1. WaTech Executive Board Meeting March 28, 2016

2. WaTech Biennial Budget as proportion of total State budget

3. WaTech Programs and Expenditure Authority (Governor’s 2016 Supplemental Proposal) Program/Sub Program Name FTE FY 2016 010 CTS Management Agency Management 64.8$7,068,298 Enterprise Technologies 10.0$1,718,246 Wheeler Allocation Pool$13,795,000 Professional Services 030 CTS Telecommunication Services TSD Phone Services 34.0$20,635,524 TSD Data Other Service 3.1$768,684 TSD Data Network 40.5$22,203,202 040 CTS Computing Services CSD Email Communications 17.8$6,487,088 CSD Content Management 7.6$1,197,554 CSD Server Hosting 17.0$7,210,326 CSD Storage Management 7.3$4,745,628 CSD Mainframe Computing 42.0$12,114,724 CSD Disaster Recovery 1.2$1,647,936 040 (050) Data Centers Data Center Facilities 10.0$5,615,604

4. WaTech Programs and Expenditure Authority Cont. Program/Sub Program Name FTE FY 2016 Program 060 Interactive Technologies Enterprise Security 38.0$14,081,624 Program 120 OCIO Office of the CIO11.9$4,481,268 OCIO Projects 2.7$202,732 Program 080 ETS Desktop & Network Support44.2$4,593,358 DES, CTS and OFM Applications 14.0$2,771,735 Shared Application Support35.2 Enterprise Systems 167.2$34,532,817 Warrants$367,764 Geospatial Portal 1.0$353,456 JINDEX 2.0$353,244 Program 080 E-GOV Access WA8.0$806,000 WABOS$806,000 Agency Total579.4$168,558,503

5. Two Primary Sources of Revenue: Fee-For-Service Content Management Data Center Facilities DES, OFM Applications Desktop and Network Support Disaster Recovery Email Communications High Capacity Computing Phone Services Server Hosting Storage Management Wireless State-wide Allocations (CSM) Access Inside Washington & WABOS AFRS Warrants BC/DR CTS Security Gateway Enterprise Security Infrastructure Enterprise System Rates GIS JINDEX Network OCIO Production Support Secure File Transfer

6. Our Financial Goal is Pretty Simple But Not Easy: Cost Recoverability WaTech is a proprietary agency with a negative cash balance and a current operating loss We have financial strategies to meet the goal of bending the negative balance curve: Pursuing More Allocations for Services that should be Enterprise Maintaining and updating FFS rates Securing More SDC Customers

7. Changes in Technology Drive Changes at WaTech WaTech is evolving from selling: Specific technologies (TDM & Ethernet Circuits) Selling specific services (Transport & Connectivity) Enabling particular capabilities (Inter-Agency/Government Collaboration & Cloud Connectivity

8. What We Buy July 2015 – January 2016 Infrastructure Applications Administration OCIO Total to Date Staff $ 13,761,597 $ 13,540,437 $ 5,968,789 $ 829,309 $ 34,100,131 Stuff Telephone $ 10,236,662 $ 52,453 $ 87,405 $ 10,589 $ 10,387,110 Hardware $ 4,996,576 $ 43,013 $ 13,636 $ - $ 5,053,226 Data Processing and Print $ 5,728,617 $ 1,483,301 $ 1,256,642 $ 2,592 $ 8,471,152 Software $ 11,306,236 $ 2,764,744 $ 837,015 $ 304,849 $ 15,212,844 Contracts $ 2,650,390 $ 530,246 $ 519,936 $ 435,321 $ 4,135,892 Facilities $ - $ 2,790,996 $ - $ 2,790,996 Other $ 1,344,392 $ 358,808 $ 648,339 $ 102,251 $ 2,453,789 Stuff Total $ 36,262,873 $ 5,232,566 $ 6,153,969 $ 855,601 $ 48,505,009 Debt Service $ - Office Building $ - $ 4,187,327 $ - $ 4,187,327 SDC Debt Service $ - $ 7,318,970 $ - $ 7,318,970 Equipment $ 920,024 $ 89,775 $ - $ 1,009,799 Debt Service Total $ 920,024 $ 89,775 $ 11,506,297 $ - $ 12,516,096 Equipment $ 2,438,215 $ 926,753 $ 31,285 $ 528 $ 3,396,782 Grand Total $ 90,565,607 $ 25,111,872 $ 41,320,607 $ 2,541,039 $ 159,539,124

