Since Virginia announced its outsourcing deal with Northrop Grumman in 2005, CIOs in other states have been watching closely to determine whether its model is worth emulating. Now they can also follow Georgia's experience.

A December 2008 report by Virginia's Joint Legislative Audit and Review Commission suggests that despite producing many benefits, several issues remain with the approach. Its summary states that:

• Transformation into a "managed service" environment in which Northrop Grumman manages and operates the in-scope IT infrastructure has been delayed because of inadequate planning by the partnership with Northrop Grumman and reported reluctance by some agencies to allow transformation to occur.
• The state's new approach to IT has created short-term challenges, and state agencies express concern that the problems they have encountered indicate a longer-term inability of the partnership to provide adequate service.

Beyond questions about Virginia's experience, it's unclear whether other global IT companies besides Northrop Grumman can pull it off. IBM had a bad hiccup in Texas in October 2008 when Gov. Rick Perry temporarily froze the transfer of state data to IBM, citing its apparent failure to back up data for more than 20 agencies. The Georgia deal could be IBM's chance to recover from that controversy.

"We may have seen the high watermark for wholesale outsourcing for a while," said the Center for Digital Government's Paul Taylor. "The last political cycle was a very good one for organized labor. Combine its renewed political clout with an uneven track record for outsourcing and the job creation emphasis in everybody's economic recovery plans, and operational outsourcing becomes a harder sell. In the near to mid term, vendors will likely shift from a general focus on managed services to bringing specialized expertise to solve intractable problems -- it's where their unique value can be more clearly demonstrated and hopefully more consistently delivered."