Tuesday, July 31, 2012

DoD Sequestration


 A lot of my friends are involved in the Military and in Defense related businesses. They are getting quite concerned about the effects of the DoD sequestration and what it will do to the economies around the bases and facilities where there may be huge layoffs.  It will be an anxious few months as we wait to see what happens. In these conversations with my friends, and as the owner of a third party support business, I have identified three ways the DoD could minimize the effects of sequestration and reduce their ongoing IT expenses. 

First, the DoD should require that their IT vendors give them license transferability on all of their software and firmware products. This would allow the DoD to move their licenses around to other departments and facilities and thereby reduce their costs of upgrades and support.  License transferability is provided to leasing companies from the manufacturers to protect the leasing companies’ residuals; why shouldn’t the DoD receive the same financial benefits?

Second, the DoD should require all service and support bids be opened up to qualified third party independent support organizations rather than restricted to the OEM service and support organizations. Currently, the DoD support and bidding process favors the OEM’s and this costs the DoD a tremendous amount of money. The manufacturers systems of opportunity registration further restricts competition amongst their dealers, and the lack of open bidding supports inflated pricing by the OEMs.


* "The Federal Government spent $2,034,269,948 on new equipment while only spending only $9,114,676 on refurbished. A resounding 99.6 percent of Federal IT dollars was spent with OEMs and OEM authorized resellers."

* "Still others [OEMs] issue fictitious list prices. These can be a much as 200 to 300 percent higher than what they will charge a good customer, i.e., they can offer the perception of huge discounts to end customers while asking independents to pay much higher list prices for the same product or part."

Third, Congress could require that the DoD maintain IT systems for a 7 or 10 year life. This would force the IT vendors to extend their product life cycles or encourage the manufacturers to  partner with legacy service companies to take over the extended support  contracts for their older systems. If fully implemented, this would encourage manufacturers to concentrate on technological improvement while service companies focus on providing outstanding technical support, creating an environment of both IT innovation and sustainability.

So there you have some good solid savings that could come out of the DoD Sequestration situation without affecting our Military readiness at all. Perhaps this could turn out to be an opportunity for the DoD to become a more efficient organization in the way it acquires and maintains the IT equipment that it purchases and maintains.  While it seems unlikely, there exists the possibility that at least one segment of the DoD bureaucracy can be changed into an affordable and efficient organization.

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