The IT Handoff

hen he feels like a rookie quarterback who's being swamped by the entire Green Bay Packers defensive line, Richard Green keeps his cool by reminding himself: "The fundamentals are there." Green is the program manager in charge of NASA's first major "seat management" computer outsourcing contract, at the Jet Propulsion Laboratory in Pasadena, Calif. The program is designed to improve management of desktop computing while cutting JPL's costs.

It is achieving its fundamental goals, but that doesn't mean Green can drop the ball. For example, he says, some of the techno-savvy employees at JPL, which specializes in unmanned exploration of space, don't like being given a limited choice of desktop computers, as the contract requires. And while the program gets high marks on employee satisfaction surveys, there are a few unhappy customers.

Green, the deputy manager of JPL's Institutional Computing and Information Services Office, is in some ways a pioneer. Since JPL awarded its seat management contract to OAO Corp. of Greenbelt, Md., in December 1997, the rest of NASA has teamed up to select a group of potential contractors that is available to any other NASA installation. And now the General Services Administration has awarded a seat management contract that will be available for any agency to use. The contract provides a framework within which agencies can fashion task orders according to their own requirements. GSA is likely to be its own first customer, beginning early next year.

Seat management is not a new concept, although the label is unfamiliar to many. IBM Corp., for example, provides computers and services for more than 1 million seats, or individual desktops, worldwide. And outsourcing IT support or leasing PCs is common among federal agencies. It's likely that more contract employees than civil servants provide PC support to federal offices.

But few agencies have consolidated all their hardware, software, help desk, PC maintenance and local network services under a single umbrella contract, as seat management aims to do. Moreover, by treating the provision of computers, printers, software and other products as a service, the new contracts remove a major ownership burden from the agencies.

Will the agencies save money? JPL found it could save more than $1 million a year with seat management. It's paying OAO roughly $20 million a year to manage about 8,000 seats. That's about $2,500 per seat, a bargain-basement price by all accounts.

May Not Cut Costs

Both federal officials responsible for seat management procurements and contractors are cautious when asked whether agencies can cut their desktop computing costs by choosing the new approach. That depends on how many desktops are involved, what services are supplied and many other factors, they say.

"I don't think they should look at it as a money-saving thing," says Everett Dyer, vice president and general manager of the desktop practice in Unisys Corp.'s Federal Systems unit. "They should look at it as the only way to get improvements" to their systems.

With these contracts, economies of scale are the key to cost savings. For example, seat management contractors often operate large call centers where customers from many locations can get telephone assistance via a toll-free number. Besides resolving many problems without traveling to the user's desk, the centers allow the same specialists to serve more than one customer organization. Clients need not know that their help desk is shared with other organizations.

Such economies in operations will, of course, be offset by the added cost of contractor profit, and any service improvements. The bottom line is that agencies shouldn't undertake seat management solely to cut their costs. That's one view on which there is unanimity from both seat management advocates and skeptics. "Nobody has proven yet that seat management is going to save money," says one doubter, David Borland, deputy chief information officer of the Army.

It's hard to achieve economies unless there are hundreds of desks being managed by a single contractor. "Smaller agencies will not see cost savings," says Wanda M. Smith, the seat management program manager at GSA, "but they will see improved service delivery." Not least of these improvements will be consistency and standardization.

With seat management, agencies need to specify with some precision the types of services they want and the levels of service. If a PC breaks, should it be repaired within three hours, or three days? Must help desk services be available 24 hours a day, seven days a week, or for a lesser period? Should PCs be upgraded every three years, or can they last four years?

Baseline Data

To make decisions about agency needs and to determine whether seat management makes business sense, officials need good information about the existing state of affairs with their PCs. That's easier said than done. Very few agencies have accurate information about how many computers and related equipment they have, what kinds of general-purpose software are in use, or what they're spending today on basic computing.

Robert M. Cann, a group senior vice president of Science Applications International Corp., says one of his customers had 14,000 employees and 18,000 PCs. No one could fully account for the extra 4,000 computers or explain why they were needed.

Agencies also need to know whether employees are accustomed to waiting hours or days for network outages to be fixed, and what the business consequences of downtime are. Legislation such as the 1996 Clinger-Cohen Act and the 1993 Government Performance and Results Act requires agencies to collect this kind of information, but for most, it hasn't been a priority. Without solid information about the current situation, though, agencies can't say for sure whether seat management makes sense.

