On January 28, 1998, the Internal Revenue Service (IRS) announced an ambitious program to replace its traditional geographic divisions with an organizational structure made up of four core divisions designed to improve service to taxpayers.

To meet the information technology needs of this new organization, the IRS, working in conjunction with Booz-Allen & Hamilton, developed a shared services model. In the planned shared services environment, each division determines its information systems strategy and the corresponding need for support from a centralized Information Systems (IS) organization. IS is responsible for building the technology infrastructure and supplying the necessary resources to meet the needs.

One of the services provided by the IS organization is software development, which is conducted at various locations throughout the country. Developers coordinate and assist customers in designing, building, testing, implementing and maintaining IRS systems.

The objective of this audit was to assess the IRS’ plans to transition the IS organization’s software development centers to a shared services model.

We believe that the IRS’ modernization plans for software development centers are off to a good start. The key to the IRS’ success is now to carefully track progress against the plans and timely address any potential barriers or risks.

The organizational modernization design teams prepared complete and comprehensive plans to transition software development centers to a shared services model. These plans adequately addressed the basic principles outlined by Booz-Allen & Hamilton for a successful transition.

The design teams identified software development staff by location and work, and recommended a plan to reallocate existing staff into positions that better meet the anticipated demand for services. The teams also established a framework for making staff reporting relationships consistent throughout the country and proposed the use of service contracts between IS and the organizational divisions.