Upgrade required: State works to modernize IT systems

Stacks upon stacks of stapled white and colored papers. Green-screened computers. An ancient mainframe. Just some of the tools used to churn out payroll for the state’s 70,000-plus employees..

When state Comptroller Doug Murdock first observed the archaic payroll system at work, he was amazed there have been no major hiccups in paying state workers.

“It was like I went back in time … I was seeing the kind of system I saw in the 1980s,” Murdock said of the 45-year-old technology.

The payroll process — part manual, part obsolete computer technology — involves a lot of legwork, paperwork, penciling and keyboarding.

“Trying to process their payroll by hand, basically, it’s a big job,” Murdock said. And it’s among a long list of the state’s computer systems in desperate need of overhaul.

Upgrading the state’s technology is high on the priority list for Gov. David Ige’s administration, which inherited an aging IT infrastructure and the state’s abysmal track record for implementing new technologies. With botched IT purchases in departments from transportation to taxation, a critical part of that overhaul is to more carefully set up contracts and then manage those big-ticket upgrades.

It’s all part of an “IT Governance” initiative that Ige and Chief Information Officer Todd Nacapuy unveiled last month, which involves the Office of Enterprise Technology Services (ETS) playing a critical role in each phase of the IT process, from determining initial need to helping manage the life of the IT contract.

ETS will be “managing and gating the project to ensure that any committed deliverables are delivered before we make any payments,” Ige told the Honolulu Star-Advertiser. “We want to ensure there is a benefit to the taxpayer and state.”

To reduce costs, the state also will move to use more commercial, off-the-shelf software that can be modified rather than focus on customized software, Ige said.

Nacapuy, head of ETS, admits there is “nothing glamorous” about implementing these initiatives, but it puts the state’s technology projects on a more fiscally responsible path. Nacapuy, who had been Microsoft’s senior technical account manager for Hawaii, has the advantage of surveying the state’s IT operations through private-sector eyes.

And he quickly identified what was wrong with the system.

“We don’t do a very good job of managing the (IT) contract through the life of it. We also don’t do a great job, necessarily, of setting up the contracts in the right way that benefit the state,” such as ensuring contractors meet benchmarks and milestones before getting paid, Nacapuy said.

Third, many of the projects failed because “no one asked, ‘What is the return on investment for doing this project?’”

But all that is changing, he said, as projects are more heavily scrutinized as part of the IT Governance process. Nacapuy said he doesn’t know why it has taken so long for these fundamental changes to be made, noting he couldn’t speak for previous administrations.

Already, IT Governance has put the brakes on a few projects, Nacapuy confirmed, noting that all $1 million-plus projects must get past four gateways — pre-initiation, initiating, planning and execution/implementation — before being approved.

There is also a push by Ige and Nacapuy to beef up the state’s IT personnel to further reduce the state’s reliance on consultants.

ETS is asking lawmakers to fund 31 positions in order to beef up its technical personnel. (See sidebar, Page E5.)

Nacapuy said far too much was being spent on consultants when he began as CIO in May. In April 2015 alone, the state paid $2.39 million for consultants, according to ETS spokesman Keith DeMello, and an average $1.4 million a month in the fiscal year that ended June 30.

So far this fiscal year, the average monthly cost of consultants has dropped to $979,411, DeMello said, and ETS is projecting $4 million maximum on consultants for fiscal 2017.

Within his first couple months, Nacapuy met with those consultants and asked, “’What value have you brought to the state in the past two years?’ If they couldn’t answer the question, they are no longer working with us.”

The lack of qualified technical personnel created an overreliance on consultants, which meant “consultants were project-managing other consultants. Never a good thing,” Nacapuy said. “Who is looking out for the best interest of the state?”

It ultimately bred a system that lacked controls and led to waste.

In September, the state Attorney General’s Office filed a lawsuit alleging the information technology consulting company Ciber Inc. defrauded the Transportation Department in a failed effort to set up a new financial management computer system for the state Highways Division.

The state paid Ciber and other consultants $13.8 million for work on what was known as Financial Accounting System Transportation, but the system never worked. Ige scrapped the project last March. The state’s lawsuit over the project was later tossed out of Circuit Court for procedural reasons, but the state has vowed to pursue the case. Ciber has also filed a lawsuit that accuses the state of improper termination and breach of contract.

Another computer contract misstep involved the state Department of Taxation’s agreement with CGI Group Inc., which was paid $87.5 million to install what officials now consider an outdated computerized tax collection system. The list of costly technological mishaps goes on.

Nacapuy is hoping changes being made in IT Governance will avoid such costly mistakes as the state modernizes its computer systems.

He also has tackled several projects to help streamline state government. For instance, his staff has worked toward moving all executive-branch employees onto a single email platform, Office 365. The software was purchased before Nacapuy arrived, but fewer than 3,000 workers had been rolled over. State IT personnel rolled over an additional 8,312 employees within six months, ditching the six or seven different email systems that were being used — with minimal use of consultants, Nacapuy said.

Office 365 makes it easier for state employees to collaborate online, from scheduling meetings to using Skype for Business, which allows workers to hold meetings virtually, Nacapuy said.

The implementation of government electronic signatures in October has brought about a “huge efficiency gain,” he noted, and Hawaii is now leading the country in its use.

Ultimately, the shift in methodology for technology projects throughout state government is expected to ensure taxpayer dollars are being spent wisely.

The state’s payroll system upgrade is a prime example. Murdock, the state comptroller, is hoping to have a contract in place for a new payroll system in May, with the system up and running by the end of the year. Because the project will be up for bid, he declined to give an estimated cost.

The archaic process that has been used for decades involves the Department of Accounting and General Services (DAGS) printing up lists of state employees with their pay rate information and distributing it to their respective departments.

Those who handle payroll within the departments compare it to their records and make necessary changes.

All that paper goes back to DAGS and “there’s some people in a little room with green screen computers and they enter in the corrections. That’s called the payroll change process,” Murdock said. “That’s all done by paper and that’s how we get the gross number,” which is then entered into the computer, which calculates net pay, he said.

The state uses a modified form of direct deposit and paper stubs are printed and hand-delivered to every government worker, Murdock said.

“The risk of failure continues to go up all the time,” Murdock said of the system. “At some point the thing is going to break and it’s probably too old to fix.”