It’s a Government Thing

Shaun Daly of TPI’s Financial Analysis Services Group will be "blogging about the bottom line" this week.

Every business has industry-unique requirements that must be attended to when contemplating a business process change as significant as outsourcing.  State government is no different. 

If you haven’t noticed, the state government community is showing an increased level of interest in IT outsourcing and is focused on exploring the leverage potential in data center consolidations.  Several states have already contracted with service providers and several more are currently exploring their options.

From a financial perspective, it is imperative the outsourcing project team address the current and future budget process and ensure continued participation from all agency funding sources. With increasingly tighter budgets, grave security threats, inadequate disaster recovery capabilities, and an aging workforce, state agencies are turning to the market place for help as many currently manage and maintain independent IT shops without taking full advantage of the enterprise opportunities of the entire state. 

The key considerations that will ensure a smooth transition with both the state budget authorities and the federal partners include the following:

• Agency participation in the procurement process to build an accurate baseline including fund source data
• Approval from the appropriate federal office of the proposed billing methodology and uniform rate structure
• Partnership with state budget office to properly fund participating agency budgets for future requirements
• Alignment with service provider on detailed chargeback data needs and proper treatment of assets in compliance with federal funding requirements

Failure to meet these requirements is simply not an option.  The risk of jeopardizing funds is too great to the state agency. 

One economic question remains, however: Why state government is turning to the market when considering a transformation of their current operating model?

Comments

[Tim Ryckman]

Interesting article. In response to your question about why government agencies would turn to the market place... Given the differences in budgeting and funding processes in government agencies (including underlying politics) versus private enterprises, it makes perfect sense to buy a managed service from an outsourcing service provider rather than trying to argue for, acquire, and manage pieces of technology internally. Outputs of service at specific service levels and predictable cost can be easily explained to politicians and the public, whereas it can be hard to get funding for piecemeal internal technology investments. For these reasons and the increasingly apparent security, disaster recovery, and consistency concerns you describe, I think we’ll see more government agencies looking to the market place to manage IT infrastructure.