Magazine article Government Finance Review

Is IT Outsourcing Right for You?

Magazine article Government Finance Review

Is IT Outsourcing Right for You?

Article excerpt

For one government, the common decision about whether or not to outsource information technology services led to uncommon improvements in IT operations.

Technology outsourcing has been a topic of great interest to a number of organizations over the last few years, and has even been a hot topic in the popular media lately. Given this level of interest, many governments are evaluating how they might use outsourcing to deliver better information technology services to both internal and external customers. However, outsourcing is not a decision to be made lightly, as it has important implications for labor relations, service levels, and cost structure. Confronting this very decision, one county government in Texas engaged GFOA to assist with the analysis.

One of the first decisions made by the county and GFOA was to approach the project as an overall IT evaluation, rather than strictly as an outsourcing/in-sourcing decision. This ensured that the project team would consider a more comprehensive set of information and solutions than just outsourcing.

The project team gathered data from a number of sources, including the following:

* Interviews and surveys of IT staff

* End user satisfaction survey

* Department head satisfaction survey and focus groups

* Interviews with elected officials

* Surveys and interviews with comparable Texas governments

The project team's most significant finding was that end users were not dissatisfied with the technology services at the county; in fact, they recognized some important strengths of the in-house services. There was relatively little support for wide-scale outsourcing among county staff, department heads, and elected officials. However, the project team quickly realized that there were other important opportunities for improving IT services at the county. Based on its research, the project team concluded that the county should commit to a "right-sourcing" strategy and that it needed to establish an IT governance process. Both of these issues are explained below.


GFOA and the project team agreed that the county should commit to a strategy of selectively evaluating potential IT outsourcing opportunities on a case-by-case basis. Put another way, the project team did not recommend a total outsourcing strategy. This recommendation was based on several specific reasons:

* The county was undertaking a number of high-profile and costly technology projects that could be disrupted by total outsourcing.

* County users were reasonably satisfied with most areas of IT performance. As such, there was a strong case for trying to improve the county's in-house services before incurring the substantial transaction costs and risks associated with total outsourcing.

The county's information technology services have an internal management orientation. An entirely different set of competencies is needed to manage a contractual organization, including contract monitoring, vendor relationship management, and architecture planning. The county would have to develop these skills before committing to total outsourcing.

The county was able to immediately identify some right-sourcing opportunities. For instance, one of the most common complaints expressed in the end user satisfaction survey was that the IT department did not set up personal computers in a timely manner. While this was a legitimate complaint, there was also a good explanation for it. The county orders new PCs immediately following the adoption of each year's budget, and this equipment arrives all at once. …

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