State Information Technology: To Own or Lease?




May 14, 2014

Last week, NASBO spoke at the National Association of State Chief Information Officers midyear conference where more than 450 people gathered to discuss state I.T. issues.

As budget decisions are made, government officials need to ask themselves more than ever - does the state need to own I.T.?  With technology changing rapidly, does it make sense for government to purchase the hardware, the software and the storage capacity? Or should a state lease the necessary programs and software? There are a lot of advantages to not owning the software and hardware -- from a finance perspective, monthly fees might be preferable than needing the money and political push to get large appropriations for new systems. Plus, with technology changing so rapidly, the state government doesn't own something that may become quickly obsolete. Several states invested in storage capacity, for example, and then we had the dawning of the “cloud’ and less storage capacity was needed. Sure, there are concerns and challenges that would need to be overcome. State governments need to ensure that the personal data they have stays private. The overall long term costs of smaller regular payments compared to one upfront appropriation needs to be considered. There are plenty of reasons though that not actually owning systems makes a lot of sense. For one thing, state governments in this “new normal” economy may not have the necessary funds available for new IT systems. And, why not outsource the risk of technological change to someone else? Many experts I've recently talked to tell me that the economy will move more and more toward people not necessarily needing to own things. Already many people in cities don't own cars and use car services, public transit and other means to get around. Some companies lease gowns or other clothing items that a person would only wear once - why not have a nice dress for the event at a fraction of the cost of owning and your closet doesn't get full of outfits one would probably never wear again? There’s a certain temptation to the "security" and the control of owning, but in the case of IT in particular, state government needs to consider alternatives that might make more sense in our rapidly changing world.