Vendors See Desktop Outsourcing Surge In 2000
Vendors See Desktop Outsourcing Surge In 2000<@VM>The Cost of Switching<@VM>GSA Seat Management and ODIN Contract Orders to Date
By Ed McKenna
With year 2000 software remediation work mostly in their rear-view mirrors, federal agencies are expected to flock toward desktop outsourcing in 2000 as they try and get their arms around information technology costs.
There has not been a stampede in the 18 months since the General Services Administration's Seat Management program and NASA's Outsourcing Desktop Initiative (ODIN) opened for business. Just seven orders valued at about $525 million have been booked on the two vehicles, which are projected to total $22 billion over 10 years.
But the pace of desktop outsourcing will pick up soon, thanks to big sponsors such as GSA and NASA, government and industry officials said.
"We see a steady stream of prospects lining up for calendar year 2000," said Paul Taltavull, senior vice president of Federal Data Corp. The Bethesda, Md., information technology contractor is a prime on both the ODIN and Seat Management contracts.
"I am very positive about what is going on. I see the dynamic in place to make this a very successful enterprise," said James Hogan, president of Wang Government Services Inc., McLean, Va., whose unit also is a prime on both vehicles. Hogan predicted a surge in orders in the second half of 2000. "I have seen a list [of customers] that has at least 15 different agencies on it," he said. "While some of those potential buys are for 1,500 seats, others are more substantial."
Christopher Wren, GSA's program manager for the Seat Management project, agreed with industry executives' bullish assessments. "Eventually, it is going to play out as we anticipated, it is just going to take a little longer," he said.
The concept of seat management is still in its infancy within the federal government, he said, noting that GSA's Federal Technical Services spent much of this past year educating government employees about the concept and marketing the product to prospective early adopters.
Some agencies have begun small initiatives, but others are waiting to see the results from existing projects, said Kevin Plexico, vice president of the market research firm Input of Vienna, Va.
NASA, which made a splash with its ODIN contract in 1998, has outsourced about 47,000 seats at five centers under separate ODIN contracts with OAO Corp., Greenbelt, Md., and Intellisource, Fairfield, Conn. Those seats are at Johnson Space Center in Houston; Marshall Space Flight Center in Huntsville, Ala.; Kennedy Space Center in Florida; Stennis Space Center in Bay St. Louis, Miss.; and Goddard Space Flight Center in Greenbelt, Md.
In 2000, the space agency plans to select a contractor for an acquisition at NASA headquarters in Washington. The agency also is planning an acquisition that will include large installations at Langley Research Center, Hampton, Va., Glenn Research Center in Cleveland, and Ames Research Center, Moffett Field, Calif., said Mark Haggarty, NASA ODIN program manager. Those orders will cover about 1,400 seats for NASA headquarters and 20,000 seats overall for the three research centers.
A host of other government organizations that have expressed interest in both the seat management and ODIN vehicles are performing cost ownership studies, seeking senior management approval for their projects or looking for ways to fund a controlled pilot, Wren said. In addition, the Defense Logistics Agency and the Navy are looking to craft their own versions of seat management.
Indeed, Input has pegged desktop services as the fastest-growing segment of the federal outsourcing market, with revenue expected to bounce from $222 million in 1999 to $307 million in 2004, Plexico said.
For agencies considering outsourcing, key drivers include cost, performance and convenience, said Payton Smith, manager for strategic studies at Federal Sources Inc., McLean, Va. But Smith warned that some of the smaller programs might not provide a real indication of the potential cost savings of desktop outsourcing. That is because savings often come from achieving economies of scale, he said.
Also, many agencies lack the necessary data to evaluate the potential benefits of outsourcing, government and industry officials said.
"Most organizations do not know what their true IT costs are today, and many do not have a benchmark for service-level performance," said Wren. In fact, "little or no actual performance and pricing data existed in the federal government" until recently, he said.
To get up to speed, many organizations are performing cost-of-ownership studies, Wren said, noting there are 30 to 60 such studies now under way.
During the past year, many agencies have been knee-deep in year 2000 issues. Along with the financial concerns associated with their Y2K fixes, government organizations want to make sure their systems are operating properly "before they start taking some of the infrastructure and outsourcing it," Hogan said.
As with any transition, there have been bumps along the way. GSA has had to battle some misconceptions about seat management, and there has been confusion over pricing, Wren said.
The bottom line is that the final number is meaningless "unless you know what is going into that price," he said. "I could buy a $2,000 seat that is going to give me a basic survival package," but the final price will depend on what level of service is required, Wren said.
"If you are looking at a scientific-type platform for [a research and development] environment, you are looking at something substantially more than $2,000 per person per year," he said.
In addition, Seat Management was mislabeled early on by some agencies as an all-or-nothing proposition, he said. But organizations need not buy a full package from desktop to wide area network; they can buy support for just the desktop, portable or network infrastructures.
