disaster readiness. the traditional way we have done things in creating data centers, although some of them have been low cost, have not been the most disaster ready facilities. this new plan really improves the readiness of the city, of the equipment in these facilities, to be prepared for disaster. it is also an opportunity to become much more grain. rather than having individual pieces of equipment scattered around the city, by joining these together in consolidated centers, we are saving energy. there are some significant environmental benefits. and then germane to the budget conversation, it generates savings over a period or after the capital investment is expected to create the centers and people move into them, then we start to see savings over time. rather than spending individually, people are pulling their money into shared centers which will save the city money. having said that, let me give you a quick update on where we

are at in executing data center consolidation because we are taking actions in this area. the committee on information technology did approve some consolidation sites in the city. one is a site where we have moved data center operations from the space you heard about on march 2200 paul. we would try to maximize the utilization in the we have already leased. and then the airport -- and this example of partnership, has agreed to construct a new data center down at the airport, using the airport staff and space at the airport to construct a shared space that the entire city should use. also unique to the project and i would like to stress, again, as an example of a partnership,

rather than proposing new staff for this project, what we asked the departments to do was to look in their existing pools of staff for i.t. staff the already had and assigned existing staff to this project. i am happy to report the department of technology, health, comptroller's office, human services agency, dpw, puc, and police have all done in a dedicated staff to this project. understandably, it is an impact on their department to reassign step away from this -- from their own projects, but they recognize the importance of it and will milling -- and were willing to make that sacrifice. also, we have tried -- i realize this is a big e eye chart, but

this is a document we update frequently appeared aside from the corporation, we want to demonstrate, we understand there is a desire to see a return of the spin on this project. we're trying to show in this chart -- i will be brief about this. we are assuming the project starts this year. we are already under way with much of the virtual causation efforts. the part of technology and health are leading the way in setting the template for the city, where the project might go on this. there are some investments we have to make over the next few years regarding staffing, construction of the new facility at the airport here. and those are the lines you see in fiscal years 11, 12, falls, 13. we are making some capital investments, buying equipment. what we are proposing to do in the short term, and in the long term, to achieve savings in the project, is reduced -- if you look at the bottom under

assumptions -- reduced the level of expenditure the city makes every year on the annual replacement of equipment. across the city for technology equipment. rather than continuing the previous cycle of expenditures, we are going to reduce those traditional expenditures of equipment and redirect our efforts to the consolidation sites. around staffing, the entire i.t. community knows in the city, just like the rest of the city is faced with challenges regarding budget and staffing, there will be levels of reduction in staffing. everyone will be able to account for a level of staff production related to this project. that is also figured into the roi calculations of this project. supervisor chu: i believe there is a question from a committee member, but i also wanted to welcome david chiu to the committee. >> thank you for the work that you have done. by way of background, we, during

the budget process last year, have placed the $6 million-plus amounts on research. in part, because we recognize our city spend a lot of money on i.t., over $200 million. there is a general consensus around the city that we have a lot of inefficiencies and redundancies within our i.t. world that we need to focus on, particularly, during these tough budget times. some of the areas we have tackled in the past has been to move to consolidate the 700 different e-mail systems we have in the city, to try to create master service agreements, rather than the contracts that different apartments have all with the same outside vendors. to work on the justice project within the law enforcement role, -- try to consolidate that project. a product of mr. walton was talking about around data center consolidation, the fact that the city has several dozen small id

departments outside of the department of technology with a similar number of data centers. i'm very much appreciative the work that has been done by dt, as well as other departments, to take the several dozen data centers that we have and consolidate them into two major data centers. i want to also thank the work that has been done at coit with our budget director, controller, and others, trying to figure out if there are ways for us to both invest in good 21st century infrastructure and save money at the same time. i do want to say, having seen six or seven iterations of this particular chart, i do hope that we will be able to squeeze out even more cost savings than this chart shows, which will require an investment of money initially in years one and two. but will hopefully lead to savings over time.

i want to let our colleagues know there has been a lot of work done. while i am not excited about releasing these i.t. reserves -- i had hoped during the budget process last year that we would figure out a way to save $600 million. -- save $6 million. i understand we have made a lot of progress, and that the risk of not wanting to knock it any of that progress off-track, i think that this committee should release these reserves and move this forward. that being said, i think we will continue to have budish conversations, as we did last year and the year before, another real conversation about other cities begin by the i.t. process. i very much hope that different cio's, it teams, dt, as well as local 21, i can help to find these cost efficiencies. supervisor chu: thank you.

