State of Texas
Department of Information Resources
Leadership for Texas Government Technology

Agency Strategic Plan for Fiscal Years 2007–2011

External/Internal Assessment

I. Overview of Agency Scope and Functions

A. Statutory basis

Almost forty years ago, the Texas Legislature began to address the challenges associated with agency management of information resources. Responsibility for the review of information resources expenditures has been assigned to various regulatory agencies through the years. In 1989, the Legislature enacted Chapter 2054, Texas Government Code (the Information Resources Management Act) which comprehensively addressed major aspects of information technology (IT) management. This legislation established DIR to coordinate and direct the use of information resources technologies by state agencies and provide the most cost-effective and useful retrieval and exchange of information within and among state agencies, and to Texas residents and their elected representatives.

DIR’s responsibilities and authority have evolved since its creation. Most recently, the 79th Texas Legislature signaled a clear mandate for the state to restructure the roles and responsibilities for its investment in information and communications technology. DIR responded to this mandate in its 2005 State Strategic Plan for Information Resources Management. In that document, DIR established five statewide goals: Reduce Government Costs, Drive Effective Technology Contracting, Leverage Shared Technology Operations, Promote Innovative Use of Technology that Adds Value, and Protect Technology and Information Assets. Ten statewide objectives underpinned the realization of the five statewide goals.

DIR continues to ensure the effective and efficient use of public funds by promoting opportunity and economic prosperity for the state’s citizens through the successful application of statewide services and technologies that are beneficial, secure, accessible, and utilize a statewide shared infrastructure.

B. Historical perspective

The oversight of information resources management has evolved from individual procurement reviews to a more strategic process focusing on shared success and shared responsibilities for state information resources. The alignment of agency business operations and technology management is critical to accurate and efficient state operations. An emphasis on cooperative projects in state government has resulted in increased facilitation activities for DIR, including the development of a statewide approach to project delivery, enterprise architecture, IT security management, and messaging.

The 79th Texas Legislature enacted a series of technology bills that support the continued implementation of a shared statewide technology infrastructure. House Bill (HB) 1516 is of great significance to statewide information technology management. It required DIR to establish a statewide technology center for data or disaster recovery services, and enabled DIR to propose additional technology centers to promote efficiency and effectiveness and provide the best value to Texas.

HB 1516 broadened the scope of commodities for which DIR is able to negotiate favorable pricing, including hardware, software, and technology services. Additionally, the legislation mandated state agencies’ participation in procuring these commodity items through DIR. HB 1516 also directed DIR to develop, in consultation with the Legislative Budget Board and State Auditor’s Office, the Texas Project Delivery Framework (Framework) guidelines and forms. State agencies must prepare Framework documents for major information resources projects. Each agency’s executive director, project manager, and employee in charge of information security must approve these documents.

A summary of key technology legislation enacted by the 79th Legislature is provided below.

• House Bill 1 – Requires higher education institutions to inventory and report their data center services to DIR. Article 1, Rider 11 requires DIR to negotiate a new/extended contract for TexasOnline that increases the state’s revenue share to at least 20 percent of gross receipts.
• House Bill 423 – Requires that an agency’s print publications available through free subscription also be available on an agency’s Web site.
• House Bill 1516 – Key provisions of HB 1516 include: DIR must establish a statewide technology center for data or disaster recovery services and operate additional centers when consolidation will promote efficiency, effectiveness, and best value; and DIR is required to negotiate a favorable price for IT commodities. State agencies must provide a planned procurement schedule for commodity items to DIR before their biennial operating plan may be approved; and DIR, in consultation with LBB and SAO, must develop Texas Project Delivery Framework guidelines/forms for major information resources projects.
• House Bill 1765 – Creates the state’s Emerging Technology Fund.
• House Bill 2819 – Requires state agencies to ensure that employees and citizens with disabilities have the same access to electronic and information resources as those without disabilities. DIR must provide training and technical assistance related to this legislation.
• House Bill 3112 – Requires DIR to provide network security to agencies that transfer their networks to the consolidated state network. It also requires DIR to establish a network security center. Agencies may not purchase network security services unless DIR determines that it cannot provide these services at a comparable cost.
• Senate Bill 5 (Second Called Session) – Promotes competition and investment in advanced telecommunications networks by authorizing broadband systems over power lines. The bill reduces regulations on telecommunications providers and authorizes the establishment of a state-issued franchise to provide cable or video services.
• Senate Bill 96 – Requires agencies to make any forms used by the public available on their Web sites. Occupational licensing agencies must add a link on TexasOnline to facilitate access.
• Senate Bill 213 – Requires that every agency ensure that Spanish-speaking persons with limited English proficiency can access state government information online.
• Senate Bill 255 – Requires agencies to permanently remove data from data processing equipment before disposing of it or transferring it outside of the agency.
• Senate Bill 1002 – Requires DIR to establish a Web site through TexasOnline for grants available through state agencies.
• Senate Bill 1670 – Requires the Texas Department of Insurance, in consultation with DIR, DPS, and TxDOT, to establish a program to verify if motor vehicle owners have auto insurance.

Significant events in the agency’s history include the following:

2006

• DIR issued a Request for Offer for Data Center Services and signed interagency contracts with 27 agencies prioritized to receive shared data center services.
• DIR executed a contract for Messaging and Collaboration Services with IBM for statewide e-mail services.

• A significant milestone was reached at the end of April 2006, when TexasOnline achieved “breakeven,” that is, the vendor recouped its initial capital investment in the portal. At the point the state portal broke even, all assets were transferred to the ownership of the State of Texas, including all hardware and perpetual licenses to all software developed for the portal, and the state began receiving 50 percent of the net revenues generated by the project in addition to sharing in total revenues. This self-funding model is unique among all state portals and it is estimated that the project will generate $36 million for the state’s General Revenue fund over the life of the contract.

2005

• The 79th Texas Legislature implemented 95 percent of DIR’s technology recommendations in its 2004 Biennial Performance Report, Making Technology Deliver, ensuring a statewide enterprise approach to information resource management and cyber-security.
• The arrival and aftermath of Hurricanes Katrina and Rita in the Gulf Coast resulted in an expanded role for DIR in terms of seeking and providing innovative uses of technology to offer direct assistance to hurricane evacuees. DIR staff worked collaboratively with other state and local agencies, the federal government, and the private sector to enable Texas to serve thousands of Gulf Coast citizens in need of immediate information and assistance.
• DIR published its state strategic plan for information resources management, Shared Services, Building a Better Texas through Shared Responsibilities, which lays out a plan for changing technology investment and management practices to ensure the state’s business needs provide the driving force behind the state’s technology.
• DIR cooperative contracts usage reached an all-time high. The dollar volume through these contracts, negotiated and managed by DIR, increased by 27 percent over fiscal 2004. This is significant because the pricing for the goods and services continue to decrease while the terms and conditions became more favorable to DIR customers.

2004

• DIR published Making Technology Deliver, its 2004 biennial performance report. In this report, DIR outlined its emphasis on reducing government costs, supporting effective technology contracting and execution, consolidating technology operations for increased efficiencies, and promoting innovative use of technology that adds value to government services. The statewide technology issues identified in this report were addressed in the 79th Texas Legislature by comprehensive technology legislation such as HB 1516 and HB 3112.
• DIR published A Foundation for Change, which presented a roadmap for a shared IT infrastructure to support the missions of government agencies.

2003

• The 78th Texas Legislature expanded e-Pay, allowing state agencies to use the service for over-the-counter transactions; required state agencies to provide a link to TexasOnline from their Web sites; required additional state agencies to use the Common Occupational Licensing project; gave DIR additional responsibilities relating to the review of agencies’ IT strategic plans and the oversight of consortia projects; named DIR as a member of the Quality Assurance Team; required DIR to create a Veteran’s Web portal; and required DIR to develop an IT consolidation plan for state government.

2001

• The 77th Texas Legislature transferred the Telecommunications Services Division from General Services Commission to DIR and established the Telecommunications Planning and Oversight Council to oversee planning and reporting functions of the division; and established a statewide security program within DIR.

C. Affected populations

DIR’s key service populations include the Office of the Governor, Texas Legislature, and oversight agencies; state agencies, universities, and their boards; school districts; political subdivisions; and the citizens of Texas. In 2005, the 79th Texas Legislature authorized state and local government entities from other states to purchase information technology products and services through DIR cooperative contracts, making government entities outside of Texas part of DIR’s service population.

During the past biennium, DIR’s role has expanded to include the provision of innovative technology solutions to meet critical human service delivery needs; for example, technology solutions to expedite hurricane disaster relief and increased information technology security requirements in a post-9/11 environment. A more detailed description of DIR’s service population is included in Section IV, Service Population Demographics.

D. Main functions

Effective planning and management of IT initiatives by state government are key to the judicious use of taxpayer funds. DIR is responsible for the effective planning, implementation, and management of a statewide technology infrastructure that supports agency business operations.

DIR is also responsible for a cooperative contracts program that enables government entities to efficiently pool their purchasing power to drive down costs. The program provides an effective procurement channel to thousands of public sector entities across Texas. DIR’s role as the provider of choice for state and local governments outside of Texas has also grown.

Another key function is the adoption of statewide technology rules and standards, and the development of guidelines and practices that contribute to effective enterprise management of information and communications technology. One practice includes guiding the development of integrated architectures that advance data and information sharing among agencies. Another practice is establishing a collaborative approach for evaluating opportunities to standardize agency business processes where common needs exist.