"What they can't do is just buy help desk indefinitely," Wren said. Take the Health Care Financing Administration, which is acquiring new products, installation and maintenance under ODIN to eliminate its Y2K problems at the desktop level, he said. That agency had an existing contract for help-desk work, so it did not require that service as part of its basic purchase. The agency may add it in a year or so when the contract expires, according to Wren.
HCFA, the only non-NASA user of ODIN to date, has awarded a $50 million task order to Boeing Information Services (now part of Science Application International Corp. of San Diego). The three-year pact covers nearly 4,000 desktops.
In contrast to HCFA's limited buy, the Department of Housing and Urban Development's Office of the Inspector General is buying the full package for about 700 seats with extras, including the desktop, wide area network, dedicated virtual private network and encryption, said Wren.
The inspector general office tapped DynCorp TechServ, Reston, Va., to provide these services under a task order under the Seat Management contract. The 10-year effort is worth $50.9 million.
The Treasury Department also opted to acquire the full package under the Seat Management contract for about 2,000 seats at its headquarters. The contract, which was signed in July with Wang Government Services is valued at $88 million over 10 years.
James Flyzik, the department's chief information officer, said the decision was motivated by practical and philosophical considerations. The agency wanted to consolidate its contracts, standardize platforms and improve customer service, he said.
Also, the move puts the agency on a standard, three-year technology refreshment cycle, gives it a predictable budget and is in keeping with the agency's overall philosophy, Flyzik said.
"We'd prefer to purchase services as opposed to equipment," said Flyzik, whose agency will evaluate the program during the next year with an eye toward possible expansion.
Flyzik said there also has been strong interest in desktop outsourcing from the Interior Department and Wright-Patterson Air Force Base in Dayton, Ohio. The Air Force base is launching a pilot project under a Seat Management task order from Federal Data Corp. that supports 220 seats.
Under the program, the company will provide full IT services, including desktop and the network for the service's Special Operations Project offices, a self-contained organizational unit at the base, according to Taltavull.
While the project is relatively small, it has the potential to expand to 24,000 seats, he said. The contract is now worth about $1 million annually and could run for 10 years.
"There have been a tremendous number of lessons learned at NASA," said Tor Opsahl, vice president of aerospace and enterprise services at Intellisource. "A lot of other federal agencies are looking at [NASA] as they plan what they want to do."
Haggarty said NASA's next step will be to start looking at renewing delivery orders for the first five centers and "to decide whether or not to stick with contractors." All of the contracts are for three years.
The agency also wants to attract other agencies to the ODIN contract, he said. "There is a lot of interest, but no one signed on the dotted line as yet," Haggarty said.
The Commerce Department is one of the agencies considering the ODIN and Seat Management contracts for a small outsourcing project next year.
It plans to acquire seat management services for 800 to 1,200 PCs at its Washington headquarters at a cost of about $10 million over five years. A contract award is expected in April.
But the Seat Management and ODIN contracts are not the only vehicles that federal organizations are using for desktop outsourcing. The Defense Logistics Agency is looking to the GSA schedule to put together its seat management version.
"We've gone through an initial market analysis, have had people in to brief us on capabilities and now we are out doing site visits," said Air Force Col. Tom Brown, director of the agency's Information Support Office at Fort Belvoir, Va.
The Defense Logistics Agency already has narrowed the competition to fewer than 10 finalists, he said. Plans call for the contract to be awarded by the end of January or in early February to support about 2,500 seats at the agency's headquarters.
"We are going to get this one under our belts first," said Carla von Bernewitz, chief information officer.
Once the DLA tests the waters and gains a better understanding of the process, she said, "we will examine the potential for taking this further across the organization."
That could mean more than 40,000 seats and a contract potentially worth $200 million or more to the winning vendor, according to Bernewitz.
Meanwhile, the Navy is crafting an effort that could outsource as many as 450,000 seats under the Navy/Marine Corps Intranet program.
"Whether or not this bold initiative succeeds," Wren said, it is a signal that "the seat management concept has taken hold."
|Organization||Contract||Award Date||Prime Contractor||Contract Value|
|NASA Goddard Space Flight Center||ODIN||October 1998||Intellisource||$20 million|
|NASA Johnson Space Center|
NASA Kennedy Space Center
NASA Marshall Space Flight Center
NASA Stennis Space Center
|ODIN||December 1998||OAO Corp.||$154.9 million|
|General Services Administration||Seat||December 1998||Litton-PRC||$114 million|
|Department of Treasury,|
|Seat||June 1999||Wang Government Services||$88 million|
|Health Care Finance|
|ODIN||June 1999||Boeing Information|
Services Inc.(now part of SAIC)
|Department of Housing and |
Urban Development, Office of
|Seat||July 1999||DynCorp TechServ||$50.9 million|
|Wright-Patterson Air Force Base,|
Special Operations Forces/Systems
|Seat||September 1999||Federal Data Corp.||$10 million|