supervisor kim? supervisor kim: thank you. if i could ask again, what were some of your hopes in terms of the savings this year, compared to what is being rejected? and is what is being projected the $308,000? what were you hoping that we would get in terms of savings this year, year,dt had summarized? -- savings this year, opposed to what dt had summarized? >> i think a bit closer to 2 under 25 or more. assuming the 200 budget, i thought we would be able to save 3% of that across city departments. the efforts that have been going in the last nine months on the data consolidation effort. what we found was in order to move from three dozen different centers into two, that that requires an initial upfront investment. we have to make over the next

two years. while that was a disappointment, unfortunately, it is a bit of a fiscal reality. supervisor kim: given the unexpected cost that we currently have -- sorry to ask all of these questions. do you think we are on track to make these savings? i have to be honest. while i want this project to move along, and i appreciate the efforts made, i think given the current budget deficits that we are looking at, we really need to ensure that things are moving along at pace that has been set at the past. i would be inclined not to support this release or during a smaller release and getting a report back to make sure we entr'acte -- we are on track. >> supervisor kim, you are expressing the exact concerns i have heard raised in this

planning process. as some of the current members of coit, mr. rosenfield, mr. walton no, i have been frustrated at the pace of which has -- of which this has taken. i had hoped to see more significance cost savings. but i do know there has been a tremendous amount of work put in by working groups around the city to get to where we are now. i do not want to discourage that work. that being said, it has been mind-boggling to me that we have had as many data centers have to be have had. i thought that we would be hopefully shutting down several dozen data centers in consolidating, but do it in a way that will still require millions in investment was a surprise. absolutely, i understand your concern and frustration. and as city staff knows, when you are proposing is something i have been digging about for some

time. given where we are, it makes sense for us to move forward. that being said, i think this is absolutely a fairer topic of conversation for the upcoming budget. we just have to get our hands on bringing down our i.t. costs. this is something i have been focused on ever since i got to city hall. now in our third year of doing this, i feel like people are saying the right thing but we are not seeing the impact on the bottom line. at a time when all of us are looking at wreck centers in our districts being cut, street cleaning being cut, public health centers being cut, we have to do better. supervisor chu: thank you. just a common as we talk about the data center consolidation issue. i would be the first to support and say that we need to consolidate our data centers. we do not need 50 of them across the city. we have a lot to do with master lease contracts, which i know the department is working on. there are and the number of opportunities that exist for

i.t. consolidation, improvement, cost reduction. to be honest, the reason why i think we are wary are now, about where the numbers should be, are we hitting the goals or none of cost savings, is the fact that we did not have any information to base with a 10% reduction would look like, 3% with books like, when we started the conversation. we had a policy in place that we would see consolidate -- we would like to see consolidation happen, but we never put in the effort to go to the departments and say, what with the savings likely be in a situation of consolidation? so we find ourselves where we ask, the rate of investment is not what we thought it would be, but what was it to begin with? we did not have a basis to determine what it would be. i just want to caution my colleagues. i do not believe this is a conversation about whether we have yet to meet a target or not, but that is because we never had a realistic conversation at the outset.

i take issue with placing blame on the department for that reason. i still think we have a lot of work to do, but i just want to be clear, in the future, as we talk about investments and were cost savings should be, let's have a conversation with the promise to ask, what is realistic and achievable? the truth of the matter is, you have these apartments who might have a server in a little closet. are you going to be able to generate savings from rent reductions? not likely, because you will still have that cause it. the concept of how it is that we do the cost saving is one thing, but really going to the details and talking through the departments with the likely savings would be at the outset, at the beginning, helps to setup a clear expectation of whether we meant anything or not. so i guess one to be sure that when we put this reserve on, we never had a target, we never had an outset of a plan to see but the savings would be.

