Desktop Outsourcing Unlocks Billions

First Government Deals Hold Big Bucks for Contractors

"We are talking about words that start with Bs and not Ms," says James Hogan, president of Wang Government Services Inc., McLean, Va.

Wang is among a plethora of companies pursuing NASA's Outsourcing Desktop Initiative (ODIN) and the General Services Administration's Seat Management contracts. These big-ticket contracts are the government's first attempts at large-scale outsourcing of desktop services.

The winners will vie for task orders to provide a wide range of management services, including networking, help desk and technology refresh for desktop computers. The winners also will help assess infrastructure needs.

Agencies will pay a monthly fee for these services on a per desktop or per seat basis, similar to the way a telephone or electric bill is paid.

The price tags on the two contracts are whoppers. GSA Seat Management is valued at $9 billion with a five-year base and one five-year option. ODIN is estimated by industry sources at $5 billion with a one-year base and eight one-year options. Both contracts are open to all government agencies.

"We believe these will be the first in a series of desktop outsourcing initiatives," says Phil Kinnett, general manager of PC Federal Personal Systems Group for Digital Equipment Corp., Maynard, Mass.

While Digital did not pursue a prime role on either contract, it is serving as a subcontractor on several teams. "Everybody is waiting to see what the first baby looks like before the others follow," he says.

Future outsourcing contracts are more or less a given, but getting on either ODIN or Seat is critical, Kinnett says. This series of procurements will produce the industry experts, he says. Contractors that do not get a piece of these contracts will have a more difficult time because they'll lack the same level of experience.

Both contracts will have multiple winners, which are expected to be announced June 19. ODIN has seven bidders: the Boeing Co. of Seattle; Computer Sciences Corp. of El Segundo, Calif.; DynCorp. of Reston, Va.; FDC Technologies Inc. of Bethesda, Md.; OAO Corp. of Greenbelt, Md.; RMS Information Services Inc. of Vienna, Va.; and Wang.

Bidding on GSA Seat are: Artel Inc. of Reston; Boeing; CSC; DynCorp.; Electronic Data Systems Corp. of Plano, Texas, FDC; EER Systems Inc. of Seabrook, Md; IBM Corp. of Armonk, N.Y.; Lockheed Martin Corp. of Bethesda; MultiMax of Largo, Md.; Litton-PRC Inc. of McLean, Va.; Science Applications International Corp. of San Diego; and Wang.

The tough reality of shrinking information technology staffs, more complex technology and tight budgets for new equipment is driving the government to outsourcing, says Wanda Smith, director of the program office for Seat Management.

The government simply doesn't have the in-house staff to run complicated computer systems, she says.

At the same time, she says, agencies are looking to use technology to increase the quality and types of services they offer.

Industry officials predict both contracts will be successful, but they expect NASA's ODIN to be faster out of the blocks.

"NASA is ahead of the field with outsourcing," says Alfred Hobelman, vice president of business development for RMS Information Systems Inc. of Vienna, Va.

The space agency outsourced its shuttle operations several years ago, and is now moving to outsource some center operations. So it's not a foreign concept for NASA, Hobelman says.

Says Wang's Hogan: "Certainly, NASA has made a commitment to outsourcing. They know that is faster, better, cheaper."

Several NASA facilities, including Kennedy Space Center in Florida, that are winding up desktop support contracts will need to jump on ODIN right away, industry officials say.

Unlike NASA, however, other agencies will likely require some convincing, says David McGill, director of business development for EDS government services in Herndon, Va.

Adopting outsourcing will be risky for many agencies because it is such a shift in the way they do business, he says.

What's more, managing desktops is more costly than many agencies realize, so there will likely be a period of "sticker shock," McGill says.

Part of industry's job will be to explain those costs, he and other industry officials say.

"The technology is pretty complex, and everybody underestimates how hard it is to keep up," says Ed Dyer, vice president and general manager for Unisys Federal Systems' desktop practice. His company is a subcontractor to Federal Data Corp. on both the Seat Management and ODIN efforts.

"The customers aren't just going to adopt this because it's the latest fad," he says. Rather, contractors are going to have to prove themselves to the agencies, Dyer says.

Agencies will come to see how desktop outsourcing is going to work, how it is going to save money and how it will improve capabilities, he says.

By outsourcing desktops, agencies can probably save $1 million a year for every 1,000 users, says EDS' McGill. At the same time, the agency will get more bang for the buck with improved productivity, he says.

Phil Kinnett

No task orders are expected under GSA Seat Management before fiscal year 1999 starts in October, according to Dyer.

A few pilot projects will move in 1999 with a few more task orders in 2000.

This contract will really have taken off around the end of 2000, he says.

Alfred Hobelman

"Right now, we buy everything by labor hours," she says.

It will likely take three or four months for an agency to determine what its service level should be, she says.

But once agencies start rolling out their task orders, awareness of the way they operate will be a key to winning business, industry officials say.

"You cannot use a cookie cutter approach," says Phil Davis, senior vice president of aerospace systems group for OAO Corp. of Greenbelt, Md. OAO is seeking a prime role on the ODIN contract, but is on IBM's team of subcontractors for GSA's Seat Management contract.

"We are primarily a research and development IT support firm," Davis says in explaining the company's strategy. "When it comes to NASA, that is our home."

Hogan says: "Contractors must have a basic understanding of the customer, the environment the agency operates in as well as their mission. Those things are going to differ from one customer to the next."

In order to sell GSA Seat Management, contractors will have to get to the IT policy-makers in the agencies, says Tom Sanders, senior vice president for business develop for DynCorp.

"We are not going to be calling on the end users," he says.

The primary sales pitch will be explaining the total cost of ownership for desktop computers, he says.

Instead of buying technology, network operations and network management from different sources, the government can get those from a single source and get them for less money, Sanders says.

"The [dwindling] budget is the driving force for the government," he says.