Treasury CIO Tackles Bank Bailout, Data Center ConsolidationTreasury CIO Tackles Bank Bailout, Data Center Consolidation

The Department of Treasury has played a central role in working to pull the American economy out of the recession, perhaps most prominently by managing the bank bailout, the $700 billion Troubled Asset Relief Program.

The Department's CIO, Michael Duffy, has overseen the IT-related aspects of TARP while at the same time serving as a leader of a government-wide data center consolidation initiative and continuing work on major projects like replacing the Internal Revenue Service master taxpayer database. information Government recently chatted with Duffy about the recession, data center consolidation, and Treasury's broader IT efforts.

information Government: Can you give me a sense of the scope of Treasury's IT operations and your role as CIO at Treasury?

Treasury CIO Michael Duffy: We have an overall IT budget of a little over $3 billion. A substantial portion goes to fund IT at the Internal Revenue Service. We have several other organizations that also do quite a bit of data processing: our Bureau of Public Debt and our Financial Management Service are the next two in terms of size. Treasury IT needs span from high end transactional data processing -- whether it's tax returns, payments to beneficiaries, issuances of debt -- to IT that supports Treasury's currency and coin manufacturing environments, IT that supports our investigative offices, and then of course the meat and potatoes of office automation: e-mail, word processing, etcetera.

information Government: How much of that is centralized?

Duffy: We run a consolidated wide-area network. We have a consolidated human resources system. We have a department-wide directory, and a department-wide public key infrastructure. Some of the administrative systems we run centrally, such as a database that we use to manage our FISMA requirements. We have also gradually moved the department toward a uniform suite of financial management systems. At the highest level, we have a central financial management system we use for the purposes of reporting general ledger information. For the bureau level, transactional financial management functions, we are striving towards two systems there.

information Government: How would you classify your role?

Duffy: At the Department level, it's a combination of policy development, enforcement, and advocacy: everything from security policy to high-level policies on how to manage IT. We're in the midst of re-invigorating our enterprise architecture program, and initiatives like data center consolidation are integral to that, as is our initiative to deploy standardized identity management capabilities.

In the capital planning investment control arena, we collect project management information from the bureaus and the project managers, review that, and decide when and where there is a need for the department to engage with the bureaus. Key questions we ask include: "Is the project on track and on schedule?" and "Are there issues/opportunities we need to discuss about consolidation or some type of joint effort?" We perform these reviews during the development of the budget as well as after the budget's been approved and the projects are underway. information Government: What are the things that are the biggest efforts you're working on these days? What's occupying most of your time?

Duffy: The data center consolidation initiative is occupying a lot of my time, but after that, my attention and time gets spread across the table pretty quickly. If you look at our $3 billion portfolio, there are over 250 discrete IT projects, of which 60 are major IT investments. We spend the lion's share of our focus on those 60 projects because they comprise over three-fourths of our IT budget. Within that category, we narrow it down even further to ones that are in an active state of development; these 15 projects are where much of my time is spent.

One is the IRS Customer Account Data Engine program, through which IRS is re-architecting the master file for taxpayer data. This project is integral to the overall effort the IRS has underway to modernize the agency's tax processing systems. The result will be a modern, single, authoritative database of all individual tax filers. The new database will allow IRS to subsequently re-architect the downstream systems that feed off that database which in turn will facilitate operational efficiency and improved taxpayer services.

Another key initiative is modernizing the Bank Secrecy Act system, which is managed by the Financial Crimes Enforcement Network (FinCEN). The Bank Secrecy Act system is used to collect the financial industry reports on financial transactions that might be suspect, and is a key data source not only for law enforcement in the federal government but at the state level as well. The current system is antiquated and its current structure limits the functionality and use of the data we collect.

information Government: What are the biggest challenges or biggest opportunities you see for the department right now? It seems like consolidation and system modernizations are two big ones.

Duffy: Yes, consolidation is an area that holds many opportunities for Treasury. Another key area we are looking at right now includes document and data management. Through this effort -- which we call enterprise content management, or ECM -- we seek to address document-centric business processes that either aren't yet automated or are automated on rather dated technology.

The ECM program is another instance of where we're trying to do things at a corporate, department level as opposed to bureau by bureau. Specific business functions to be addressed through ECM include automation of our Freedom of Information Act processes and our correspondence management processes. We also expect to bring a new level of document management capability to policy offices that do a lot of document development and evaluation. While internally focused, ECM should yield a lot of benefit to the public, either in our ability to respond more rapidly or produce a higher-quality level of analysis.