in terms of meeting expectations, there was not at the beginning. supervisor kim? supervisor kim: if i could ask another question. i was looking at your time line, so when are we beginning to implement the consolidation? >> we are under way right now. there are two pieces of consolidation. the physical relocation of the physical and equipment from one site to another, and then what we call the ritualization, which is taking physical devices and creating virtual devices on fewer pieces of equipment. that part is already underway. the department of technology is consolidating our equipment to make more space for other departments to use the extra space for the consolidation effort. the department of health is under way with a study to consolidate. we anticipate the consolidation equipment, fewer pieces, not

only under way, but will be done in the next 18 months. really, the physical relocation of the equipment is pending on the final construction of the new facility at airports. the construction will not be completed for another 12 to 14 months. while we will be virtual laws in place, we will not be able to physically relocate until that space is available to us. to supervisor chiu's point, we are trying to relive it things from not ideal situations into a real data center, so we need to wait until that space is available. supervisor chu: thank you, supervisor kim. i would like to go back on the expected savings. i would like you to finish your presentation first. >> i will not spend any more

time on the timeline. i would like to talk, in summary -- i think i have been most of the high points. we are asking you to endorse data center consolidation plans and the release of reserved for two reasons. one, i think the data center consolidation plan shows a new way of doing business and i.t. in the city. the city is not in a unique position of other government agencies we see around the country, large cities, states. historically, i.t. has been treated as expenses simply buried in department's budgets. over the past few years, the help the conversation we have been having at coit and at the board is what does it really mean, what are we getting for our money's worth from technology? that has raised the visibility of i.t. spending in the city. to supervisor chiu's point, we

have more data. i think now you are in a better position as you enter a new discussion about the budget. you know what we are spending across the department's city- wide on i.t. you will have the baseline data to make better policy decisions about the level and where money is being spent, the level of reductions that can be achieved. i would just like to point out, i guess, really we are dealing with a complex problem of -- we are looking at a budget as a single number. to supervisor david chiu's point, i think he said we spend $200 million a year on i.t. that is not in one pot of money. so it makes it a complex challenge to save that money. i think the data center consolidation approach project is perhaps a template for the city on how departments can come together, pull funds and resources to solve complex

problems related to i.t. again, we said at the beginning, the data center of the piece of the i.t. expenditure represents may be less than 10% of the total expenditures city-wide. the challenge for the city now in working together under the direction of coit is how do we address those remaining funds? are they being expended well, can we be more efficient? are there other opportunities like data center consolidation that we should focus on to generate savings? i think we should take credit for the good progress we have made on data center consolidation, should release the reserves to allow departments to continue to provide operational services they need, hospitals, puc, police department. on the other hand, we need to continue to look for ways for i.t. to help solve the budget problem. speaking simply from my department's standpoint, we have been able to achieve, in the

last two years, looking at the portion of the budget that the department of technology overseas, we have continued to provide services over the past two years. we have reduced our budget by $15 million, 16 positions. some of those we moved out to other departments, some were reductions. it is a hard challenge to face as a department to reduce our budget and positions and continue to provide service and leadership. but that is really the role of coit. the recommendation you see before you, i think coit is trying to provide that leadership now. members are very engaged. in working with the board, coit can help to answer this question. how much are we spending, are we spending be a corporate amount? if we have to make reductions, where is the appropriate amount?

supervisor chu: thank you. does that compare your presentation? i don't go to the budget analyst report. >> madam chair, members of the committee, based on the cost and savings reported by coit, page 6 of the report, as shown in the attachment on page 8 of the report, the attached and that has been displayed. coit projects net savings from the data center consolidation project at $308,739 in a 11-12, $29,386 in 12-13, $1.7 million per year in fiscal year 2013-14 through fiscal year 2015-16. while we know the city will

incur certain costs for the consolidated data center project, the associated savings are less certain. we point out on page 8 of our report, which is our recommendation, we recommend you request the department technology to provide a written status reports on the data center consolidation project every six months. the status report should provide details on the project cost and time lines for constructing the new airport data center, increased license cost for 200 paul street, the transfer of the equipment from city departments to the consolidated data center at the airport, and 200 paul street, specific reduction in the city departments i.t. budget for equipment positions and other costs related to data center consolidation. if the departments have not reached budgetary savings from the consolidation project, the department of technology should

provide the reasons for not achieving such savings. the consider release of the requested money of funds on reserve to be a policy matter for the board of supervisors. we note that not approving the requested release in bonds on reserve would result in layoffs of existing positions in the 14 city departments. supervisor chu: thank you, mr. rose. just a follow-up question to the mayor's budget office about the capturing how it is -- how is your intent to capture savings. it looks like the current year does not have any savings, per say, but in the next fiscal year, the budget year we will be deliberating on, there are supposed to be savings from the consolidation of the equipment, savings regarding staffing. have you been able to roll through those savings, $1.6 million in savings, the $600,000 roughly, and staffing?

