Resignations, once offered and accepted, can defuse a political crisis. But not in Sacramento, which is grappling now with a software contract snafu that could affect the technology plans of state government for many years to come.

The story thus far: Three state agencies and the Governor’s Office were involved in a decision last year to purchase database software from Oracle Corporation. The Bureau of State Audits recently concluded the contract was overpriced by more than $40 million. Governor Gray Davis accepted the resignation of his Department of General Services director, and asked the state’s attorney general to dig further. The Legislature is holding hearings, and seems poised to defund the Department of Information Technology in retaliation.

Tech is quickly becoming a four-letter word in Sacramento.

Setting this immediate controversy aside for a moment, the simple truth is that state government needs to invest more in technology than it does today. California lags behind many other states and the federal government in using technology to reduce costs and improve the quality of government services. Especially in light of current and ongoing budget pressures, the public sector must recommit itself to doing business faster, better and cheaper. Technology is key to making this happen.

All over the nation, indeed the world, private companies and public agencies are using technology to improve productivity. The correct application of technology produces remarkable results.

Cisco Systems, for example, takes 90 percent of its orders online (more than $1 billion every month) and answers 82 percent of customer support calls over the Internet. More impressive, however, is the fact that Cisco processes 240,000 employee expense reimbursement claims each year – with a staff of six. The typical company spends $36 to process a single expense report; Cisco’s cost is less than a tenth of that amount.

California state government needs to accelerate its pace of technology adoption, but “business as usual” clearly isn’t an option in light of recent events. Here are some areas where both political parties in the Legislature can find common ground with the Davis Administration.

Agree on what matters – results.

Missing throughout the Oracle contract chronology is any sense that there was a compelling business reason behind the purchase, other than to reduce the per-unit cost of a software program.

The cart was not only in front of the horse, there doesn’t seem to have been a horse in sight.

What is needed is bipartisan agreement on a limited number of strategic management initiatives. The federal government is moving in this direction, with the Office of Management and Budget launching 24 separate initiatives designed to reduce costs or improve the quality of government services. These goals in turn drive the demand for certain technology applications. There is no comparable effort under way in California.

The goals need to leap off the page and deliver: (1) Significant cost savings and (2) measurable improvements in quality of services to citizens and/or businesses when they interact with public agencies.

Demand a return on investment and agree how it will be measured.

In a January study sponsored by PricewaterhouseCoopers, Professor Craig L. Johnson of Indiana University-Bloomington found only one state conducted a return-on-investment (ROI) or cost-benefit analysis before investing in a web portal project, the capstone of the typical state e-government initiative.

An April 9 survey by the National Association of State Chief Information Officers concluded that by a margin of two-to-one, state technology managers believed a sound business case was the most important factor in determining whether a technology initiative would be funded. But there was no agreement on what a business case should contain.

California is not alone, but that is no excuse. The Department of Finance should develop a model for establishing a business case for agency technology initiatives – a model that allows plans from different agencies to be compared to one another.

Break down bureaucratic resistance to technology

Respected Sacramento Bee columnist Dan Weintraub wrote April 30 about another potential computer imbroglio in state government, based largely on criticisms made by a public employee union about a major software implementation at the California State University system.

This is an ominous leading indicator. The Oracle controversy could become Exhibit A in a misguided effort by public employee unions to minimize technology acquisitions, in order to preserve union jobs.

Head this off at the pass.

Republicans in the Legislature are crowing that they have confirmed many state agencies keep “phantom employees” on their payrolls as a way to cover unanticipated costs. Perhaps this budget can include a one-time only offer: Let agencies keep half of these funds for three years to invest in technology with clear ROI. Agencies that don’t take the deal lose all the money.

Correct the expertise imbalance.

The state auditor concluded that taxpayers were poorly represented in the contract negations with Oracle. This is a common complaint in a range of situations when contract terms are found to have been too generous to the seller. (In fact, a nearly identical charge appeared in the state auditor’s December 2001 report on the long-term power contracts negotiated by the Department of Water Resources.)

While the state employs many skilled and experienced attorneys, more firepower at the negotiating table would be welcome. California is home to some of America’s smartest and toughest technology lawyers. Let’s tap into that talent pool. The executive branch should be given expanded authority to contract with private law firms to represent the state in contract negotiations with technology vendors.

Sure, these lawyers don’t come cheap. But if the state auditor is right, California just overpaid $40 million in one software deal.

Act now.

California faces a staggering budget deficit. Only in this environment is there enough pressure to keep all parties at the table and make tough choices. When the budget crisis eventually recedes, the pressure will be off and we will be left again with business as usual.