Outsourcing's savings debated

Local officials say that the outsourcing of services doesn't help government rein in technology costs

Public Technology Inc.

The outsourcing of services has been promoted as a method that can help governments cut their information technology costs, but several local officials say studies haven't supported that outcome.

Governments can outsource certain skill sets or projects at certain times, but there's not enough evidence to indicate that it helps government rein in technology budgets, said Dianah Neff, Philadelphia's chief information officer.

If the outsourcing of services is done purely for cost-savings, the savings probably are not going to materialize, she said. Politics also have to be taken into account, including the views of union employees, she said during a panel discussion at Public Technology Inc.'s annual conference in Miami last week.

Jack Hersey, Microsoft Corp.'s state and local government market director, described alternatives, such as a shared service approach, which can be considered as outsourcing. For example, if two cities provide a similar service, such as tax collections or payrolls, then one may perform the service while both share the costs. Another example involves application service providers: A government may have a third party or vendor host an application, such as financials and tax collections, as a way to reduce costs.

Sandra Vargas, Hennepin County, Minn., county administrator, agreed that sharing services, such as a dispatch center, is certainly a way multiple entities can cut costs.

Another way that cities and counties could improve is by providing better business case analyses of technology projects, officials said.

For example, Sandy Mesa, Miami-Dade County's e-government program manager, said her county has instituted an Applications Academy where officials can collaborate on a project and analyze business cases.

But in tough budget times — which some panelists said could last for another six years — officials said they're hopeful that they can become more creative in delivering services and reducing costs by implementing innovative technologies. Neff said her city is partnering with the state and federal governments, something that hasn't happened before.

Vargas said the economy has forced cities to consider approaches, such as outsourcing, that had not been politically feasible in the past.

"If leadership does not look at this time as a total transformation [of business practices and services], we're going to miss the boat," Vargas said.

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