Additionally, DIR is responsible for ensuring that agencies and universities are informed of technology trends and methods for securing information assets, that the state’s electronic government portal (TexasOnline) performs flawlessly, that statewide telecommunication operations are reliable and efficient, and that the Texas Legislature stays informed on IT issues.

DIR will continue to set technology direction in state government by delivering on its commitments described in Shared Success, the 2005 State Strategic Plan for Information Resources Management. These specific functions include:

• Manage consolidated data center services;
• Develop, implement, and manage a new consolidated Internet Protocol network to provide a more robust, efficient, and secure statewide infrastructure;
• Provide enhanced and expanded telecommunications services to meet the growing needs of state agencies and local governments;
• Leverage the statewide investment in information and communications technology, for example, leveraging the Lonestar Education and Research Network (LEARN) to reduce state agency telecommunications costs;
• Assist agencies in providing secure, reliable, statewide IT operations;
• Promote cyber- and network security through the development of a Statewide Network and Security Operations Center;
• Develop and implement statewide security policies, standards, guidelines, and procedures;
• Support the Texas Office of Homeland Security in key initiatives through a tailored implementation plan;
• Negotiate and manage statewide agreements for quality IT products and services to reduce the cost and increase the value of state government computer hardware, software, and services;
• Manage the TexasOnline project and contract to ensure cost recovery and prepare for re-procurement;
• Implement and manage shared services when proven to be an effective and efficient technology service delivery option for the state;
• Develop, in consultation with the Legislative Budget Board and State Auditor’s Office, guidelines and forms required for implementation of the Texas Project Delivery Framework;
• Develop and implement an enterprise architecture for the state that results in rules and standards for information technology;
• Develop a policy framework for promoting code reuse and programming collaboration across state government;
• Develop an integrated strategy for enterprise applications across state government;
• Improve the state’s system for reporting statewide IT assets and expenditures;
• Develop rules and training and provide technical assistance to state agencies; for example, training relating to the use of electronic and information resources by state agencies to facilitate access to individuals with disabilities;
• Complete all legislative mandates in a timely manner; and
• Provide research, advisory services, and technical assistance to all levels of Texas government.

E. Public perception of DIR

DIR manages TexasOnline (www.TexasOnline.com), the state’s business portal and official state Web site. TexasOnline enables state agencies to interact with their constituencies electronically. Through May 2006, more than 52.7 million payment transactions were conducted and more than $3 billion was collected through the portal, which receives more than two million visits monthly to the 700-plus services offered through the site.

TexasOnline provided a central source of information for Hurricane Katrina and Rita evacuees and emergency responders. In response to these hurricanes, DIR also collaborated with the Health and Human Services Commission, other agencies, and its vendor partners to deliver information and communications technology services through the Internet Protocol (IP) network infrastructure and wireless data services, among others.

By using DIR’s cooperative contracts, state and local government entities are able to maximize their financial resources available for IT goods and services and redirect those savings into increased services delivered to their constituents. Over the past biennium, DIR has expanded its outreach and collaboration efforts directed towards local governments, including Texas school districts. In so doing, DIR has also broadened its role as the technology service and commodity provider of choice for local governments.

Additionally, DIR developed a heightened visibility in information technology security issues through its collaboration with state and national Homeland Security initiatives. SecureTexas provides up-to-date technology security information as well as tips to help strengthen Texas’ technology infrastructure. DIR designed this site to cater to the needs of Texans.

DIR maintains an agency Web site that contains relevant agency and statewide information. Citizen’s questions addressed to the DIR Web site usually receive a response within 24 hours. The agency’s operations are efficient and effective so public funds are maximized to the fullest extent possible. The agency also provides research, advisory, and open records services to citizens.

International events such as the World Congress on Information Technology, held in Austin in May 2006, have further increased DIR’s role in worldwide technology leadership and initiatives.

II. Organizational Aspects

A. Size and composition of workforce

DIR has 208 budgeted full-time equivalent positions. The actual composition of the workforce, based on required reporting categories, follows:

DIR Workforce Composition—Actual
Source: DIR Human Resources Office (May 2006)

• Official Administration – 8 Anglo Males, 8 Anglo Females; 1 Black Male,
  0 Black Females; 2 Hispanic Males, 1 Hispanic Female; Total: 20
• Professional – 43 Anglo Males, 44 Anglo Females; 1 Black Male,
  8 Black Females; 5 Hispanic Males, 6 Hispanic Female; Total: 107.
• Technicians – 20 Anglo Males, 10 Anglo Females; 0 Black Males,
  4 Black Females; 7 Hispanic Males, 4 Hispanic Female; Total: 47
• Administrative Support – 1 Anglo Males, 12 Anglo Females; 0 Black Males,
  6 Black Females; 2 Hispanic Males, 5 Hispanic Female; Total: 26
• Service/Maintenance – 2 Anglo Males, 3 Anglo Females; 0 Black Males,
  0 Black Females; 2 Hispanic Males, 1 Hispanic Female; Total: 8
• Agencywide – 151 Anglo, 22 Black, 35 Hispanic, 0 Other, Total: 208

B. Organizational structure

The agency is organized under a governing board into the Executive Director’s (Chief Technology Officer’s) Office, and five operating divisions: Strategic Initiatives, IT Security, Telecommunications, Statewide Technology Operations, and Service Delivery.

1. Governing Board

DIR is an executive agency governed by a ten-member board with seven voting members and three ex officio members. The voting members are appointed by the Governor with the advice and consent of the Texas Senate and serve for staggered six-year terms. One appointed member must be employed by an institution of higher education as defined by Section 61.003, Texas Education Code. The ex officio members come from two groups of three nonvoting members who serve on the board for two-year terms, one group at a time, on a rotating basis.

2. Executive Director’s Office

In addition to the state’s Chief Technology Officer, the Executive Office includes an executive assistant, Director of Special Projects, the agency’s Legislative Liaison, General Counsel, Chief Financial Officer, and five financial and budget analyst positions. The Executive Director’s Office provides overall leadership and direction to the agency and coordination of key agency initiatives.

3. Strategic Initiatives Division

The Strategic Initiatives division provides the strategic and policy direction for the implementation and management of information technology in the state. Core functions for the division are enterprise architecture and applications, statewide reporting, statewide standards (through rules, guidelines, and best practices), and technology innovation. Division activities include Texas Project Delivery Framework development and deployment; enterprise architecture and governance model development; statewide policy development and implementation; statewide planning and coordination; statewide alignment of agency IT reporting requirements; and review and development of technology standards. Major reporting activities include producing the Agency Strategic Plan, State Strategic Plan for Information Resources Management and its companion, the Biennial Performance Report (BPR), which details the state’s progress toward the goals of the SSP.

This division represents the agency on the Quality Assurance Team, which is charged with reviewing, approving, and monitoring high-risk, high-cost IT projects. The division also participates on the Texas Building and Procurement Commission (TBPC) Contract Advisory Team with the Office of the Attorney General, Comptroller of Public Accounts, and Office of the Governor to review and approve state agency technology solicitation plans.

4. It Security Division

The IT Security Division is responsible for overseeing and assisting state agencies and universities on statewide IT security issues. Core activities of the division include developing security standards, policies, and procedures; performing periodic security assessments, including controlled penetration and vulnerability assessments; providing technical assistance to agencies, such as recommending remediation for vulnerabilities identified during vulnerability assessments; providing security awareness training; testing and evaluating security products, tools, and resources; researching security issues; maintaining a working knowledge base of exposures and security risks; and acting as a centralized point-of-contact for IT security issues.

The IT Security Division collaborates with DIR’s Telecommunications Division to establish a sustainable security services strategy for the state’s consolidated wide area network (WAN). Additionally, the two divisions are collaborating on developing a plan to establish a Statewide Network and Security Operations Center (NSOC) to provide centralized network security services to Texas governmental entities, in compliance with HB 3112 (79th Texas Legislature, Regular Session). Additionally, the division provides support to Texas Office of Homeland Security initiatives through participation in the Texas Homeland Security Council.

5. Telecommunications Division

DIR provides two primary telecommunication services—the statewide telecommunications network (TEX-AN) and the Capitol Complex Telephone System (CCTS). State agencies are required to use TEX-AN, unless a waiver is granted. DIR is also permitted to offer telecommunications services to other political subdivisions such as cities, counties, and councils of government, independent school districts, and institutions of higher education.

The core functions of the division are managing the state telecommunications contracts for voice and data services, providing technical support for all voice and data networks operated by DIR, evaluating new technology, and conducting telecommunications planning and analysis.

The Telecommunications Division is responsible for the design, implementation, and management of a new consolidated Internet Protocol (IP) network created to provide a more robust, resilient, and secure foundation for the shared statewide infrastructure. The division works closely with the Health and Human Service Commission (HHSC) to facilitate and oversee the provision of services required to support the broad telecommunications needs of the health and human services agencies. This includes the migration of the legacy Health and Human Services Consolidated Network (HHSCN) sites to the new shared statewide IP network infrastructure. DIR will work with agencies interested in joining the statewide IP network infrastructure on a case-by-case basis and the division will collaborate with DIR’s IT Security Division through the Network and Security Operations Center to establish a sustainable security services strategy for the consolidated WAN.

