The City of Minneapolis and Unisys won the Best First Steps Outsourcing Excellence Awards in 2004. We went back to see how the relationship has progressed. Did outsourcing really help the citizens of Minneapolis?
The original situation: Concerned that its IT department was not moving in the right direction, the city hired consultant Karl Kaiser to become its interim CIO in 2000. He discovered 60 percent of the city's IT budget was devoted to keeping the infrastructure alive. He had a different view of what the focus should be. "IT's real goal is to take technology and make it valuable to the city's agencies and its voters," Kaiser believes.
Kaiser convinced the City Council to outsource IT infrastructure services on a utility basis to Unisys in January 2003. It sold all its IT assets--from PDAs to servers--to the supplier. Unisys also took over the help desk. "The city turned over its ITO business to us," says Jim Collins, Director of Client Program Management for Unisys. The goal was to transform the city's remaining IT group so it could focus on new initiatives.
Here's what has happened.
Kaiser's original business case included $20 million in savings over the seven-year contract; a recent audit concluded that will happen. He reports Unisys has reduced the city's operating budget by $2.5 million a year.
Personnel costs were part of those savings. Kaiser's department has 95 people, down from 145.
But Kaiser says many cities who call him to ask for outsourcing advice "are only concerned about cost savings." In his opinion, that's the wrong way to look at the business decision. "Saving money is just a component," he explains. "I would have chosen to outsource even if the city just broke even. That's because I don't think the city should be in the break/fix business. I want outsourcing to close the IT gap between the department and the businesses."
Other Business Benefits
Until Unisys entered the picture, Kaiser said a city employee had to grab an IT person in the hall to rectify a computer problem. Today, everything is defined in service-level agreements (SLAs). "Unisys has to respond in a certain amount of time. This has drastically improved everything," reports Kaiser.
The same applies to the help desk. The city didn't have 24/7 support even though many of its departments--fire, police, 911 operations, the city attorney--work around the clock. "We couldn't afford it because it would add another $1.6 million to my budget," the CIO explains. Unisys now provides 24/7 support, which the citizens also appreciate, since they can apply for city services on the new Web site at their convenience.
The IT department had no disaster recovery capabilities before outsourcing. "The state auditors were upset we didn't have a second data center, but we couldn't rustle up the $4.7 million needed to build and staff it," says Kaiser. Outsourcing solved the problem; Unisys has disaster recovery redundancy.
Centralization was another major benefit. One of the city's major departments was not part of the IT department before outsourcing. The CIO says the city couldn't afford to make it conform to the rest of the IT department. Outsourcing again solved the problem; Unisys included that department in its engagement.
Technology refresh is no longer "a capital problem I have to worry about," continues the CIO. The two parties agreed to a refresh schedule when they signed their outsourcing contract. "No more licensing headaches," he adds.
Perhaps most important, outsourcing has instilled a discipline to provide customer satisfaction "on a much higher scale." In fact, the city has SLAs that specifically address customer satisfaction at both the department and citizen levels. "We took the tech talk out of IT," says the CIO. Now, when IT employees talk to the city's agencies, "they find out their business needs and try to figure out how to leverage IT" to make them happen.
The Ability to Tackle New Initiatives
"Getting out of the IT business has enabled me to focus on more strategic initiatives," Kaiser says. "I would never have been able to attack these things if I had the distraction of managing infrastructure."
The first was the 311 (non-emergency) common contact center. Today citizens of Minneapolis can call 311 and reach every department in the city--they can report a pothole or complain about graffiti. They can also pay parking fines. "The city was struggling to implement this," Collins recalls. "We knew they wanted citizens to have one-stop access." Unisys brought in Lagan and its FrontLink solution, a business partner, to provide the application; Unisys implemented the infrastructure around it.
Another new initiative was a case-study management system for the city attorney's office. The city attorneys only prosecute misdemeanors. They refer all other cases to the state, county, or federal courts. Interfacing with these agencies was difficult with a paper-based system. The attorneys needed an automated workflow system.
Unisys and Kaiser's department worked together to document how the attorneys process their cases. This was an important first step "because we didn't want to purchase a piece of software to run a broken business," says Kaiser.
The third new program is computer-aided dispatch (CAD) 911. Collins says Unisys once again studied the emergency services organizations to understand their procedures. They discovered that the mobile devices in the squad cars and fire trucks didn't have patch and virus management. "We knew we could improve their experience," says Collins.
Together the two partners selected a wireless application that provides GPS. The city purchased it and Unisys provides the hardware and management services. The city now knows where every squad car and fire truck is so the 911 dispatcher can look at a map and call the closest one; emergency responders can now get to the scene faster.
"This was a collaborative process," Collins reports. Another benefit: He says the fire and police departments have a "higher degree of appreciation for our collaboration."
The fourth initiative is a public-private partnership to provide wireless communications to the citizens of Minneapolis; the two partners are implementing this capability currently.
The city needed broadband and mobile communications for squad cars, fire trucks, and its public works employees. Kaiser says the city didn't have the funds to pay for this. However, he saw a business opportunity for the private sector. "We leveraged our anchor tenant--the city--to add the service for private citizens and local businesses," Kaiser explains.
The city has signed an agreement with US Internet Corp. to make these communication services available everywhere and at all times. "The agreement is closing the digital divide," Kaiser says proudly.
The two partners believe this is only the start. "The city is not just focused on keeping the lights on," says Collins. "We want to continually improve."
How the Relationship Works
Collins says "one of the visionary things" Kaiser did was to make Collins report directly to Kaiser. "We are integrated into his organizational structure," says the Unisys executive. "This built and strengthened our relationship."
This close interweaving has helped keep problems to a minimum. "We see the business problems first hand," says Collins. "Then we set out to solve them."
Lessons from the Outsourcing Journal:
- Getting out of the IT business has enabled the city's CIO to focus on more strategic initiatives. He says he would never have been able to focus on them with the distraction of managing infrastructure.
- Outsourcing IT has helped the citizens of Minneapolis by providing one-stop phone access (311) for all city services and by knowing they will get help faster because of the new CAD 911 service.
- Unisys studied the city's processes first before implementing a solution, often with outside partners. This ensured the process was working properly before purchasing an application.