For rent: Agency systems

In the latest sign that the application rental model of outsourcing is catching

on in government, two federal agencies recently signed contracts to rent

enterprise application services from USinternetworking Inc.

The Federal Railroad Administration (FRA), part of the Transportation

Department, will rent access to USi's e-mail and collaboration applications,

which are based on Microsoft Corp.'s Exchange Server software.

The Federal Energy Regulatory Commission (FERC), through a subcontractual

agreement with a systems integrator that USi declined to identify, will

tap into USi financial management applications that are based on PeopleSoft

Inc. software.

In the ASP model of outsourcing, a service provider is responsible for

buying, customizing and maintaining the enterprise software. Customers then

pay a flat monthly fee to rent access to the applications via the Internet

or a private network.

"It just makes so much sense, and it's more cost-effective," said George

Molaski, chief information officer at DOT. "The government is getting less

IT resources. The ones we have in-house need to be focused on supporting

the [government's] missions and not taken up on those that are essentially

back-office applications."

FRA will provide the new USi-hosted e-mail application to all of its

800 employees, many of whom are safety inspectors located throughout the

country. The one-year contract with USi, with two additional option years,

will cost the FRA $26 per month per user, according to agency officials.

Transitioning the FRA staff to the new e-mail service from their current

in-house system, which uses Novell Inc.'s Groupwise software, is scheduled

to be completed in January, according to Cristal Perpignan, an IT manager

with FRA in Washington, D.C.

She said that training workers to use the new system will be a bigger

challenge for FRA than any technical migration issues because USi is handling

those. She added that training for the new application would have been necessary

whether the software was installed in-house or outsourced to an ASP.

Perpignan expects that renting the e-mail application will be less expensive

for FRA than running its own software, which has become maintenance-intensive

for the agency's IT staff.

"We think we'll almost immediately see a return on investment in the

first year," she said.

Another benefit of using an ASP is that an agency can know precisely

how much it costs per month to run a software application. Those figures

are often difficult to pin down when the application is operated in-house

and costs are spread across staff, procurement and system maintenance budgets.

"That's very important from a management perspective," Molaski said.