Additionally, the division supports the Telecommunications Planning and Oversight Council (TPOC), ensuring that the council fulfills its responsibilities accurately and on time. TPOC’s responsibilities include establishing policies for the system of telecommunications services managed and operated by DIR; reviewing financial information; overseeing strategic and operational planning for the state’s telecommunications network; evaluating TEX-AN usage; developing service objectives and performance measures for CCTS and TEX-AN; and reviewing the performance of services provided by DIR to CCTS and TEX-AN customers.

6. Statewide Technology Operations Division

The Statewide Technology Operations Division leads DIR’s activities relating to the implementation and management of state technology center initiatives, other shared services, and the contract for the Texas State Data Center. The division has issued the Data Center Services Request for Offer (RFO), a procurement for a service provider to consolidate 31 data centers across 27 agencies, and is responsible for establishing the governance model to actively manage the data center contract, services and service levels.

The division has established an advisory committee and several workgroups to ensure agency involvement throughout the procurement process. Agency involvement ranges from the definition of data center services scope to collection of information on data center-related assets, services, service levels, and expenditures for the 27 prioritized agencies; to input on technical requirements for the RFO, the RFO evaluation, and building the governance structure.

Another shared service managed by the division is Enterprise Messaging Services, which provides comprehensive e-mail solutions, including calendars and meeting planning, SPAM control, and state-of-the-art data security. The division coordinates with DIR’s Service Delivery Division to provide access to this and other services; and coordinates with the IT Security Division regarding security solutions.

7. Service Delivery Division

The Service Delivery Division negotiates and manages contracts offering cost-effective technology-based goods and services to the state’s public entities. DIR’s customer base includes state agencies, institutions of higher education, cities and counties, councils of government, and independent school districts. State and local governments outside of Texas have also joined DIR’s customer base.

Technology offerings include commodity items such as personal computers and associated desktop software, hardware and software maintenance; specialized and high-end software; industry expert services; technical staffing services; IT training programs; disaster recovery planning and services; and other products with high customer demand. These items are offered through over 300 cooperative contracts with major manufacturers. Cooperative contract usage is increasing at a rate of approximately 20 percent per year, and 97 percent of all cooperative contract usage is voluntary.

Telecommunications offerings encompass the products and services related to TEX-AN, and include working directly with customers to find the right technology solutions, order services, and resolve problems.

The division oversees the master contract for TexasOnline and will initiate a competitive re-procurement process for the state portal in 2007.

The division also works with agency information resources managers (IRMs) to identify and implement cooperative procurement opportunities resulting from HB 1516 (79th Texas Legislature, Regular Session) and coordinates the state’s IRM continuing education program.

The division additionally supports the daily operational needs of the agency through the following service areas: accounting, administrative support, human resources, IT management, and public information.

C. Geographical location

DIR is located in four buildings in the Capitol Complex: the W.P. Clements, Jr. Building, the Central Services Building, the Sam Houston Building, and State Garage R.

D. Location of service populations

DIR’s initiatives are designed to reflect the needs of its service populations. While most of the state agencies are headquartered in Austin, field offices and university campuses are spread across every region of the state. Local governments and K–12 school districts are also distributed across the state.

DIR employs electronic conferencing and Internet strategies to communicate with its diverse service populations. DIR’s cooperative contracts program has received requests from agency field offices and local governments to adopt a more regional approach to the program when possible. DIR will pursue this approach, as appropriate, to assist in meeting local HUB requirements, expand the service availability, and allow voluntary users the option of buying locally through DIR contacts.

E. Human resources strengths and weaknesses

DIR’s human capital continues to be one of its greatest strengths. The agency has been able to attract and maintain a highly professional, motivated, and committed staff. The agency continues to experience low-level turnover.

However, analysis indicates that the organization will continue to lose a percentage of talented senior-level management and staff due to retirement. DIR is dedicated to its role as the chief information resources agency for the state and strives to hire and retain employees whose knowledge of and experience in technology is exceptional. Developing long-term strategies for acquiring and retaining staff to achieve program goals continues to be a challenging task. DIR is committed to preparing staff for the future to better ensure the availability of employees with the attributes, qualities, and capabilities needed to assume specific roles and responsibilities.

In accordance with the agency’s Workforce Plan (see Appendix E), DIR will continue to determine the critical skills and competencies needed to achieve desired program results and will develop hiring and training strategies that can be implemented with available resources.

F. Capital asset strengths and weaknesses

1. State Data Center System

DIR is responsible for management of the State Data Center in San Angelo and the Austin Disaster Recovery and Operations Center in Austin. These facilities are available for use by state agencies and universities and are operated by a private vendor under contract to DIR. Although DIR is responsible for maintenance on the infrastructure equipment for these centers, no additional funding is received for these activities.

2. Capitol Complex Telephone System

DIR provides Capitol Complex Telephone System services to the Governor’s Office, state agencies, the Texas Legislature, and legislative agencies in the Capitol Complex. CCTS comprises a digital private branch exchange (PBX) with back-up facilities to ensure survivability. Additional infrastructure includes voice mail systems, automatic call distribution services, conference bridge services, and an inside/outside cable plant.

3. Austin Metropolitan Area Network (MAN)

DIR provides Synchronous Optical Network (SONET) based MAN services in the greater Austin area. This resilient platform is the foundation from which many area voice and data services are supported. This infrastructure uses state-owned fiber optic cable to connect the Capitol Complex buildings and services to the statewide gateway for Internet access.

The SONET infrastructure also allows DIR to deliver a variety of communications transport solutions that agencies may use as inter-office connections across the Capitol Complex and the Austin metropolitan area. The SONET infrastructure consists of two OC-48 rings and one OC-192 ring utilizing fiber on the Greater Austin Area Telecommunications Network, a regional partnership between the state and local governments and institutions.

4. Statewide Data Network

The responsibility for managing the Health and Human Services Consolidated Network was transferred from HHSC to DIR via an interagency contract effective on September 1, 2004. This transfer facilitated the development of an enterprise network solution by providing DIR with the resources essential for managing a statewide network offering centralized network management, full-scale customer support and service, and efficient technologies across an intelligent, converged network.

5. TexasOnline

In April 2006, DIR reached the break-even point in the cost of developing and operating TexasOnline. As a result, the assets of TexasOnline (portal and infrastructure) are now owned by the state. Also, concurrent with break-even, Texas will begin to receive 50 percent of the net receipts from TexasOnline transactions and will begin receiving 20 percent of all gross receipts starting in fiscal 2007. This is an increase from the ten percent share in the original contract. DIR staff research indicates that Texas receives one of, if not the best, return on investment for its portal of any state.

G. Agency use of Historically Underutilized Businesses

It is the policy of the agency to use Historically Underutilized Businesses (HUBs) for goods and services whenever feasible. DIR uses the TBPC Master Bid List, and each relevant HUB vendor is given an opportunity to bid when the agency procures goods and services.

DIR’s Cooperative Contracts program provides significant opportunities for participating agencies to increase their HUB utilization. During fiscal 2005, 32 percent of purchases made through the Cooperative Contracts Program were made through HUB vendors. Of the 303 cooperative contracts managed by the agency and utilized by state agencies and local governments, 95 (or 31 percent) of the prime vendors are HUBs. Additionally, 61 HUB resellers are available through the contracts, for a total of 156 HUB avenues. DIR works with TBPC to ensure HUB purchases made through the Cooperative Contracts program are properly credited to the purchasing entity.

In January 2006, DIR and the Texas Association of HUBs launched a new initiative expanding their commitment to partnership and promoting mutual opportunities in Texas. The collaboration agreement facilitates increased communication and cooperation between HUB companies and the state through several important new and existing technology initiatives. The agreement establishes a HUB advisory board and expands communication channels between HUBs and the public sector.

H. Key organizational events and areas of change and impact on organization

The following, listed in reverse chronological order, are key areas of change that impact the agency:

• Information Resources Strategic Plan – On May 5, 2006, DIR issued Information Resources Strategic Plan instructions for state agencies and institutions of higher education to develop their individual strategic plans for information resources management. These instructions changed significantly from previous years, as they were tailored to help DIR and state agencies fulfill the state’s commitments made in the 2005 State Strategic Plan for Information Resources Management.
  IMPACT: State agencies and institutions of higher education will be able to develop their information resources management strategic plans for the coming biennium in alignment with the 2005 State Strategic Plan for Information Resources Management.
• Data Center Services – On March 31, 2006, DIR issued its Request for Offer (RFO) for consolidated data center and disaster recovery services in response to HB 1516 (79th Texas Legislature, Regular Session) which directed DIR to manage the operations of technology centers providing data center or disaster recovery services and prioritize agency participation in the centers.
  IMPACT: Consolidation of data center services and technologies will improve operating efficiencies and make maximum use of state resources.
• Planned Procurement Schedule – On March 31, 2006, DIR collected the first semi-annual submission of the Planned Procurement Schedule as required under HB 1516 (79th Texas Legislature, Regular Session).
  IMPACT: DIR will use information in agencies’ planned procurement schedules to obtain information technology volume purchasing discounts, identify new information technology commodity contracting opportunities, and review and approve data center and disaster recovery expenditures.
• Messaging and Collaboration – On March 15, 2006, DIR awarded IBM the contract for statewide provision of e-mail and collaboration software services.
  IMPACT: The Messaging and Collaboration contract will offer significant cost savings to state and local agencies on enterprise electronic mail and related services. The contract also adds security, performance guarantees, disaster recovery services, and increased functionality compared to many current agency environments.
• Statewide Technology Management – On December 23, 2005, DIR released Statewide Technology Management: Opportunities for Improvement, its legislative report on current automated information systems of state agencies.
  IMPACT: This report outlines DIR’s collaboration with the Legislative Budget Board, Texas Building and Procurement Commission, and Comptroller of Public Accounts to determine how automated information systems of state agencies may be combined to more effectively synchronize strategic planning, budgeting, and reporting of information technology expenditures, assets, and projects.
• State Strategic Plan – On December 14, 2005, DIR released Shared Success: Building a Better Texas through Shared Responsibilities, the 2005 State Strategic Plan for Information Resources Management. The state strategic plan offers a vision for Texas government to maximize the value of its technology investment to best serve all Texans.
  IMPACT: This vision will be accomplished by DIR’s collaboration with other agencies in areas of common interest, using technology to advance agency-specific missions while allowing agencies sufficient flexibility to innovate.
• House Bill 1516 – On September 1, 2005, House Bill 1516, the Texas Legislature’s information technology reorganization bill, became effective.
  IMPACT: This legislation resulted in a major expansion of DIR’s role in Texas state government. This bill placed the components of the Texas Project Delivery Framework in statute; authorized DIR to operate statewide technology centers; added “hardware” and “technology services” to the definition of commodity items; and required DIR to produce legislative reports on statewide IT security resources and improving the planning, budgeting, and reporting of information technology expenditures and projects.
• House Bill 3112 – Texas Computer Network Security System (effective September 1, 2005), requires DIR to establish a network security center that provides services to agencies to guard against external threats to a network. HB 3112 also directs DIR to adopt guidelines and standard operating procedures to ensure efficient operations, and prepare a report on integration and user-specific access features that will enhance network and information security. DIR may also provide network security to local governments, the legislature, special districts, and institutions of higher education, if approved by the Information Technology Council for Higher Education. Additionally, HB 3112 requires DIR to prepare a biennial report on the accomplishments and status of the state’s consolidated network security system.
  IMPACT: DIR will provide converged network security services, including telecommunications networks, that encompass network assessments and monitoring, as a proactive means to identify and remediate vulnerabilities and external network threats for participants of the state’s network security and operations center and security services for other eligible entities when requested and approved.
• Hurricanes Katrina and Rita – In August and September 2005, DIR worked with the federal government, other state and local agencies and private corporations to provide ongoing information and resources to Hurricanes Katrina and Rita evacuees. The state government portal, TexasOnline, provided vital hurricane information throughout this period.
  IMPACT: DIR assisted with the timely delivery of critical, often life-saving information and resources in the wake of these two natural disasters. As a result, DIR is preparing for future emergency operations through a coordinated planning effort.
• Biennial Performance Report – On November 1, 2004, DIR released Making Technology Deliver, the agency’s biennial performance report. DIR outlined its commitments and strategies for statewide information technology management in this report.
  IMPACT: DIR’s 2004 Biennial Performance Report was translated into state law, House Bill 1516, by the 79th Texas Legislature. These commitments and strategies operationalized DIR’s commitment to sound management of the Texas state government technology enterprise.
• Transfer of Health and Human Services Consolidated Network to DIR – On September 1, 2004, the responsibility for managing HHSCN was transferred from HHSC to DIR via interagency contract. The contract included the transfer of HHSC staff to DIR.
  IMPACT: The transfer facilitated the development of a cost-effective statewide enterprise network that will offer centralized network management, full-scale customer support and service, and efficient technologies across an intelligent, converged network.

I. Use and anticipated use of consultants

DIR anticipates using consultants to assist the agency in the following areas:

• Continuing to support the Data Center Services RFO;
• Advising the IT Security Division on technical cyber-security issues and collecting and collating requirements as well as providing technical advice on user-access technologies that enhance network and information security;
• Reviewing internal telecommunications operations and functions for possible outsourcing opportunities or internal operational area improvement;
• Advising the Strategic Initiatives Division on development of Enterprise Architecture;
• Benchmarking of state telecommunications rates versus private industry rates; and
• Performing market research and outreach.

III. Fiscal Aspects

A.Size of budget

DIR’s budget and method of financing for fiscal 2002 through 2007 is shown in the following table.

Note: Fiscal 2006 expenditures include approximately $4 million for extraordinary one-time expenditures including development of a state Security Operations Center, replacement of the financial and budgeting systems, receipt and expenditure of grant funds for Texas Data Exchange portal licenses, hurricane-related expenditures reimbursed by FEMA, and development of a TexasOnline consolidated business application. Fiscal 2006 also includes approximately $5 million for establishment of the Statewide Technology Operations Division related to implementation of HB 1516. The division’s expenditures were not included in the fiscal 2007 Appropriated Amount since HB 1516 was passed during the session, but the expenditures will be incorporated into the agency’s fiscal 2007 budget.

Fiscal 2007 General Revenue is based on the appropriated amount and has not been adjusted for the 3 percent legislative pay increase effective September 1, 2006. Fiscal 2006 General Revenue includes $399,000 for the 4 percent legislative pay increase effective September 1, 2005.

B. Method of finance

The following table shows DIR’s method of financing the agency’s budget by percentage for fiscal 2002 through 2007.

For the 2006–2007 biennium, DIR reduced general revenue by the mandated 5 percent plus an additional 10 percent in fiscal 2006 and an additional 20 percent in fiscal 2007 by utilizing net revenues from cost recovery operations to fund core activities. DIR will reduce 2008–2009 general revenue by 10 percent, as mandated.

Federal Funds shown in fiscal 2007 are estimated. The agency has applied for approximately $2 million in Homeland Security Funds.

State agencies and local governments will purchase an estimated $850 million in information and communications technology goods and services using DIR contracts in fiscal 2006, a 19 percent increase over the prior fiscal year. Cost recovery from those contracts will provide 92 percent of the agency’s funding in fiscal 2007 through interagency contracts and appropriated receipts.

C.  Per capita and other state comparisons

According to the 2004–2005 NASCIO (National Association of State Chief Information Officers) Compendium of Digital Government in the States, in 16 states, including Texas, the Chief Information Officer (CIO) oversees freestanding IT departments that provide a wide array of services to agencies and local governments including architecture development, security penetration testing, network administration, project administration, project management, Web site/portal development, and telecommunications. The most common statewide management responsibilities include architecture/standards development, planning, management policies, privacy policies, and procurement oversight. The CIO respondents accounted for more than $9 billion in fiscal 2004 IT spending: Texas reported $1.4 billion.

The Taubman Center for Public Policy at Brown University published its sixth annual review of digital government in the 50 states and major federal agencies in September 2005. State Web sites were evaluated for the existence of online publications, online databases, audio or video clips, and foreign language or language translation ability. Sites were also evaluated with regard to disability access, privacy and security policies, online services, digital signatures, credit card payments, e-mail addresses, comment forms, automatic e-mail updates, Web site personalization, PDA accessibility, quality control, and readability. Texas ranked 18 based on the overall scores of state agency Web sites.

D. Budgetary limitations

Funds were not appropriated for the implementation of HB 1516 or HB 3112. DIR’s Clearing Fund will be substantially reduced in order to implement HB 1516 and the agency is seeking grant funds to enhance operations related to HB 3112.

DIR’s Telecommunications Revolving Fund Account rider has not been funded for the past two biennia. In previous biennia, the Telecommunications Revolving Fund Account was utilized to replace and/or upgrade telecommunications equipment and software without having to increase user rates.

E. Degree to which current budget meets current and expected needs

As noted above, DIR did not receive funding for the implementation of HB 1516 or HB 3112. DIR will prioritize agency activities to maximize the funds that are available to achieve the current legislative mandates and the agency’s goals. The reduction in the Clearing Fund related to implementation of HB 1516 will reduce amounts available to implement any future unfunded legislative mandates.

F. Capital and/or leased needs

The agency estimates approximately $6 million in capital spending for fiscal years 2007, 2008, and 2009 as follows:

Upgrades to the state’s telecommunications networks will be funded by cost recovery from users of the TEX-AN and Capitol Complex telecommunications networks.

An agency Capital Plan has been submitted to the Texas Bond Review Board as required.

IV. Service Population Demographics

A. Historical characteristics

DIR was created to provide leadership in information resources management for all state agencies and institutions of higher education. DIR has developed and published policies, procedures, and standards; reviewed and approved IT strategic and operating plans; tracked IT expenditures; and provided technical assistance, training, computing services, and new technology evaluations to its customer population.

In 1992 DIR expanded its responsibilities by establishing an information technology cooperative purchasing program to leverage the buying power of the state. The original three contracts generated $24 million in sales from 250 customers. The Interlocal Cooperation Act 1. allowed DIR to expand its potential customer base from state agencies and institutions of higher education to include local government and the public education community.

By fiscal 2000, the cooperative contract sales volume had increased to $128 million and the customer base had grown to 1,200. The demographic breakdown of customers was 21 percent for state agencies, 51 percent for the public education community, and 28 percent for local government.

Also in fiscal 2000, the state’s Web portal, TexasOnline, went live, providing e-government opportunities for state agencies and local governments. Customers were able to use multiple services provided through the portal. In September, 2001, the telecommunications services group transferred to DIR expanding the agency’s customer base to include more local and education customers and providing additional service to existing customers.

As the customer base grew, outreach and education efforts were undertaken to show the breadth and depth of the full portfolio available from DIR, which in turn sparked demand for more services and products.

B. Current characteristics

DIR’s constituents include the Office of the Governor, the Legislature, state agencies and institutions of higher education, local governments, publicly-funded school districts, vendors, the business community, and the general public.

