Virginia Outsourcing Deal Bears Careful Watching - InformationWeek

InformationWeek is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them.Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

IoT
IoT
News
Commentary
11/22/2005
08:02 AM
Connect Directly
Twitter
RSS
E-Mail
50%
50%

Virginia Outsourcing Deal Bears Careful Watching

Virginia's massive outsourcing deal will succeed or fail pretty much on one metric: how well it does at providing e-services for its citizens.

Not too long ago, I would have probably railed against the state of Virginia's decision to outsource the entirety of its IT operations.

But now I think that the state may be onto something. It's certainly taking an interesting approach, designed to avoid the major problems that have scuttled other states' outsourcing agreements.

The proposed $2 billion deal--which must be approved by the state legislature even though additional IT funding is not being requested--is being touted as way to save taxpayers $200 million, upgrade IT infrastructure so old it's considered a serious security risk, and provide other benefits.

Two major ingredients might combine to mean this stands a chance of success. First, the primary outsourcer--Northrup Grumman--has promised there will be no offshore operations involved in this deal, and is spending over $55 million to build two brand-new data centers in Virginia. Which leads to the second item: Northrup has promised to employ 900 state IT workers for at least a year, complete with 4% raises and signing bonuses.

In this way, the state has deftly avoided outsourcing political pitfalls that have plagued other states, including New Jersey and Connecticut. As my colleague Paul McDougall notes in his blog entry, the no-offshoring promise alone may have been what took IBM out of the running for this contract.

All that said, the long-term make-or-break part of the deal, in my opinion, will be the types of new and improved e-services delivered to citizens. Because in the end, all the back-room IT benefits in the world won't really matter to most people. Citizens want their government to make life easier or at least more efficient, whether that means being able to apply online for a new-business license or, as we can do in my home state of Massachusetts, go to the Registry of Motor Vehicle's site and see how long the wait is in any of the offices before we head out the door. (Is it accurate? Who knows. It just makes me feel better to believe the wait is 20 minutes as opposed to two hours.)

Regardless of how successful the rest of pact may be, the citizens of Virginia will probably measure this deal's success by the number and types of 'public-facing' services that result from the outsourcing arrangement. State leaders, both in and out of IT, would be wise to do the same.

This arrangement is especially interesting coming as it does on the heels of a little-noticed study by an economic forecasting firm. The study is about how global outsourcing is really creating jobs, on balance. And yes, the study agrees that some American IT jobs are going away as a result of offshoring, but still maintains that outsourcing adds jobs globally. Massachusetts Governor Mitt Romney, widely expected to announce his candidacy for President, said as much in a recent speech.

As for the Study: it was conducted by Global Insight, an economic analysis and forecasting firm, on behalf of the Information Technology Association of America. The study said that global outsourcing added some 257,000 jobs in the United States this year.

Although Mike Raimondi, a Global Insights spokesman, agrees there have been some "pain points" in terms of IT job losses too, overall the practice has improved wages, and encouraged investment and spending. Moreover, almost 75% of the 112,000 IT job losses that occurred between March 2001 and Sept. 2003 were due to factors other than outsourcing, including the telecom and dot-com busts, the study says.

By availing themselves of lower-cost workers, the logic goes, companies are able to pump more back into the overall U.S. economy, 'raising everyone's boat,' so to speak.

There is a lag between when jobs are lost and re-created, Global Insights says, but on the whole the practice is healthy.

It's an interesting premise. I have long considered offshoring, in particular, as a big negative for ITers in this country. (And being that I'm married to an IT guy, I'll admit to being a bit biased on this front.) I'm still not entirely convinced this is a good thing, but it has sure given me food for thought.

We welcome your comments on this topic on our social media channels, or [contact us directly] with questions about the site.
Comment  | 
Print  | 
More Insights
State of the Cloud
State of the Cloud
Cloud has drastically changed how IT organizations consume and deploy services in the digital age. This research report will delve into public, private and hybrid cloud adoption trends, with a special focus on infrastructure as a service and its role in the enterprise. Find out the challenges organizations are experiencing, and the technologies and strategies they are using to manage and mitigate those challenges today.
News
How to Fail: Digital Transformation Mistakes
Jessica Davis, Senior Editor, Enterprise Apps,  11/6/2019
Commentary
Study Proposes 5 Primary Traits of Innovation Leaders
Joao-Pierre S. Ruth, Senior Writer,  11/8/2019
Slideshows
Top-Paying U.S. Cities for Data Scientists and Data Analysts
Cynthia Harvey, Freelance Journalist, InformationWeek,  11/5/2019
Register for InformationWeek Newsletters
Video
Current Issue
Getting Started With Emerging Technologies
Looking to help your enterprise IT team ease the stress of putting new/emerging technologies such as AI, machine learning and IoT to work for their organizations? There are a few ways to get off on the right foot. In this report we share some expert advice on how to approach some of these seemingly daunting tech challenges.
White Papers
Slideshows
Twitter Feed
Sponsored Live Streaming Video
Everything You've Been Told About Mobility Is Wrong
Attend this video symposium with Sean Wisdom, Global Director of Mobility Solutions, and learn about how you can harness powerful new products to mobilize your business potential.
Sponsored Video
Flash Poll