Integrators Line Up for Pennsylvania's Data Center Contract

Integrators Line Up for Pennsylvania's Data Center Contract

By Andrea Novotny
Staff Writer

Unisys Corp. officials have signaled their intent to bid as prime contractor on a data center outsourcing project planned by Pennsylvania that could span five to 10 years.

As part of that endeavor, Unisys has signed on IBM Corp., Armonk, N.Y., and Bell Atlantic Corp., Philadelphia, as subcontractors, said Brian Daly, director of public relations for Unisys, Blue Bell, Pa. The deadline for vendors interested in bidding the project is July 13.

The state is looking for one or two prime vendors to take over its operations and technical support functions for 23 data centers operated by 18 state agencies, said Don Wenstrup, special assistant for strategic planning for the Governor's Office of Administration.

Currently, the state uses both IBM and Unisys platforms. A single vendor could be picked to manage both platforms, or two vendors could be picked, one for each platform, Wenstrup said.

The request for proposal was released in March, and an award is expected by the end of September, Wenstrup said. State officials have not put a price tag on the award, although the annual operating budget for the data centers is about $85 million, Wenstrup said.

Pennsylvania Data Center Outsourcing Project
Could span five to 10 years
Would put one or two prime vendors in charge of the operations and technical support of 23 data centers run by 18 agencies
Has an estimated operating budget of $85 million
A data center is a computer facility designed to house large or medium mainframe computers. The facility acts as a processing center, receiving input data over communications lines and returning updated output information over the same lines.

The project is expected to save $127 million over five years by eliminating about 200 jobs and streamlining operations, state officials said. That will create a spillover sales opportunity for IT vendors, as savings will be pumped into state government PCs, local area networks and other information technology investments, state officials said.

"We know that we will improve service levels to Pennsylvania citizens and generate savings for taxpayers," Wenstrup said. Historically, IT in the state has been decentralized, he said. Individual agencies have used separate data centers with little planning involved to determine the kind of technology that would best serve the constituents, he said.

State and local government spending on data center outsourcing is growing nationwide. Last year, state and local governments spent $496 million on data center outsourcing, said Lesley Kao, public sector market analyst with research firm G2R Inc. of Mountain View, Calif. Next year, that figure is expected to reach $585 million, she said.

Don Wenstrup
"Information technology vendors should take a good look at what is happening in Pennsylvania," she said. "The market for outsourcing is [large,] so the opportunity is there for vendors that have the capability."

Other potential bidders for the Pennsylvania project include Electronic Data Systems Corp., Plano, Texas, and Computer Sciences Corp., El Segundo, Calif., although officials at both companies refused to comment on their bidding plans.

Outsourcing is attractive to Unisys because it generates a dependable revenue stream over a number of years, according to Daly. The company does not break out revenues for its outsourcing business, he said.

Most of Unisys' data center outsourcing business has been on the commercial side, Daly said. Unisys wants to continue leveraging that business in the public and private sectors, he said.

The company also plans to take advantage of business opportunities stemming from a massive outsourcing project planned by Connecticut, Daly said. Unisys is a subcontractor to EDS, which is vying for the prime contractor role on that project, he said.

State and Local
Government Spending on
Data Center Outsourcing
1996 $420 Million
1997 $496 Million
1998 Projected $585 Million
Source: G2R Inc.
In Connecticut, state officials are getting national attention for their determination to outsource all information technology services, including the running of data center systems. That project, which is estimated to be worth $1.4 billion over seven years, has run into political problems.

State officials had planned on announcing an award in April or early May, but legal questions arising from a joint bid submitted by CSC and the Connecticut State Employees Association, a labor union, have delayed the process, said Michael Krochmalny, chief administrative officer for Connecticut's Department of Information Technology.

CSC and the labor union also submitted individual bids to serve as prime contractors on the project, as did IBM and EDS.

Connecticut officials would not comment on the timetable for resolving those legal questions.

Michigan has also gotten into the data center outsourcing act. The state awarded IBM a contract in the fall of 1995 to outsource its unemployment data center operations. That job is worth an estimated $60 million over 10 years, state officials said.

Also, Michigan is planning to consolidate all 15 of its data centers, including the IBM-run unemployment data centers, state officials said. That process should be completed by the end of the year, they said.

Unisys helped Michigan plan and implement portions of its data center consolidation, Daly said. And the company recently completed a consolidation study for New York state of its data centers, Daly said.

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