Historically, California officials have struggled to manage effectively the state’s massive, decentralized $3 billion IT (information technology) network. In recent years, Governor Arnold Schwarzenegger has used the state’s IT Strategic Plan as a guiding document to streamline operations, improve efficiencies and accountability across dozens of state agencies. The motive is sound, but whether this effort will succeed remains in doubt.

The Strategic Plan lacks critical policy reforms, placing public dollars and private enterprise at risk. For example, the IT plan has already rubberstamped more than $471 million in new high-tech capital projects, with few safeguards for cost controls. That is the finding of California Disconnect: A Critical Assessment of California’s IT Strategic Plan, a report released last month by the Pacific Research Institute.  

The report identifies a few cost savings, but these were outweighed by higher capital spending, and the threat that political factors will override procurement decisions, reducing job creation and state productivity. The Plan makes scant mention of ironclad budget and procurement reforms such as performance measures, outsourcing, and total cost of ownership analyses. If properly implemented, such measures can save millions of taxpayer dollars, but they face a political obstacle.

Powerful public employee unions in Sacramento are fighting to slam the door on outsourcing IT services, a process which previous studies indicate will save taxpayer dollars, improve core business functions and free agencies from the unnecessary risk of continuous technology investments. Though the debate on this issue is far from over, a familiar pattern is beginning to emerge.

In late 2009, state energy officials ignored protests from consumer and business groups and passed new “green” restrictions on electricity usage which would effectively phase out new purchases of large plasma screen televisions by 2011, costing California approximately $50 million annually in lost tax revenue and more than 4,600 jobs. In February 2010, San Francisco’s municipal government adopted a new policy mandating that city agencies consider politically popular open source software for all software purchases in excess of $100,000.

Procurement policies that prohibit open competition or establish software preferences are bad public policy. They arbitrarily force product uniformity and vendor lock-in, making agencies dependent on a sole or reduced number of providers of IT products and services. This practice discourages research and development, limits choice, and prevents agencies from selecting the best solution.

Absorbing all IT functions under costly government operation places undue risks on taxpayers. A better strategy is to control capital spending through safeguards, and open the door for large-scale outsourcing and other contracting partnerships.

Sacramento is one of the largest purchasers of IT products and services in the country. As such it wields significant impact on the pace of innovation and job opportunities in Silicon Valley, which lately has been abysmal. Earlier this year, the Joint Venture Silicon Valley Network’s economic Index report identified the state government as a primary hindrance in achieving greater regional growth and prosperity.

A Strategic IT Plan should be a help, not a hindrance, to one of the state’s best generators of innovation and prosperity. California needs to rethink how it engages this vital economic sector and meets the needs of a state still enduring tough times. Workers in the San Jose metropolitan area, the heart of Silicon Valley, are suffering under a 12.3 percent unemployment rate.

The state’s budget deficit is now in the range of $20 billion, and could well get worse. It is therefore critical that California structure future procurement decisions on sound public policy, and maintain the goal of providing the best value for embattled California taxpayers. That should be the core of the Strategic Plan, and to help it succeed, high-tech entrepreneurs should be welcome mentors at the state capitol.

Vince Vasquez is co-author with Hance Haney of PRI’s California Disconnect: A Critical Assessment of California’s IT Strategic Plan.