in Government Outsourcing

CENTER in Government Outsourcing By John Makulowich The manager of Seminole County in Florida took a strictly business approach to the question of the status of his community's information services and technology development. And what Gary Kaiser found he laid bare to his staff. "We looked at where we needed to be to support the community and where we were going. What we got back w

"Privatization is a major trend at all levels of government, but it is only beginning to emerge in the information services area. We see a tremendous opportunity here to build these public-private partnerships all over the country," says John Jones, director of HTE Resource Management. According to Rich Jarmusik, vice president of sales for Unisys Outsourcing, the typical outsourcing relationship is built on understanding the client's requirements and offering a better price and level of service than the client could do itself.

CENTER>

in Government Outsourcing

By John Makulowich

The manager of Seminole County in Florida took a strictly business approach to the question of the status of his community's information services and technology development. And what Gary Kaiser found he laid bare to his staff.

"We looked at where we needed to be to support the community and where we were going. What we got back was a resounding 'no' to the question of whether we had the professional resources to do the job ourselves," Kaiser said.

County officials then addressed where the county was in terms of software and hardware technology. "Were we significantly behind the curve? This time we got back a resounding 'yes,"' he said.

Similar stories are being told around the nation and around the world as governmental bodies at all levels confront the issues of dwindling financial, technical and human resources, of meeting and exceeding citizen demand and expectations, and of focusing on their core competencies, the tasks they do best and the reasons why they exist.

The conclusion that many public information services departments and divisions are coming to in more and more cases is that outsourcing makes very good sense. Whether it's the year 2000 problem, computer training, applications software services or even support for 911 emergency services, all are fair game for outsourcing.

In the case of Seminole County, an agreement signed in early September amounts to a five-year outsourcing service contract with HTE Inc. of Lake Mary, Fla., totaling nearly $8 million and which began in mid-October. In essence, the service bundles all software, hardware and information management services into one monthly fee. The financial benefit is that government customers get predictable expenses with the need for only minimal up-front capital.

For the publicly traded HTE, the contract marks the first customer for its new IT outsourcing service called Resource Management, which lets governmental units turn over the operation of their computer functions, including staff and all software and hardware, to the company. All of Seminole County's 12 information services division staff became employees of HTE.

To Kaiser, outsourcing represents the possibility of recovering from the awkward position of trying to accomplish an impossible task with limited resources.

"With HTE, we went from being two to two-and-a-half years behind the curve to getting up to speed," said Kaiser. "The partnership gives us access to their applications software and allows us significant upgrades in hardware development. It also allows us to leverage their purchasing ability."

In what he admits was a painful process, Kaiser notified employees whose jobs would be affected about the intended outsourcing and offered them the opportunity to seek other employment.

"We anticipated that the project would take eight months to implement. In that time, the IT staff went from 23 to 12 - and productivity increased 60 percent. Those who remained on board were hired by HTE and now work at their facility," explains Kaiser.

While he thinks outsourcing is one of the answers for governmental bodies, Kaiser feels there are many ways to do the same thing in this country and that the solution depends on the specific locale and how the system is structured.

"We view outsourcing as a management philosophy; we are open to anything and everything. The key issue is the efficiency and effectiveness of county operations. We have even had cases in which the county bid on outsourcing projects themselves and prevailed," says Kaiser.

HTE, the winner of the Seminole County contract, already boasts more than 1,000 customers worldwide as an enterprise software solutions provider. Its clients over the last 15 years have included public and private utilities, cities, counties, public safety agencies and transit authorities. HTE Resource Management is the new service division culled to assist organizations that need to beef up their IT and information services operations but don't have the resources to do it from the inside.


HTE photo

John Jones, director of HTE Resource Management

Jones feels the push for outsourcing comes from the realization among governments that they can cost-effectively use the expertise of the private sector.

"This allows governments to get back to their core business, which is servicing private citizens. Outsourcing success in certain areas has led to this recognition, for example, [in] solid waste management as well as fleet management," notes Jones.

HTE intends to leverage the Seminole contract for business throughout the country. The company's pitch is that it not only allows government agencies to stay on top of rapidly changing technology, but it opens new and different career opportunities for staff who come to work at HTE.

Jones boasts that the company has a strong base of talent inside the organization. However, another part of its secret may come from the regimentation that the company practices and which seems a necessary component of servicing large numbers of outsourcing contracts.

"What we are doing is mass customization. Our approach is to use a lot of regimentation, for example, standard procedures, such as file naming, that can be recognized wherever you are in the country. Our focus is to move from people-dependent to process-dependent operations. This facilitates data center operation as well as customer service. It also makes documentation easier and more efficient. On the other hand, we are not regimented to the extent that we don't allow the client enough room to adapt," explains Jones.