"There is a lot of up-front work if you're going to have a result that you'll be happy with," JPL's Green says. At the lab, he says, a team of seven people led by a Ph.D. economist worked intensely for six months to inventory PCs and assess the baseline costs before deciding to outsource. Even though the lab was using a lot of contract help and was charging computing costs back to user programs and offices, Green adds, "only a very small part of the cost was visible" to accountants and managers.

That's common in corporate America as well as in federal agencies. The Gartner Group, a Connecticut market research firm, has been alarming executives for a couple of years with its conclusion that corporations are spending, on average, about $10,000 a year for each desktop computer they own. That figure includes every cost, such as user training, procurement overhead, network wiring and Internet services. It's been challenged by many people, but a roughly equal number say it's accurate.

Organizations that keep using older PCs and don't buy all the bells and whistles can reduce their costs, Gartner experts say, but it's clear that the purchase price of the computer is by no means the biggest factor in the cost of the computing infrastructure.

Stop the Finger-Pointing

As agencies try to manage ever more complex computing environments, they encounter finger-pointing among their contractors and suppliers. Was the e-mail service interruption the fault of the Internet provider, the mail software supplier, a modem manufacturer or the agency's technicians? Probably no one in management will ever know for sure.

The simple PC no longer is simple. "This desktop/network environment is consistently underestimated by both the vendors and the customers," says Unisys' Dyer. "It's labor-intensive, and there's no integration." With seat management, one entity--the prime contractor--takes responsibility for making everything work together and perform according to agreed-upon standards. The customer gets a single point of contact for service.

Unisys is the prime contractor for another early seat management effort, involving 5,000 users at the Bureau of Alcohol, Tobacco and Firearms. ATF officials say they are satisfied with their contract, awarded a year ago after the agency realized it needed to upgrade its IT infrastructure but had neither the capital to invest in new desktop systems nor the staff to manage and maintain them. ATF has seen its costs increase somewhat and the quality of its systems improve substantially under the new system.

Because of its security requirements, ATF asked Unisys to operate a help desk just for the bureau's use, Dyer says. Unisys has a substantial support environment, including call centers, in place, and when customers are willing to share their existing resources with other Unisys clients, "I can afford to charge less," he explains.

Some corporate seat management contracts reportedly have foundered because customers complained about distant, impersonal support centers, but Dyer and other seat management advocates say users simply want their PCs and their networks fixed promptly. "OAO is able to do better on this than we can do ourselves, " says JPL's Green.

He tells of having a PC problem of his own and calling OAO for help. "I started to tell the help desk what I was seeing," Green says, but the technician quickly recognized his problem and walked Green through the steps to fix it. "We were done in like 20 seconds," Green says.

Technicians will arrive at a customer's desk when phone service can't solve a problem. But relying on the call center as the first line of defense is more efficient than dispatching people to respond in person to every user. In preparation for JPL's seat management procurement, Green says he followed one of the lab's PC technicians around to observe what the technician did all day. In the course of an eight-hour day, the technician spent no more than two hours actually fixing computers. The rest of the time was spent traveling from desk to desk. By eliminating much of the wasted travel time, Green says, "you've taken one of the scarce resources available to us and multiplied it by 5."

Indeed, one of the reasons agencies are considering seat management is the difficulty of hiring and retaining computer support staff. There's a nationwide shortage of qualified people, and agencies find it hard to compete with private employers for the limited pool of qualified job-seekers.

JPL's contract with OAO encouraged the company to hire the lab's tech support employees, both direct employees and contractor workers, who would be displaced by the new arrangement. Of the 130 affected employees (80 of them contract staff), 128 went to work for OAO, Green says. The GSA seat management contracts have no such provision, but GSA's Smith says she would be surprised to hear that seat management led to the loss of federal jobs. "In most situations, it's not a displacement of federal jobs," she says, but of contract work.

A spokesman for the American Federation of Government Employees, the largest federal union, agrees that much of the desktop support work already has been contracted out. Although outsourcing of this IT work is not a major issue for the union today, she says employees are hurt when federal jobs disappear, because many private employers do not offer comparable benefits.