Another big challenge area is our effort to adjust the allocation of our budget between infrastructure versus applications. One of the reasons why the Data Center Consolidation Initiative is such a key initiative here at Treasury is that, looking at our budget, I've come to the conclusion that we have an opportunity to extract savings out of our infrastructure if we're more aggressive in consolidating, and then re-channel those resources into additional development of value-added applications. information Government: You've been tapped, along with Department of Homeland Security CIO Richard Spires, to lead the government-wide data center consolidation initiative. Could you give me an update of where things stand with that right now?

Duffy: We're in the process of reviewing the first set of data that came in from each of the agencies and the agencies themselves are in the process of developing their initial plans which are then due to the Office of Management and Budget at the end of this month. We're very much in the early analysis and planning phase of the overall initiative.

information Government: How important is this effort to Treasury itself?

Duffy: We have some very good data centers in Treasury, but we don't process all of our mission-critical data in those data centers. My objective is to get all of our mission-critical data processed in high-quality data centers such as those we have in place at the IRS and our Fiscal Services.

I want to get smaller organizations, for whom running a data center is a major burden, out of that business so they can focus on accomplishing their missions. We also expect to identify savings as a consequence of consolidating data centers, and then apply those savings to projects that add value to the Treasury mission. It's no secret that the federal budget is going to be under constraints for the next several years. Everything we can do to save costs and free up resources is going to be helpful to the Treasury and helpful to the American public.

information Government: How much of this is technical versus cultural?

Duffy: It's a fair amount of both. There's a lot of engineering that has to be done to consolidate the data processing capabilities we have. For starters, we have to maximize the ability to virtualize our application environment and our storage environment. For the organizations that haven't done much virtualization, that's significant technical work. Some applications virtualize well, some do not; and even those that do, there's a process to go through in terms of migrating to a virtualized environment.

After we virtualize, moving into a shared data center environment is the next step. We don't want to simply put Bureau of Engraving and Printing servers next to Mint servers next to departmental headquarters servers. Instead, we want to be able to consolidate applications onto a single set of servers and leverage the efficiencies that are available in the computing architecture today. The bottom line is that there's a lot of technical work.

There's also a lot of cultural work because, historically, Treasury has acted more as a holding company of independent entities, rather than as a unified corporate entity. We are trying to operate more as a corporate entity to be able to take advantage of the efficiencies inherent in that business model. information Government: How has the financial crisis changed the way you look at or driven how you do IT?

Duffy: It's definitely driven our IT, particularly at the department level. When we set up the Troubled Asset Relief Program back in the fall of 2008, that work was done primarily out of Treasury headquarters. We've had to develop new abilities to be able to consume, analyze, and manage far greater amounts of data than we had previously. It's also brought in a new cadre of Treasury officials to the department, many of whom are sophisticated users of IT. So the financial crisis and the Treasury's response has ramped up our requirements. An example of this change is in the document management arena. We had very rudimentary document management technology prior to 2008. It's led to a lot of the initiatives we're looking to pursue in eliminating paper and eliminating manual processes.

information Government: With the passage of TARP, you had to put things into place quickly. Tell me a little bit about that experience, what you've learned from doing that.

Duffy: We had to stand stuff up in a hurry. The primary lesson is that you don't want to develop from scratch things that you don't have to.

In point of fact, we didn't have the luxury of standing up from scratch much of what we used for TARP for the first six months of the program. That was actually good because it took a while for the Office of Financial Stability to determine what IT tools they wanted and how they wanted to use those tools. As OFS has been building new systems over the course of the last year, they've actually been able to draw on the lessons learned by the business.

Since the IT is really just there to facilitate business, it's important that the business has a really good understanding of what they need. Until the business does understand what they need, you're almost better off applying the minimum amount of IT in the interim.

information Government: So were you able to cobble together the existing systems and licenses you had to get the things done that needed to be done?

Duffy: That was the initial strategy we had, and we also relied on some external partners -- including other federal agencies. We were able to learn from those partners what the more refined toolsets needed to be.

information Government: What are you doing now with TARP?

Duffy: Right now, the program is heavily focused on managing the assets that we acquired during the initial capital investments we made in the banks, the auto industry, AIG, etc. There's a lot of financial and investment portfolio management work being performed.