The 90-day transition from Northrop Grumman to HP went smoothly, said Cathy Varner, the San Diego County program manager for HP Enterprise Services. A large portion of the Northrop staff was retained, and the company already had a major role in the contract. “We were a subcontractor and had what we believe are the core components. HP had the data centers, the help desk, we managed those portions of the contract, as well as on the application side, we managed Health and Human Services, which is the largest of the five business units.”
San Diego County’s IT crew consists of 16 staff members in the County Technology Office including the CIO, an enterprise architect, a county information security officer, a communications person, administrative assistant, assistant CIO, staff that do service management for infrastructure and applications, staff to manage the contract, and staff members that liaise with county government’s five business units. Under the county’s General Management System, five business group IT managers have a dotted-line reporting relationship to the CIO, which brings the total to 21. “And we have departmental IT coordinators who work for the larger county departments,” said Tuck. “They have a reporting relationship to their department head and to the group IT managers, and they represent approximately 40 people. So that’s about 61 people total.”
The outsourcing agreement doesn’t cover the sheriff’s or district attorney’s offices except for telephones, so about 60 internal people handle those functions for 13,500 county employees. “The rest of the IT delivery is done through Hewlett-Packard and AT&T, which has a subcontract with HP,” said Tuck, adding that the contract with HP is worth about $127 million per year.
Tuck credits some of the county’s success to stable personnel who have been involved with source selection and contract management since 1999. The San Diego County Board of Supervisors, for example, has retained the same members since the 1990s. A governance structure, called the General Management System, has been tweaked and improved over the years. Tuck also touts the IT Innovation Council that brings in Fortune 500 companies to meet with the county’s front-line employees. What began as a utility, said Tuck — simply managing a contract — evolved into what he calls a “transformative state” with HP.
Tuck said outsourcing has served the county well during the economic downturn, even though it was not done originally to save money, but instead to focus on the county’s strengths. “We invested over $100 million because we sold our landfill and invested that money in outsourcing and in our infrastructure. In 2007 and 2008, to the present time you have the horrific economic downturn, and organizations are asked to make budget cuts. I haven’t been asked to do that because we have a contractual obligation with Hewlett-Packard. None of my colleagues can make that claim.”
In contrast, the economic environment forced many local governments to delay replacing and upgrading software and it also left them, in many cases, more than one version behind vendors’ current operating systems. And in the worst-case scenarios, jurisdictions laid off employees as a cost-cutting measure.
“My colleagues are consolidating and virtualizing servers,” Tuck said, “they have fewer physical servers in their data centers, they have more real estate available yet they still have the utility costs, and other costs responsible for running a data center, so they will want to do shared services to fill up their space because smaller organizations have the same concerns. So now outsourcing comes into play, and you have to consider it.”
So why aren’t other jurisdictions doing San-Diego-style outsourcing? Tuck said the city of San Diego and Orange County, Calif., have RFPs out, and others are considering it, but he suggested that putting members of public-sector unions into the private sector requires strong political backing that may be beyond the abilities of many jurisdictions.
HP’s Varner said many jurisdictions lack a strong governance model, which she sees as essential to outsourcing success. She added that other municipalities sometimes allow departments to opt in or out, which defeats the enterprise view, scalability and ultimate success. “With the right governance model and commitment for success, county government can achieve the cost savings that San Diego County has achieved, and large or small, the formula can be replicated.”
HP provides help desk, workplace services (desktop, phones and network), and applications hosted in two U.S.-based remote data centers, as well as the development and maintenance of the applications.”We do storage” Varner said, “and right now we’re involved in a transformation project with the county, which is developing their cloud strategy, their mobility strategy and doing their applications rationalization.”
Varner said San Diego County wanted to know the total cost of ownership for some of the applications as well as an overall view of its portfolio of more than 520 apps, including who uses them and how old they are.
“It was interesting to see how many apps were over a million users, obviously those were the public safety ones, versus two or three apps that were highly specialized.
“We were able to show them that if you touch this app, it impacts this upstream or downstream and also where they should be putting some of their investment dollars because some of these applications are going to be retired, some need to be maintained, and some need to be replaced.”
In addition, she said, redundant functions like departmental case management systems were located and the county shown how consolidation could save money and create more of an enterprise view. The county’s agreement with Hewlett-Packard runs until January 2018.
When Minneapolis’ outsourcing contract with Unisys smacked into the recession, it did not allow needed flexibility, said CIO Otto Doll. Doll, formerly South Dakota’s CIO, said the contract was first inked in 2003 and runs until 2015. While cuts came to Doll’s in-house staff and operations, the outsourcing contract was untouchable and that has been a source of frustration.
“My salary, staff salary, money for new ventures, you keep eating away at that and you are left with fixed costs and they may come back and say you need to cut more. And then what do you do? I’m faced with that right now. We’ve been given direction to cut more for fiscal year 2013, so I’m looking at this. … I’m against cutting staff further, I do have a few outs in the Unisys contract, but it’s minimal.”
Doll said the cuts began before he started working for Minneapolis. In the years preceding his arrival, cut after cut was made not only in the IT department, but also across the city government. The outsourcing contract was renegotiated in 2008 and 2010 to help with the financial strain. “But ultimately it’s a difficult thing to open up the contract because then you invariably have to extend it,” he said.
And now, nearly a decade after the contract began, the city must make a strategic decision.