In a recent research note (see "Government and IT Modernization"), we highlighted the fact that government agencies need to modernize their IT paradigm to cope with new business requirements and to tackle issues that directly challenge the sustainability and manageability of IT systems, and operations. Legacy application modernization is one of the most impacted areas. Two of the driving factors for application modernization mentioned in our note were:

• Elected officials and program executives need to have levers they can pull to quickly adapt the way government operations are run. This need for flexibility is exacerbated in times of budget constraints.
• Existing government IT systems are the result of proliferation of fragmented developments and updates, thus, they require significant amounts of time and money for changes, upgrades, and maintenance. In addition, the people with the skills to manage those systems are retiring.
The state of California's government payroll system is the quintessential example. As the state continued to operate without a budget 36 days into the fiscal year, Governor Arnold Schwarzenegger recently announced a plan to issue minimum-wage checks to 200,000 state workers to preserve cash during the following two months.

But Democrat State Controller John Chiang replied that it would take at least six months - and not one as requested by the governor — to reconfigure the state's legacy payroll system to issue blanket checks at the federal minimum wage of $6.55 per hour. In essence, an outdated software application, managed with skills that are becoming scarce, dictates what elected officials and government executives can do, instead of providing services that flexibly align to the business strategy.
California must find a quick fix — and most likely a rather expensive one — such as hiring freelance consultants to rush system changes, rehiring retired personnel with COBOL skills, or outsourcing the whole payroll process to a BPO vendor for the next couple of months. But the real message of this story is that a bell is ringing for government agencies that still rely on 30-year-old applications. Budget constraints will not permit a "big bang" approach or the use of substitute mainframe systems with the latest commercial off-the-shelf software.

Besides, this is not the only possible approach to acquiring new applications (see "When to Use Custom, Proprietary, Open-Source or Community-Source Software"), and certainly, it cannot be done in one month. The state of California's CIO, finance department, controller and HR department - and stakeholders in other jurisdictions with similar legacy modernization challenges - will need to sit around a table and define a long-term application strategy by identifying gaps in the existing architecture as well as what needs to be done to align with the business requirements. That application strategy will form the basis of a modernization program that will include both technology sourcing and implementation, as well as business changes. Once the strategy is set, selling the business case to the governor to draw the appropriate amount of money will be the easiest task.