Risk/Reward: A Partnership Path to IT Modernization in the Public Sector

Blog /Risk-Reward-A-Partnership-Path-to-IT-Modernization-in-Public-Sector

Hampered by aging IT environments consuming an increasing percentage of annual operating budgets, many government organizations find themselves becoming more technologically obsolete by the day. Often, these organizations recognize the urgent need to modernize IT systems but lack a funding source or the required expertise to implement such a plan. Other factors compounding this dilemma include:

  • The increasing rate of retirement among government employees
  • The availability of professionals experienced in antiquated technologies
  • Reliance on unsupported third-party hardware/software

Building IT partnerships

One solution to this dilemma is to build an IT partnership with a knowledgeable vendor. True IT partnerships aren’t formed quickly. They require establishing trust and compromise, with an eye toward the future. The following are risk/reward IT outsourcing models which, when properly defined, contribute to building strong and mutual beneficial partnerships between clients and providers.

  • Unit based – Ongoing day-to-day maintenance support is billed on a unit-based model. For each service type (e.g., a service desk call) a billing rate exists. “Price times Quantity” drives the total monthly fee for each service type.    
    • Expenses are predictable and driven by consumption, rather than some less objective unit.
    • The service provider is incentivized to drive efficiencies and realizes the associated benefit when achieved.
  • Continuous reinvestment – For ongoing day-to-day support, the provider guarantees a year-over-year productivity improvement. In return, the client agrees that a certain portion of the savings be reinvested in modernization projects with the IT partner.
  • Bonus and penalty – Application of service level agreements (SLAs) are important to sustain expected service performance. Incentivizing the provider to exceed expected performance can also be a win-win. The SLA model includes the traditional financial penalty for performance below a certain threshold. (An incentive allows the opportunity to recover from a prior month’s penalty.) In addition, service above a performance threshold may be recognized in the form of a bonus, particularly when sustained over a period of time.  

Like the physical infrastructure of public roads, bridges, and highways, the IT infrastructure of our state and local government agencies must be maintained and modernized to ensure continuity of services to citizens. One path to these goals is through IT outsourcing, which is why many government agencies are giving this approach a fresh look. 

Post Date: 9/20/2016

Tim Morton - NTT DATA Tim Morton

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