Privatization has forced those of us in the public sector to reevaluate, redefine and in some cases, reorganize IT departments. Traditionally, public sector IT organizations have enjoyed the luxury of a captive customer base for their services. State and local government organizations have provided services to their constituents, and in turn, IT departments have provided the necessary data processing services to their government organizations. Yet this situation is quickly changing.

Privatization is simply the hiring of private sector vendors to provide IT services traditionally offered by in-house public sector IT departments. The concept of privatization has spawned the growth of outsourcing.

Outsourcing IT services is not a new concept. It goes back to 1989, when Eastman Kodak and Enron signed multimillion-dollar contracts with outside vendors to provide their nonstrategic IT services. More recently, state and local governments nationwide have been closely watching the highly publicized outsourcing initiatives by San Diego County and Fairfax County, Va. These two counties have embarked on multimillion-dollar, long-term strategic plans to privatize and outsource most if not all of their IT functions.

Outsourcing has further evolved into an entirely new industry of ASPs that provide outsourced services for specific applications via the Internet. As the attractiveness of privatization gains momentum, those of us in the public sector need to understand how it will affect our organizations.

The appeal of outsourcing IT services in the public sector boils down to three factors: the cost of implementing technology, the cost of upgrading technology and the cost of maintaining staff. Shrinking budgets and constituents’ demanding the most from every tax dollar are forcing elected officials to seek alternative methods of providing necessary support services. As new technologies emerge, traditional public sector IT departments are hard-pressed to provide the services these technologies afford.

Traditional state and local IT organizations are set up as departments with corresponding levels of management and coordination capabilities. Outsourcing, however, requires high-level IT management and coordination. This management group is responsible for setting a company’s IT direction and reporting to the CEO the needs and expectations of various departments. This type of structure prohibits the purchase and disbursement of rogue applications and systems without regard to a company’s overall direction or strategy. It also facilitates better usage and coordination of financial and IT resources.

Public sector IT management must begin to think of themselves and their departments as the consultancy of choice for their government entity. They must strive to establish themselves as the place to go when department heads are considering IT services, even if they are incapable of providing those services. When dealing with outside vendors, they want to be sitting on the purchasing department’s side of the negotiating table. As IT professionals, not only do we need to be present in these situations, we must also be prepared.