Gov. Rowland Touts Benefits of Outsourcing

By Steve LeSueur, Staff WriterConnecticut Gov. John Rowland urged the nation's governors to consider slashing their information technology bureaucracies and turning over state IT functions to the private sector at their recent winter summit in Washington."I hope that government entities, whether [they're] cities, counties or states, take a very serious look at getting out of the business of information technology," Rowland told a governors' Task Force on Information Technology session. It was held in conjunction with the National Governors' Association meeting Feb. 20-23 in Washington, D.C.The Republican governor, whose state has begun the process of letting a private firm provide its day-to-day IT services, traced Connecticut's controversial effort to become the first state to outsource its information technology. In December, state officials selected Electronic Data Systems, Plano, Texas, for the job, estimated at $1 billion over seven years. Other states can expect great benefits in savings and improved services from companies hungry for this work, said Rowland, citing the "extraordinary" interest from contractors and subcontractors in his state's effort. "Once someone gets through the peephole and gets this done, there's going to be a great response," he said.Many of the governors attending the meeting expressed cautious interest in Connecticut's outsourcing project, and one wondered how a state could manage effectively outside contractors and ensure quality control. "What happens when the state essentially surrenders control to get the innovation, and then doesn't get what it bargained for?" asked Gov. Tom Vilsack, D-Iowa."They appeared nervous about taking the step to full outsourcing," said Bob Salvucci, president of SAP Public Sector and Education in Washington, and a participant in the task force's roundtable session. Salvucci said it was more likely the governors would do small pieces of outsourcing rather than the whole enchilada.The governors agreed that any technology initiatives undertaken by a state would require strong leadership support."You're going to have to take charge," said Gov. Paul Patton, D-Ky. His state has started a $200 million effort to redesign the government through new technology. "You have to make it a top priority."Finding ways to take advantage of IT was very much on the minds of the governors and a panel of industry executives who participated in the discussion."Information technology is changing society and the economy," said Gov. Jim Geringer, R-Wyo., co-chair of the governor's IT task force. Technology should be used not just to automate government services, he said, but also to "transform how we deliver services in the future."Connecticut began developing a plan to outsource its IT functions more than two years ago. Rowland said government employees were unhappy with their computers and the quality of IT services, and the state seemed unable to keep up with the latest technologies. But as the first state government to attempt outsourcing all its IT functions, Connecticut has encountered a host of obstacles, including state employees and legislators who are wary of delegating such important tasks to the private sector, he said. After months of delay, Connecticut officials tapped EDS for the job, but even now the work will not begin for at least six months. Connecticut and EDS have up to 120 days to negotiate the contract, then state auditors must look it over. Finally, the general assembly can scuttle the deal with a three-fifths vote against it in either chamber.Commenting on the difficulties facing Connecticut, Geringer said, "There's a saying in the West: The pioneers get the arrows, the settlers get the land."A number of other state and local governments have attempted outsourcing projects, though none as large as Connecticut's. Pennsylvania, for example, selected Unisys Corp. Blue Bell, Pa., for a seven-year, $400 million effort to consolidate and manage the state's data centers. The city of Chicago is in the process of outsourcing its various IT functions to a number of different vendors. In San Diego County, many of the nation's largest systems integrators are competing for an outsourcing contract valued at up to $700 million over 10 years. County officials initially anticipated that the contract would be worth about $1 billion, but the county's law enforcement and court offices have decided to keep in-house most of their IT services. The county's board of supervisors issued a request for proposals Feb. 24 outlining the county's goal to select a vendor by September. The prime contractors in the San Diego competition — Computer Sciences Corp., El Segundo, Calif., EDS and IBM Corp., Armonk, N.Y. — are the same three that competed for Connecticut's contract.Despite Rowland's strong pitch, observers are uncertain whether full-scale outsourcing will catch on soon among state and local governments."I'm sure that a lot of jurisdictions are interested in this and are looking to see what happens, but I think they're going to wait until they can see a successful benchmark," said Leslie Kao, a senior analyst for G2R Inc.'s public sector research in Mountain View, Calif.Kao suggested that potential vendors also will want to see what kinds of contracts are negotiated in Connecticut and San Diego, and whether they hold the promise of solid profit margins.Nevertheless, the market for smaller outsourcing projects remains strong, said Kao. Her firm estimates spending on IT outsourcing by state and local governments will grow from $1.56 billion in 1999 to $3.8 billion in 2003.Industry panelists at the task force meeting recommended the governors maintain a close working relationship with their chief information officers."The key is not the technology knowledge of your CIOs; the key is their understanding of the business of government and your relationship with them," said John Kost, formerly Michigan's chief information officer and now vice president with TRW Public Sector Solutions.