Return to Virginia Business - June 2002

by Garry Kranz

Click image to enlarge

In January, George Newstrom was sitting in a Hong Kong hotel room oblivious to the shifting political winds in Virginia 8,000 miles away. The veteran high-technology executive was nearing the end of a bright career. He was ready to retire from huge Electronic Data Systems Corp., where he had worked since 1974, and currently headed its Asia Pacific operations. He teased colleagues that by April, he'd have left his post in Hong Kong for his second home in Scottsdale, Ariz. polishing his 14-handicap on sun-drenched desert courses.

Then the telephone rang. The caller, John Milliken, head of the transition team for newly elected Virginia Gov. Mark L. Warner, got right to the point: Warner wanted Newstrom to serve in his cabinet as secretary of technology. Would Newstrom consider leaving Hong Kong and return to Virginia immediately? Halfway around the world, with visions of par-3s and par-2s dancing in his head, Newstrom was nonplussed. "I didn't even know Mark Warner had been elected," he said sheepishly.

It didn't take long for Newstrom to shelve his golf clubs in exchange for a spot on the Warner team. He and Warner had known each other about 10 years, serving on various boards and committees in Northern Virginia. The pair embraced similar ideals on issues such as education and high-tech business. Just 24 hours after leaving the Far East for Richmond, the 55-year-old ex-Marine was sworn into office as Virginia's second technology czar. Immediately, he plunged into a whirlwind of visits to state agencies, universities and businesses. Along the way, Newstrom has had to confront head-on the dicey issues surrounding Warner's attempt to make up a state budget shortfall of $1.3 billion, an unwelcome leftover from the cupboard of former Gov. James Gilmore. All the while, he's been preaching a gospel of privatization aimed at saving Virginia big bucks.

Known as a demanding workaholic, Newstrom must oversee some bedeviling tasks. Many of the state's wunderkind high-tech firms are in the tank, a budget crisis is making it harder for state universities to train the next crop of information technology (IT) specialists and lack of funding is sapping the activities of the Center for Innovative Technology, the state's 18-year-old facilitator for high technology.

Yet many colleagues believe he has the patience and disposition to solve thorny problems. Says Harris Miller, longtime friend and president of Arlington-based Information Technology Association of America: "George is indefatigable. He's got that Marine background that believes all hills can be taken; it's just a question of how long it will take."

Sipping a diet soda in an office at the University of Virginia in Charlottesville during an interview with Virginia Business, Newstrom looks the picture of serenity. His genial manner and easy smile belie the quality that colleagues say will serve him best in Warner's administration: unrelenting drive. "George is extraordinarily competitive. He locks on a target and it's difficult to get him off course," says Robert Laurence, president of LYCEUM Network Integration & Professional Services in Vienna, and a frequent Newstrom golfing buddy.

Making Virginia more competitive is at the heart of Newstrom's plan to streamline government services, starting with smarter purchasing and implementation of information technology products. Newstrom talks frequently about accountability and return on investment and the need for state department heads to run their agencies like private businesses, concerned about the bottom line. This is why Warner chose Newstrom as successor to Donald Upson, the first state Secretary of Technology in the nation. "We ought to run Virginia so it's the most efficient state in the country," says Newstrom.

His first public comments on Virginia's technology-spending habits painted a dismal picture of bureaucratic waste and inefficiency. Just one week after assuming the reins, Newstrom told a specially appointed commission headed by former Gov. L. Douglas Wilder that Virginia agencies spend anywhere from $800 million to $1.3 billion each year on software, PCs and other technology-related services and products. Such fragmented spending patterns lead to agencies making duplicate purchases of IT products and services. What's worse, Virginia could not account for about $300 million in other assorted IT spending.

Rather than piecemeal purchases of computer gear, Newstrom wants to implement a statewide technology plan, including centralized procurement practices with a clear paper trail. The Virginia General Assembly recently gave Newstrom's office greater oversight, requiring state agencies to get his approval for IT projects costing more than $1 million.