Staff from state agencies work with DIR on data center consolidation, messaging and collaboration, Texas Project Delivery Framework tools and commodity purchasing. State agencies have helped to define the current telecommunications backbone and are working with DIR to develop the next generation of converged data and voice services. The information contributed during DIR forums has proven invaluable as the state moves toward implementing the Texas Model for the Enterprise.

DIR’s cooperative contracts program has an active customer base of 2,670 out of a potential 4,800 in-state customers and a much larger potential base of state, local, and education customers from across the nation. With more than 300 contracts, sales estimated for fiscal 2006 at $731 million, and aggregated sales since inception exceeding $3 billion, the cooperative contracts program has grown the customer base significantly. Although only 17 percent of the customer base for the cooperative purchasing program is state agencies, they are driving much of the demand for new products and services.

Local government customers, including counties, cities, and other political subdivisions, account for approximately 27 percent of the purchases within the cooperative contract program. Of the more than 3,000 Texas local government entities, 69 percent are DIR customers. Resources available to local governments are being stretched by rapid population growth, consumer demand for convenient services, and the physical size of some counties. This customer segment has shown early interest in data center consolidation and messaging managed services as a means to save local infrastructure dollars.

Public education has long been the largest user of the DIR cooperative contracts program. With a 94 percent penetration rate across 1,500 Texas education entities, this customer segment accounts for 56 percent of total sales. The value provided in pricing, convenience, and product is particularly appealing to K–12 service population. Rapid population growth across the state has resulted in a substantial number of additional educational facilities, each requiring an IT infrastructure, to be built. Fortunately, community support of school bonds has kept growth moving at a rapid rate. The effect of recent changes to the Texas school funding model (79th Texas Legislature, Third Called Session) is still unknown.

In its report, Foundation for Change, released in May 2004, DIR established a goal of saving the state of Texas $270 million in IT infrastructure costs over the five-year period beginning May 2004 and ending May 2009.

DIR implemented a process to identify, monitor, and report those savings. The process was validated by the agency’s internal auditor in fiscal 2005. The accuracy of the estimated and actual savings was verified by the auditor in fiscal years 2005 and 2006.

As of April 30, 2006, DIR had identified $91.1 million in savings through contract renegotiations. Of the $91.1 million identified, $49.4 million in actual savings had been realized.

C. Future trends

Population growth, particularly among ethnic groups, will demand multi-language applications. It will also place demands on DIR’s customers to find innovative means of providing core mission services. Rising fuel costs and long commutes to city jobs from the suburbs will make telecommuting and remote work more attractive and increase the use of videoconferencing and broadband connections. Predictions of increasingly stronger and more frequent natural disasters and the possibility of widespread health epidemics will require all government organizations to prepare and be able to implement disaster recovery and business continuity plans quickly. Security will continue to be a priority for protecting citizens and government property.

House Bills 1516, 3112, and 2819, enacted by the 79th Texas Legislature (Regular Session), support and extend DIR’s mission to use technology to make government more accessible and secure, communicate with constituents, and increase operational efficiency and security. Statutory provisions of this legislation will impact government activities for some time to come.

1. Short-Term Trends (1 to 2 years)

• The rapid changes inherent in the information and communications technology industry will continue to affect DIR’s customers in the near future. End users of DIR’s customer services are already demanding faster, more convenient, and greater connectivity and are using computers for everything from banking and entertainment as a primary form of communication. Balancing consumer expectations with customer resources will be an even more important consideration in the future and will impact the initiatives DIR undertakes to develop a public IT infrastructure and deploy innovative, value-added technology solutions to help agencies meet their core missions.
• The opportunity to establish out-of-state cooperative contracts sales will improve Texas government’s ability to leverage a greater buying power.
• Security issues will continue to be at the forefront of customer demands. As headlines record recent compromises of massive databases around the country, customers will require greater security from suppliers. Improved security is particularly important within a managed services framework.
• As a result of DIR’s greatly expanded role during the state’s emergency response to Hurricanes Katrina and Rita, the agency has established an emergency response team of staff and management to enable it to respond with expanded capabilities when the next natural or man-made crisis occurs.

2. Medium-Term Trends (2 to 5 years)

• Consolidation and shared services will continue to be important to the state. Services provided to citizens over the Internet will expand. A competitive reprocurement of TexasOnline will occur in the next biennium. Planning for this procurement will begin in fiscal 2007. Government and private partnership projects will continue to be explored and implemented where feasible. Common business processes shared by all agencies will be reviewed for any re-engineering potential and delivery through technology centers.
• E-learning will continue to grow as a means to reduce travel and training costs associated with traditional classroom learning and training.
• The adoption of mobile phones as end-users only communications devices will continue to shift the telecommunications sector from a wired to wireless world. Government staff will become increasingly mobile and able to perform their jobs from anywhere.

3. Long-Term Trends (more than 5 years)

• As computer literate high-school and college graduates enter the workforce, expectations for virtualization, collaboration, and work from anywhere at anytime will create the demand for greater access to government information in a variety of forms. The typical office infrastructure will change to accommodate these workers toward more telecommuting. Agencies may require employees to furnish their own computing equipment, which would change the state purchasing model considerably.
• Health information will be widely communicated among government agencies, research universities, medical personnel and facilities, and commercial operations. Security issues will continue to be a top concern along with protection of individual privacy.

V. Technological Development

A. Impact of technology on current agency operations

DIR only deploys IT solutions for the purpose of meeting justifiable business needs. DIR’s use of automated processes has reduced the need for individual agencies’ staff to perform standardized, repetitive functions.

DIR has implemented a pilot project using Voice over IP technology. VoIP telephones were installed on the desktop of every DIR employee. Lessons learned from the VoIP pilot will be included in a VoIP Best Practices document that will become a resource for state agencies if they choose to implement VoIP.

DIR is in the process of purchasing or implementing several new technologies to improve productivity and efficiency. The agency’s e-mail system will be migrated from an in-house supported messaging system to a service-based, comprehensive e-mail solution with SPAM control, and state-of-the-art data security. This service offering, managed by DIR, provides a pay-by-the-mailbox basis, so each organization can tailor the package to meet its needs.

DIR’s cooperative contracts customers can expect a customer interface, currently termed “DIR Mall,” that will facilitate more efficient contract usage, data management, and deployment of new sourcing (solicitation) techniques. Customer interaction, issue resolution, sales opportunities, and return-on-investment measures for customer outreach activities will be tracked with new customer relationship management software. Accounting transactions and associated data will be managed through the use of an Enterprise Resource Planning (ERP) solution. Agency staff will require training and support as they transition to each of these new technologies.

DIR introduced a policy listserv to better communicate with state agencies and institutions of higher education. It is used for announcements of new publications, policies, RFOs, and educational events. DIR will gather information from other agencies through electronic surveys and additional means to collect the data needed for reporting, developing policies, and other activities.

Advances in the sophistication of malicious software (viruses, worms) has forced additional layers of security and an increased emphasis on the need for workstation virus software, active network virus monitoring, and more complicated layering of network filtering and monitoring. Instant messaging, remote access, cell phones, and other mobile devices have also introduced new technology challenges.

B. Impact of anticipated technological advances

Information technology continues to change at a rapid pace, often evolving and adapting to changing economic and social pressures. The successful and economical use of technologies such as broadband Internet access, RFID (radio frequency identification) tagging, SOA (service-oriented architecture), secure electronic messaging, and identity management are examples of evolving technologies. DIR will continue to monitor technology trends and provide advice and direction to its customer base. The State Strategic Plan for Information Resources outlines objectives and strategies based on the following trends.

