Transforming IT Modernization – The New O&M

Government agencies need modern Information Technology (IT) systems and infrastructure to deliver innovative, secure, and cost-effective mission and business outcomes. Unfortunately, emphasizing modernization using only a small portion of the IT budget artificially restricts governments’ ability to digitally transform. Harnessing Operations and Maintenance (O&M) budgets to deliver Optimization and Modernization (the New O&M) can yield game-changing results for government organizations. In fact, a full-court modernization press is vital to accelerating the digital transformation of our governments and their ability to continuously deliver innovative capabilities and services in our new software-defined world.

Traditional modernization approach

IT Spend

The traditional approach for modernizing government IT systems and infrastructure is to allocate funding for Development, Modernization, and Enhancement (DME) within the federal agency budget cycle. The Office of Management and Budget, within the Executive Office of the President, directs agencies to break down IT investment costs into two categories: O&M and DME. O&M (also known as steady-state) costs refer to the expenses required to operate and maintain an IT asset in a production environment. DME costs refer to those project and activity expenses that lead to new IT assets/systems or modify existing IT assets to substantively improve capability or performance. DME spending has been the customary measure of Agency efforts to modernize legacy technology (usually via Capital Expenditures (CapEx)).

In 2010, Federal government IT spending on DME was $25.7B or 32% of total Federal IT spending, while spending on O&M activities was $55B. This budget year (FY23), Federal DME spending has declined to $16.9B and represents only 21% of Federal IT spending, while O&M spending is now at $64.5B. DME and O&M spending has been at these percentages over the past several years. Most significantly, as it relates to traditional modernization, overall annual DME spend has declined by $8.8B, more than 34%, since 2010.

Optimization & Modernization must become the New O&M

There needs to be more than this traditional DME approach to modernizing our critical IT systems and infrastructures if we are to deliver the enabling capabilities required for future government agency mission and business success. Modernized, intelligent IT infrastructure telemetry provides the visibility and supporting analytics that are so essential to enabling dynamic and effective networking and infrastructure automation and orchestration. This dynamic infrastructure, enabled by advanced AI/ML algorithms (trained on massive, relevant data sets), is critical to delivering optimal customer experience, enhancing employee productivity, and ensuring enterprise security.

It is now crucial that IT infrastructure modernization efforts be considered across an organization’s entire multi-domain environment to deliver these enterprise outcomes. Gone are the days of modernizing individual silos without regard to cross-architecture impacts, benefits, or optimal enterprise performance and results. A great example is the impact that intelligent switches are having in achieving governmental zero trust mandates to make access control enforcement as granular as possible. Smart network switches can provide the most granular and dynamic microsegmentation access possible by serving as zero trust Policy Enforcement Points, protecting each resource at the OSI Model Layer 2 point of access. Operations and Maintenance must become Optimization and Modernization to successfully enable the necessary digital transformation of our IT systems, infrastructures and governments.

The New O&M in a software-defined world

Like the evolution in software development facilitated by the arrival of Agile methodologies, DevOps, and software factories, IT modernization must become continuous and embedded across the entire IT ecosystem to optimize experiences and outcomes in our digitally transformed world. This makes sense when you realize that these IT infrastructures are now also “software-defined” and it’s the reason that Cisco is now one of the world’s largest software companies. This software-defined IT infrastructure evolution can leverage the proactive and predictive capabilities and functionality that advanced AI/ML algorithms can deliver across the entire enterprise IT infrastructure.

Using the New O&M to deliver enterprise solutions

My colleague Andy Stewart’s discussion on transitioning to a DevOps approach for delivering network infrastructure as Code (IAC) aligned with continuous integration and continuous deployment (CI/CD) processes provides greater detail on this transformational evolution. Modernization efforts must now be viewed through an enterprise-wide, holistic architectural perspective to reduce critical technical debt, deliver integrated cybersecurity, and dynamically optimize infrastructure and mission and business outcomes.

To achieve these advances, we must perfect a new style of business case and Return-on-Investment (ROI) analyses to promote, prioritize and accelerate enterprise modernization efforts. A key element of this new approach is factoring in “run the business” impacts, including reduced operational and maintenance labor costs and more efficient delivery of infrastructure capability upgrades to optimize transformational modernization.

Acquisition constructs like network and infrastructure-as-a-Service (XaaS), utility-like consumption models, and delivering software Enterprise Agreement (EA) subscriptions are ways to leverage traditional O&M funding but they must continue to evolve to optimize the impact of the New O&M.  Cisco’s Portfolio Explorer discussions on Enterprise Solution Delivery models provide examples.

The New O&M – Bottom line impact

Software-defined infrastructure is at the heart of the New O&M, delivering never before seen agility for intent-based network and infrastructure capabilities so crucial to enhancing mission and business outcomes. It is also key to delivering full-stack optimization to ensure that the infrastructure delivers the client and employee experiences that enable these outcomes. Most significantly, this new optimized and modernized (New O&M) approach can become a catalyst for innovation by using technology to shape, deliver, and continuously enhance future governmental agency capabilities, services, and mission success.


Steve Vetter

Senior Strategic Solution Executive and Federal Strategist

U.S. Public Sector