Seat Management Still Needs a Kick in the Pants

Seat Management Still Needs a Kick in the Pants<@VM>Major Desktop Outsourcing Orders Off of Seat and ODIN<@VM>Have a Seat? State, Local Governments Say No Thanks

Even as the massive Navy-Marine Corps Intranet program steams ahead, government agencies remain reluctant to launch seat management initiatives.

Since it was awarded in October 2000, NMCI, expected to include as many as 360,000 seats for $6.9 billion over eight years, has generated headlines but has done little to energize the almost moribund desktop outsourcing business in the federal government.

With little to report for the last six months, the government's two largest desktop outsourcing vehicles, the General Services Administration's Seat Management program (Seat) and NASA's Outsourcing Desktop Initiative (ODIN), have tallied about $700 million sales in more than three years. It is hardly a pace that will yield the $22 billion in revenue projected for the two programs during their 10-year lives.

Acknowledging slow growth, program managers and industry representatives remain optimistic, citing growing interest if not sales, and the hope that the momentum generated by NMCI and the recently unveiled, $5 billion National Security Agency Groundbreaker might spur a second wave of seat management orders.

Reflecting a little of this optimism, the Vienna, Va.-based market research firm Input Inc. bumped up its latest five-year growth projections for seat management, excluding NMCI, from 7 percent to 7.7 percent. Pegged at $260 million last year, federal desktop outsourcing revenue is projected to reach $377 million in 2005.

For now, however, NMCI is easily setting the pace. In the first five months of the program, the contractor team, led by Electronic Data Systems Corp. of Plano, Texas, "has assumed responsibility for over 42,000 seats at about 25 different sites ... without any disruptions in service," said Rick Rosenburg, program executive for the NMCI at EDS.

Those seats mostly have been at Naval Air Systems Command and Naval Sea Systems Command sites. The biggest challenge to date was the transition at the Naval Air Station at Patuxent River, Md., said Rosenburg.

It is a very large and complex site ... and we did not have [enough] resources at first," he said. "We ended up sending a lot of people there to work through that transition. It was a lesson learned that we used at the rest of the sites."

"The NMCI contractor strike force assumed responsibility for the 'as is' condition of our networks and computers" Feb. 21, said Charles Giacchi, the executive director for Port Hueneme Division, Naval Surface Warfare Center. "That was pretty much right on schedule."

What is Seat Management?

Seat management, also known as desktop outsourcing, calls for a contractor or a contractor team to take over the desktop environment for an organization. Under such an arrangement, the contractor provides the essential hardware, software, network capabilities and support services for individual computer users within the organization.

The contractor often charges a fee per user or "seat," hence the term seat management.

In essence, desktops and servers become a utility, similar to telecommunications services. The customer purchases the right to use the contractor's equipment and services, but the contractor retains ownership and is responsible for maintaining and upgrading the equipment.

"The big challenge now is to get to the 'to be' condition," slated to take place in late summer, said Giacchi. "From now until then, they will be bringing in new equipment and software packages and converting the system to the [new] Navy enterprise level."

Depending on size and complexity, "the overall transition process takes anywhere from five to nine months," said Rosenburg. The entire Navy enterprise in the continental United States will be stood up in about two years, he said.

Although NMCI progress has not spurred sales of seat management to other organizations, NMCI has "validated the seat management concept," said Chris Wren, chief technology officer of Federal Technology Service/Information Technology Solutions at the General Services Administration.

"If nothing else, it has brought attention to seat management and helped clarify the concept for people," said Jeannie Lee, director of the GSA Information Technology Outsourcing Center.

NMCI will spur a better understanding of IT costs across the enterprise, said Rosenburg. However, he added, there is no other project in the federal government like it.

"Seat and ODIN are focused on the desktop .... while NMCI is the entire environment ... It is like seat management-plus," Rosenburg said.

Because of NMCI's size, though, it will be difficult to judge its impact, said Chip Mather, senior vice president of Acquisition Solutions Inc., Chantilly, Va.

"If it doesn't work or a portion of it doesn't work, will that be because seat management doesn't work, or because the program is just too damn big?" he asked. Unless NMCI is a total success, it will be hard to learn anything, he said.

In practical terms, NMCI has not prompted any significant trends, said Tor Opsal, senior vice president of the enterprise services division at Affiliated Computer Services Inc., Dallas. "I haven't seen any agencies that have ... said now that NMCI is done, we will go and do [it]. They are pretty much following the plans that they had in place before."

Opsal, however, is optimistic about seat management's future. "I think we are approaching a second wave of orders in the next year to 18 months," he said.

These new customers will come from agencies that are watching the progress of early adopters and waiting to get the benefits of lessons learned and those that have or are now conducting total cost of ownership studies to prepare for an acquisition, said Opsal. Total cost of ownership studies establish benchmark costs for IT expenses.

His optimism was backed up by a recent survey of agency chief information officers by the Information Technology Association of America, Arlington, Va.

"Roughly 40 percent [of those officials] indicated they were either considering or were already taking preliminary steps toward seat management," said Paul Wohlleben, a partner at Grant Thornton LLP, who worked with ITAA on the survey. For most chief information officers, the preliminary steps are total cost of operations studies, he said.

"I still entertain a lot of interest from agencies," said Mark Hagerty, NASA ODIN program manager. "I have briefed probably 27 agencies in the last 19 to 20 months, and get one to three inquiries a month."

These interested agencies "are taking a very slow, look-and-see approach. There is not a stampede to the door," Hagerty said.

