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Many States Consider Outsiders for Infotech Services

By Dennis McCafferty

Staff Writer

As in many states throughout the country, Virginia is looking to get the most out of agency infotech spending and services.

Even if it means turning it all over to an outsider.

Stamford, Conn.-based Gartner Group is getting nearly $450,000 to research, among other topics, whether the state of Virginia should outsource a portion or all of its agency-level infotech services.

It's all part of an in-depth look at how Virginia can best tap into IT to benefit the taxpayer.

Hud Croasdale said Virginia must determine if outsourcing services is cost-effective.

A draft of the Gartner Group's findings should be completed in the summer and is expected to be presented by fall in a public meeting to the Joint Legislative Audit and Review Commission, which is made up of state elected leaders.

The state's House Appropriations and Senate Finance committees requested the report and the General Assembly approved, paving the way for the Gartner Group's hiring late last year.

"The Legislature has gotten more technically savvy over the years," said Glen Tittermary, senior division chief for the commission. "They're concerned that it's been a while since we looked at this issue. They've seen articles in trade publications and other materials about outsourcing, and they say it may be time to look into it again."

Turning over all or part of a state's agency infotech structure has surfaced as a hot issue nationwide, as state leaders and industry executives gathered last week in Falls Church, Va., for the third annual State of the States conference, sponsored by Federal Sources Inc., a market research company in McLean, Va.

At the conference, many were talking about the state of Connecticut's recent groundbreaking and somewhat controversial move. Connecticut state officials put out last month a request for proposal to outsource the oversight, maintenance and upgrade work for state agencies' mainframe, desktop, telecommunications and applications structure - currently a $300 million-a-year job. Agency employee representatives have voiced opposition. The move is the first of its kind for a state government, and industry leaders say it may encourage other states to do the same.

Nationwide, not counting the Connecticut plan, state and local government outsourcing of infotech is growing at a 20 percent rate and is projected to account for $936 million in contracts this year, according to G2 Research Inc., based in Mountain View, Calif.

In Virginia, the Gartner Group study will focus on the entire range of state IT services, including data centers and telecommunications. All agencies and higher education institutions will be included.

Among the options for infotech service expansions are two-way, interactive distance learning at universities and Internet-based transactions for automobile and drivers license renewal. Taking state park reservations via the Internet is another possibility.

As in many states, infotech obviously has room to grow in Virginia. The agencies' World Wide Web sites run from skeletal to state of the art. A nationally recognized Department of Transportation site provides live video on road conditions. But several other state government sites amount to a thumbnail agency sketch with phone numbers and an address.

But in boosting the infotech provided to the public, the trick is to do good homework before getting out the wallet, state officials say.

"Technology remains a major investment of taxpayer dollars and has much potential to either improve services or waste a lot of money," said Delegate Kenneth Plum, D-
Reston, who chairs Virginia's Joint Subcommittee on Science and Technology. "Our experience is that there's a lot of advice out there on what to spend money on. A consultant report tends to bring all the facts together so we can make good decisions."

And among those decisions could be a drastic switch to outsourcing, said Plum, although he declined to predict where state lawmakers' sentiments remain on this issue. It's too early to tell, Plum said, but interest in exploring the topic remains high.

"I don't think you take anything off the table right now," Plum said. "The circumstance which makes the whole technology arena unique is rapid change. Rapid change means we need more flexibility than the traditional approach of government. Outsourcing is definitely on the table as it should be."

That position is supported by the Virginia Technology Council, an advisory group of 19 industry and policy leaders who report to Gov. George Allen.

"What we've been trying to achieve is to increase the level of services we're providing to all constituents," said David Lucien, council chairman. "In order to do that, you have to reduce costs .... Outsourcing is a positive initiative. The problem that all the states, not just Virginia, are dealing with is seeking to maintain a technical edge and provide it at a [reduced] cost."

The Gartner Group has worked on about 10 similar studies for local and state government clients, said Scott Lewis, a director for the consulting and research company who is overseeing the Virginia study.

"We're deciding whether outsourcing makes sense and how the providing of infotech should be structured," said Lewis. "A lot of states are trying to become more decentralized and want to give agencies more autonomy to provide services. But at the same time, they're trying to reduce costs.

"We're seeing a lot of business in state and local government and it's clearly a need."

Gartner's study is similar to that being conducted in Pennsylvania, where KPMG Peat Marwick LLP is completing a report on 34 data centers in the state executive branch. It's one of 20 consulting reports the company has recently worked on for state and local governments.

KPMG Peat Marwick's conclusions will be used to support whether information technology is being most effectively used in everything from state professional licensing procedures to welfare system operations. Company officials say they will present results to the state within the next three months.

Officials in Pennsylvania are also considering outsourcing information technology - either as a total commitment or in part.

"We're interested in exploring all options, whatever they may be," said Charles Gerhards, director of the central management information center for the state of Pennsylvania. "At this point, we haven't excluded anything."