• According to Gartner, Inc., a leading IT research and advisory company, the trend toward “centralization is unlikely to change for at least the next five years as the ‘IT infrastructure as a service’ function slowly matures.” 2. Drivers for consolidating state data centers are efficiency and cost savings. In addition, the state data center system will build a more secure, agile, and cost-effective infrastructure for the delivery of government services.
  IMPACT: DIR will implement a shared data center system to reduce cost, eliminate duplication, and improve performance of data center services. As required by statute, DIR has prioritized the initial 27 agencies that must participate in the consolidation.
• Technology security, both physical and cyber, has become a key component of critical infrastructure protection. Because security threats to information and technology systems are becoming more sophisticated and complex, coordination of efforts and resources among agencies will be necessary for better control.
  IMPACT: DIR will develop a comprehensive strategy for advancing a statewide security program that addresses incident response and other training, promotes information classification, establishes an approach to engage agencies in proof-of-concept pilots, and provides for topical workshops on emerging security issues.
• Advanced telecommunications technologies such as converged multimedia wide area networks that accommodate high-quality video, voice, streaming media, and enterprise applications through a single infrastructure are emerging to enhance work activities.
  IMPACT:DIR will expand the current 2-1-1 network to deliver a shared, secure, statewide IP infrastructure available to all state agencies, implement VoIP services within the Capitol Complex, and expand and upgrade the high-speed, fiber-optic Austin metropolitan area network.
• Collaborative efforts among institutions of higher education, such as the Lonestar Education and Research Network (LEARN), a nonprofit association of 33 higher education institutions that supports the research, education, health care, and public service missions of its member institutions by providing network connectivity to Internet2 and the National Lambda Rail, will provide value to the state.
  IMPACT: DIR will leverage LEARN in cases of disaster recovery and business continuity for state agencies and use LEARN for the transport of latency-tolerant data traffic to and from state data centers.
• Government agencies continue to improve citizen access to government and reduce costs by delivering services through online self-service models.
  IMPACT: DIR will support current and projected TexasOnline initiatives, offer e-government services through a speech-enabled interactive voice response (IVR) technology to increase access for citizens who have physical limitations or language barriers, deliver integrated services to business customers, and implement a user authentication system so that applications can be accepted online using acceptable electronic signatures.
• Contracted IT services are a continually fast-growing area of expense in government IT budgets, triggering the need to develop innovative contracting methods to obtain the best and most innovative services and products from the commercial sector.
  IMPACT: DIR will build a scalable commodity procurement infrastructure to support future growth of the cooperative contracts program that will include the sourcing strategies and program modifications needed to maximize the state’s buying power. This infrastructure will include robust contract and customer management systems within DIR and will expand customer support and service delivery through effective outreach activities.
• Government organizations are turning toward developing business cases through specified templates and frameworks that examine the costs, risks, and public-value benefits of each major proposed technology investment. Concerns about project failures or an inability to show improvements from projects have driven legislators and government executives to implement more statewide controls.
  IMPACT: DIR will develop Texas Project Delivery Framework tools, templates, and guidelines that support project delivery and promote the use of best practices through a consistent toolset that supports a Software Development Life Cycle (SDLC) methodology that will help agencies to deliver applications as designed on time and within budget.
• Although enterprise architecture is not a new concept, it is increasingly cited as a key practice to improve business and information technology alignment. Enterprise architecture provides the planning and discipline necessary to ensure that information and technology support the organization’s strategic goals and enable it to respond quickly to changing conditions and new opportunities.
  IMPACT: DIR will develop and document a policy regarding agency architecture, work with agencies to identify common business processes conducted by multiple agencies, support the efforts of interagency advisory groups managing collaboration initiatives for specific business areas, and establish an interagency workgroup to assist in development of a technology reuse program.
• According to Gartner 3., between 50 percent and 70 percent of IT investment goes toward capital assets, such as hardware, software, telecommunications, and networking costs, making IT one of the most capital-intensive business functions. Calculating the return on IT assets (ROITA) provides IT management with a valuable tool for maximizing the organization’s return on its IT investments.
  IMPACT: DIR will coordinate with other agencies to examine current technology review guidelines, responsibilities, and processes; and propose methods to align and improve them; and will develop and submit a report to the 80th Texas Legislature that provides strategies and legislative recommendations to streamline technology reporting requirements related to planning, budgeting and procurement.
• An enterprise approach to information management is becoming a core discipline for government entities that must serve all citizens and other constituents while facing financial and organizational restrictions.
  IMPACT: DIR will work with other government entities to identify opportunities for improving data management, perform an annual assessment of state agency Web sites, report on agency compliance with accessibility standards required by HB 2819 (79th Texas Legislature, Regular Session), and identify strategies and methods for protecting personal information in agency information systems.
• Data mining, a process used to discover new correlations, trends, patterns, and relationships by sifting through large amounts of existing data, is emerging as a key government method for protecting homeland security, detecting fraud and improving service.
  IMPACT: DIR will work with other government entities to develop policy to balance the need to preserve and protect information from unauthorized use with the state’s open records laws, and find practical solutions for improved electronic data access.

C. Degree of agency automation, telecommunications, etc.

DIR’s automation is delivered through a microcomputer-based local area network attached to CAPnet. The local area network supports workstations, printers, external electronic mail capability, and Internet Web servers. Workstations, printers, and help desk services are provided through a seat management contract. A mid-range computer runs the agency’s accounting, purchasing, project management, and billing systems. The local area network supports shared access to a variety of standard software application packages including word processing, electronic mail, calendar, scheduling, database management systems, spreadsheets, electronic publishing, and graphics. Internet connectivity is provided through DIR’s connection to CAPnet.

To facilitate agency reporting, DIR has implemented online tools. Examples of these tools include the Statewide Information Technology Asset Reporting (SITAR), which collected information on technology assets in fiscal 2004. In fiscal 2006, DIR implemented an online collection tool for agency Information Resources Strategic Plans.

DIR recently implemented VoIP technology within the agency to deliver converged voice and data services. This advanced technology will provide a number of options to improve administrative efficiency within DIR. Lessons learned from this pilot will be documented and shared as a resource for state agencies that are considering implementing VoIP.

D. Anticipated need for automation (either purchased or leased)

Collaboration between agencies is a large part of DIR’s mission. Electronic collaboration is an area that DIR does not currently have the tools in place to facilitate. As DIR establishes opportunities for electronic collaboration to meet the state’s business needs, the agency may require software tools or hardware to support these services.

DIR’s planned investment in customer relationship management (CRM) and ERP will be both strengthened and leveraged by electronic commerce and business intelligence solutions. These are substantial endeavors that will require appropriate financing.

As part of its efforts to promote agency architectures which drive improved planning and coordination through reuse, collaboration, and interoperability, DIR has developed an RFO to establish cooperative contracts for Business-IT Governance and Enterprise Architecture Tools. The contracts will provide a broad spectrum of tools, which will meet functional requirements ranging from enterprise governance, including Business and IT Strategy Development, and Program and Portfolio Management to IT operations governance, including IT Asset Discovery and Management, and IT Monitoring and Management. All eligible entities may purchase from these contracts, which will offer a variety of solutions and price points, while ensuring basic inter-operability.

DIR will prioritize the initiatives that support three statewide objectives: ensuring maximum results from state projects, enhancing the value of state reviews and encouraging business and technology architectures, and from this offering, will plan and implement appropriate solutions that will advance the state in achieving these objectives.

DIR is constantly reviewing its internal administrative processes, looking for opportunities to streamline and eliminate duplication of effort. This often involves automation or changes to automated systems. These are typically not capital projects, are small in scope, and have become a part of our normal baseline operating costs.

VI. Economic Variables

A. Identification of key economic variables

The Texas economy continues to exert a major influence on DIR and other state agencies. Technology purchases by other states, state agencies, and local governments through DIR’s cooperative contracts program grew by almost 30 percent in 2005, for a total of $667 million. Cooperative purchases are projected to reach $731 million in 2006, and to continue to increase in the future.

House Bill 1516 (79th Texas Legislature, Regular Session) requires DIR to negotiate favorable prices on technology commodity items, based on total demand. This statute also mandates that state agencies buy commodity items through DIR contracts unless a formal exemption is granted. This legislation provides an avenue for additional cost savings by other governmental entities in Texas, including counties, cities, and school districts.

The Texas economy will influence the resources available for state agencies and local governments to purchase IT commodities and services using DIR contracts. The volume of those purchases affects the DIR cooperative contracts purchasing program in the following ways:

• Purchase volumes impact negotiation and pricing on DIR contracts, and
• Total contract purchases by state agencies and local governments impact DIR’s cost recovery, which is used to fund 92 percent of the agency’s operations.

DIR’s role in direct services to citizens has expanded in the wake of natural and manmade disasters such as 9/11 and Hurricanes Rita and Katrina. Similar disasters may continue to exert a negative effect on the availability of state resources. The Legislative Budget Board reported in November 2005 that Texas state agencies had submitted $1.394 billion in costs related to Hurricanes Rita and Katrina. DIR’s expenditures in this report totaled $0.3 million. 4.

DIR has begun its efforts to create a consolidated information technology infrastructure, as authorized by House Bill 1516 (79th Texas Legislature, Regular Session).

B. Extent to which service populations are affected by economic conditions

DIR provides technology services to state agencies, public colleges and universities, and local governments. These governmental entities are dependent upon public monies, which in turn are influenced by the economic climate at the local, state, and national level.

The Governor’s Office and DIR have launched online business and consumer portals that expand access to state and local government resources. These portals demonstrate the power of information technology to enhance citizen access to government services and programs. Businesses wishing to locate or expand in Texas can apply for licenses and permits from the Texas Business Portal. Visitors to the state government Web site (www.TexasOnline.com) can utilize the “Living in Texas” portal to access online services such as driver’s license renewals and utility rate and tourist information, saving both time and money.

DIR will continue to provide innovative technology solutions that offer maximum return on investment for every government dollar.

C. Expected future economic conditions and impact on agency and service populations

Economic growth in previous decades was primarily driven by increases in labor or natural resources. Economic expansions in the Information Age are fueled by advances in knowledge and large-scale adoptions of new innovations. Information technology will create continued economic growth at the state and national level. 5.

Texas’ economic climate has steadily improved during the past biennium and is expected to continue its progress. The state’s economic expansion has occurred at a faster rate than the national economy, and in 2005 surpassed the U.S. economy. Factors such as Texas’ strong oil and gas and technology industries have contributed to the state’s vibrant economic growth. Additionally, Texas has experienced a significant level of population growth, which contributes to its economic expansion. For example, state population increases have contributed to growth in the construction industry. 6.

The Federal Deposit Insurance Corporation’s (FDIC’s) State Profile for Texas indicates that statewide employment levels grew 2.5 percent in 2005, reflecting a net gain of 237,900 jobs. This increase surpasses previous projections, indicating that the Texas economy is robust. The FDIC also projects continued growth for the Texas economy into the future. However, the FDIC reports that the telecommunications industry will continue to experience fluctuations due to factors such as cost restructuring, surplus capacity, and low level of demand. 7.

Texas’ technology industry continued its growth in the first quarter of 2006, as new hires in the high tech industry increased at a faster rate than the state’s manufacturing sector layoffs. High-tech employment rose 1.9 percent (or a total of 1,400 jobs) in the first quarter of 2006. 8.

