Friday, December 6, 2013

Outsourcing Federal IT = Silver Bullet: Don’t Let The Truth Interfere With A Good Story


 
Sparked by the Healthcare.gov rollout “disaster”, pundits and politicians have pointed to “outsourcing” to the private sector as a solution to developing and operating Federal IT systems.  To paraphrase Ronald Reagan: There they go again! 

 I worked on a study for an agency looking into outsourcing software development and operations.  The CIO wanted examples of where outsourcing was being done and whether it was achieving the organizations technical and cost goals.  We enlisted the help of Professor Mary Lacity:  http://www.umsl.edu/~lacitym/vita.htm of the University of Missouri-St. Louis who is widely known for her teaching, data collection and 18 books and countless journal articles on outsourcing.  She has been collecting global data on outsourcing for many years, and has tracked deals through their life cycles.

 At the time of our study the idea of outsourcing had taken hold in the IT industry.  Australia’s Inland Revenue Service (their IRS), Dow Chemical, Kodak, and other large organizations were attempting to focus their own staff on direct mission functions and jettison the IT work to (presumably) more productive and cost effective contractors. 

 While there is a vast body of work which I do not want to misrepresent, it’s fair to say that contractor vs inhouse skills isn’t as much of an issue as is the ability of the organization to craft and execute contracts that meet their REAL and evolving needs at predictable, perhaps lower costs.  It turns out that many organization’s employees actually do things as a part of what they perceive as their JOB that the official organization charts and job descriptions do not document.  So, it is problematic for an organization to specify “exactly” the duties, functions, procedures, and tasks to be performed under contract, at a price, with performance criteria.  It is also difficult to specify future needs and to specify, measure and enforce cost and productivity characteristics.

 Unless perfectly specified, the work performed by a contracted source will either: a) not meet the organization’s ACTUAL requirements, or b) will (and should) cost more than originally priced.  On the other hand, to achieve an “exact” specification and contracting documents acceptable to both parties take a very, very long calendar time (multiple years) and thousands of hours for both parties in lawyers, accountants, business and IT managers to arrive at an acceptable set of contractually binding documents.

 The real world experience has yielded very mixed results.  Lacity’s books and papers chronicle these results and are mandatory reading for those contemplating outsourcing.  The myth that outsourcing is a silver bullet is partially due to the fact that most who have attempted it, and failed, do not discuss or publicize those failures, leaving the positive impressions that were left from the big media deal announcements (even Time Magazine covers).  Lacity has published data and analyses showing the true story.

 In the Federal IT environment, requirements are continually evolving (including new legislation); contracting process is proscribed; deals must be done in public; and there are more antagonists than protagonists. Outsourcing federal IT functions is probably a fool’s errand if the goal is to save dollars and achieve higher overall productivity. 


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