“The following article was nominated for our Editor’s Choice Award 2001. We felt it was a story worth sharing with our readers as an example of excellence in outsourcing.”
The Commonwealth of Pennsylvania, fifth largest state in the U.S., is a diverse area. It has the largest rural population in the country and yet is urban with Philadelphia, Pittsburgh and other large cities. As the Commonwealth is charged with providing services under a number of state agencies, Pennsylvania’s citizens reap the benefit of their current forward-looking governor who, shortly after taking office, determined the most important initiative to launch was to move the “smokestack state” forward on the information technology front. His vision includes implementing electronic services to citizens and also to free up government IT people to work on more strategic projects. A second trigger point was to streamline the Commonwealth’s 20 data centers that had been installed and were being managed separately by each of the 17 government agencies.
In August 1999, Pennsylvania signed an outsourcing agreement with Unisys for the operation of its mainframe and a number of its midrange computer systems. Curt Haines, Director of the Bureau of Consolidated Computer Services in the Governor’s Office of Administration for the Commonwealth, says they selected Unisys because it was clearly a premier company relative to mainframe computers. He points out that IBM is a major subcontractor for Unisys in this outsourcing agreement but that Unisys is the prime vendor and has ultimate responsibility to make sure it works.
Already their relationship is notable. In March 2000, Pennsylvania’s Secretary of Administration was a finalist for the Outsourcing World Achievement Award, presented at the Outsourcing World Summit. The honor recognizes Pennsylvania’s vision for the strategic use of technology by state agencies.
One year is down in their contractual agreement, and it focused primarily on migrating the status quo. To ensure success in this extremely complex project, a number of steps were taken by both sides. The Commonwealth acted on advice of KPMG’s consulting group and has established a bureau that oversees the outsourced environment. As Haines says, “There is a whole lot of effort put into managing this relationship.”
Because this project is highly visible in Pennsylvania, the Governor personally briefed his cabinet members before the project started, stating that he expected everyone’s support and effort. “Obviously, there was a whole lot of emotion to this when it was first announced but, thanks to the executive level, it didn’t last long. The agencies have been very cooperative in the transition,” comments Haines.
The enormity of the deal also makes it highly visible on the Unisys side, too. Again, the success of this relationship is so important, that Unisys’ Chairman became personally involved in the proposal and continues to commit his personal time when it is needed. “It was critical to let the staff on both sides know that their bosses want this to work,” says Haines.
He points to the capabilities of Unisys in reacting with speed and flexibility to changes and problems as another important success factor. “This is the first state to do mass outsourcing of anything like this,” he explains, “so it’s getting a lot of attention in other states, cities and counties, and in trade magazines.” In several instances on technical issues, both Unisys and IBM have called on their international resources. “Obviously, when one of our agencies is dealing with a technical problem, it’s important,” says Haines. “But it’s not quite as important as when you are providing that support to the whole Commonwealth of Pennsylvania and literally everybody is watching what happens.”
Other than technical issues, he says there have been very few problems to overcome. Both parties recognized during early contract negotiations that there would be an element of controversy and that the relationship had to be a true partnership. Describing their relationship as “healthy,” Haines says managers on both sides are frank with each other and don’t let anything erode their partnership mentality. “It happens rarely but, if there is something that the Commonwealth is doing that is bugging my counterpart on the Unisys side, he will come in, close the door, and tell me like it is. And we always say ‘thank you.’ That is what will keep this partnership on track.”
And Six to Go
With six years left on the seven-year contract, the Commonwealth has already freed up its staff for e-government initiatives. Another objective achieved is ensuring that the small to mid-size agencies’ hardware, software, tape libraries and tape management systems are maintained at a state-of-the-art level that is more reliable and easier to administer. Prior to outsourcing, the Commonwealth was restricted to civil service lists as its source for IT labor. “But there are few colleges that offer a mainframe course these days, and that labor pool is dwindling,” says Haines. Both Unisys and IBM were able to pull in nationwide experts for the staffing on this agreement.
Now that migration and transition have been achieved, the goal for the next six years is to improve processes. The expertise of Unisys is to be relied on heavily in this regard. “A good example is that one of our agencies came to us with a federally-mandated need to encrypt its data as it moves outside the data center,” explains Haines. Unisys was asked to work on a solution but went back to the Commonwealth with a totally different approach. “We were looking to solve a problem for one agency, and they came back and showed us how to solve it for all agencies,” says Haines.
“That’s a big, big change for Pennsylvania, and I would venture to guess it is the same for any state,” Haines comments. “To take 17 agencies and try to get them to think as one, economize as one, and act as one, is a huge change. Unisys is recommending ways for us to get to that environment.”
It’s a good bet they’ll get there because both sides are committed to success. It’s too big to let something happen to prevent it.
Lessons from the Outsourcing Primer:
- Where there may be pockets of controversy or resistance to outsourcing, it helps to have top executives on both sides explain the importance of the success of the relationship.
- In an enormously complex project, it may be helpful to establish an oversight committee for management of the relationship.
- In a successful outsourcing relationship, both sides must be committed to a partnership mentality, rather than an “us versus them” attitude.