Selective Outsourcing Speeds Information Technology Upgrades

Selective Outsourcing Speeds Information Technology Upgrades

Editor’s Note: Peter Weber is the CEO of Seven Space, an IT service provider located in Ash-burn, VA.

There has been no better time than now to be an IT outsourcer seeking a government contract. According to a study by INPUT, a service provider for technology vendors, the U.S. federal government’s spending on outsourcing will nearly double in the next five years, from $8.5 billion to $15.5 billion.

One reason for this growth is a Bush administration initiative to streamline the federal government and improve its technical capabilities. Under the “Expanded Electronic Government Initiative,” the Office of Management and Budget (OMB) rates each cabinet office and federal agency’s technical capabilities with a scorecard. Red, yellow, and green marks indicate level of expertise and preparedness of both IT networks and application management.

The OMB has undertaken this broad initiative to ensure that agencies are using taxpayer-funded budget dollars allocated toward technology networks and systems as effectively as possible.

The initiative, launched in summer 2001, evaluates performance across 27 agencies in five governmentwide areas:

• Strategic management of human capital,
• Expanded electronic government, Improved financial performance,
• Competitive sourcing, and
• Budget performance integration.

The OMB estimates that these 27 agencies engage in 28 major lines of business, 19 of which are duplicated across different agencies. Streamlining those agencies’ business functions is proving to be a difficult task indeed. Results.gov, a compendium of data pertaining to the initiative, lists duplicative IT investments, ineffective IT spending, underperforming IT projects, and IT security gaps as drivers of the IT operations challenges facing the U.S. government. There are four major areas in which the federal government is failing with respect to IT function:

1. Agencies often automate existing processes instead of fixing under-lying management problems or simplifying business processes to take advantage of new e-Business and e-Government solutions.
2. Multiple departments and agencies buy the same IT items, resulting in duplicative investments rather than integrated efforts across government.
3. On average, only a few federal IT investments have significantly improved mission performance, and many major IT projects do not even meet cost and schedule goals.
4. Major IT security gaps exist within and across federal agencies.

Federal government agencies are under enormous pressure to comply quickly with the standards. The OMB scorecard is updated quarterly. If an agency gets a red mark three quarters in a row, OMB may withhold—or at least question—an agency’s funding. This means federal agencies must address their IT systems performance right now.

Selective Outsourcing Drives New Efficiencies
In order to spend their IT dollars more efficiently and improve IT performance, many agencies are turning to a selective outsourcing model. In selective outsourcing, an organization engages an external service provider to perform chosen strategic IT functions. This allows government agencies to use vendors from the private sector to assess the IT operations challenges within an agency. Recommendations for systems performance improvements can be implemented quickly. A major advantage to this model is that an agency can outsource only critical functions (or only those that are in most need of improvement), while maintaining control of its IT systems and projects. Additionally, most service providers implement their solution within weeks, so the benefits can be realized almost immediately.

In the past, government agencies have had to rely on the monolithic, traditional labor-intensive outsourcing model, or they have resorted to an expensive in-house solution, perhaps an off-the-shelf product that is not designed specifically to meet their needs. Selective outsourcing allows agencies to rely on service providers to solve specific operations challenges. Agencies need only contract out for essential functions, eliminating waste and duplicative efforts. This improvement in technical management exemplifies the type of efficiency the OMB aims to accomplish.

A selective outsourcing provider can help federal agencies determine appropriate systems availability metrics based on user requirements, then work with them to create an advantageous service level agreement (SLA) that ensures these requirements are met. A service level agreement is a guarantee (usually backed by monetary compensation) that the vendor will provide a pre-defined level of service to the agency. The selective outsourcing model encourages collaboration between agency IT staff and the outsourcing vendor. The metrics measured by the SLA agreements provide concrete evidence that this collaboration results in improved IT systems performance. SLAs become an important tool for agencies striving to fulfill the requirements of the Bush administration initiative.

Selective outsourcing can supplement existing federal workers and management systems to enhance availability and performance. In a productive IT outsourcer-agency relationship, the outsourcer is a trusted partner, not just a supplier. The selective outsourcer becomes an extension of the agency’s internal IT team. Because the onus of delivering improved performance is now shared with a team of IT management experts, selective outsourcing helps to address the growing crisis of diminishing federal human capital.

Outsourcing Opportunities At Every Turn
There are numerous areas in which IT outsourcers can take advantage of bidding in the federal government. A sampling of 24 government agencies shows that 11 offer opportunities in the IT or technical arena.

According to the OMB, the agencies with the biggest technical outsourcing needs are the U.S. Department of Agriculture (USDA), the Department of Defense (DOD), the Department of Energy (DOE), Housing and Urban Development (HUD), the Departments of Labor, Transportaion, and the Interior, the Army Corps, the General Services Administration (GSA), and the National Aeronautical and Space Administration (NASA). The agencies with the biggest outsourcing budgets include DOD’s Office of the Secretary, with $1.26 billion slated through the end of this year, the U.S. Navy, with $1.08 billion to spend, and the U.S. Army with a $768 million budget.

Over the next year, many federal agency IT operations will be examined under OMB’s microscope. To achieve necessary improvements quickly, agencies should look for service providers that can support their own goals and objectives, becoming true partners. After all, e-government initiatives will be around for the long haul.

PRO PATHWAYS
President Bush’s Expanded Electronic Government Initiative: Visit www.results.gov

—Office of Management and Budget (OMB), Visit: www.omb.gov

—INPUT, a service provider for technology vendors: Visit www.input.com

—SevenSpace, an IT outsourcing service provider: Visit www. sevenspace. com