One Newstrom ploy is to have state agencies buy technology products in bulk to receive volume discounts from vendors. He's ordered IT administrators to examine how to tie the state's disparate computer networks together. Such steps could yield annual cost savings between 15 and 20 percent. "We have to be able to implement large purchasing programs better than we have before. Lay them out, plan them effectively, manage the implementation, ensure there are no cost overruns, make sure (systems and networks) are put in on time and that they run properly," Newstrom says.

Getting state bureaucrats to think like private business owners could be both Newstrom's biggest accomplishment and his most nettlesome challenge. Other Virginia governors have dabbled with privatizing public-sector services. Gov. George Allen, for example, fitfully tried to outsource management of many services from running prisons to the highway department. Even Newstrom admits to being "naive" about whether government agencies can - or will - readily adopt private business tenets. But he won't understand why if it isn't done. "I may be oversimplifying the answer, but I'm not sure that it's different even though we're in a bureaucracy," he says. "I don't think a lot of our agencies and departments have specific goals and objectives. They've been doing their jobs for a long time, but they don't know what the measurement of success is. We're developing a plan with actionable tasks, goals and objectives."

Such idealism could be a pragmatic pipe dream. "As we've learned over the years at both the federal and state levels, these economies are tougher to achieve in reality than on paper," says Larry Sabato, a professor of government and foreign affairs at the University of Virginia. "Old ways die hard, changes turn out to be more expensive than expected and the impact is often limited. But we'll see. Newstrom is very much in the Warner mold: a hard-driving businessman in a temporary government role. Some sparks might fly, and that might be to the good."

Others see Newstrom as the perfect blend of chutzpah and persuasion, capable of transforming a staid state government into a model of efficiency and cost savings. Former colleagues recall Newstrom's withering attention to detail: it could be intimidating, especially if projects missed deadline or were executed without care. Although he could excoriate laggards, Newstrom at the same time was personable and approachable. "The people who understand what the goal is and work hard will do well with George. Those who don't … well, they won't be around long enough to have to worry about it," says Randy Dove, a fellow EDS executive.

Newstrom acquired his tough-love style from the Marine Corps and by working for EDS, run for years by hard-charging maverick H. Ross Perot. The Plano, Texas-based firm was a pioneer in convincing the federal government to jump into the new world of IT back in the 1960s and 1970s. With Perot as a guide, Newstrom was to play an instrumental role at EDS. "George understands the culture of government, so I think that probably puts him in better stead than somebody who doesn't have that experience," says Dove.

Revamping state computer purchasing isn't Newstrom's only major task. He wants Virginia to be an even bigger player in the global market for goods and services. That goal can only met by expanding the beachhead won by his predecessor, Upson. While Virginia earned recognition for its greatly expanded high tech sectors, especially in Northern Virginia during the 1990s, it has since stumbled as telecommunications firms and Internet-based companies have gone belly up. Newstrom has to ensure that Warner's policies promote rebuilding.

Another challenge is the intense rivalry among the state's regions as they squabble over high-tech investments. Also at issue is how well state colleges and universities are meeting their mission of growing a computer-savvy labor force. Newstrom thinks they can do better, and has urged them to find common ground.

Newstrom's biggest problem of all is the same one Warner faces: a dearth of state funds to accomplish his goals. That's one of the reasons for Newstrom's recent whistle-stop tour of the state. Newstrom has been meeting with university provosts to reassure them that more money will come their way once it's available.
Newstrom also must allay fears that budget cuts of nearly 30 percent at Virginia's Center for Innovative Technology will torpedo technology-based economic growth. Created by the Virginia General Assembly in 1984 to enhance research activities at the state's universities, CIT has seen funding slashed from $12.5 million to $9.2 million in the current biennial budget.

This has hurt some CIT initiatives, including one that provides money to help start-ups defray operating costs. State legislators have openly wondered about just how much impact CIT has on Virginia's economic growth. "We need to take the funding that CIT does have and focus it like a laser beam. We can't do a plethora of activities," Newstrom says.

Four years may not be sufficient time for Newstrom to complete his agenda, especially given the uncertainty of the economy and Virginia's traditionally cautious approach to change. Newstrom has the vigor and the experience for the job. But his decision to serve the state rather than retire to golf may bring on bigger sand traps than he ever imagined.

Return to Virginia Business - June 2002