9. More Stuff than Staff Stuff includes: 19% Telephone 9% Hardware 11% DP and Print 21% Software 5% Contracts 3% Other Stuff includes: 5% DP and Print 4% Software 8% Contracts 4% Other Stuff includes: 7% DP and Print 14% Software 3% Contracts 2% Other Stuff includes: 1% Telephone 18% Software 26% Contracts 6% Other

10. Agency Overhead As of January 2016 DepartmentFTEsOverhead $ Directors Office13$1,048,026 Human Resources8$711,011 Finance Office17$1,543,904 Office of Legal Services7$448,995 Agency Technology Solutions11$1,701,140 Customer Relations4$304,539 Enterprise Technologies5$507,325 Project Management5$346,597 Desktop & LAN25$2,233,151 Support Center10$518,357 1500 Jefferson Rent & Utilities0$2,790,996 Total105$12,154,043

11. No Cash Leads to: Operating losses Difficulty making new investments FY 2016 Projections Staff $ 60,417,308 Stuff $ 86,871,829 Debt Service $ 28,906,536 Total Costs $ 176,195,673 Revenue $ 164,667,777 Operating Loss $ (11,527,896)

12. Financial Strategy a blend of fee-for-service and allocations Customer LOB Fee For Service 46% Allocations 54% New Economy of Scale Concentrated Expertise Mature Foundational Enterprise VPN, Wireless, Cloud

13. How WaTech fits into the 2017-19 Budget Process Fee For Service Rate Plan Required by RCW 43.105.006 OFM Review and Approve Annually Due March 31, 2016 Rate Day June 2016 Prepare for 2017-19 Biennium Present Fee For Service Rates for customers to use in their budget planning Allocations Governor’s budget process Decision Packages Agency Biennial Budget Request to OFM Sept 2016

14. Questions?

15. WaTech Executive Board Strategy for Moving the Washington State Enterprise to Microsoft Office 365 Dan Mercer March 28, 2016

16. Questions We Will Address Today  What is Office 365?  Why the state should move  How does the state move  What have we done so far  Where do we go from here

17. What Is Microsoft Office 365?

18. What is Microsoft Office 365? Office productivity suite desktop software On-Line version of productivity suite Collection of Cloud Services Subscription licensing model (5 devices per person) ++

19. What Changes With Office 365? Shared services run at Microsoft User files can be stored in Cloud New cloud-only products OneDrive ! Yammer ! State Gov. Network State Data Center Agency

20. What Stays the Same? The User Experience! The same Word, Excel, PowerPoint and Outlook you use today, running on the same computer, laptop, tablet or phone

21. Why Move to Office 365? Boost agility and productivity New products and features Improve security User-based Licensing Each user is licensed for 5 PC/Mac + 5 Tablets + 5 Phones Positions the State Strategically Microsoft investing and innovating in cloud products, not in on-premises versions

22. How Does the State Move

23. Moving to Office 365 Procure Appropriate Office 365 Licenses Define Enterprise Office 365 Tenant Architecture Design Enterprise Identity and Access Mgmt (IAM) Architecture Engineer Optimal Network and Security Solution Establish Hybrid Environment for Migration Begin Migration to Appropriate Tenant Planning – Design - Testing Enterprise Project Management and Governance

24. Identity and Access Management (IAM) IAM is the Foundation of a Secure and Manageable Enterprise Enterprise Active Directory (EAD) is the State’s IAM Standard OCIO/ISB Policy 183.20.10 - Identity Management User Authentication Standards, mandates executive branch agencies use the state’s Enterprise Active Directory as the standard identity management solution We must maintain the integrity of our name space Crucial to a variety of strategies beyond O365 All enterprise applications (ERP, AFRS, HRMS) Single Sign-On for all your internal applications

25. Tenant Design Options DSHS DOH ESD ECY DOR DFI DES L&I DRS HCA DOC DFW Single Shared Tenant DOH DOR L&I DOC DSHS ECY DES HCA ESD DFI DRS DFW Separate Agency Tenants (1 agency per tenant) Identity Access Mgmt IAM Basic Choice: Shared Tenant or Separate Tenants?

