April 30, 2012 By Wayne Hanson
San Diego County CIO Harold Tuck, who just announced he will retire in July, oversees the county's third-generation IT outsourcing contract. More than 2,000 miles away, Phil Bertolini, CIO and deputy county executive of Oakland County, Mich., for years has engaged in a different type of outsourcing — offering shared services to local municipalities and the recently rolled out G2G Cloud Solutions to other jurisdictions in a county cloud.
Tuck and Bertolini recently talked to Government Technology for an upcoming special section on IT sourcing — what considerations are most important in determining the best mix of internal and external sources of technology infrastructure and services. Part of those conversations included outsourcing and how it figures into local government IT operations.
Tuck said that organizations first need to be honest about their core competencies: what they do well and what they don’t do well. “For example, technology obviously changes rapidly, new applications come out, and if you lose a key developer to a company, do you have the bench to replace that person?” Tuck asked. “Do you have the ability to pay market rates for the positions that you have? And if the answers to those questions are no, then you need to strongly consider outsourcing."
Bertolini said an IT organization's maturity figures prominently in sourcing decisions. “The mature IT organization utilizes sourcing as a tool," he said. "For example, we selectively source out our help desk. We bring contractual people in and they handle that for us. Why is that? It is a very routine function. You can get those kinds of assets — they are pretty easy to find and they are lower cost.”
Oakland County also outsources about 30 percent of its development needs, mostly through supplemental staffing. “We bring in contractual staff that have certain skill sets, and then we try to do knowledge transfer to our existing resources," Bertolini explained.
However, an organization can't just bring in a bunch of contractors without skilled in-house staff to lead them, Bertolini cautioned. If you’re not a mature IT organization, said Bertolini, outsourcing can be a challenge. “If your organization only thinks you put PCs and e-mail on their desks — and you figure maybe you could outsource that and get it cheaper, that may be seen as a threat to the internal IT organization. Or they might not have the skill sets to manage that effectively."
And there are significant political considerations as well. You have to have the support of your elected officials, said Tuck. “Outsourcing — especially when you are talking about people — has to engage in the conversation with labor unions, because most often those people are part of a union. So to have those tough discussions — that now these people will not be civil servants, but will be part of the private sector — is a difficult conversation to have, and one that you can’t have without an abundance of political support."
Tuck and Bertolini both mentioned that the economic downturn has stimulated outsourcing initiatives, even though outsourcing doesn't necessarily cost less. For San Diego County, having a contractual partnership in place with Hewlett-Packard meant that IT did not have the budget cuts experienced by many in-house IT shops.
When the recession hit, said Tuck, many local governments went to cost-saving measures such as consolidating and virtualizing servers. That led to more available data center space, which encouraged shared services to help fill up that space. “So outsourcing comes into play,” said Tuck, "and you have to consider, ‘Is this going to be cost-effective for us?’”
Tuck said he thinks economic recovery will slow down the pace of outsourcing: “I believe the model for outsourcing may be data center, cloud and desktop support. I believe that application development and application support most likely will stay in-house. That's my prediction.”
But Bertolini has a somewhat different opinion. He doesn't think that a post-recession return to old ways of doing IT is in the cards. "I think we’ve gone too far to go back,” he said. “We’ve shifted the way we do business so much, and we’ve put efficiencies into the process that to go back just wouldn’t make sense."
At Issue: Will outsourcing evaporate when good times return, or become an increasingly valuable option in changing world? Leave your comments below.