Budget Woes Could Boost Government Offshoring

Political pressure may not keep outsourcing in check as state tax revenues plummet.

1 2 3 Page 2
Page 2 of 3

Strings Attached

In 2005, the state of Virginia signed a 10-year, $2 billion agreement to outsource its IT infrastructure. But the deal required that the contractor, Los Angeles-based Northrop Grumman Corp., keep the data centers -- and IT personnel -- used to fulfill the contract in facilities located within the state. In fact, approximately two-thirds of Virginia's 850 IT workers took in-state jobs with Northrop Grumman.

Under the contract, Northrop Grumman runs the state's data centers, help desks and other IT operations.

When the agreement was signed, Virginia officials said that about half of the state's IT equipment was more than eight years old and the contract was a way to get a massive upgrade and to consolidate IT operations without having launch a 10-year project to replace the older systems. The state had estimated the replacement costs at about $200 million.

Chris Dixon, an analyst at Input, a Reston, Va.-based government market research firm, said that Virginia remains a "test case" on infrastructure outsourcing.

However, he believes that as more states move to consolidate IT operations, interest in infrastructure outsourcing will increase.

Meanwhile, some of President Barack Obama's appointees to top federal IT posts appear open to the use of offshore resources for at least some government projects.

Take Aneesh Chopra, Obama's pick to be the nation's first-ever CTO, for example. Chopra was Virginia's secretary of technology when the state signed a 2007 outsourcing contract for content management development with HCL America Inc., a unit of Noida, India-based outsourcing firm HCL Technologies Ltd.

At the time, the Virginia Information Technologies Agency said it would allow work under the contract to be performed at HCL facilities in India. The officials said that the contract was awarded to HCL because it offered the "best value" compared with competing bidders.

The earlier contract with Northrop Grumman was signed just prior to Chopra's appointment as the state's secretary of technology.

The other top technology officer appointed by Obama, federal CIO Vivek Kundra, signed a similar deal with Advanced Integrated Technologies Corp., a Washington-based company with operations in India, in his previous position as CTO of the District of Columbia.

Advanced Integrated Technologies and a city employee were implicated in an alleged bribery scheme in March, but the White House concluded that Kundra was not involved, and he retained his federal post.

1 2 3 Page 2
Page 2 of 3
7 inconvenient truths about the hybrid work trend
Shop Tech Products at Amazon