IT Overhaul and State-Sponsored H1B Farms
The Texas House DOGE Committee began meeting this week. Testimony was taken from various agency employees on their lack of efficiency - some representatives even took our first DOGE report into the committee as a resource for their inquiries!
One major topic of discussion was IT spending, and the possibility of rolling many of these wasted expenditures from various state agencies into the Department of Information Resources (DIR). At least one of the agency representatives testified that many departmental "IT Consulting" expenditures were temporary - essentially that consultants would set up systems or train staff, and then back out. This is questionable, because many of these expenditures appear to be consistent over time.
The Sunset Commission recommended that many agency IT needs are consolidated into DIR, and we agree. In fact, we believe that fully doing so could save the state hundreds of millions per year.
One benefit of doing this would be to allow DIR to coordinate various IT expenses - software, licensing, hardware, etc - to standardize across agencies, and to increase bulk purchasing discounts.
Across all state agencies, total IT Services spending for FY24/25 comes out to over 1.4 billion dollars. IT Consulting accounts for another $63.5 million. Consulting in particular, but IT services broadly, could be rolled into DIR for increased efficiency, productivity, and state oversight.
For example, the State has paid over $110 million to "SHI Government Solutions" since 2024. Two of the main services provided by SHI, according to their website, are procurement of software/program licensing, and maintenance of software renewals. There is no reason that the purchasing of software and renewal of subscriptions couldn't be done in-house by DIR.
In the long-term, we recommend that the committee looks further into the Statewide Technology Center (STC). While it is true that hundreds of millions of dollars spent on the center go towards outsourcing costs for data center operations, which is necessary, unless the State were to invest in in-house data centers, there are other questionable expenses.
For example, for FY24/25, over $250,000,000 was paid through the STC to the consulting agency Deloitte. Data center maintenance appears to be paid to Rackspace, meaning it is unlikely that these payments to Deloitte are mostly going to that important resource. One wonders how much of this goes to consulting overhead. No doubt, tens of millions could be saved per year by bringing these services in-house to DIR.
It should be noted, separately from our agencies' unnecessary IT costs and outsourcing fees, the State pays over $76 million per year to notorious H1B farms like Capgemini, Infosys, etc. These farms are known for bringing in lower quality, foreign work, which could instead be done by high-quality Texans. We include this fact here not only because it represents waste, but because it fits into our recommendation of increasing DIR staff to decrease overall spending and increase government output.
The State would have to allocate more money to DIR for staffing to meet these restructuring needs, of course. For example, if agency IT needs were rolled into DIR rather than outsourced to IT consultants, DIR may need to spend roughly $10 million per year hiring 60 or more full-time equivalent employees. But the savings would easily approach half a billion dollars.
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