Chicago's Daunting Outsourcing Effort Takes Shape

By Steve LeSueur, Staff WriterWhen Elizabeth Boatman took over in March 1997 as the head of Chicago's Department of Business and Information Services, a colleague warned her that she would soon become one of the most unpopular people in the government.After all, she was planning to reorganize information technology services across the city's major departments and turn over nearly all of her department's IT functions to private contractors. "He said I would be hated," Boatman recalled. "He was right."No city as large as Chicago had ever tried to outsource its information services, says Linda Cohen, vice president and research director with the Gartner Group, which was providing consulting services to Boatman's department. It's been nearly two years since Boatman took over the Department of Business and Information Services, and many of the pieces of her strategy are starting to fall into place. The city has outsourced about 95 percent of the IT functions previously performed by her department, she said.Last fall, the city awarded a $17.5 million contract to TASC Inc. of Reading, Mass., for a citywide database and a number of other projects. IBM Corp. has been awarded the business to track and collect parking fines. Officials are set to announce Unisys Corp. as the winner of a five-year, $75 million contract to take over the city's desktop and network support. And within the next two months, they will award a contract to run the city's data center.While leaving day-to-day operations to the contractors, Boatman's department of about 100 people now focuses its attention on establishing the overall IT strategy for the city and on managing the contractors and other city IT projects.But getting to this point was not easy."It was a huge political challenge," said Cohen. All the departments had long histories of how they performed their work; jobs and relationships and connections were heavily entrenched. "It was very upsetting to the people who had traditionally been delivering these services."Boatman, 39, joined Mayor Richard Daley's staff as the city's chief information officer in November 1996, and was appointed commissioner of the Department of Business and Information Services the following March. That post effectively made her responsible for overseeing both IT strategy and the approximate $70 million the city spends on IT services.Daley wanted Boatman to fix several problems that had plagued him for some time, she said. "The mayor got tired of hearing that 'systems weren't talking to each other,' and it appeared to him that the city's investments in technology weren't paying off," she said. "He wanted to outsource the city's IT services." At the time, the city had about 170 people performing IT functions in a largely mainframe computer shop with some home-grown systems. Most of the technology dated back to the 1970s, as did many of the city's business processes.Boatman and her staff immediately got busy visiting the city's other 41 departments to learn their business needs and figure out how information services could help them do their jobs more effectively.After these visits, they began plans to consolidate IT functions and to contract out the services to private contractors. These plans were a huge shock, both to people on Boatman's staff and to some in the other departments, who saw their jobs and responsibilities being shipped out to the private sector."The initiatives struck fear in the department heads and the people who were doing this work," said Stuart Peskoe, director of emerging business with TASC, which was helping Boatman's department with some of these projects.Part of the problem, Peskoe said, was that Chicago was one of the first cities trying to outsource its IT functions. Consequently, Boatman didn't have any reassuring examples of success in the public sector. "The way people did things was changing, but they didn't know how it would benefit them," he said.Boatman had anticipated that the city's displaced IT personnel would either assume management roles or take jobs with the contractors, but many opposed the changes and began leaving the department. When all of the changes are completed this year, about 100 employees will have left or had their jobs privatized, she said.Similarly, a number of people in other departments also will be affected by a privatization effort, including about 30 in the water department where billing and collections are being privatized, so Boatman developed a reputation for eliminating jobs. "People would get fearful whenever I visited their departments or offices," she said.People who work with Boatman describe her as a no-nonsense person and firm decision maker. Five feet tall, she doesn't have an immediately commanding physical presence, but she takes control at meetings, and there's no question of who's in charge."There's no fluff," said Hugh Murphy, commissioner of the Revenue Department, who has worked closely with Boatman on several projects for his department. "She cuts right to the point."But is Boatman heartless and cruel in her drive to eliminate jobs? No, they said. "The point wasn't downsizing, but to deliver the best IT services to the city," Cohen said. "The mayor brought her there for a reason, and she was doing her job."Boatman and the others say Daley's support has been evident throughout her tenure. Peskoe said he knew of several instances when the mayor called people in who were resisting Boatman's initiatives and made it clear that he backed her up.Two other major governments of note, the state of Connecticut and California's San Diego County, are planning to outsource their IT services, and others are expected to follow, industry and government officials said. In this regard, Chicago is a pioneer."Chicago will stand out as an example soon for other cities," said Peskoe.