Virginia's Outsourcing Problems: Bigger Not Better

Ann All

Earlier this month, when I wrote about the state of Virginia's troubled outsourcing initiative, I wondered why public agencies continue to up the ante with mega-contracts like Virginia's 10-year, $2 billion deal with Northrop Grumman, even as their private-sector counterparts have largely eschewed big outsourcing contracts with a single provider in favor of a multisourcing model.


I'm still wondering after reading a interview with Virginia CIO George Coulter, the former Solera Holdings chief information technology officer whose job is to fix the mess. In an effective argument for multisourcing, Coulter said:

... the one thing I've learned in the IT arena is that if you don't have the experience and haven't done this before, it's very difficult to say, in 2003, "This is how it's going to go. We're going to structure this contract, and then expect it to be 100 percent accurate." It is a very, very complex project. It's extremely large, and it's a change-agent project. You're taking 80-plus agencies that had been running independently and consolidating them, so there are elements of that coming into play. Also, [there are challenges in] trying to outsource everything to one contractor, and getting the contract to where it's going to work perfectly. In my whole career, I've never seen one [single-sourcing contract] done well. I haven't seen an IBM or EDS one done where it's 100 percent accurate.

Still, the length and size of the contract might not have been out of line, considering the transformative nature of the project and Virginia's relative inexperience. As I wrote last year, citing an IT Business Edge interivew with EquaTerra Managing Director Charles Collier and other experts, a multisourcing model doesn't work as well for organizations that lack process maturity and effective management strategies. Said Collier:

If you have good process maturity, you'll have those handoffs well documented and it will be very clear who should be doing what, and you should be able to write very specific contracts that outline who is responsible for what responsibilities. If you aren't that mature and you add in multiple players, it can become very chaotic.

Virginia's Coulter also faulted what he called a "tower approach" in which teams assigned to separate areas like desktops and networks didn't communicate with each other. The state will attempt to resolve its issues with Northrop Grumman by using a more collaborative approach. Taking a leading role will be a CIO council with some 18 members, including CIOs and IT directors of large agencies; CIOs of smaller agencies, two counties and a city; and a Northrop Grumman project manager. Said Coulter:

We're using that council to help move forward with what we do from an architecture, project and process standpoint. We've included the agencies in the decision-making process, which was not going on before. It's helping me tremendously to focus on what the business is and what the agencies are concerned about.

Coulter also pointed out the project has yielded "tremendous benefits," some of which were outlined in a Network World story I cited in my earlier post.

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