26. Tenant Design Options Single Shared Tenant + A Few Separate Tenants Identity Mgmt & Directory Federation ESD ECY DOR DFI DES DFW DRS Identity Access Mgmt DOH IAM DSHS IAM HCA IAM L&I IAM DOC IAM

27. State Gov. Network Office 365 Traffic ExpressRoute State Gov. Network Network & Security Infrastructure Option 1: Public Internet Requires multi-million $ upgrades to existing firewalls Unpredictable performance, high security threats If we don’t act soon – state will devolve into this option Option 2: Private Network (MS ExpressRoute) Extends SGN routing and security context Connected via network aggregation vendor Strategically positions State to integrate other cloud services Internet State Data Center

28. What Have We Done So Far?

29. 05/12 – 10/12 Office 365 Business Case Assessment 03/15 - 07/15 MCS Assessment of Primary Tenant Design Options 11/2015 Customer Workshop – Review Criteria Review Tenant Data from Other States 01/16 - 03/16 Financial Analysis for Tenant Options Process To Reach Strategy Decisions

30. MCS Tenant Design Options Study Spring 2015 - MCS assess tenant design options Outcome: The majority of the state’s business needs could be met by either design Single Shared Tenant is least complex and most cost-effective Separate tenants are better for compliance and autonomy, but complex and costly

31. Customer Workshop Nov 2015: Customer workshop with representatives from 11 agencies Criteria derived from MCS report analyzing Compared single shared tenant and separate agency tenants Prioritized criteria for decision making Outcome: Higher Value: regulatory compliance, e-discovery and agency autonomy Lower Value: reduced cost, architecture complexity and identity management

32. Results Department Autonomy Overall Complexity Identity Framework E-Discovery Compliance E-Discovery Reduce Cost Autonomy Agency Participants: DFI, DFW, DOC, DOH, DOR, DOT, DSHS, ECY, ESD, HCA, L&I Identity Mgmt Complexity

33. Tenant Data From Other States Microsoft State Gov. Customers 17 primarily single shared tenant, some with exceptions Gartner Confirmed ~20 States Almost all single shared tenant No reported compliance concerns Anecdotal Lesson Learned Some states may be moving to multiple shared tenants State Shared Tenant Separate Tenants Comments 1) Georgia X No exceptions 2) North Carolina X No exceptions 3) Florida X No central IT 4) Alabama X w/ exceptions 5) Louisiana X w/ exceptions 6) New York X 7) Pennsylvania X No exceptions 8) Minnesota X 9) California X Complicated by BPOS-D transition 10) Kansas X One agency is anchor org 11) Texas XX Mix 12) Hawaii X w/ exceptions 13) Rhode Island X Few exceptions 14) Maine X 15) Ohio X 16) Kentucky X Still on-premises 17) Virginia X Some exceptions, but still on-prem 18) Maryland X Just an RFP at this time 19) Nebraska X Still on-premises 20) Santa Clara County, CA X No exceptions – maybe Sheriff’s office

34. Which is Cheaper? $22 $53 /mo Current – Office Pro and WaTech Shared Services E-mail only Office 365 – Separate Tenant, private network, customer network capacity upgrades $32 Office 365 – Shared Tenant, private network, no customer network capacity upgrades Current – All products and WaTech Shared Services $31

35. 1 Additional Active Directory Federation, Tenant Administration and Support. (~2000 users /tenant)$7 Separate Tenant-Total Monthly/User $38 - $53 Migration Costs: One-time cost for migration tools and contracted support staff $50,000 - $750,000 per agency tenant Per User Cost Comparison Product or Service Current Service Monthly Per User Office 365 Monthly Per User Software / Service User Licenses: $22 - $32$27 (Also includes cloud-only products) Office Professional desktop Windows + Enterprise CALs Email, Anti-virus/Anti-spam Message Hygiene, Secure Email Email Archive Mobile Device Management SharePoint Skype for Business Additional Identity Management, Tenant Administration and Support (Not required) $2 Additional Network and Security Infrastructure (Not required) $2 - $17 Shared Tenant-Total Monthly/User $31 - $46 + + +

36. Where Do We Go From Here?

37. Go Forward Proposal Shared tenant agencies request exceptions Exception criteria to be determined Agencies with separate tenants assume additional costs Establish enterprise program Establish project team(s), governance structure and budget Implement a hybrid environment to a “test tenant” Validate tenant and IAM architectures and management processes Establish a private network connection to government cloud Propose a Funding Strategy

38. What We Need from You Feedback and/or Buy-Off on strategy Help define exception criteria Assign people governance Input into funding strategy

39. Thank You Office 365 Strategy Brief