by Stephanie Overby

Texas State CIO Bets Big On Controversial Outsourcing Deal

Jun 28, 20123 mins
Data CenterData WarehousingOutsourcing

After a multimillion-dollar outsourcing deal with IBM went bust, the state of Texas appointed a new CIO who hopes to turn things around by placing one outsourcer in charge of several others to manage data centers and other public-sector IT

Wanted: Experienced CIO to take over struggling IT organization with flailing outsourcing relationships, data centers in disarray and a disheartened internal staff.

As Governor Rick Perry’s director of administration and technology, Karen Robinson was charged with finding candidates capable of meeting that challenge. But the only one the chief of staff trusted to take over the Department of Information Resources (DIR) was Robinson herself.

“It was not one of the positions where you say, ‘Ooh ooh, take me!'” Robinson, now Texas State CIO and Executive Director of DIR, admits. But through her work with policy analysts and others to assess what went wrong during a public battle between IBM and Texas over their $863 million data-center-consolidation contract, she knew as much as anyone could about how to fix IT outsourcing.

Robinson spoke to leaders of the agencies DIR serves, created an executive leadership committee to guide IT decision making, and launched an 18-month process of rebidding the IT work. “The DIR does so much more than data centers that outsourcing was the only way to go,” says Robinson. “But I feared no [vendors] would apply.”

Even the ugliest outsourcing efforts often succed on the second attempt, but to be sure this one worked, Robinson embraced a different approach–the services integrator model. She signed a deal potentially worth more than $1 billion earlier this year, whereby Xerox and its outsourcing division (formerly ACS) will take over five towers of IT service, subcontract some of the work to vendors, including Unisys and Cisco, and Capgemini will be the master service integrator.

It’s an unproven tactic–one outsourcing provider managing its real-world competitors’ end-to-end delivery. But Robinson felt the potential rewards were worth the risk. “The other model–IBM telling IBM what to do–wasn’t working,” she says. “This is going to offer more flexibility and visibility. We have Capgemini there to oversee what’s working.”

There is pent-up IT demand from customers underserved by the previous five years of outsourcing. But “with the new contract, we opened the door to new secure, sustainable and cost-effective technologies like cloud computing, so customers don’t have to wait for servers to be delivered,” Robinson says. “We can have something built in 20 minutes.”

Successful outsourcing relationships take longer than that. Many have their eyes on Texas to see how this model works, particularly Robinson’s public-sector CIO peers, who have struggled with IT services deals. “It could be a landmark deal or it could be a disaster because so much is unknown,” says Esteban Herrera, COO of sourcing analyst firm HfS Research.

“I’ve gotten lots of ‘Good lucks,'” says Robinson. “I expect some hiccups. But I’m tired of having unhappy customers.”

The biggest benefit Robinson is looking for is increased transparency of IT delivery and improved service. She’ll know the new deal is working, she days, when her phone finally stops ringing.