing competing work go away.

CALDOW: I would agree. Partnership is really the -- going to be a major trend.

I guess I interpreted outsourcing a little differently. I was recently out in California, and I think I saw five counties, including the one that is right in San Jose and the Silicon Valley, Santa Clara. And a couple of smaller counties around that area, and one of them has an eleventh grader running their network. I mean it gets back to the skill shortage.

There are just not enough skills to go around. It is going to force a lot of rethinking in partnership, I think, between public and private sector if we are really going to move this country forward at the state and federal level.

MILLER: I agree with what Ed said to some extent about redefining the debate, but I think it depends on the type of activity.

If you analogize to some of the jargon that there is in the private sector, you have in the front end the CRMs, those people calling about Customer Relations Management. How does an organization deal with its customers? And those may be literally day-to-day consumers in the business model, or it may be other businesses, but that's under your customer relations.

I think Ed is right on target there. I mean, there is no doubt that customers, including the government, are going to insist that they don't want to go stand in line. They don't want to fill out forms. They don't want to spend time punching through 15 different telephone codes to get to someone to talk to. They are going to want to do everything online.

We are getting closer and closer, to an application service provider you can use for government, so that you can sit down at your PC at home and you could say, "I want to renew my driver's license," you'd punch in your zip code, and you'd say, okay, you're from the state of Maryland, and you'd go to the Maryland Web site, and you'd renew your driver's license.

How do I get my dog's license renewed? Well, say you live in Montgomery County, and you'd go to the Montgomery County Web site. How do I check on my Social Security? It would take you to the Social Security Web site. How do I check on my veterans' benefits? It would take you to a Web site that Harold and his people manage.

On the supply chain management, which is the back side, how do I get my supplies into my business, how do I deal with my supply chain? I think again, it's going to be an e-based approach, because no one is going to want to fill out forms, no one is going to want to accept bids in large documents. I think that is also going to change.

The third part of the equation, the ERP, Enterprise Resource Planning and Enterprise Resource Management, I think that's where there is going to be a slower transition, even though I agree ultimately it is going to be outsourced or partnered, as Ed said, but that's going to be a little slower, because people still want to control the family jewels, whether you are talking about the financial records, or you're talking about the personnel records, whether you're talking about internal sensitive documents.

But now people are turning to the so-called ASP model, the Application Service Provider model, which is very exciting, from the industry's perspective, but also is raising a lot of questions about the willingness of any organization to turn to another company totally outside the organization and say, that's where our financial records are, that's where our personnel records are, that's where all the patent research we're doing, the records are kept.

It's a challenge, and it's a psychological challenge, and I think it's going to be even bigger in the public sector, because there are going to be a lot of agency officials and a lot of members of Congress who are going to say, are we really comfortable saying that medical records of veterans are being handled totally by someone who is not a government employee?

If you did it in a business environment, you'd say, okay, well, once we decide to outsource, we really don't care whether they store the data in Bangalor, or whether they store the data in Northern Ireland, or where they store it, whereas in the government, even if you could convince the government to outsource some of these sensitive data, I think there would be even more sensitivity if you said, "Oh, by the way, our storage records happen to be in Venezuela." People would say, you can't do that. So it is going to be much trickier, I think.

HARPER: But there is limited precedent for that already in the federal government. In terms of the financials, many federal agencies have their financials resident at some other federal agency. They cross-service each other, and they're moving more in that direction, because they can't afford not to.

MILLER: But it is a federal agency. It's not --

HARPER: That's exactly right, but I think where it comes to sensitive records, like veterans' medical records, your tax records being held in Venezuela, clearly, the initial push will be absolutely not under any circumstances, but I think inroads will be made, because the agencies can't afford to maintain their own systems.

DeSEVE: Harris, I have to disagree with you, because right now where are HCFA records?

MILLER: Well, they have been historically held by the private sector for a long time.

DeSEVE: Right. My guess is, and Harold can speak to this, that a lot of veterans' records are in the hands of third-party contractors currently. I don't know that for a fact.