ODIN awarded its latest contract July 2000 to Intellisource Group Inc., now part of ACS, to equip the Glenn Research Center and Dryden Flight Research Center, which completed NASA's plan to contract out the desktops at its 10 main centers.

"We have just over 40,000 fully supported at NASA," said Hagerty. In the next two to three years, the number of seats under contract may grow by 10 percent within the space agency as some small design and engineering offices sign on.

NASA also has begun awarding follow-on contracts, which will be needed for some centers by Dec. 1. The Goddard Space Flight Center has already re-upped with ACS, Hagerty said, and NASA is in the process of finalizing a decision on its code M centers: Johnson Space Center, Kennedy Space Center, Marshall Space Flight Center and Stennis Space Center.

"At this point, it is a likelihood [the centers] will stick with OAO [Corp.]," he said.

The State Department in October 2000 placed the last sizable order off of GSA Seat when it tapped Getronics Government Solutions Inc. to provide support for 1,100 seats at its Office of Foreign Buildings Operations in Washington, at a cost of $48.9 million over 10 years.

Since that award, Seat registered two other small orders. The Federal Highway Administration tapped Reston, Va.-based DynCorp, and the District of Columbia Housing Authority picked EER Systems Inc., Chantilly, Va., to manage about 250 and 500 seats, respectively.

GSA has also begun in the past six months leveraging the knowledge and data gained from the Seat contract to address the needs of customers that want to consider other contracts, such as the GSA Federal Supply Service schedule program, said the GSA's Wren.

The Office of the Secretary of Defense, for example, used a blanket purchase agreement last November to order seat management services from Lockheed Martin's GSA schedule. The deal went through the Center for IT, said Lee. The project is potentially worth $400 million over 10 years. For now, though, the organization is concentrating on a "smaller group of between 700 and 800 seats," Lee said.

The Office of Secretary of Defense is not the first organization to use the schedule for seat management. The Defense Logistics Agency last year used blanket purchase agreements worth $20 million over five years to piece together a seat program covering 2,200 seats from Wang Government Solutions Inc., now part of Getronics.

OrganizationContractAward DatePrime ContractorContract Value
NASA Goddard Space Flight CenterODINOctober 1998Intellisource Group Inc.
(Now ACS Government Services)
$20 million
NASA's Johnson, Kennedy, Marshall and Stennis space centersODINDecember 1998OAO Corp.$154.9 million
General Services AdministrationSeatDecember 1998Litton PRC Inc.$114 million
Treasury Department, departmental offices
(now Getronics)
SeatJune 1999Wang Government Services$88 million
Health Care Finance AdministrationODINJune 1999Boeing Information Services Inc.
(now part of SAIC)
$50 million
Housing and Urban Development, Office of Inspector GeneralSeatJuly 1999DynCorp$50.9 million
Wright-Patterson Air Force Base, Special Operations
Forces/Systems Program Office
SeatSeptember 1999Federal Data Corp.$10 million
Peace CorpsSeatApril 2000Federal Data Corp.$16.9 million
NASA headquartersODINJanuary 2000SAIC Information Services$20.1 million
State DepartmentSeatOctober 2000Getronics Government Solutions Inc.$48.9 million
NASA's Glenn, Dryden, Langley and Ames research centersODINJuly 2000Intellisource Group Inc.$123.7 million
At the state and local level, seat management programs are rare. Only one state and a handful of municipalities are even looking at the concept.

Like the Navy-Marine Corps Intranet contract at the federal level, Virginia's seat management program is, by far, the leading edge. Projected to include up to 60,000 seats, Virginia hopes to have its first 10,000 seats under contract by the end of June, said Bette Dillehay, Virginia's deputy secretary of technology.

"We have somewhere in the neighborhood of 25 to 30 agencies that have either expressed interest or are in negotiations to do seat management," she said.

The state launched its program last September when it awarded performance-based contracts to Affiliated Computer Services Inc. of Dallas; DynCorp of Reston, Va.; and Unisys Corp. of Blue Bell, Pa.

A key challenge in the first months of the program has been completing the total cost of ownership studies for all the interested agencies. The state has required the studies be done before acquisition of desktop hardware could take place, said Dillehay.

The studies, however, have proven to be more difficult and costly than originally thought, and the state has trained six of it own people to help the total-cost-of-ownership contractors hired by the state to complete the process.

To date, no states have followed Virginia's lead, and some observers think there might be more opportunities at the local level in the near term.

"There are a number of municipalities we are pursuing," said Tor Opsal, senior vice president of enterprise services division at ACS. Opsal said ACS already has a small seat program in Philadelphia, but is especially interested in an estimated 1,000-seat project being planned by Charlotte, N.C.

Fremont, Calif.-based Everdream Corp. is also actively pursuing that project, said Lyndon Rive, vice president of direct sales and one of the founders of Everdream.

In the public space, the company has focused mainly on small implementations, such as that at Lafayette, Calif. The northern California city with a population of 25,000, signed a three-year contract last fall with Everdream for an outsourcing deal worth about $8,000 a month, said Tracy Robinson, administrative services director for the city.

For that sum, Everdream provides the city with 32 desktop computers and two laptops, Microsoft Office Suite 2000, a Windows NT file server and print server, a firewall, a virtual private network solution, a digital subscriber line connection to the Internet, e-mail accounts, nightly remote data backup, virus protection and live 24-hour, seven-day support, said Rive.

Looking to deploy a network and upgrade outdated computer systems, the big issue was not buying the hardware, but the support that would be needed, said Robinson.

"The numbers did not work out for us to hire a full-time information technology person," she said, adding it would also be quite expensive to hire a contractor. In the end, the 24/7 support offered by Everdream was key to the city's decision, she said.

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