San Diego officials are expected to vote Tuesday on a US$667million IT outsourcing contract with Northrop Grumman InformationTechnology, a move more and more local and state governments maysoon make if Reston, Va., consultancy Input is right about its IToutsourcing market forecast.

Input expects state and local spending on IT outsourcing to growfrom $10 billion in 2005 to $18 billion by 2010, with a compoundannual growth rate of 12 percent.

James Krouse, manager of state and local markets analysis at Input,said he expects states increasingly to turn to outsourcing to dealwith an unprecedented set of problems, including aging ITworkforces, outdated systems, and pay scales and technologies thatmake government service unattractive to college graduates. “Theleading-edge technologies are in the private sector,” he said.

The county of San Diego awarded one of the first biglocal-government outsourcing contracts in the nation in 1999 toComputer Sciences Corp. The county’s board of supervisors todaywill consider a different vendor, Northrop Grumman, after rebiddingthe work. At stake is a seven-year contract to manage IT for the17,000-employee county government, which operates on a $4 billionbudget.

Krouse sees the commonwealth of Virginia as a bellwether for thenation. In November, Virginia officials approved a 10-year, $2billion agreement with Northrop Grumman to manage the stategovernment’s IT operations. More than 900 employees of the VirginiaInformation Technologies Agency will get job offers through thecontract or can choose to stay with the state, according to detailsof the plan released in November.

San Diego officials are expected to vote Tuesday on a US$667million IT outsourcing contract with Northrop Grumman InformationTechnology, a move more and more local and state governments maysoon make if Reston, Va., consultancy Input is right about its IToutsourcing market forecast.

Input expects state and local spending on IT outsourcing to growfrom $10 billion in 2005 to $18 billion by 2010, with a compoundannual growth rate of 12 percent.

James Krouse, manager of state and local markets analysis at Input,said he expects states increasingly to turn to outsourcing to dealwith an unprecedented set of problems, including aging ITworkforces, outdated systems, and pay scales and technologies thatmake government service unattractive to college graduates. “Theleading-edge technologies are in the private sector,” he said.

The county of San Diego awarded one of the first biglocal-government outsourcing contracts in the nation in 1999 toComputer Sciences Corp. The county’s board of supervisors todaywill consider a different vendor, Northrop Grumman, after rebiddingthe work. At stake is a seven-year contract to manage IT for the17,000-employee county government, which operates on a $4 billionbudget.

Krouse sees the commonwealth of Virginia as a bellwether for thenation. In November, Virginia officials approved a 10-year, $2billion agreement with Northrop Grumman to manage the stategovernment’s IT operations. More than 900 employees of the VirginiaInformation Technologies Agency will get job offers through thecontract or can choose to stay with the state, according to detailsof the plan released in November.

“Virginia is a prime case that is looking at something that couldbe a precursor for things to come,” said Krouse.

Otto Doll, CIO of South Dakota and someone who has long beeninvolved in a national association that represents top state ITmanagers, also sees new interest in outsourcing among his peers.“Right now, there is a big drive toward consolidating services –and one of the options when one looks at consolidating is whetheryou are going to do it in-house or whether you are going tooutsource it,” he said.

“Consolidation is on a lot of people’s minds,” said Doll, who isalso on the executive board of the National Association of StateChief Information Officers in Lexington, Ky.

Government IT services have long been stymied by “stovepipe”systems built to support individual state agencies. Doll said hesees a range of consolidation plans that run from basic efforts tocombine data centers and networks to larger schemes by stategovernments interested in consolidating all IT services under oneorganization. The latter is what Virginia officials are eyeing.

Doll said his state consolidated its IT services in the mid-1990sbut uses outsourcing only in a limited way, such as hiringcontractors to help with application development. He said SouthDakota has compared the cost of providing IT services withoutsourcing, “and it doesn’t prove to be a viable economic decisionfor us.”



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