GRACEY: No, not true.

DeSEVE: Social Security would say that many of their contractors hold their records. At HUD we had contractors who held FHA records. So I'm not sure we haven't already, by moving to data center --

GRACEY: Crossed the line, you think?

HARPER: Right.

GRACEY: Well, we have done it in different programs, because the housing program is administered essentially through mortgage bankers, but back to the larger outsourcing point. I think Harris is right on, and when you get to the ERP or ASP issue, you get to where I think the big crisis is coming, and where the line is coming, which is the management capability of the government. We talk all the time about the IT work force shortage, or our inability to recruit people, and how we are going to have to outsource the technical part of the business. The federal government looks like me right now. People are 50, 51, 52 years old. I think it's a great age, by the way, but there are no young people. There are a handful here and there.

We happen to have some that we have recruited into our medical system, for a whole other reason, practitioners, but people who are going to run the departments of the federal government are not in the federal government today. The people who will be managing the federal government ten years from now are not there.

MITCHELL: Well, the set of skills that you need with this outsourcing model, you can't abdicate your responsibility for managing this. That's the problem. That means you have to have top project management skills. That means you have to have business modeling skills. That means you have to have some real strategic thinking going on about what I'm doing, and why I'm doing it, and who are the alliances that I need to build to make these things work.

So yes, you can outsource a lot of lower-level functions, but if you don't have enough in-house talent to manage it effectively, then you are in deep trouble.

GRACEY: I agree.

HARPER: Let me just add to Mary's list, though. The technical skills to oversee these partnerships, because without all the other skills are not going to count.

HARPER: You need to understand what it is that you are managing.

GRACEY: Technology is not going to replace the management function.

MILLER: What that says is you have to change the model of what your government employee looks like. You need 15 people being paid $200,000 to $300,000 a year, and not 100 people being paid $50,000 a year.

GRACEY: You also have to create some kind of new modern intake mechanism to get people in now, so they can grow with the enterprise, to some extent, before they are charged with the financial management, the program management, the outsourcing management, whatever.

MILLER: They'll never pay them more than the congressional salary anyway, so that is a big hurdle to get over.

TEMIN: Which is something I want to get into, is that whole Civil Service reform possibility.

Can the government get by with that little technical knowledge, even to the point of where something as mission critical as delivering battle data can be done by contractors?

BRANDT: We have kind of an interesting model that we are starting at NSF. It's to fill the gap in terms of people who are technically able in the area of security.

What we are doing is creating a scholarship program for undergraduates, where they will focus on that during the course of their school, and when they're finished, if they come to work for the government, we will relieve them of debts associated with that. I think we will be starting that this year.

TEMIN: What are the kinds of skills, I mean specifically, do you think you need to have as employees?

BRANDT: I think one of the problems is being able to look far enough out. It's not surprising, I come from a research organization, but I think the pace of these technologies is going to continue to roll over. You know, it was the Web, and then it was Java, and it will be something else. It's not going to stop.

For example, you're going to have incredible bandwidth, wireless bandwidth available. I just saw somebody the other day talking about a radio modem they had that works at a gigabyte per second.

How do you know about that stuff? How is the government going to see that coming? I think the same problem is there for companies. I wouldn't speak for Mitre, but I imagine one of their issues is how to look far out enough and see when the tidal wave is coming.

LEHMAN: It is not only the matter of looking far enough out at the technology, but how do you design systems today so that they can incorporate tomorrow's technology?

I think that's where the government has the challenge, to have management that understands those issues, so as they outsource to contractors to build their infrastructure, they don't get captured into a particular architecture, but are able to refresh that architecture rapidly over time and start matching the scale of refresh that the commercial world is seeing, you know, the 18-month refresh.

BRANDT: Can I pose a general question to you? Do you see the government, it's a general question, investing in IT at the level that you see in industry, and should we be?

