CIO: J. Clark Kelso (1 year on the job)Budget Deficit: $34.6 billion shortfall (January 2003 through June 2004).What That Means for IT Budget: California has no IT budget that\u2019s set aside from other state spending after the state dissolved its IT department when a no-bid contract scandal led to former CIO Elias Cortez\u2019s ouster in 2002 (see www.cio.com\/printlinks). The state CIO serves as special adviser on IT to Gov. Gray Davis and focuses exclusively on large, statewide IT issues, such as IT security, data centers and the state\u2019s online portal. Each state agency procures IT on its own, but no budget line items are specifically devoted to IT costs.Priorities: Projects that save money, data center consolidation, e-government via state portal, collaboration of IT efforts with other state agencies.Cuts: Consultants working on the state\u2019s portal (www.ca.gov).Methodology: Top-to-bottom review.The Problem: Kelso, who also serves as California\u2019s interim director of General Services, is in the unenviable position of having to justify IT spending at a time when the state is facing its most dramatic loss of tax revenue since World War II. Kelso\u2019s assuming the job after a scandal only made things worse.One of Kelso\u2019s first orders of business upon taking over the CIO post in June 2002 was to decide, in light of funding problems and intense public scrutiny, whether to replace the state\u2019s award-winning portal with a more static website or to keep the portal alive until legislators could vote on what they wanted to do with it. Legislators had begun to question whether the state portal was truly beneficial to citizens and state civil servants, and whether it was worth the more than $25 million it was purportedly going to cost to develop and maintain. (Kelso says procurements for the portal done under the previous CIO were so poorly recorded that the state doesn\u2019t have a single budget number for the project.)Kelso decided the controversial project required a complete review\u2014a thoroughness of approach he\u2019s applied to IT governance and the project management frameworks he\u2019s established for the state as well as the procurement reforms he initiated.The Process: Instead of pulling the plug on the baggage-laden portal, Kelso initiated a top-to-bottom review of the project in six weeks. When he looked at the portal, he saw a system with a variety of functions that appealed to a wide swath of constituents. The Department of Motor Vehicles system was on the portal. The state bar of California had its licensing system on the portal. Citizens could apply for hunting and fishing licenses, real estate licenses, and state park campsite reservations, among other things. Studying the portal\u2019s technical components, he saw that many of its pieces, such as its content management and e-mail alert systems, were readily scalable to allow more agencies to add services. Finally, Kelso looked into the portal\u2019s spiraling cost. For this task, he sought perspectives from the departments of Finance and General Services as well as the Business, Transportation and Housing Agency. When he found a way to substantially reduce ongoing maintenance and operational costs by 40 percent by renegotiating contracts and by setting a path to bring the portal\u2019s operations in-house, he became convinced that sustaining the portal\u2014at least until legislators could vote on it\u2014was the right thing to do. For several months, Kelso discussed scaling back the portal\u2019s features with the Davis administration and state IT officials. They found that the portal\u2019s design made it difficult to remove some features without disrupting the whole system. Kelso says of the portal: "It represents in the long term a very good investment opportunity for the state, and it would be a shame to lose what I think is in everybody\u2019s agreement a very robust, scalable technology that we know has provided benefits to tens of millions of Californians." An Expert\u2019s View: "Kelso\u2019s comments that the procurements [for the portal] were poorly done points to one of the endemic problems with contracting and contract inventory [in state government]," says Carol Kelly, a government strategies analyst for Meta Group. "The public sector has to do a much better job of understanding its true costs, be it the cost of a systems integrator, a contractor or the staff involved from the state CIO\u2019s office. Frequently those aren\u2019t established up front, or when they are, the process [of doing so] becomes so onerous that everybody will avoid it."