Purchasing IT as a Utility

Now that the trailblazers have begun to build a body of best practices, the timid may be tempted to test the new approach.

When NASA decided seat management was the way to go, it developed and awarded the Outsourcing Desktop Initiative (ODIN) contract. One important goal was moving NASA civil servants away from solving the "break/fix" problems that crop up with networks of computers and into NASA missions, says Mark Hagerty, ODIN program manager. "NASA's mission is earth and space science," Hagerty says. "With ODIN we are shifting civil servants away from things NASA isn't supposed to be doing as part of its mission."

Inherent in Hagerty's statement is this: Supporting a network, computers and even a phone system does not help NASA or other agencies meet their missions. As the technology workforce crunch continues, this notion is gaining acceptance among managers and it is boosting support for seat management.

Under seat management, an agency buys most of its IT infrastructure as a service that can include centralized asset management, help desk support and phone service. In most cases, the agency relinquishes ownership of its IT assets. Each seat management contract sets service levels for repair response times and help desk calls, and for technology refresh rates. "We've focused on shifting the asset management responsibility away from the government to the private sector," Hagerty says. "We no longer own our equipment because we no longer have to."

At each major NASA facility, a prime contractor upgrades new versions of software all at once across the entire operation. "We are able to bring to bear some commercial best practices such as automated help desks, pushing down new software over the network and asset management," Hagerty says.

Seat Genesis

In late 1997, months before ODIN went into effect, the Jet Propulsion Laboratory in Pasadena, Calif., became the first NASA-affiliated operation to award a single contract to centralize IT support functions, asset management and technology refresh. JPL embraced the sometimes chilling idea of relinquishing control of its basic IT infrastructure in favor of moving its own IT staff into mission support roles. NASA awarded the multibillion-dollar, governmentwide ODIN contract to seven prime contractors in June 1998. The General Services Administration awarded its governmentwide Seat Management Contract in July 1998.

Since then, response has been tepid at best. Early adopters do exist. But because seat management has lacked a large and solid set of best practices and lessons learned, most agencies have taken a wait and see approach. At its core, seat management comprises elements that agencies have been comfortable with for years. Agencies are old hands at outsourcing, especially when it comes to information technology. They traditionally have cobbled together options from numerous service contracts and have made awards to a series of contractors.

"In the past, agencies have maybe chosen to outsource the procurement of their hardware or even help desk support-but they are still managing multiple contracts to provide those services," says Chris Ambrose, a research director who covers federal seat management for the Gartner Group, a Stamford, Conn., IT consulting firm.

Seat management changes the traditional approach. Instead of picking one vendor for help desk support, another for asset management and a third hardware leasing partner, a seat management contract enables agencies to contract with one firm for all IT services. "Agencies certainly gain efficiencies under seat management through the elimination of contract costs," says Ken Reisig, vice president of the ACS Government Solutions Group Inc. infrastructure systems division. "They only have to administer one contract. They will have all their service providers under one umbrella."

GSA and the Treasury Department have what amount to pilot projects in seat management. Both have outsourced the desktops, servers, software, networks and help desks at their Washington headquarters. Smaller entities, such as the Housing and Urban Development Department's Office of the Inspector General and the Peace Corps, recently have outsourced nearly 1,500 seats combined.

And while NASA has outsourced the most seats-27,000 out of 54,000-the Navy's proposed Navy/Marine Corps Intranet, with 355,000 seats up for grabs, could reshape the way IT managers view the desktop.

Gaining Control

The 1996 Clinger-Cohen IT management reform act required technology managers to look at how they made IT investments. Since then, managers have found that IT spending doesn't stop once equipment, services or software are paid for. Direct maintenance and help desk costs, for example, continue for the life of machines and software. Indirect costs are harder to quantify. They occur, for instance, when a worker asks anyone other than a help desk staffer to help fix his or her computer. This lost productivity is very hard to capture under most IT cost measurement schemes.

The combination of direct and indirect costs is called the total cost of ownership, or TCO. Agencies attempt to quantify TCO in order to help them decide whether to move to seat management. TCO studies distill the costs of myriad IT services and assets down to one price for keeping a single seat running per year. TCO studies also help managers determine acceptable service levels for seat management contracts.

But TCO studies are not universally valued. "It's hard to know if you are going to save any money in the long run if you don't know what you are spending on IT now," Hagerty says. "But I'm not a fan of TCO studies unless you can get good data coming in. If managers covet data and don't come clean about the technology they manage, a TCO study is not worth paper it's written on. You need a good faith effort."

While some agencies do not conduct formal TCO studies before embarking on seat management, nearly all create some justification based on before and after costs distilled to the seat level.

NASA, HUD and Treasury all saw their costs decrease after they awarded seat management contracts. "Although we did not do a TCO study before beginning the procurement process for [seat management], we estimate that with our added services, our seats were costing between $7,000 and $9,000. Our seats with our added services are now costing about $5,500," says Judith Gerber, program manager for seat management at Treasury's departmental offices.

NASA's per-seat costs are much less. "We pay $1,700 to $2,000 per seat per year," Hagerty says. "It's fair to say we've reduced our costs. In the beginning, we did a baseline cost concept, or TCO study, and it came to just under $3,000 per seat per year."

The story of seat management at HUD's Office of the Inspector General is different. By paying more per seat, the IG office gained control of its own IT infrastructure for the first time. When the office received its services from HUD, the IG paid approximately $7,000 per seat for 700 seats, says John Connors, deputy inspector general at HUD. Now, under a seat management contract with DynCorp negotiated through GSA's Seat Management Contract with improved hardware and services, each seat costs 7 percent more.

Two years ago, the office used HUD's main network. But after IG office managers looked at how information systems were handled by IG offices government-wide, they concluded the office needed a change. "Most of the other offices had established their own network or were given control over a server." Connors says.

And with almost 70 different offices located around the country, the HUD IG could use seat management to procure secure, distributed networks, desktops and laptops for hundreds of frequently traveling investigators and auditors. In this case, seat management enabled the office to pay slightly more to get considerably better services and equipment than it had received from HUD's IT shop.

Acknowledging that a change to seat management can transform the way an office operates, HUD IG Susan Gaffney appointed her deputy, Connors, an auditor with decades of experience, to help manage the change. NASA also takes this type of change seriously. "There is a cultural shock," Hagerty says. "Outsourcing is not something that is welcome with open arms. We have to prove to our customers that this is a good thing to do." Agencies and contractors with seat management experience say the success of a contract depends on communication during the rollover.

DynCorp now gives daylong training sessions to HUD IG employees when it issues their laptops. The training also lets employees know what to expect from DynCorp's help desk and know when their laptops might be replaced with new technology.

Ambitious Incentives

Agencies that have tried seat management have taken a cautious, incremental approach. The Navy, however, has chosen a more aggressive and ambitious plan called the Navy/Marine Corps Intranet (NMCI).

The $10 billion NMCI is at its core a seat management contract. Seeking to capitalize on system interdependencies and reasonably up-to-date inventories created by the buildup to Y2K, the Navy is set to outsource its 355,000 seats, local-area networks, wide-area networks and even its phone network.

For these services, the Navy plans to pay $4,582 per seat per year. And instead of dictating what the vendors will provide, the Navy has written a set of 44 performance measures, or service level agreements that set out performance metrics contractors must meet, beat or suffer financial loss for missing.

"The contract is full of incentives should the contractor do well and full of penalties where they will not get paid should they not do well," says Ron Turner, deputy chief information officer of the Navy for infrastructure, systems and technology.

The Navy's goal is to move its existing IT staff into developing knowledge management, database and Web applications.