The U.S. federal government is expected to outsource US$17.6billion in IT work by 2010, an increase of more than $4 billionover last year, according to a recent report by market researchcompany Input.
The projected increase in outsourcing is being driven primarilyby the Office of Management and Budget’s lines-of-businessinitiative, according to the report. The government’s lines ofbusiness include financial management, IT security and grantsmanagement, among others. Government agencies will have to apply toOMB to become Centers of Excellence for a specific businessfunction, and only agencies that receive that designation will bedeemed qualified to perform that function.
Agencies not designated as Centers of Excellence will have totransfer their function to a Center of Excellence once the systemsthat support that particular function (such as financial managementsystems) reach the end of their lifecycle. The Centers ofExcellence will then compete with outsourcing vendors for theopportunity to provide management services, though OMB has beentight-lipped about how the competitions will be organized.
“Generally speaking, the business challenges and market factorsdriving the decision to outsource are similar between the privateand public sectors,” says Chris Campbell, senior analyst forfederal market analysis with Input. “Most often, outsourcing isprompted by the need to supplement internal technical resources,reduce cost, infuse new technology, or standardize and streamlineoperations.”
In the case of the federal government, the war in Iraq, budgetdeficits and shrinking agency budgets are driving outsourcingdecisions, Campbell says.
