****OMB Bulletin No. 96-02****
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**October 4, 1995 
 OMB BULLETIN NO. 96-02 
TO THE HEADS OF EXECUTIVE DEPARTMENTS AND ESTABLISHMENTS**

 SUBJECT: Consolidation of Agency Data Centers 

**1. Purpose.** This Bulletin provides guidelines for significantly                reducing the number of agency data centers and reducing the total cost of data                center operations governmentwide. This Bulletin calls for agencies to: 

- Reduce the total number of agency data centers during the next 24                  months, by closing many currently operating data centers and concentrating                  their operations into a smaller number of physical locations.                    
- Collocate small and mid-tier computing platforms in larger data                  centers.                    
- Modernize remaining data centers in order to improve the delivery of                  services.                    
- Outsource information processing requirements to other Federal or                  commercial data centers if the aggregate installed base is below minimum target                  sizes. 

**2. Background.** The National Performance Review (NPR) report,                Reengineering Through Information Technology, includes a recommendation to                develop a Governmentwide data processing consolidation and modernization plan.                Industry experience suggests operational savings of between 30 percent and 50                percent from consolidation when compared with unconsolidated operations. With                the assistance of the NPR and the Council of Federal Data Center Directors, a                committee was formed to assist in collecting and analyzing information on                today's agency data center environment. The committee's report, Consolidation                of Federal Data Centers, recommends a data center consolidation strategy and                provides a plan for implementing the recommended strategy. Information on                obtaining copies of the report can be found in Attachment 1. 

**3. Applicability.** This Bulletin applies to all Executive                agencies that operate or finance the operation of agency data centers that                support Government missions. 

**4. Policy.** Agencies are allowed considerable discretion as to                which data center(s) to retain and which to close so long as (1) the selected                consolidation scenario is cost-effective and the best value, and (2) minimal                data center target sizes are met. 

 Agencies should strive for revenue neutral consolidation plans with                capital and operating expenditure savings being used to fund the consolidation                effort. Agencies should conduct business case analyses to determine whether a                site should be expanded into a consolidated agency data center or phased out.                

**5. Exceptions.** OMB will consider exceptions to the guidance and                policy contained in this Bulletin on a case-by-case basis. All requests for                exceptions shall be submitted by the agency's chief operating officer or                comparable official. Exception requests should be directed to the OMB policy                official with responsibility for the agency requesting the exception. Requests                for exceptions should also be noted in summary and progress reports. 

**6. Definitions.** As used in this Bulletin: 

 a. *Agency* - The term agency means any executive department,                military department, Government corporation, Government controlled corporation,                or other establishment in the executive branch of the Federal Government, or                any independent regulatory agency. 

 b. *Agency Data Center* - Large centralized information processing                operations have traditionally been referred to as agency data centers. This                bulletin focuses on consolidating small, mid-tier, and large computing                platforms into such centralized information processing centers. In order to                identify all information technology assets that should be considered for                consolidation, this traditional definition is expanded as described below. 

 In the context of consolidation and modernization, an agency data                center is defined as any automated information processing operation with a                standing staff of five or more full-time-equivalent (FTE) employees (computer                operators, computer systems programmers, telecommunications specialists,                administrative support staff, etc.) that performs one or more of the following                functions: processes agency-approved automated applications systems, affords                time-sharing services to agency personnel, provides office automation and                records management services through a centralized processor, and/or provides                network management support for agency wide area networks. 

 Facilities that merely support local area networks (LANs), file                servers, or desktop computers are not categorized as agency data centers.                Applications programmers are not included in calculating FTE employees. 

 c. *Agency Data Center Consolidation* - Agency data center                consolidation means concentrating data processing into fewer physical                facilities and combining workload onto fewer computers. Agency data center                consolidation includes one or more of the following concepts: 

*Collocation* - Moving information processing systems from                multiple locations to a single location where they continue to operate as                discrete systems. 

*Hardware Consolidation and Upgrade* - Combining hardware                components from various locations into centralized, modernized hardware                configurations. 

*Workload Consolidation* - Moving software applications workload                from two or more computer systems into discrete workload segments that are                processed on a single computer system. Workload consolidated in this manner is                considered to be "rehosted." Workload consolidation is distinct from                consolidation and standardization of software applications that result from                reengineering basic functions and services and related systems. 

 d. *Agency Data Center Modernization* - Agency data center                modernization means upgrading, enhancing, and/or phasing out and replacing                outdated facilities, equipment, and operating practices, to keep pace with                improvements in information technology and management methods. Modernized                facilities, technology, and management practices play a critical role in                capturing the economic benefits of agency data center consolidation. 

 e. *Outsourcing* - Outsourcing means obtaining data processing                services from other Federal agencies or commercial concerns. 

**7. Responsibilities.** a. All Federal Agencies. The head of each                agency will: 

- By March 1, 1996, develop an inventory of agency data centers and                  identify the FY 1995 end-of-year size and cost of operations of each data                  center in the format provided in Attachment 1. A good starting point for most                  agencies will be found in the Consolidation of Federal Data Centers report.                    
- By June 3, 1996, develop a data center consolidation strategy for                  meeting the minimum target sizes established in Attachment 2. Agencies with an                  aggregate installed base below the minimum target sizes must develop a strategy                  for outsourcing to other Federal or commercial data centers.                    
- By September 2, 1996, develop a detailed Implementation Plan for                  consolidation in accordance with Attachment 3. The plan should identify all                  issues that will affect the schedule, including those relating to acquisitions,                  human resources, funding, and facility improvements. The plan will ensure that                  agency data centers designated by agencies as receiving sites be given                  administrative and budgetary priority for facility buildout and upgrade;                  environmental improvements (e.g., power supply, air conditioning, air                  purification); adequate security and access provisions; and continuity of                  operations.                    
- By June 1998, complete consolidations.                    
- Determine if a proper financing mechanism (management fund) exists in                  the agency's account structure, within which a Federal data center can be                  efficiently, and effectively operated on a fee-for-service basis. Where the                  proper financing mechanism does not exist, agencies should provide draft                  authorization language along with their FY 1998 budget submission.                    
- Assure that data center fee structures adhere to the costing                  methodologies prescribed in OMB Circular A-130 (subsection 8.b.4.c) and the                  standardized accounting practices as recommended by the Financial Accounting                  Standards Advisory Board (FASAB) and issued by OMB and the General Accounting                  Office (GAO).                    
- Provide summary and progress reports to OMB in accordance with the                  following schedule.                     Inventory of Agency Data Centers -- Due March 1, 1996