Additionally, Texas largest export category in 2005 was computer and electrical equipment, valued at $31.14 billion. Texas’ largest computer export markets are Mexico, Canada, South Korea, Malaysia, and China. 9.

The state’s economic forecast for fiscal years 2007–2011 shows continued increases in the gross state product (from $908.8 billion in fiscal 2007 to $1.03 trillion in fiscal 2011) and personal income (from $830.6 billion in fiscal 2007 to $1.05 trillion in fiscal 2011). These projections reflect expectations for Texas’ continued growth and prosperity well into the future. 10.

The 79th Texas Legislature (Regular Session) enacted House Bill 1765, which created the $200 million Texas Emerging Technology Fund. This fund is designed to encourage technology innovations that will directly benefit the state economy. The fund will reduce the amount of time needed for new or emerging technologies to be adopted and will ultimately transform the quality of life for all Texans. The fund will also attract world class researchers and companies, who in turn will help to ensure that Texas’ high-tech future remains bright.

DIR will continue its efforts to consolidate state agency data centers, expand cooperative purchasing, and implement shared information technology services. DIR’s enterprise approach to government technology remains a sound strategy for the state under any economic condition, offering improvements in operating efficiencies, interoperability, and savings from economies of scale.

D. Agency response to changing economic conditions

DIR’s approach to government information technology has and will retain a focus on collaboration to create an integrated government technology enterprise. DIR has specified its technology commitments to the state for the coming biennium in its 2005 state strategic plan, Shared Success: Building a Better Texas through Shared Responsibilities.

VII. Impact of Federal Statutes/Regulations

A. Historical role of federal involvement

While historically, federal statutes and regulations have had minimal direct impact on DIR, this is changing as more federal laws are enacted that affect the use of information resources. Recently enacted state legislation (e.g., HB 2819, 79th Texas Legislature, Regular Session) regarding access to technology for people with disabilities incorporated related federal regulations to ensure consistency.

Federal laws relating to identity theft may also impact DIR and other state agencies as we transact business with the public over the Internet. DIR reviews and evaluates federal IT standards and federal technology initiatives to determine their applicability at a statewide level.

B. Description of current federal activities

DIR monitors federal IT legislation to determine its impact. DIR is primarily involved with the federal government in three areas, cyber-security, consolidation of state agencies’ shared services, and state GIS coordination.

The U.S. Congress continues to be active in the area of cyber-security. Federal Homeland Security grant funding was requested in fiscal 2006 through State Homeland Security in order to reduce the vulnerability of critical state infrastructures from cyber-terrorism and other malicious attacks. This funding would supplement state funds for a network security and operations center, and would improve DIR’s ability to respond to computer security incidents statewide.

DIR has also worked closely with the U.S. Computer Emergency Response Teams (US-CERT); the Government Forum for Incident Response and Security Teams (G-FIRST); and local communities to enhance cyber-threat information sharing.

During fiscal years 2005 and 2006, DIR coordinated with federal agencies regarding the consolidation of data center and disaster recovery services among state agencies, to ensure that its consolidation efforts were consistent with federal funding requirements. DIR has also served as a resource for a task force of federal officials interested in consolidating data center and other shared services at the national level.

DIR has complied with all relevant federal regulatory issues, and will remain compliant with the regulatory guidance provided by the federal agencies in consolidation of other shared services.

DIR houses the state GIS coordinator, who works with several federal agencies including the Department of Interior, Department of Homeland Security and Federal Emergency Management Agency on matters related to state and federal coordination of GIS technology and data.

Since September 11, 2001, the U.S. Congress has enacted new laws affecting cyber-security. Additionally, the United States Access Board has started the process of updating the federal accessibility standards. DIR continues to monitor any proposed security and accessibility legislation to determine the impact on Texas government.

C. Anticipated impact of future federal actions

DIR will be impacted by future federal privacy, security, and accessibility legislation. Legislation of this sort may affect operations at the state data center, security services, and TexasOnline. Because it is uncertain whether and in what form such legislation may be passed, the nature of the impact, and any associated costs, cannot be quantified.

However, there is a growing trend to federalize cyber-security reporting and accountability for protecting sensitive information. Cyber-security may be impacted by federal laws or regulations, particularly from the perspective of Homeland Security. Federal homeland security funding for increased cyber-security has been made available for specific purposes.

At this time, additional mandates in cyber-security or other areas have not been adopted or proposed by Congress or federal agencies.

VIII. Other Legal Issues

A. Impact of anticipated state statutory changes

DIR may be impacted should legislation related to the following issues be enacted:

• Any legislation related to operation of the state data center and the agency population it serves;
• Any legislation related to TexasOnline;
• Any legislation related to IT security or privacy;
• Any legislation related to contracting for or purchasing IT products or services;
• Any legislation related to the Information Resources Management Act or responsibilities of the agency therein, even if codified in another statute; and
• Any legislation that would further regulate the telecommunications services DIR provides.

B. Impact of current and outstanding court cases

The agency is not a party to any lawsuits or administrative proceedings. Indirectly, DIR may be affected by court cases involving public and higher education, the criminal justice system, and health and human services systems, as well as by court cases involving any agency prioritized to receive data center services if those cases involve resources and services provided through information technology. The resolution of these cases may have an indirect impact on the budget of the agency, as well as service delivery. DIR is not aware of any such cases at the time of the drafting of this plan.

C. Impact of local governmental requirements

Local procurement requirements often add restrictions to include locally certified minority and women-owned business enterprises and local competitive procurement for purchases over a set dollar amount. While there are opportunities to work with DIR vendors to answer these concerns, they may present obstacles to use of the cooperative contracts program.

IX. Self Evaluation and Opportunities for Improvement

A. Agency performance

Texas’ national and international leadership in information technology has expanded over the past biennium. It is expected that the state’s leadership role will continue to grow in the coming years. DIR has been a key player in this growth, through its vision for consolidated, cost-effective and enterprise management of the state’s information technology resources and assets.

DIR has and will continue to play a central role in state and national efforts to establish cyber-security at the state and local level. DIR continues to win awards and be cited in state and national publications for its technology leadership. DIR’s data center consolidation efforts and competitive technology procurement efforts are being studied for replication by other states and countries.

The 79th Texas Legislature passed a broad range of information technology bills, many of which required the development of administrative rules. DIR staff has worked throughout 2005–06 to develop new administrative rules related to data centers, purchasing, information technology security, and information resources management, including rules for making state Web sites more usable and accessible to persons who speak Spanish or have disabilities. State administrative rules relating to information technology can be accessed through the DIR homepage.

DIR recently issued the Data Center Services Request for Offer (RFO), a procurement for a service provider to data centers of 27 prioritized agencies. As part of this process, DIR has established an advisory committee and several workgroups to ensure agency involvement throughout the procurement process, ranging from defining the data center services scope to collecting information on data center-related assets, services, service levels, and expenditures for the prioritized agencies. These committees additionally have provided input on technical requirements for the RFO, the RFO evaluation process, and building the governance structure.

DIR has responsibility for two full-cost-recovery operations—the Cooperative Contracts Program and management of the statewide telecommunications network (TEX-AN). Performance measures for these cost-recovery operations benchmark customers’ costs of products and services against those offered by the private sector.

Through its competitive pricing structure, the agency has established rates for data and voice services that are significantly lower than published state industry averages. DIR continues to review its pricing to ensure that customers of CCTS and TEX-AN receive unparalleled savings and services.

DIR’s Enterprise Architecture (EA) Program is one of the statewide objectives described in the SSP. The EA strategy is to encourage and support agencies in the development of business and technology architectures that drive improved planning and coordination through reuse, collaboration, and interoperability. The EA Program will focus on developing a core conceptual model and methodologies to support agencies in the development of their enterprise architectures; developing useful, consistent statewide business and technology architecture standards; developing reuse guidelines which address business asset reuse, technology asset reuse, and Service Oriented Architecture (SOA) guidelines for reuse; and prioritizing, reviewing, and establishing statewide and/or shared applications that address common business problems.

From outcomes and deliverables developed in conjunction with the Enterprise Architecture program, DIR has extended the work to encompass a comprehensive approach to statewide project delivery. In coordination with agencies, DIR developed the Texas Project Delivery Framework. The Framework promotes a consistent approach to project delivery—from business justification through benefits realization—that proposed major projects must follow to ensure the business needs of agencies are explicitly documented. Agency use of the Framework will produce project results consistent with the initial project goals.

TexasOnline was created as a self-supporting, public/private partnership. It does not rely on General Revenue and has been developed and operated with funding from the state’s private partner. DIR must be vigilant in its management and governance of the project. The project is routinely audited by an independent accounting firm, the State Auditor’s Office (SAO), and DIR’s internal auditor.

In its November 1, 2005 audit of TexasOnline, the SAO stated that DIR “significantly strengthened” the provisions of the TexasOnline contract. In fulfilling legislative intent, DIR has taken the following action in response to Rider 11 of DIR’s section of the General Appropriations Act passed by the 79th Legislature:

• DIR negotiated a contract for TexasOnline with the advice of Legislative Budget Board (LBB) and SAO. The discussions with LBB and SAO staff involved the entire draft contract, not just the financial details.
• Incorporating the feedback from SAO and LBB staff, the contract requires that net revenue be divided evenly between the state and the contractor.
• DIR increased the state’s share of revenue from 10 percent to 20 percent of all gross receipts in fiscal 2007.
• DIR set a firm contractual deadline for project breakeven on December 31, 2006, with capital asset ownership transfers to the state at breakeven or December 31, 2006, whichever event occurs first.
• Annual financial audit is required and must be paid for by the contractor.
• Eliminated the contractor’s right to terminate for convenience.
• Strengthened terms for transition to awarded vendor at re-bid.
• Capital asset costs are capped by the contract.