The rise in the popularity and acceptance of outsourcing over the last few years was detailed earlier this year in a trends report, "Outsourcing: From Tactical Tool to Strategic Initiative," published by the Outsourcing Institute of New York.

Among its findings was that the reasons for outsourcing mirror the evolution of outsourcing from a tool to an initiative. Thus, 64 percent of institute members, who include executives from companies and government agencies, still cite reducing and controlling operating costs as one of their top three reasons for outsourcing.

Yet, the second and third drivers of outsourcing decisions were the strategic benefits of improving company focus and access to world-class capabilities.

Further, the report found that more and more business-critical operations are being outsourced, such as customer support, sales, marketing and finance, that outsourcing has spread across industry groups within American business as well as government at all levels, that outsourcing has become a powerful management tool for smaller, faster-growing companies and that the very nature of the relationship between the customer and the provider of the outsourcing service has matured.

The extent to which outsourcing is attaining acceptance was evident in a presentation by Frank McDonough, deputy associate administrator in the U.S. General Services Administration, at a recent Oracle conference in Herndon, Va., on the public sector worldwide.

Speaking on "A Glimpse at the Government of the Year 2010," McDonough, who also serves as the chair of the International Council for Technology in Public Administration, gave futuristic examples of outsourcing already emerging around the globe. For example, Australia intends to consolidate the processing and delivery of government benefits from three agencies to one, manage that agency initially with a contractor and later outsource the function. In the United Kingdom, tax processing has already been outsourced to Electronic Data Systems Corp. of Plano, Texas.

One company with a major stake in the worldwide public sector outsourcing marketplace is Unisys Corp. of Blue Bell, Pa. A key program it is now pushing is its Data Center Consolidation. From the standpoint of the Unisys Outsourcing division, the activity eliminates duplication and redundancies, installs consistent management practices, introduces suitable and appropriate new technology and reallocates resources. From the state government side, the benefits include reduced costs, increased operational efficiency, improved service levels, modernized management practices and maximized limited resources.


Unisys photo

Rich Jarmusik, vice president of sales for Unisys Outsourcing

"Basically, outsourcing lets the government unit focus on what it does best. For state and local governments, their core business is that of governing and government. While IT is important, it is not their core expertise; it is not what they are in business to do," says Jarmusik.

He notes that the measures used for making an outsourcing decision in the government market are often different from those used in the commercial arena. For example, one business rule of thumb calls for a cost/benefit analysis and an expected range of costs savings from 15 to 20 percent.

"Is that applicable to the government?" asks Jarmusik. "It might be. It all depends on how efficient and well-run the current operation is, where you can achieve savings through consolidation, reduction in duplicative costs or operation of equipment. You have to research and review the range of processes, procedures and expertise to find out."

One helpful trend for Unisys and other companies hopeful of winning government outsourcing contracts is the seriousness with which governments are starting to view their procurement policies, practices and processes in the light of business process re-engineering. Many governments, like Seminole County, clearly want to run more like a business than they did in the past.

Another trend noted by Jarmusik is that many leading-edge outsourcing companies are offering value-added services that go
beyond simple cost savings. One example is what he calls "customerizing," which he defines as helping customers meet their own customers' needs. This might amount to achieving better economies of scale when buying for clients where improved volume discounts can be negotiated.

"Constantly adding value to clients is where the outsourcing business is headed," says Jarmusik. "Admittedly, this is new territory for the government. The new keys are efficiency and focus. As a result, one of the barriers that needs to be overcome is what happens to the people. Another key is flexibility. More and more outsourcing vendors are appreciating flexibility. The typical relationship has been with the lowest bidder. That's no longer how we do business. The government client should want the vendor to be successful, to be profitable. They are ensuring that the company is going to be a long-term player as an outsourcer."

Overall, in agreement with many major players in the outsourcing industry, he sees almost any activity as fair game for contractor service.

"You evaluate the type of process or service and then consider whether the community thinks it can do that. It boils down to a core competency issue. But anything is fair game for outsourcing, whether trash collection, bus services, IT types of services or even crucial life threatening support services. What I am seeing is that any company that has as its core business services that can be provided efficiently, cost effectively and that meet expectations can be outsourced," says Jarmusik.

Asked for advice on what clients should look for in outsourcing companies, he offers three guidelines to follow. First, choose a company that is already in the business of providing the service to be outsourced, not one that is just looking for an opportunity. Second, there should be a meeting of the minds between what the client wants and the outsourcing company can deliver, where the expectations of performance are in sync. He characterizes it as almost a prenuptial agreement. Failure to synchronize expectations is the main cause of problems in an outsourcing situation.

Third, service-level agreements and measures of performance should be set up based on a win-win and partnership relation. He stresses that the bottom line is no longer enough. Also important are the other things you can bring to the table, such as modern equipment, new technology, plans to improve the client's business and ways to help them do more business with your support.

