Outsourcing's hidden benefit

When it was introduced into the federal market in 1998, many in government

saw desktop outsourcing as a way to lower agency costs by handing over ownership

of hardware, software and support services to a private company.

But early adopters of desktop outsourcing report that giving responsibility

for agency networks to a third party has benefits beyond reducing costs:

It has improved the performance of information technology, and it has enhanced

the reputations of IT managers.

Agencies that have awarded desktop outsourcing contracts — called seat

management — are finding that the contracts may help IT managers move from

a position as outsiders to one integral to an agency's top management.

Because seat management can lower the flat rate an agency pays for technology

and tech support, many agencies approached seat management at first by wondering,

"What is the "right' amount to spend on technology and services?" and, "If

my agency pays $7,000 a seat, is that too much if another agency pays $5,000

a seat?" Agencies focused on the total cost of ownership — how much they

were paying for the technology and services.

Over time, agencies grew to understand that the bottom line is not the

only factor to consider with seat management. IT managers now consider TCO

to include not only the price an agency pays in hard costs — technology

and services — but also the money that the agency spends on soft costs.

Soft costs include factors such as employee productivity that is lost when

federal workers spend time dealing with computer problems instead of doing

their jobs and the agency productivity that is lost when old technology

or poor service impedes new initiatives.

Harris Corp., which has been contracted by the General Services Administration

to provide TCO studies through GSA's Seat Management contract, found that

agencies and other federal organizations devoted an average of about $14,000

to each PC. Of that, more than $12,000 went to soft costs, according to

Howard Stoodley, distributed computing environment business practice manager

at Harris. Industry typically spends about $12,800 per desktop, of which

soft costs account for less than $5,700.

Agencies' focus on dollar cost explains this gap between public- and private-sector

expenditures because agencies that do not spend as much up front on their

technology end up paying a lot more on the back end in personnel and productivity,

Stoodley said. This is especially true when agencies do not have a strategy

for technology refreshment or funds regularly obligated for upgrades, he

said.

Perhaps most important for federal chief information officers, who consistently

try to prove the value of technology and its associated costs in helping

an agency meet its mission, some soft costs cannot be measured in dollars.

Such intangibles include the confidence in the IT office to deliver workable

solutions that deliver on high expectations of what technology can deliver.

"The total cost of ownership approach is an important element because

it speaks to the bottom line. But the issues of quality of service, of technology

upgrades, the issues of flexibility and risk management are equally important,"

said Alan Balutis, deputy CIO at the Commerce Department. "Ensuring you

give solid support is a key piece in the evolution of the CIO."

Harris has found that respondents consistently cite poor quality of service

from an IT office and skepticism that the office can supply reliable technology,

Stoodley said. In one agency, workers did not have e-mail for almost six

weeks, and they "just kind of dealt with it," he said.

Seat management can make an agency's IT office able to deliver more

reliable services to the agency, top IT managers say. Employees then will

be more likely to consult the IT staff to help the agency meet its mission,

Balutis said.

"The key piece that you have to demonstrate is your capacity to make

IT a utility," he said. "You're providing a solid network, consistent help-desk

services, a solid suite of products that provide interoperability — a key

piece of the digital government."

Commerce may join other agencies in awarding seat contracts (see box,

Page 70). For organizations that outsource their desktops, the benefits

in agency productivity are obvious but perhaps not measurable in dollars,

suggested Stephen Miller, deputy director of the Special Operation Forces

System Program Office at Wright-Patterson Air Force Base, Ohio.

Miller said eliminating the soft costs — not the hard costs — persuaded

IT managers at his organization to award a seat contract. "I don't have

to be a rocket scientist to know that if I don't have to tie up people fixing

computers, they can do a much better job doing their mission," he said.

This emphasis on the overall benefits to the agency is a natural progression

in the federal buying process, said Robert Guerra, president of the consulting

firm Robert J. Guerra & Associat

"Now people are starting to focus

on solutions instead of labor hours," he said, adding that they are asking,

"How does information technology fit into my total mission goal and how

does it support my agency goals?'"