>> mayor budget director. one point i want to make, we have been making the run the course of this discussion -- just to reemphasize it again -- is that there are two types of savings we can talk about here. one is an actual cut to a department's budget. another is an avoided cost that frees up a resource for a more needed activity within the department. so, for example, we have a process right now where the department of technology reviews purchases of equipment, and that process is going to allow us to look when a department requests a piece of equipment, that would be duplicative under the new data

center, we can look at that go to the department and ask, why are you requesting this purchase, given that we know within the next two years we will be moving to a consolidated center. then we can save the money on the purchase by deferring it until we consolidate. that is one way that we will look to do that. in that example, we can choose to cut that money out of the budget, or we can choose to use that money to purchase a different piece of equipment where the department makes an argument that that is going to result in improved operations or efficiencies. so that is the key element on the purchasing and avoided the equipment cost. on the staffing, that is going to have to be an ongoing discussion as part of each department's management plans and budget process in the mayor's office and here at the board of supervisors. for each department will be a

management decision when a resource -- staff resource becomes available due to no longer having the need to staff the data centers, the dispersed data centers. we will have to have a management discussion with the departments on how we treat that. i think the strategy will be to increase the number of vacant positions that we can hold a bacon at department over time, or figure out within the department's five-year i.t. plans, the city's five-year i.t. plan, whether we can reallocate those savings to a high priority for other technology investments. supervisor chu: thank you. to the comptroller's office, just a question. there was a comment made by the budget analyst, that if we were not to release the reserves, meaning that we would not allow department to spend this money, that layoffs would have to occur. the apartments would have to

figure out a way to reduce their expenses since we would not be giving them the resources. given the time line on layoff noticing, what would we expect, given that we are looking at this, at this moment? >> supervisors, then rosenfield, comptroller's office. it is impossible to put a hard count on the number of layoffs that would have to occur, if this were not released. we are certainly dealing with this time in the year, a timing issue with the amount of fiscal year that is left, during which departments would need to readjust their budget were this reserve not given. as of today, the vast majority of our labor contracts continue on the 60-day layoff notification provision, which effectively means any eliminations of build positions would have to take effect note earlier than june 1, effectively leaving one month for

departments to make up this loss of funds. what we do not have insight into is the number of positions in any given department bacon or killed, but we know as a city, the majority of positions are filled. it is hard to put a specific number on it, but it would be a significant number, given the fact that this annual reserve would have to be achieved in savings in a single month for those positions. supervisor chu: does the mayor's office have anything to elaborate on that? >> i would basically echo what the controller said. given the time line that we are under, the operational expectation has been, at some point, we are going to have flexibility within the i.t. salary budgets as a result of the release of the reserves. departments have not been operating under the assumption that they will have to cut this

money from their budget. so to react, at this point, would require a very compressed time line to achieve that level of savings. so i do not know -- i think the numbers that have floated around out there were a calculated value, just doing the math on how many positions it would result in. i do not know -- i do not know how many layoffs would be required, but it would require a relatively quick and sharp adjustment in the park operations to achieve that level of savings within the remainder of the fiscal year. supervisor chu: thank you. supervisor kim? supervisor kim: i know this is my first time, in many ways, dealing with reserves. but i have to say, if departments are not prepared for reserves being approved, what is the point of doing it? the board puts reserves in place

so that we can ask for a certain outcome that we would like to see that are not happening. so while i appreciate all of these discussions in terms of what would happen if we do not release the reserves, on a certain level, i am not that sympathetic because the board reserve these for a reason. everyone knew that we had this much time left, and this was the time to come back to the board. i just feel like there is a certain level of -- everyone should have known this was on the table and there were certain expectations coming back. i do want to say i appreciate what supervisor carmen chu had to say earlier, that there were not necessarily expectations as to what would be in the expectations in terms of savings, what president chiu had said earlier. i was still be voting no on this today. i think there needs to be a level of urgency in which we