LEHMAN: Well, I think you have a problem. You are going to have citizenry that is going to expect and demand the kind of services from the government that they see in the commercial sector, that kind of responsiveness. So it can lag, but it can't lag to the extent that it's lagging today.

MILLER: Not to be too myopic about it, but look at the Customs' modernization thing going on right now. I mean for years everyone within Customs and all of its customers have been saying, "The system is outmoded. It needs to be replaced."

Congress has been unwilling to appropriate money. The Clinton Administration keeps insisting that the user community should pay additional fees on top of the $1 billion they already pay annually in fees.

Six weeks ago or so, Commissioner Kelly said, "We are going to pull the plug on this Customs modernization program." It was a political ploy, but it was well done. So now it turns out all the Administration is going to put up $12 million.

We are talking about a program for which over four years it is going to cost about $1.2 billion.

You have four huge, expensive teams that have been working on this, have spent tens of millions of dollars. Everyone in Customs says the number of brownouts is going up dramatically.

The cost statements will be enormous, and yet Congress and the administration can't get together on what, frankly, within a system that generates $22 billion in fees a year, should be a fly speck. People think a billion dollars is a lot of money.

DeSEVE: Harris, do you know what we call that? An opportunity. We are bidding with IBM on the Customs' program, and what Customs is asking at the same time they're asking for money from Congress is innovative, creative solutions from the business community. We don't know how we are going to respond yet. We have some ideas about how to do that. There is a fee base out there already to support that. What the Administration has said is surcharge that fee base for the purpose of this. We haven't figured out exactly how to do it yet, but there is a pony in there somewhere, and the government shouldn't necessarily be fronting all of the money.

The government has said this as well in their draft RFP in October, they shouldn't be fronting all of the money. The question is, should they be fronting any of the money? We don't know, and we're all trying to sort that out.

In the IRS, that wasn't possible. It wasn't really possible to think through a model because the taxpayer is the taxpayer. There's an identity there, a mathematical identity. But the people bringing goods and services in are of a different character.

How do we work with them to provide them enhanced services, perhaps that they would be very willing to pay for, beyond what they're getting now, that goes in some way to support the creation of the system, et cetera, et cetera? I don't want to go too far, because we're kind of giving up our competitive strategy.

MILLER: But again, in a bottom line company, this wouldn't even be a debate. The CTO would go to the CFO and say, look, instead of taking four hours to process the paperwork through traditional Customs' forms, we can now process it, it says, in 15 seconds through a transponder, and the savings is "X" in terms of personnel, costs to the government. No-brainer.

But in Congress, this is a huge debate. It may end up not even being funded. In the private sector, it would be over in ten seconds. The CFO would look at the numbers the CTO gave, and the debate would be done.

No one in the Congress or at Customs, and obviously your teams are looking to enhance this value proposition, but no one is debating that this is going to save money to process a load of steel from Canada in fifteen seconds, as opposed to four hours.

DeSEVE: But Harris, what they might also do, if I can take FedEx as an example, you could have it in three days, or you can have it in two days, or you can have it in one day. If you want the enhanced service, you pay for the enhanced service.

MILLER: Sure.

DeSEVE: You use that to put more planes in the air, and so on. All we are suggesting is that there is a business model, the government hasn't thought of yet, that has a variety of services available, and you pay differentially for those services as a way to build the systems. They give you 15 seconds, as opposed to 40 response time.

There is something there that we haven't quite decoded yet, but I think that's the trend. Even Harold could probably think of things in the VA that have that same characteristic.

MILLER: In the private sector, the reason I disagree with you to some extent, Ed, and I had this question come up at the hearing, is, when e-trading comes along, you pay less to do a trade with your broker, not more --

DeSEVE: Right.

MILLER: -- because at the end of the day, it is saving the broker money not to have clerks entering the paper order, making a certain number of errors, having to correct it, et cetera, et cetera, et cetera, store all of those paper files. So your transaction costs, if you do online brokerage, is actually less.

DeSEVE: That's another model.

MILLER: Yes.

