There was a lively discussion of the State of Texas outsourcing and many speculations. It was not apparent and seemed to cost more in the long run. There is an aspect of this which is never discussed and is very real. In general, yes it will probably cost more in the long run but will cost Texas less over the long haul. Confused? Let me explain.
State Governments have been centralizing IT now for quite a while and also Outsourcing functions. The reasons are many but as private industry strives to cut costs, State’s are doing the same. It all goes back to the 1960s with the advent of the massive US Government programs and how they were funded. Equally massive Administrative structures were created in Washington DC. FACT: say for example there is a $100M program for more police around the country. Then $100M is not spent all on police. Part of the $100M is used to fund the IT necessary for administering the program. In the 1980s and 1990s, the Republicans wanted to reduce the size of the US Government employees. One solution was to create “Block Grants” and programs where the money was passed to the States was to be spent locally. Therefore the Administrative charges with IT support costs created State jobs. Agencies in Washington DC were downsized in favor of pushing those jobs out to the States. The guidelines for what expenses can be billed for IT to those Grants and programs are covered in the Office and Management OMB Circular A-87. So when Texas gets FED money, they get to use part of it to administer things with a portion for IT costs. I know one person who specializes in assisting States in reading OMB A-87 and structuring IT services to get the most money. He also helps talking to the FED IT auditors (whose goal is to ensure States only use that IT or “portion of IT” for the intended purpose). I attend an IT Financial Conference each year where the States compare their strategies and how various FED IT auditors interpret the rules. So, say Texas consolidates IT, which is easier to do if they also outsource (why is another story). One strategy might be to have a large computer which runs State work also does Federal work supporting various grants and programs. Now you would have some Chargeback scheme for recovering the IT costs. As the private sector might do things to exploit Tax laws, States will do things to exploit OMB A-87. The more of the computer expense a State could attribute to the Federal workload, then the more money is charge to Uncle Sam and the less the State of Texas would pay. Just as private companies would want to write off all expenses as Tax writeoffs, States want to shift as much of the cost to the Federal Government. So as you can imagine, the trick is combining the workloads onto a few computers and exploiting OMB A-87 to get as much Federal money as possible. In the end, it may cost more but the amount Texas actually spends could be less (they hope). Now you know why my friend was able to retire at age 50, Washington reduced its number of employees overall but needed more OMB A-87 Auditors. States increased their employee numbers with money shifted to be locally spent, and Federal Politicians were happy keeping the voters happy at home. The only losers in this could be the State IT workers who might go over to Outsourcers and surely lose their State Pensions and benefits. Hope this makes sense. Jim ---------------------------------------------------------------------- For IBM-MAIN subscribe / signoff / archive access instructions, send email to [EMAIL PROTECTED] with the message: GET IBM-MAIN INFO Search the archives at http://bama.ua.edu/archives/ibm-main.html