For those technically skilled federal employees who want to stay in government, there will be jobs, even if not at the same agency. The most optimistic scenarios call for seat management contracts to take hold in only half of federal offices. In a recent survey of federal managers by the Association for Federal Information Resources Management, 37 percent of the respondents said they would not award a seat management contract while 15 percent said they expected to do so. The rest were undecided, although 58 percent said they would be willing to try a pilot program or small-scale contract.

Such programs, though, would miss out on the economies of scale that full-scale seat management could offer. And pilot installations could face one problem that surfaced for the JPL pioneers: the inevitable difficulty in adopting new operating procedures. "Doing it the way we envisioned under this contract is a serious change," says Green, adding that some of the old dogs at the lab have had difficulty learning new tricks. For example, the PC support staff is not allowed to work on a user problem unless dispatched by OAO after a call to the help desk. Users no longer can buttonhole a passing technician for help. Some analysts say that changing procedures in one part of an agency and not in another part can add to the confusion.

Confusion about seat management is not limited to users and support employees involved in implementation. Vendors report encountering misconceptions and unfamiliarity with seat management among their potential customers in agencies. Their marketing experts are trying to get the word to senior agency managers, at the chief information officer level and higher. These executives need to buy into the concept of seat management if it is to spread, the marketers say.

Risky Business

More success stories like the ones at JPL and ATF will help inform decision-makers about seat management and persuade them to give it a try. But there are some risks. One is that the seat management decision may be difficult to reverse if it should prove to be a mistake. "It would seem to me that once you get into it, it's almost impossible to get out without a huge cost and potential disruption," says the Army's Borland.

Another risk is misjudging the levels of service users need and will pay for. It's difficult to tell someone trying to finish a report requested by a senior official that she'll have to wait until tomorrow to get her computer repaired. But without relegating some users to a lower-priority status, keeping costs down is difficult. Of course, adjustments can be made once the agency has gained some experience in contracting for seat management. However, a new contractual arrangement that gets off on the wrong foot seldom delights the customers, no matter what fine-tuning is done.

One way contractors will head off problems is by undertaking "due diligence" to determine before making their bids what systems an agency is using and what managers and employees expect. "The due diligence phase will actually be a project in and of itself," says John V. Flynn, senior vice president of Wang Government Services. Contractors, he says, "need due diligence to even come up with a good [price] estimate." This summer, as NASA was preparing to select contractors to manage at least 22,000 seats at four space centers, employees were warned to expect visitors who would inspect their desktops and ask some questions in the course of due diligence.

A third risk is one that can occur in any kind of outsourcing arrangement-- the failure to pay enough attention to the continuing relationship with the contractor, who now has a critical role in the agency's operations. When a seat management contract is awarded, agencies and their contractors need to agree on measurements for assessing vendor performance. Both objective measures, such as allowable downtime for equipment, and subjective ones, such as customer satisfaction ratings, can be used. The subjective ones help fill out the picture when, as JPL's Green says, "all the [objective] metrics say you ought to be as happy as a clam, but you're actually pretty angry."

Just keeping an eye on the contractor's scores on performance tests, though, probably won't be enough. Agencies and their people change over time, as do contractors and the technology they're supplying. Because the seat management contractor is responsible for an important piece of the infrastructure, agency officials dare not simply outsource this function and then forget about it. Frank Casale, executive director of the Outsourcing Institute in New York, is advising organizations that opt for outsourcing not to overlook the importance of what he calls "relationship management."

"Just as much attention must be invested in the post-contract phase as is paid to pre-signing issues," Casale says.

"Partnership" between agencies and contractors is a tired label, and one that reeks of insincerity. But with seat management, many observers say, partnerships will be necessary. "The level of relationship that this takes goes well beyond the traditional agency-contractor relationship that we've seen in the past," says Unisys' Dyer. He observes that such a relationship requires changes on the part of the agency as well as the contractor.

But agencies already are being forced to change, with or without seat management. The federal government has lost more than 329,000 jobs since the start of the Clinton administration, and the downsizing isn't over. Agencies are honing their strategic focus, concentrating on their core missions and preparing to jettison the rest--including their in-house IT operations.

Whether they choose seat management or stick with more conventional contracting approaches remains to be seen. The contractors are hoping seat management shows up in federal managers' playbooks.