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A Strategic Guide with insight from THE CENTER FOR DIGITAL GOVERNMENT

Outsourcing Models

Outsourcing relationships have evolved into four typical models:

  • Single Provider ITO: Outsourcing IT services to one off-site provider;

  • Multiple Provider ITO: Outsourcing IT services to multiple off-site providers;

  • BPO: Outsourcing business processes to an off-site provider; and

  • Business Transformational Outsourcing (BTO): Transforming the organization through the outsourcer.

IT Organization

IT Outsourcing


  • Servers

  • Networks

  • Software

Third Party

The first outsourcing model, Single Provider ITO provides government organizations the opportunity to outsource a component of their operations, such as help desk support, so that the organization can focus on its core compe- tency: serving the citizens.

Business Process Outsourcing

As technology has become more specialized, organizations have gained the opportunity to outsource multiple operations using the second model, Multiple Provider ITO. Organizations gain access to specialized IT services and can be selective in the services they choose from each vendor. For example, outsourcing to multiple providers reduces the problem of having an outsourcer that provides excellent desktop support, but below-average application development services. However, organizations must consider the tradeoffs of specialized service with the additional complexity of managing multiple vendors and integrating their activities. Larger vendors typically perform all of those services or subcontract if appropriate.

Minneapolis turned to the Multiple Provider ITO model when it outsourced its help desk support, application management and data center network support to take advantage of different providers offering specialized services. In fact, the city divided the Request for Proposal (RFP) into three parts – each part for


• Accounting



• Procurement


• Human

Business Process


the specialized service needed. Dissatisfaction prompted the move. Users were satisfied with desktop support from the previous ITO, but not with its application development services.

As government becomes more results oriented, process outsourcing is likely to become increasingly prevalent. Some of the more feasi- ble candidates for BPO in the government include fleet management, payroll, bill collec- tion, and check processing.

nificant traction in the private sector. The trans- formational approach involves taking different departments, such as the finance or human resources groups, and using IT to transform and reengineer related business processes. With more stakeholders involved, change is more rapid and effective throughout the enter- prise.

And, finally, beyond the BPO model is the BTO model, which focuses on organizational transformation. The BTO model is gaining sig-


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