Virginia To Launch Groundbreaking Outsourcing Plan

Virginia To Launch Groundbreaking Outsourcing Plan

Don Upson

By Steve LeSueur

Virginia officials are preparing to adopt an ambitious desktop outsourcing initiative that will include all state agencies, local governments and educational institutions, making it the first statewide seat management program in the nation.

The plan to transfer responsibility for the state's desktop personal computers from the government to the private sector would cover an estimated 60,000 desktops and have an annual value of more than $70 million just among the state agencies, said officials.

"We've done a pilot, we know what the issues are, and we intend to move forward as quickly as we can with seat management," said Don Upson, Virginia's secretary of technology.

Virginia's Department of Transportation next month will complete the one-year, $2 million pilot project with Halifax Corp. of Alexandria, Va., which took over desktop procurement, maintenance, technology refreshment, training and other services for more than 1,500 desktops for the department.

Under the Halifax contract, the average cost per "seat" for the department is running about $1,350, significantly less than the estimated $4,500 per seat cost when the department handled these services itself, said Peter Kolakowski, the department's assistant commissioner for planning, research and technology.

"Seat management has worked well in the private sector, and our pilot shows that it can work in the public sector, too," he said. The Virginia Retirement System also participated in this project.

In addition to the budget savings, seat management has provided the state transportation department with predictable costs, standardized equipment and state-of-the art technology, said Upson and Kolakowski.

Virginia's Council on Technology Services will meet Sept. 29 to adopt formally a desktop-outsourcing plan, said Upson, who chairs the council. The council was established by Gov. Jim Gilmore (R) in August 1998 to oversee information technology planning and decision-making for the state.

A Seat Management Workgroup within the council has been examining the concept since November 1998, and is preparing a report that will recommend moving to desktop outsourcing on a statewide basis.

An Aug. 17 draft report of the workgroup contains a number of key recommendations and findings:

? The scope of seat management could be modeled after multivendor programs among federal agencies;

? The technology secretary should establish a Seat Management Office as a point of contact for the state;

? Government agencies will need $7.2 million to fund the transition to a seat management program;

? Virginia should begin implementing the program by July 1, 2000.

The expected annual cost for seat management is about $1,200 per seat, though this will vary with the particular needs of the agencies and their users.

Upson could not predict how quickly Virginia agencies could get moving, but he said the state could start sooner than the July goal recommended by the workgroup.

The Virginia General Assembly probably would need to review some budgeting and regulatory issues to help facilitate the new procurement process, officials said.

Upson expressed confidence that local governments and state universities would embrace desktop outsourcing, pointing out that the Council on Technology Services includes representatives from local government and Virginia universities as well as from the state government.

In addition, both the University of Virginia and the College of William and Mary are getting ready to start seat management projects, and the University of Virginia has volunteered its initiative as a pilot project for higher education, according to the draft report.

Desktop outsourcing has not produced huge revenue in the state and local market, but it is expected to be a high-growth area, according to James Macaulay, a public sector analyst with Dataquest, a research arm of the GartnerGroup Inc. of Stamford, Conn. "It will be an important engine of spending over the next several years," he said.

Although the Virginia initiative would be the first statewide desktop outsourcing project, a number of companies have received lucrative contracts in this arena.

In California, for example, IBM Corp. of Armonk, N.Y., has a nine-year, $217 million contract to provide desktop management and other services for California's child welfare system. In New York, IBM has two four-year contracts with a total value of $125 million to manage desktops for the state's child support enforcement system.

"We've seen more interest at the federal level," said Jack Winters, vice president of government and education industry for IBM Global Services. "The states are coming into it more slowly."

Unisys Corp. of Blue Bell, Pa., in January won a five-year, $75 million contract to provide network and desktop management to the city of Chicago, and Intellisource Information Systems Inc. of Vienna, Va., in the spring was awarded a desktop management contract by Philadelphia.

The North Carolina Department of Health and Human Services also is developing a request for proposals for seat management that could evolve into a statewide program, said Virginia officials.

Two federal agencies that have been in the forefront of desktop outsourcing are the General Services Administration and NASA. Their awards include a $500 million NASA task order to OAO Corp. of Greenbelt, Md., for services at four NASA centers over nine years and a $114 million GSA task order to Litton-PRC Inc. of McLean, Va.

"I see a huge amount of interest in seat management in the public sector, though more on the federal side," said Ellen Zidar, a senior research analyst with the GartnerGroup. "But we're starting to see it in the states as well."

To make seat management more palatable for individual government agencies, which may be reluctant to give up ownership of their computer equipment, the states likely will try to structure their contracts with as much flexibility as possible to allow the agencies to select the vendors and services they want, Zidar said.

Halifax's pilot project with Virginia puts the company in an advantageous position. Halifax almost certainly will qualify to be part of Virginia's multivendor seat management program now being planned, but the state transportation department also could exercise the first of three three-year options with the company when the pilot project ends next month.

In addition, other state agencies can use the transportation department's contract with Halifax, said Don Fraser, a sales manager with the company.

Halifax, which had revenue of $74 million in 1998, is pursuing two major seat management deals in the commercial sector and intends to continue pursuing government contracts, officials said.

Halifax is developing a model for seat management that will allow government agencies and entities to select from a menu of desktop services.

"We don't want to put anyone into a box or force them to accept services they don't want," said Frank Ostronic, vice president of business development for the corporate office. "The idea is to tailor the seat management program to the agency that gets it."

While desktop outsourcing can provide many benefits to government, Ostronic said the potential for cost savings would be its real selling point.

"That's what gets the attention of comptrollers," he said.

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