he recently terminated contract that Unisys Corp. had to manage the health-care program for the state of Florida's 215,000 employees illustrates one hard outsourcing lesson: Consider whether your service provider can do what you want it to do.
Unisys, which processes Medicaid claims for Florida and other states, had tried to move into business process outsourcing with the contract, which was prematurely terminated last month. The contract was "an aberration, an aggressive move," admits a Unisys spokesman.
A chastened Unisys i
s now "picking processes where there is a high component of technology and a small component of business," such as logistics, says Barbara Babcock, VP of strategy for the information services organization. The company now has about 700 consultants with industry-specific expertise, plus alliances with 100 industry-specific software and consulting firms.
In 1995, Unisys was surprised by the labor-intensiveness of managing Florida's $500 million in health-care claims annually, says Gale Sittig, the state's deputy budget director. The contract, worth $86 million over four years, replaced Blue Cross and Blue Shield of Florida with Unisys as the state's administrator for the insurance program. It took over operations in January 1996.
The Florida-Unisys deal matches the profile of one of the most common pitfalls for services contracts, notes George Logemann, director of outsourcing consulting at the Yankee Group Inc., a consultancy in Boston. That is, he says: "the buyer not knowing what they're buying and
the seller not knowing what they're selling."
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he recently terminated contract that Unisys Corp. had to manage the health-care program for the state of Florida's 215,000 employees illustrates one hard outsourcing lesson: Consider whether your service provider can do what you want it to do.