DeSEVE: You could, and I'm not suggesting that we would even propose this, you could outsource that in major areas, and give the government back the benefit of the lower costs. Someone could build the system, lower the costs, give the government back the benefit of lower cost. Again, that is also in the RFP, that idea. That value proposition is in the RFP as well.

TEMIN: I want to ask a follow-on on outsourcing, and maybe Janet can comment on this. I want to cite two recent examples of outsourcing, one successful, one unsuccessful, and something they had in common.

One was the State of Connecticut, which had at that time the largest outsourcing deal ever at the state and local level, a billion dollars with EDS. Because of union considerations and politics, the thing eventually collapsed.

The other is the Army LOGMOD [logistics modernization] contract. In both cases, the deal was that the companies would hire the employees from the government, and they would keep their jobs.

So my question is: If it's so fat and happy in the private sector, where are the savings if the same number of people are now hired by contractors?

CALDOW: Well, some of the savings are in the data farms, because the price per whatever element of computing power goes way down, because you have these huge farms of servers, and that kind of thing.

I'd like to get back to the earlier point, but there are a couple of things, we were going so fast, I don't want to lose from a little bit earlier, and then maybe come back to this point, but when you look at the problem in government, you have to ask yourself, is it the same proportionate problem as the larger society or is it greater, in terms of the aging work force, in terms of the IT skills? Young people are not coming to government.

If you talk to the Kennedy School of Government at Harvard, our number one graduate school in government, 65 percent of their students are international. Harvard is training the next presidents, premiers, prime ministers, and so forth, all over the world, except for here.

In terms of outsourcing, I think you have to look at voluntary outsourcing, whatever forms that takes, big contracts like the Connecticut deal. But there's also a very growing involuntary kind of thing happening, mostly in state and local government. I don't know how it would affect the federal, where government is actually being disintermediated.

You have a lot of dot com companies loaded with venture capital that are happy to come in and grab the heart right out of government, which is the data, the -- somebody said about the crown jewels a little bit earlier, and the government is just starting to wake up to the fact to what they do have, but it's so poorly, financed isn't the right word, but people haven't totally woken up to the fact of what's happening, that companies can come in, sometimes without even any permission needed, and do the dog tags, and pay the parking fines, and things like that. The government doesn't have any choice.

LEHMAN: Or with the case of the IRS, the companies that come in and do electronic filing, and then when the IRS starts talking about people filing directly electronically with the IRS, then say that you're taking business away from private industry.

CALDOW: Yes.

MILLER: I think to answer the specific question of both the previous speakers, we were involved in lobbying very heavily for both of those. As you know, we almost lost the Army logistics modernization, because five federal employees complained to their congress people, and it almost got killed. Fortunately, cooler heads prevailed, and it went ahead.

But the soft landing issue you raise is, just a political compromise. And the companies realize that if they were hard-nosed about this and said, "We're going to hire people as we need them," and if they happen to be federal -- federal employees, it becomes a political nonstarter.

But the good news is, and where this has been done in other companies, and the UK has been where it's been done the most, and South Australia, and other places, where they're outsourcing, it turns out the soft landing still makes economic sense, because most of the employees that come along tend to be older employees.

There's an attrition rate. Frequently, they end up moving to somewhere else. These tend to be big teams. You're not talking about a small, little company, so if an EDS, or an IBM, or KMPG win a contract, even if the employee doesn't ultimately stay on that particular contract, the employee frequently moves on.

So I think the companies decided that (a), they had to swallow this soft landing as part of the political compromise, but (b), at the end of the day, it wasn't really that bad a deal for them. There were plenty of other ways to achieve the financial benefits of outsourcing without worrying specifically about head count as being the primary issue.

DeSEVE: You answered the other part of the question earlier when you said that only 12 percent of the cost of government is in head count. If LOGMOD works, it's going to save an enormous amount of money by eliminating warehousing, eliminating inventory, eliminating a lot of other things along the way. That's where the savings are going to be.

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