A good case of innovative outsourcing is how Paradigm4 Inc. of New York is equipping the Florida Department of Law Enforcement headquarters in Tallahassee with a new Crime Information Center Message Switch/Hot Files System. With 800,000 transactions per day, the Florida Department of Law Enforcement is one of the busiest agencies in the United States.

This solution will let more than 40,000 users in over 600 Florida state, county and local criminal justice agencies access and update data and images in real time, many of them directly from patrol cars. When the system architecture is fully developed, it could make Florida the first state to meet the federal NCIC 2000 mandate, integrating Florida into the FBI's National Crime Information Center.

Paradigm4 also worked with New Jersey to upgrade that state's paper-based parking ticket process by creating a wireless data system called the Parking Authority Ticketing System. The system lets New Jersey parking enforcement officers use wireless hand-held computers to instantly access online warrant information and issue violations. The unit includes an alarm feature that automatically notifies the central office of an emergency.

The company entertains the lofty goal of becoming the dominant force in the mobile computing market by offering outsourcing services and end-to-end mobile computing business solutions on data networks.

For Joseph Dion, Paradigm4 vice president, the opportunity in Florida came through the company's expertise in wireless and switching technology.

"This clearly was a case of being at the right place at the right time with the right technology," says Dion. "We're used to developing systems for handling many, many users and to working with message switches where the messaging stream includes imagery, compression and encryption."

The company, which beat Unisys and Honeywell Inc. of Minneapolis for the contract in Florida and normally competes against only a handful of firms, plans to go after state switching systems throughout the country. A proposal for Kentucky is due in October and one for Delaware in November. And, an initial public offering is probably just around the corner, maybe as early as spring, according to Dion.

"Paradigm4 is the new kid on the block. We all came from a public safety background. This is a good thing; we do not carry any legacy with us. The future looks bright for outsourcing. In the wireless world, every major state government is saying, 'We can't do it internally.' In fact, there are very few companies that can put a wireless solution in end to end, from the laptop to the mainframe," says Dion.

Paradigm4 goes beyond the mechanics and technology of systems and switching. In the value-added world of outsourcing, the company also is helping to secure funding.

"What makes such systems uncommon in the public safety area is funding. While there are law enforcement block grants for states to put in switching, to put in the infrastructure, there is also the need for continuing revenue for long-term maintenance," explains Dion.

For John Ridgeway, chief information officer of Florida's Department of Law Enforcement, the contract with Paradigm4 means looking forward to providing the state's law enforcement agencies and municipalities with more responsive law enforcement data.

"Part of our impetus was our own state needs. The [Florida Department of Law Enforcement] is the central collection and dissemination point for all criminal information between the states and the FBI. Our databases contain the full range of information, for example, on missing articles, people, driver's license files. With the new systems, we can access Department of State files and corporation files. This system will also allow us to access the system faster. For instance, the patrol officer who stops a potential offender on [Interstate] 95 in Florida will be able to gather information in 98 percent of the cases within 3 seconds," says Ridgeway.

Further, using an interstate identification index, officers will be able to access information on outstanding warrants in any state 24 hours a day, seven days a week. Attached to the network will be 10,000 devices, half of them mobile digital terminals in patrol cars.

"The types of capabilities the system will add include increasing dramatically our capacity to handle more users. Within two years of installation, we estimate we'll have 80,000 users and 17,000 devices. From the perspective of functionality, we will be able to access images in real time," said Ridgeway.

At the local level, MCI Systemhouse's International Public Safety Group of Robbinsville, N.J., part of the global public safety systems integrator, recently completed installation of the first completely outsourced emergency response system in North America, an enhanced 911 communications solution for Northampton County, Pa.

A partnership of enhanced 911 emergency telephone service and a countywide public safety communications system for law enforcement and fire agencies, the project included more than 100,000 access lines, the design and construction of a state-of-the-art facility to house communications and dispatch for 37 communities, custom software and application design, integrated real-time computer-aided dispatch, and mapping workstations with overlay map functions. The estimated savings in operating costs to the county over the life of the contract is $2 million.

At the outer edge of outsourcing, the Defense Advanced Research Projects Agency contracted with Engineering Animation Inc. of Ames, Iowa, to produce a 3-D biological animation of a journey through the human body that shows biological defense strategies that could protect the human body in a bioweapons attack. The animation fuses scientific realism with 3-D technology.

As part of the outsourcing contract, Engineering Animation produced a Web site for DARPA that showcases the agency's programs and activities that are dedicated to eliminating the threat of biological weapons. The URL for the site is www.bwd.org/upc/.

The company combined its in-house expertise of molecular biologists, anatomists and medical illustrators with multimedia artists and 3-D animators to produce the project. The 3-D excursion through the body begins with inhaling deadly viruses and their quick entry into the lungs, circulatory system and individual cells. After the virus takes over, biological defenses attack and overcome the intruders.


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