Part 1: IT Outsourcing Part 2: Managing IT

1. Part 1: IT OutsourcingPart 2: Managing IT March 6, 2012

2. Managing IT in the public sector 2 • In-house development • IT is managed by the public agency itself • However, the agency needs the human resources and technical expertise, which may not be available in-house • Partnerships (Public/ private) • Public agency partners with private sector in developing IT service, bringing strengths of each • Joint ventures between the public and private sectors • Public sector has its core service objective; private sector provides technical competence • Is it automatically more efficient to turn IT functions over to the private sector? Some have an ideological belief that it is always preferable to have market-based solutions.

3. Managing IT: Partnerships • Keys to successful partnerships • Agency culture open to learning from the private sector • Willingness to engage in mutual problem solving/goal seeking • Having a comprehensive partnering agreement • Having an ongoing day-to-day mechanism for feedback • Inclusion of performance penalties as well as rewards in contract • Agency must not become dependent on the partner • Private partner able to handle changes in services provided. • The degree of accountability of the private partner • What if the partnership is of weaknesses? • Private sector could hold the public sector hostage • Public services could be compromised

4. Managing IT: Outsourcing • Outsourcing as an alternative • Outsourcing is a process of contracting with a vendor to provide a service or an activity while the public agency retains the responsibility and accountability for the service or activity • There is a transfer of management responsibility for the delivery of resources and the performance of those resources • Many examples of IT oursourcing • See: International City/County Management Association. 2005. Information Technology Outsourcing: A Handbook for government. [Online at http://bookstore.icma.org/freedocs/Outsourcing.pdf]

5. Managing IT: Outsourcing 5 • Outsourcing Advantages • Contractor may be able to provide state of the art technology • Contractor may be able to provide technology at lower cost • Agencies receive hardware and software updates automatically • Large outsourcers deal better with scalability issues • Outsourcers may be able to obtain better human resources • Agencies can shift or shed training and support burdens • IT services are provided on fixed budget, no surprises • Competition between contractors ensures high quality/low cost (in theory!)

6. Managing IT: Outsourcing 6 • Outsourcing Disadvantages • Loss of agency jobs can leave them with little or no tech ability • Agencies lose capacity to get baseline performance data and contract management is difficult • Outsourcing of jobs has been done in the past for no good economic reason – cost/benefit did not support the actions • Outsourcing may involve the loss of local jobs • Outsourcing may lower agency morale and cause turnover • Outsourcing increases the possibility of favoritism • Outsourcing is done mainly through large contractors, making contract monitoring difficult • Costs of monitoring contracts are typically underestimated • Possibility of expensive litigation • Outsourcing can adversely affect women and minorities

7. Managing IT: Outsourcing • San Diego Case study • First, San Diego’s outsourcing failed, then it turned around • Failure: See • http://www.cio.com/article/31139/GOVERNMENT_OUTSOURCING_You_Can_t_Outsource_City_Hall • Turn around: See • http://www.govtech.com/gt/93060 • http://www.computerworld.com/action/article.do?command=viewArticleBasic&articleId=108019

8. Contract Management • Good contract management is a key element for successful outsourcing • Contract management allows an agency to obtain goods and services at an advantageous price, delivered on time, meeting functional specifications. • White and Korosec (2005) enumerate many problems with IT contracting: • Specification default – if specifications are lacking vendors take advantage • Requirement creep – agency asks for additional features • Legacy maintenance – vendors are reluctant to integrate existing legacy systems into new systems • Integration risk – vendors propose and government seeks enterprise software – however one size does not always fit all • Aspects of contract management • Performance Based Service Contracts • Share-in-Savings Contracts • Procurement

9. Aspect of Contract Management -1 • Performance Based Service Contracts • Agencies specify only the outcomes they want – the means and methods are left to the contractor. • Difficulties in managing performance-based contracts have given rise to a new industry • Consultants who assist agencies in development and monitoring of performance-based IT contracts • Pitfalls with performance contracting include achieving artificial cost savings due to reducing services to have a better bottom line and failing to closely monitor results

10. Aspect of Contract Management -2 • Share-in-Savings Contracts (SISC) • A contract management strategy for creating vendor incentives to deliver effective IT systems on time and within budget • Vendors are awarded a portion of the savings brought about by the system • SISC has many critics who say that it uses “shady financing and accounting techniques” and moves federal IT purchases away from “public and congressional” scrutiny • Evidence that SISC is in the public interest is weak as there is very little documentation of actual savings

11. Aspect of Contract Management-3 • Procurement • Procurement is the purchase of goods and services by a public sector agency • It is another aspect of contract management • E-Procurement • Electronic procurement was enabled in the 1990s when several companies began to develop applications that allowed vendors to publish electronic catalogs • Process • Typically federal procurement has been based on the lowest bid. • However the new concept of “best value” is beginning to eclipse the low bid procurement. • ‘Smart procurement’ is also used as a synonym for best value, or it may also refer to a centralized purchasing agreements. • See: GSA Smartbuy Program • http://www.gsa.gov/Portal/gsa/ep/contentView.do?contentType=GSA_OVERVIEW&contentId=22458

