Extra space means extra money

Orange County, Calif., hopes a new deal with Lockheed Martin Corp. will

turn excess data processing capacity and other information technology resources

into profit.

Orange County will get $21 million from an expanded partnership with

Lockheed Martin IMS, said Leo Crawford, Orange County's chief information

officer. The additional revenue will help offset the $260 million cost of

the county's new information systems and telecommunications contract with

Lockheed Martin IMS.

Under the 11-year agreement, Lockheed Martin IMS will use Orange County

facilities as a base of operations for other outsourcing opportunities.

The company plans to offer surplus mainframe space and shared personnel

and infrastructure resources to attract network support, printing and Web-hosting

contracts.

The contract achieves milestones for both partners. It is the largest

contract ever won by Lockheed Martin IMS, spokesman John Harwood said. It

also is the largest contract of any kind awarded by Orange County, Crawford

said. And the county for the first time bundled its voice and data services

in one contract, he added.

Governments increasingly are exploring new ways to pay for the next

e-government infrastructure generation, "but this sort of approach is relatively

unique," said Rishi Sood, a principal analyst for Gartner Group Inc.

"My first reaction is — good," said Costis Toregas, president of Public

Technology Inc., a nonprofit technology organization that advises local

governments. "It's one way to level the demand peaks and valleys for service."

Company officials forecast an additional $250 million in outsourcing

revenue from other public and private clients in Southern California.

Orange County will share in that windfall. On top of its $21 million

payment, spread out over the course of the contract, it will receive 5 percent

of annual gross revenues exceeding $8.5 million, said Naomi Marr, the company's

vice president for business development technology solutions.

As the incumbent manager of the county's data center, Lockheed Martin

IMS already processes data for the region's Transportation Corridor Authority

and other public entities. It also provides network support, mainframe programming,

Web development and other support services to Orange County. The current

data center management contract expires at the end of February 2001.

Lockheed Martin IMS, which specializes in transaction processing, program

management and systems integration services, is partnering with Pacific

Bell to provide telecommunications services.

The county's data center, built to withstand a magnitude 8.0 earthquake,

was completed in 1992 when the size of mainframe computers dictated a larger

facility. Lockheed Martin IMS' prime market for that space will be private

industry, Marr said. New clients will have several options. They can lease

floor space for their own servers and mainframes, lease surplus disk space

or ask Lockheed Martin IMS to acquire equipment and operate it for them.

Nearby cities or counties also may find such an arrangement attractive

because it can simplify their procurement process, Marr said.

Orange County technology managers have taken care to protect county

interests in the deal. They have the right to approve subleases and/or client

agreements entered into by Lockheed Martin IMS; if their needs change, they

can get back data center space by giving six months' notice and paying

Lockheed Martin IMS' relocation costs; and they used a fairly new contracting

approach to get favorable terms.