Agencies are finding that the outsourcing of information technology projects is not a panacea. In fact, insourcing the decision to move projects inhouse is picking up the slack when outsourcing fail, according to industry experts.
Agencies are finding that the outsourcing of information technology projects
is not a panacea. In fact, insourcing — the decision to move projects in-house — is picking up the slack when outsourcing fail, according to industry experts.
Federal agencies spend more than $26 billion on outsourcing each year,
but not all projects are successful.
According to a 1995 report by market research firm The Standish Group
International Inc., only 16.2 percent of application development projects
are completed on time and on budget, and more than 31 percent are canceled
before being finished.
"The same agencies and vendors that trumpet their success also have
failures to perform," said Ed Emig, director of customer services for OAO
Corp., an IT systems integrator. "No one wants to talk about the failures."
Outsourcing fails when an agency inadequately defines the requirements,
has unrealistic expectations or has outsourced the wrong project, according
to industry experts who spoke at last month's FOSE trade show in Washington,
For example, when the Commerce Department's Minority Business Development
Agency in 1997 decided to update its database to provide customers with
online resources, it soon found that the services it originally outsourced
did not meet its changing requirements.
The agency spent more than nine months working with Environmental Systems
Research Institute Inc. to modify the system to meet its new needs for customized
maps. But in the end, the agency decided to solicit bids from other vendors.
"It was not ESRI's fault," said Michael O'Hara Garcia, chief information
officer at MBDA. "What we were asking them to do was outside their level
of expertise. They provided what we needed at the time."
MBDA decided to lease MapQuest technology and services and use in-house
personnel to customize the mapping programs.
When an agency decides to outsource a project, the contract must be
very specific. A vendor must be made aware of the performance requirements,
including how success will be measured, necessary interfaces, a timetable
and the consequences of a failed project, industry experts said.
"You can be informal when a project is in-house. You don't have to write
down all the instructions for work or explain how a system will be used,"
Emig said. "When you outsource a project, it is very important to document
everything to make sure both parties understand the expectations and have
something to refer to."
Sometimes, the outsourced project simply may not be feasible. Other
times, vendors become overzealous and make unattainable promises.
If an agency decides to outsource a project because it cannot find qualified
personnel to perform the task, it should expect that vendors will face the
"A vendor does not have people sitting around waiting for a phone call,"
said Pat McConnel, chief analyst for the Internal Revenue Service's Office
of Technical Contract Management. "If [agencies] can't find people to fill
positions, [agencies] can't expect vendors to."
To prevent outsourcing failures from disrupting services, agencies must
have a contingency plan, Emig said. Someone within the agency must monitor
the vendor's performance.
The IT infrastructure must be kept in-house so that agency personnel
are aware of the technology that has been implemented, panelists said. Agency
personnel must also be kept up-to-date on a proj-ect's progress to ensure
that someone in house can pick up where the vendor leaves off. Personnel
should review lessons learned as part of the transition to insourcing.
"Insourcing requires developing staff who are competent and qualified
to provide the services desired," McConnel said.
Added Emig, "[Agencies] need to know where all the skeletons are and
where the work in progress is. When outsourcing fails, an agency shouldn't
just take over the function, but should set goals to improve the function
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