A Strategic Guide for Local Government On: Outsourcing
Key Reasons Why Jurisdictions Outsource
A confluence of events is driving local govern- ments to consider new ways of managing and administering technology. Faced with budget challenges, an aging workforce, skills shortages, and a dated technology infrastructure, govern- ments are increasingly considering technology outsourcing as a vehicle to address these issues.
Governments have used outsourcing for years. From recycling to garbage waste collection to IT services, well-managed outsourcing pro- grams help government reduce costs and increase effectiveness. Today, government organizations are outsourcing IT services for a multitude of reasons, including:
Increasing focus on core competencies;
Containing costs/saving money;
Increasing specialized skills to improve IT
Eliminating out-of-control functions or
Focus on Core Competencies Outsourcing allows government organizations to focus on their core mission. After interview- ing city and county officials across the nation, outsourcing played a significant and positive role in enabling organizations to focus on mis- sion-critical activities for their constituents and deliver higher overall value and service levels. By outsourcing IT services, the agency focuses on its core mission – improving service to its citizens, not worrying about the LAN or staffing a help desk.
Minneapolis expects outsourcing to save the city $20 million over seven years, the length of the outsourcing contract. The contract centers on infrastructure management, including servers housed at the vendor’s data center. However, the city focused on strategic rea-
sons, not just cost reasons, for outsourcing. By outsourcing, the city is able to improve IT serv- ices, increase backup and reliability of systems, and the IT organization is able to focus atten- tion on using technology to improve services rather than the technology itself.
Containing Costs Along with enabling governments to concen- trate focus on their core competencies, outsourcing helps organizations contain costs. In fact, government leaders cite cost contain- ment (particularly during periods of increasing demand for IT services), as opposed to cost reduction, to be a key driver. Most leaders realize that savings is a long-term result and understand that outsourcing limits the costs to a set amount, so jurisdictions gain control over operating costs.
In some cases, governments are in need of aggressive modernization of hardware, soft- ware and mission-critical applications. This can often lead to short-term needs to significantly increase investment in IT. The expertise of high-quality firms will help organizations invest efficiently and target spending where it will have the greatest impact and the strongest business case.
The city of Fort Wayne, Ind., moved to outsourcing to gain control over costs. Its outsourcer provides a fixed-cost to run the equipment on site allowing the city to dispose of managing IT functions and better focus on the real issue at hand – improving customer service to its citizens.
Increasing Specialized Skills Top-quality vendors provide access to a wider and deeper set of skills and services. Governments can also reduce overall IT risk by using suppliers with a reputation for delivering first-rate services and capabilities.
The most common IT specialized skills and services that local governments need include:
Help Desk Support
Data Operations (Servers)
Application Services and Development
Consulting and Reengineering
The city of Minneapolis looked for an out- sourcer who could provide a data center to house its servers in the state. The vendor has a nearby data center with back-up capabilities and redundancy – technology components the city lacked. In addition, the vendor houses other clients’ data, which proved to the city that the vendor had the specialized skills and experience required for housing the city’s serv- er environment.
Montgomery County, Md., generally manages its own operations and infrastructure, but relies on vendors for specialized skills and expertise.
Obtaining Predictability/Reliability Predictability of cost and service is another driver. Many contracts use a fixed-price con- tract in which the outsourcer provides negoti- ated-levels of service for a fixed price. Risk of out-of-control costs or unforeseen charges because of technology changes are reduced.
Reliability is crucial for local governments to ensure that citizens and public servants receive the services they need. By outsourcing specific functions, local governments gain access to high-performing infrastructures. For example, by outsourcing application development, local government entities can work with a vendor to prioritize appropriate technology investments.