Company OverviewThe County of San Diego, California, is one of the most award$-$winning and innovativegovernment agencies in the United States. Its Board of Supervisors runs it like a businessandemphasizes accountability, efficiency, and customer service. The County's annualrevenues are around $$4$ billion per year, and it is home to $3\mathrm{.}3$ million residents. TheCounty of San Diego's mission is to be a national municipal leader and a strategicbusiness partner for innovative technology solutions. To achieve this, San DiegoCounty's vision is to provide high$-$quality technology and wireless services while drivingstrategic innovation through collaboration and partnership with city and regionalstakeholders. The County Technology Office is responsible for the oversight of theCounty's IT$,$ including strategic planning, contract oversight, and execution andoperational support for over $18,000$ County employees at more than $200$ sites.The ProblemTwenty years ago, San Diego County had an outdated IT infrastructure that needed a$$100$ million investment to update it$.$ Systems weren't integrated; $50+$ departments eachhad their own IT staff, and communication throughout its $300$ County offices was poor.The SolutionInstead of investing heavily in outdated IT infrastructure, San Diego County decided tooutsource its entire IT function$$hardware$,$ software, networks, data centers, help desk$$everything$!$ It wanted a productive outsourcing arrangement that offered a state$-$of$-$the$-$artIT infrastructure, an IT governance structure that fits the County's needs, and stronginteroffice communications. In $2020,$ San Diego County has achieved its goal and is amodel for how to outsource government IT operations. But it wasn't easy getting there.Outsourcing Contract #$1$In October $1999,$ the San Diego County Board of Supervisors decided to outsource aradical upgrading of the County's IT function. On December $13,1999,$ Tom Boardman,Chief Technology Officer for San Diego County, signed a $$644$ million, seven$-$year IToutsourcing contract with Pennant Alliance, a four$-$vendor team led by ComputerSciences Corporation $($CSC$).$ At the time it was the biggest, broadest outsourcing dealever initiated by a regional government. Under the terms of the outsourcing contract, allCounty IT employees, hardware, and processes were moved to the consortium. The entireIT function was centralized under a new County Technology Office $($CTO$)$ by replacingevery component of the County's IT infrastructure and developing an aggressiveenterprise resource planning $($ERP$)$ rollout plan to provide San Diego County's citizenswith better access to its services.Unfortunately, the first year of the contract didn't go smoothly largely due to the SanDiego County's extremely high expectations. For example, the contract set the unrealisticrequirement that Pennant correct $90\%$ of reported application software problems withintwo hours and $99\%$ within six hours. County employees cited one problem of waiting forweeks to receive reports and being billed several hundred dollars. Before outsourcing, theemployee was accustomed to receiving a similar report in a maximum of three days andat no cost$.$ Paperwork and administrative red tape also rose dramatically. One manager

claimed that since outsourcing began, "We've had more system failures in the last threemonths than in the last three years."At the end of two years, the outsourcing situation was an even bigger mess. The twoprincipals who signed the deal had left, Michael Moore was the new San Diego CountyCIO, and the new day$-$to$-$day managers were embroiled in a bitter behind$-$the$-$scenesdispute over costs, service levels, and a late rollout of the promised ERP. By this time,Pennant had already exceeded its project investment by $$10$ million due to penalties andunforeseen upgrades to the County's creaky IT infrastructure and had added $300$ extrapeople to hand hold County agency employees through the early days of the transition.By the end of the contract, things were getting on a much more even keel. Seventeenseparate help desks had been combined into one, five e$-$mail systems were integrated intoa single system, and $800$ or more servers distributed over $300$ sites reduced to $520$ housedin a single data center. Security had also been improved with the deployment of acommon operating system for $12,000$ County PCs that were refreshed every $36$ months.The IT silos had disappeared, and an integrated IT function took there place.Moore and his IT staff could now concentrate on strategic IT planning. Dramatic rewardswere being realized from the new integrated IT infrastructure. Reliability was up andoutages were down, and more effective security was designed in$,$ rather than bolted on$.$Outsourcing Contract #$2$In January $2006,$ under its new CIO, Harold Tuck, San Diego County parted companywith Pennant Alliance when it signed a seven$-$year $$667$ million outsourcing contractwith Northrop Grumman Information Technology $($NGIT$).$ Learning from previousmistakes, the new contract specified fewer ser