Outsourcing big is not always beautiful. Indeed, sometimes outsourcing big can be a blunder. For example, on Friday, Information Age reported a tally of the UK government’s project management track record, and found that IT projects count among its worst failures. Why? “Government needs to stop thinking that when it comes to procuring IT systems, big is always beautiful,” says shadow chancellor George Osborne. “We need to move in the direction of what are known as ‘open standards’ – in effect, creating a common language for government IT,” he said, which would mean “big projects can be split into smaller elements, which can be delivered by different suppliers and then bolted together”.
Even in Texas, big isn’t always beautiful. Texas was an early advocate of large scale outsourcing of government work, with lawmakers in 2005 ordering agencies to outsource their data storage, security and disaster recovery services. The state contracted for IBM to take over IT and procurement services for 27 state government agencies. Years later Texas is still stumbling. A highly critical report released, ironically on Friday the 13th, by the Texas Department of Information Resources in essence states that both Texas and IBM are at fault in the on-going fiasco and was caused by the same disease: abject naivety and excessive optimism about what could be accomplished and how to go about it. Does it really make practical sense to consolidate all IT functions for so many agencies? Unfortunately, the vendor community seems continually able to convince decision-makers that this is a good thing, based on savings that tend to prove hard to ever realize. Not that I am against outsourcing, but it hardly seems like any single organization is the best solution for all situations.
Not many other states have outsourcing initiatives of this magnitude, though Virginia last year launched a similarly ambitious program. Virginia approved the centralization of information technology services for all state agencies after an audit determined that Virginia was wasting over $100 million annually on IT project cost overruns and on unsuccessful efforts to get the different state departments’ heterogeneous and outdated IT systems to communicate with one another. The Joint Legislative Audit and Review Commission released an audit report that essentially said that the outsourcing contract’s significant risks had turned into significant problems, and that there would be no savings to the state through the initial 10-year term of the its $2 billion agreement with Northrop Grumman.
With revenues dwindling in an economic downturn, governments are likely to face increasing pressure to get outsourcing right. These cases should come as a warning to those now considering the outsourcing of IT and other operations, with questions of how much outsourcing is too much, especially to a single vendor. Big is not always beautiful, and as my mother, your mother, everyone’s mother says—be careful for what you ask for, you may get it.