In a 2015 survey, the National Association of State Chief Information Officers (NASCIO) found a significant increase in states that outsource “some” of their IT infrastructure operations. By 2015, 79% had given some IT operations to a contractor, up from 42% in 2010.
“The recognition that we can’t do it all ourselves is what you’re seeing,” Mark Raymond, Connecticut’s Chief Information Officer, told StateScoop.
In addition, 55% of public sector officials foresee further outsourcing of business applications through common ‘as a service’ models, like Software as a Service (SaaS) and Infrastructure as a Service (IaaS). 43% of survey respondents said the public sector will expand outsourcing IT operations in general.
“If CIOs follow through on the plans represented by the data, the dominant future business model for the state CIO organization will be a shared services organization leveraging managed services and application outsourcing to deliver a significant proportion of the service portfolio,” NASCIO wrote in its report on the survey.
I suspect 80 percent of our infrastructure will be off our premises and in a cloud somewhere.Kentucky CIO Jim Fowler
Furthermore, Onvia’s Spending Forecast Center shows that Kentucky’s CIO noted in the states’ Capital Improvement Plan for 2016-2022 that within seven years the Commonwealth Office of Technology will only be a “broker of ‘as a service’ offerings.”
A Boost in Public Sector ‘As a Service’ Solicitations is Good News for CIOs and Contractors
Confirming what state CIOs told NASCIO, Onvia’s Project Center shows a similar uptick in terms of solicitations and awards. In just the last two years, the amount of bids and RFPs from state and local governments increased by nearly 10%, reaching 940 solicitations in 2015.
With the number of solicitations increasing steadily, the doors are opening for IT service providers that can provide government agencies with new business models for operating their applications and hosting infrastructure.
NASCIO wrote that states are continuing to reduce state-owned and operated data centers, while not increasing staff. They are outsourcing more, including greater use of IT shared service and managed service models.
For Technology Vendors, Early Insight into Outsourcing Plans is Key
Indeed, states are looking to be more efficient and mindful of how they spend tax dollars. One example is the Vermont Agency of Education (VAOE):
The agency had two business problems to solve related to an online application system for its child nutrition program. First, it was too difficult to manage a system maintained by a company and the state, particularly when regulations change. Secondly, the costs to handle a state-owned system continued to get more expensive. Those cost estimates raised questions about the long-term sustainability of the system. So they decided to adjust their model.
As shown in state’s IT Strategic Plan for 2015-2019, state officials plan to apply the SaaS business model to the VAOE and to more state agencies, such as the Department of Motor Vehicles’ automated testing, performance management and educators’ online licensing system.
Vermont’s realizations fit with what many other state and local government CIOs are thinking. They see their most critical function as setting an enterprise-wide vision and strategy, followed by risk management and then aligning IT to create value. Meanwhile, the outsourcing can be a key to handling their core duties and a long-term opportunity for IT contractors.
As the public sector continues to let go of traditionally siloed IT operations, technology vendors have an opportunity to help CIOs set up new business models, increase efficiencies and assist in performing the public service of stretching taxpayer dollars.