EYE ON THE STATES

Enterprise Outsourcing Marches On

Thomas Davies

When Connecticut canceled its enterprise outsourcing initiative, it caught many by surprise. For a time, it had looked as if the state had navigated the most difficult hurdles surrounding the contract. But after years of effort, the contract fell into the "too hard to do" category, and the governor pulled the plug.

In spite of what some now say, Connecticut came closer to outsourcing its IT business than most ever thought possible. So what went wrong? Quite simply, politics.

Someone once said that politics is the art of the possible. What is unsaid is that what is possible at one point in time is sometimes impossible at another. This was clearly the case in Connecticut.

Anyone following the initiative could see that the circumstances in Connecticut were changing significantly. Over the course of the multiyear procurement process almost everything surrounding the deal changed: the political and economic climate, nationally and in the state; the people involved, inside and outside of government; and the economics of the deal. The only real question at the end was whether the will of the state leaders also had changed.

The main reason statewide enterprise outsourcing is so difficult for governors is they need the support of their legislatures. Outsourcing opponents know the best way to kill these initiatives, especially once they gain the support of the chief executive, is in the legislature. This is what makes any kind of enterprise reform, be it health care, tax or IT, one of the riskiest undertakings for a governor, even a popular one.

There are only a few proven paths governors can follow to gain support for statewide IT reform. The first strategy is taking the case directly to the people. The right governor enjoying tremendous popular support can be successful if he or she has the right marketing skills, the right issue and the right political climate.

A second strategy is a direct frontal attack. Governors who feel they have the votes in the legislature can go for it. If they meet serious resistance, they can employ good old fashioned arm twisting and horse trading until they prevail.

A third strategy is to win over other statewide leaders early and, once everyone is committed to reform, lock arms. This sends a clear signal to opponents that resistance is futile.

A fourth strategy is to build a consensus. Slowly working the process one vote at a time, a governor can build a base of support for outsourcing.

Picking the right strategy for enterprise outsourcing in state government is difficult. IT outsourcing is not a popular issue that resonates with voters and, therefore, most governors would avoid a direct citizen-focused campaign. Nor is IT outsourcing an easy issue to build a consensus around, especially since the debate often becomes partisan. A strategy of going direct will work if the votes in the legislature are there. But it must be done quickly and decisively.

What can be learned from Connecticut?

• State government is not local government. It is one thing for a county executive to get the support of a handful of county commissioners, or for a mayor to garner the support of a city council. It is a more complex challenge for a governor to win over a legislature controlled by the opposition.

• Powerful opponents that stay the course make a huge difference. Whether it is IT outsourcing or education privatization, the unions in Connecticut successfully have resisted privatization. Where unions are major stakeholders in the public sector, they need to have a seat at the outsourcing table.

• The outsourcing sales strategy needs to fit the circumstances. As circumstances change, so must the strategy.

• Time is the enemy of everyone except the opponents and the consultants. Unless there is an absolute commitment to conclude the outsourcing deal within a reasonable, agreed-upon time, everyone is better off tackling other pressing concerns.


Connecticut undertook one of the most innovative and visionary IT reform initiatives of any state in recent memory. The state challenged private industry to come forward with best-in-class proposals, and industry responded. While lengthy, the procurement process brought out the best that industry had to offer.

Many questions will remain unanswered. Would Connecticut have been better off outsourcing its IT enterprise? Would the state actually have been able to save money? Would its work force have benefited?

What is certain is the outsourcing debate will continue in the years ahead as all states struggle to respond to the many challenges of a digital world.

Thomas Davies is senior vice president for Internet Services at Federal Sources Inc. in McLean, Va.

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