With these changes, while still growing the number of online available services to TexasOnline constituency, the project was able to achieve breakeven in April 2006. As a result of breakeven, the state began receiving 50 percent of the net revenues generated by the project in addition to sharing in total revenues. This self-funding model, unique among all state portals, is estimated to generate $36 million for the state’s General Revenue fund over the life of the contract.

Additionally, at breakeven, all assets were transferred to the ownership of the state, including all hardware and perpetual licenses to all software developed for the portal. Of the states with self-funded portals, Texas is the only one that owns its infrastructure and code and achieves the largest state revenue sharing strategy in the nation.

TexasOnline financial statements have been audited by an independent audit firm for fiscal years 2002, 2003, and 2004. The 2002 and 2003 audits resulted in clean opinions of the TexasOnline financial statements and found that the financial statements present fairly, in all material respects, TexasOnline’s financial position. The targeted timeframe for release of the fiscal 2004 financial audit is summer 2006.

An audit of fiscal 2005 TexasOnline financial statements is currently underway and is scheduled for release later this year.

In 2004 and 2005, audits of TexasOnline’s internal system controls as required by Statement of Audit Standards (SAS) 70 were conducted. There were no significant audit findings.

Additionally, in December 2005, DIR’s IT Security Office contracted for penetration tests of TexasOnline with an industry leader in such tests. The testers were not able to breach TexasOnline’s network security. The IT Security Office gave TexasOnline its highest assessment rating of adequate, meaning ystems could not be compromised and proprietary information could not be retrieved. A security audit (scan and penetration test) was also conducted earlier this year.

TexasOnline continues to be one of the most visible, scrutinized, and audited projects in the state. It has been the subject of inquiries and visits from government entities both from the United States and international communities who view its operational and financial models as something they would like to emulate.

The State of Texas has been the recipient of several prestigious awards over the past five years. These awards reaffirm our innovative use of technology and also illustrate the many benefits that can result from collaborative and cooperative arrangements between state agencies. To date, the awards that DIR has won include:

• Top 25 Doers, Dreamers and Drivers – This honor recognizes individuals who are redefining and advancing technology’s role in government and society. Larry Olson, CTO for the State of Texas, was a recipient for showing that change is possible despite the age-old belief that institutional barriers impede government reform. Recognized in March 2006 by Government Technology Magazine.
• Best of Texas Award – Demonstrated Excellence in Project Collaboration for the Licenses, Permits and Registrations System – This award recognizes advancing and advocating excellence in the application of information technology. Awarded in October 2005 by the Center for Digital Government.
• TASSCC Excellence Award for the Innovative Use of Technology in State Agencies – This award recognizes advancing and advocating excellence in the application of information technology to improve the provision of public service in Texas. Awarded in August 2005 by TASSCC (Texas Association of State Systems for Computing and Communications).
• National Electronic Commerce Coordinating Council (NECCC) Cost Effectiveness Through E-Government Award – Finalist, Internet Occupational License Renewal System – This award recognizes governmental projects that drive cost savings through the use of information technology. Awarded on November 2003 by the National Electronic Commerce Coordinating Council (NECCC).
• American Council for Technology Intergovernmental Solutions Award – This award recognizes governmental agencies working together on information technology projects. Awarded in May 2003 by the American Council for Technology.
• Computerworld Honors Program – Finalist – This award recognizes exceptional information technology projects in the public sector. Awarded in April 2003 by Computerworld.
• Excellence in IT Collaboration Award – Best of Texas Contest – This award recognizes governmental agencies working together on information technology projects. Awarded in November 2002 by the Center for Digital Government and Government Technology.
• Best of the Web Award – 5th Place, State Government Category – This award recognizes advancing and advocating excellence in the application of information technology. Awarded in September 2002 by the Center for Digital Government.
• TASSCC Excellence Award for the Innovative Use of Technology in State Agencies – This award recognizes advancing and advocating excellence in the application of information technology to improve the provision of public service in Texas. Awarded in May 2002 by TASSCC (Texas Association of State Systems for Computing and Communications).
• Trailblazer Award – This award recognizes the promotion of innovative e-government programs. Awarded in April 2002 by E-Gov.
• George Mitchell Payments System Excellence Award – This award honors outstanding organizations that have demonstrated excellence and leadership in the development and advancement of electronic payments. Awarded in March 2002 by NACHA, the Electronic Payments Association.
• Government Technology Leadership Award (“Gracie”) – This award recognizes government projects making exceptional contributions to mission accomplishment, cost effectiveness, and service to the public. Awarded in November 2001 by Government Executive.
• Digital State Survey—11th Place, Electronic Commerce Category– This award recognizes the availability of regulations, forms, and online assistance; the ability to submit required paperwork and payments; and the status of portals and e-procurement systems. Awarded in October 2001 by the Center for Digital Government.

B. Agency characteristics requiring improvement

While DIR maintains a very good reputation statewide, nationally, and increasingly on an international scale, the following areas are being reviewed for further improvement.

• Continue to enhance timeliness and accuracy of financial reporting and monitoring to ensure that all funds are maximized and that business activities operate in a full cost-recovery manner.
• Fully implement enterprise (business, data, and technology) architecture standards (through rules, guidelines, and best practices) for individual agency adoption, which will promote and support reuse, collaboration, and interoperability within agencies and statewide.
• Continue to align its staff and financial resources to support consolidation and shared services projects.
• Continue to upgrade and expand its capabilities to enhance security services to agencies.

C. Key obstacles

DIR faces several obstacles, partially or wholly outside its control, including:

• The decentralized nature of Texas government continues to make it difficult, through administrative means, to implement enterprise business processes, build a common technology architecture, and implement collaborative, resource-sharing initiatives.
• Future natural or manmade disasters, as exemplified by 9/11 and Hurricanes Rita and Katrina in 2005, could continue to redirect technology resources to emergency assistance and relief.
• Homeland Security threats, as well as other cyber-criminal activity, have increased and are expected to continue to expand in the future.
• Rapidly emerging and converging technologies present challenges for state and local governments to deliver services through the most efficient technologies to their clients and customers.
• Citizen concerns about privacy issues and several large scale security breaches at large public and private institutions are expected to hinder adoption of e-government services.
• Many agencies currently construct and manage their own networks using TEX-AN services. In many cases, services to local governments are duplicative and agencies individually fund separate circuits for services to local entities.
• Some state agencies are reluctant to change business processes in order to consolidate at a statewide enterprise level or bring services online.
• The approval process in many state agencies continues to be lengthy and cumbersome, which hampers timely delivery of new online services and subsequent fee collections.
• The competitiveness of the agency’s telecommunications services will continue to be impacted by rapid changes in the telecommunications marketplace.

D. Opportunities

DIR has identified several opportunities to address some of the obstacles listed above, including:

• Examining shared services, and when proven to be an effective and efficient technology service delivery option for the state, implementing and managing those services.
• Exploring additional innovative public/private partnerships and enterprise-wide solutions to reduce costs.
• Continuing to work with the federal government to identify and secure new funding for information security initiatives.
• Providing security assessments to improve the security of state networks, including local government networks, and easing citizen concerns about privacy.
• Continuing to generate revenue for the state via TexasOnline, possibly for use in fostering other innovations.
• Increasing standardization of IT infrastructure, policies, and technologies that will lead to technology and project consolidation and collaboration, sharing of technology assets, and enhancing partnerships among agencies and vendors.
• Implementing VoIP more widely will allow the state to take advantage of changes in telecommunications technologies that improve service while reducing cost.
• Assessing results of TexasOnline’s periodical surveys of state agencies’ e-government needs and their satisfaction with the state portal, and acting on significant findings to enhance service delivery.
• Working with the Texas State Library and Archives Commission and other government institutions to develop standards, guidelines, and best practices to reduce costs and improve government information sharing and management for citizens’ and state workers’ current access and preservation of historical state records.

E. Working with local, state, and federal entities to achieve success

As part of its planning process for this agency strategic plan and the State Strategic Plan (Shared Success), DIR has developed a roadmap through which its vision for government technology management will become a reality. DIR has developed objectives and strategies that support and involve all state agencies while reflecting our strong ties to the goals of the Governor and all state leadership.

DIR’s emphasis on shared success reflects the reality that transforming information technology throughout Texas state government is not the responsibility of a single agency. It is, rather, a shared responsibility of all agencies working collaboratively to build an enterprise infrastructure that supports individual, mission-critical agency business processes. The result will be a shared success in state government information technology management.

State and local entities are both partners and customers of DIR, and DIR will work to enhance its relationship with those entities. Eighty-three percent of the purchases from DIR’s cooperative contracts are to local entities. DIR has an aggressive outreach program to local governments and school districts, and will continue to inform local customers of commodities and services available through DIR contracts. DIR meets with local officials through professional associations and regionally to determine their technology needs. That information will be used to shape procurements that will meet their needs, as well as the needs of state agencies.

With the passage of HB 1516 by the 79th Texas Legislature, state agencies are required to purchase computer hardware and technical services through DIR contracts, a