Outsourcing succeeds

| GCN STAFFControversy has swirled around the idea of outsourcing since before Ferdinand and Isabella of Spain outsourced exploration of the Ocean Sea. The contractor certainly took risks, but nobody complained about the deliverables. Christopher Columbus and his employees, no doubt, could have learned a thing or two from Pennsylvania's recent efforts to outsource its data centers. When Gov. Tom Ridge took office in 1996, the state had 17 data centers within a 10-mile radius of Harrisburg, said Curt Haines, director of Pennsylvania's Consolidated Computing Services Bureau. After Ridge assigned a blue-ribbon commission to evaluate the state's technology infrastructure, those 17 data centers 'stuck out like a sore thumb,' Haines said.Haines and the Office for Information Technology worked with KPMG LLP of New York to take an exhaustive inventory of what the state had, what it was doing, and all its software and hardware. It turned out that dozens of tasks were being duplicated. 'We had four people at four different data centers responding to the same kind of errors,' Haines said.But scrapping the data centers and starting over was not an option, Haines said. The centers' mainframes'half of which were IBM Corp., half Unisys Corp., all of widely varying vintage'ran most of the state's vital operations: tax collection, driver's licenses, welfare and payroll systems.After a year-long bid process and negotiation, Pennsylvania settled on Unisys to consolidate the 17 data centers into one operations center. The seven-year contract will cost the state $520 million. So far, the project is going smoothly, Haines said.Pennsylvania took the resources that were being duplicated and diverted them into electronic-government applications, Haines said. Outsourcing freed up 200 employees for retraining and redirecting to Web and desktop applications.Pennsylvania officials worked closely with representatives of the American Federation of State, County and Municipal Employees (AFSCME) to ensure that not one state employee was displaced, Haines said. 'Nobody lost a job,' he said.The state provided $400,000 for computer-based training classes for the 170 employees who used to work in the data centers, said Scott Elliott, the Office for Information Technology's press secretary.Data centers are a prime target for outsourcing, Haines said. 'I haven't talked to anybody coming out of college or technical school that hasn't focused on the Web and desktop world. The ability to attract and retain mainframe operators is getting more and more difficult. But companies like IBM and Unisys have hired mainframe operators from all over the world. It's become an increasingly specialized area of information technology,' Haines said.Haines attributes the success of the data center consolidation to the fact that the state valued its employees and invested in training them. 'I can't tell you the number of former mainframe operators that came up to me and said, 'This was great for me. I'm working in a more interesting part of IT.' It got them away from the big irons.'And the timing of the project was good, Haines said. Pennsylvania's data center consolidation was launched when state governments were deciding what to do with surplus revenues, Haines said.Even the mainframe migrations were relatively easy, Haines said. IBM and Unisys transition teams would set up a new data center and do some cutovers in the weekends prior to the move. Then in the early hours of a Saturday morning, transition workers would migrate the system. 'It was incredibly smooth,' Haines said.According to Haines, outsourcing will grow in popularity because it's an effective way to deal with the staff shortages that have plagued government, as well as private industry, for the past few years. 'It's a way to save money and still have quality services,' he said.Analysts from GartnerGroup Inc. of Stamford, Conn., estimate 80 percent of government organizations will increase their dependence on outsourcing in the next few years.But is this a mutually beneficial dependence, for outsourcer and outsourcee? Some labor officials think not.'People have a perception that computer stuff is always successful, a guaranteed quick fix,' said Gary Sporrs, a labor economist with AFSCME. But many such projects fail, and the costs are higher than anticipated, he said.Sporrs also questioned the balance of power between state and vendor once the two enter into an outsourcing relationship. 'I just don't think it's a good thing when states hand over the whole reins of their system to a vendor,' Sporrs said. 'The state loses its controlling role and becomes vulnerable.'In contrast to the Pennsylvania outsourcing project, Rick Melita, political director of the Connecticut State Employees Association, offered the example of Connecticut's much-publicized outsourcing deal with Electronic Data Systems Corp. that crumbled in the summer of 1999 [].'It's been a three-year saga, like a Norse opera,' Melita said.The state did offer employment to the outsourced IT workers at first, he said. 'It was a bad deal. When you outsource, good people leave, and you lose institutional memory. The old systems relied on a small number of middle-aged IT professionals, people who had worked these systems with spit and Band-Aids. Should the systems be improved? Sure, but it was impossible to do this with the $50 million the state said it would save by outsourcing,' he said.Melita said the costs of the $1 billion contract with EDS were 'uncontrollable. A company like EDS is in the business of selling more product,' Melita said. 'Finally Gov. John Rowland said, 'That's it, we'll do it in-house.' So that's what we did, and so far, so good.'Connecticut, like Pennsylvania, decided to invest in its own employees, said Rock Regan, Connecticut's chief information officer.'We've learned a lot about ourselves through this outsourcing project,' Regan said. 'One thing we discovered is that we had a little of everything'far too many technologies deployed. Now we're essentially doing an 'in-sourcing' model,' he said. 'We're training folks in all thingsWeb ' and in database technologies. It's going very well.'