12. Chapter Summary • Public sector may not have in-house expertise in IT • Public sector could seek to implement IT through public private partnerships • Outsourcing has emerged as a key aspect of IT implementation in the public sector • However, outsourcing has both advantages and disadvantages • Contract management is important for successful outsourcing • Without major investment in oversight abilities the agency will be very likely to become dependent upon the contractor

13. Part 2 Managing IT

14. How to plan for IT investments? • The Role of the CIO • It is important to have a Chief Information Officer (CIO) who can strategically direct the IT investments in the public agency • The CIO role became widespread under the “Reinventing Government” initiatives of the 1990s. • The vision of the CIO position is that this officer would report directly to the department head and play an inner-circle role in departmental planning. • The CIO’s position was formalized for public sector with the Clinger Cohen Act, 1996. • At the federal level, there is also a CIO Council, which was codified into law by Congress in the E-Government Act of 2002 . The CIO Council serves as the principal interagency forum for improving practices in the design, modernization, use, sharing, and performance of Federal Government agency information resources. [See: http://www.cio.gov] • Since 1998 the Office of Management and Budget (OMB) and CIO Council have issued an annual strategic plan that sets goals, objectives, and targets for IT investments.

15. How to plan for IT investments? 15 • Strategic Planning • Strategic planning is required for IT investments. • Strategic planning builds on environmental scanning to perceive changes. • Strategic planning for IT involves seven steps: • Creating a planning structure • Auditing information systems • Defining goals • Evaluating proposals • Composing annual plans • Obtaining administrative and political approval • Implementing the plan, evaluating outcomes, revising the plan

16. IT Management: Needs Assessment • Needs Assessment • The main purpose of needs assessment is to identify organizational problems (internal and external). • A thorough needs assessment can re-energize an organization as quickly as a poor one can damage it • Four stages of Needs Assessment • Collecting information: • Interview stakeholders, brainstorming, focus groups, organizational surveys, data and transaction reviews • Present modes of Service delivery of the organization • Identifying and prioritizing problems: This identifies • What are the baseline improvements sought in LOBs and Services • Can IT adaptation achieve the improvements? • Researching alternative possible solutions: This identifies alternative technological solutions to improve performance • Seeking consensus on proposed solution: People need to agree to the solution

17. IT Management: Business Process Analysis (BPA) • BPA is not the same as needs assessment and not necessarily associated with it. • Prime focus of BPA is on Workflow analysis • Workflows deal with how tasks are distributed and sequenced between employees in an agency (or between agencies). For example, building permit requires processing by several units, such as planning and zoning, fire, infrastructure, environment, and other departments. • Workflow analysis seeks to increase efficiency of task performed (e.g. reduce building permit process from 30 days to 5 days) • Workflows are categorized into processes (each with its associated process owner) • BPA uses an iterative method to consider how a process might be reengineered and to arrive at consensus on proposed solutions

18. IT Management: Feasibility study • Feasibility study analyzes a business problem and has three broad dimensions • Operational feasibility • Economic feasibility • Technical feasibility • Feasibility study is needed to indicate what is possible on the above three dimensions; Needs assessment identifies what is required for the organization. Sometime, what is needed may not be feasible, and what is feasible may not be needed. • Needs assessment should be coupled with feasibility studies in order for both to be effective • Feasibility studies do not ensure that projects match agency missions, and do not establish need. They simply bridge strategic planning and needs assessment on the one hand, and practical concerns of the project manager on the other hand.

19. IT Management: Project Management • A project is a temporary management effort to launch a product, service or process. • Project management is the oversight of this effort • A project plan involves several elements: • Mission statement • Governance of the project • Authority and approval structure • Budget and resources • General management approach • Evaluation procedures to be used • The Role of the Project Manager • Managing people is more difficult than managing technology • There are 10 broad tasks of all project managers • An important universal skill for project managers is project scheduling – PMs must have knowledge of critical path scheduling techniques, and address scheduling of all project resources (time, money, human resources, hardware, software) • Various certification and training programs are now in place, and are being supported or supplemented by professional associations

20. IT Management: Project Management • The Role of the Project Manager • Managing people is more difficult than managing technology • Various certification and training programs are now in place, and are being supported or supplemented by professional associations • An important universal skill for project managers is project scheduling – PMs must have knowledge of critical path scheduling techniques, and address scheduling of all project resources (time, money, human resources, hardware, software)

21. IT Management: Project Management • There are 10 broad tasks of all project managers • Setting clear goals for the project • Setting clear objectives for the project • Establishing specific checkpoints, activities, relationships, and timelines • Scheduling tasks for the project • Developing the project team and the individuals in it • Motivation of team members • Keeping stakeholders informed • Managing project tasks creatively • Negotiating agreements with all internal and external groups involved with the project • Negotiating enough power for the project manager, commensurate with responsibility

22. Lesson summary • Ideally, organizations should engage in strategic planning to achieve objectives that further the organization’s goals and fulfill its mission. • The CIO’s role is significant for strategic planning • Strategic planning is required for IT investments.

23. Lesson Summary • IT Management requires both technical and human resource management • Four aspects of IT Management: • Needs Assessment • Business Process Analysis • Feasibility Studies • Project Management • Proper IT Management ensures implementation of projects