To save on IT outsourcing, Minneapolis takes over help desk

Above: OneNeck IT Solution's Eden Prairie-based data center

Realizing that IT outsourcing firms make their highest profit margins on technical support, Minneapolis plans to save millions by bringing those jobs back to the city.

That is one component of a plan to leave the city's current provider, Unisys, ending a 12-year relationship ultimately worth $147 million to the Pennsylvania-based company -- the city's largest contract. The council gave initial approval Wednesday to switch some services to OneNeck IT Solutions.

Changing contractors and bringing the help desk and desktop support in-house will save the city about $3 million a year overall. It currently pays about $13 million a year to Unisys for technical and desktop support, in addition to data storage, security and networking.

The change involves hiring 33 employees, most of whom will staff a 24/7 support center or install hardware and software. The city's IT chief, Otto Doll, said they were surprised by the cost savings of bringing those services in-house.

"What we learned is these areas, particularly the service desk, closely followed by desktop services, within the IT outsourcing industry is the most lucrative part of the outsourcer's set of activities," Doll said.

The transition itself will cost about $10 million, since the city has to hire new employees and purchase equipment owned by Unisys. But that cost will be covered by past charges to city departments that have accrued in an account now worth $45.8 million (see slide below).

The new five-year contract with OneNeck is worth $22 million and includes data storage and network services. While headquartered in Arizona, OneNeck's Twin Cities arm was formerly its own firm known as Visi, Inc.

Unlike the Unisys contract, Doll said the new arrangement is based on consumption -- rather than a baseline annual payment -- and eliminates costly fees for adding or moving computers. It also allows the city to more quickly transition to new services.

Doll said in-sourcing the help desk jobs lets the city evolve over time. The annual cost of that in-sourcing will be just over $3 million, one chunk of the annual $10.5 million expected IT costs in the future.

"An outsourcer wants to create a model and sort of turn that crank. And do a repeatable process. And for a fee, you can always change that process," Doll said. "And we really feel that we need to really kind of own that client relationship and have that ability to evolve how we deal with employees and with the departments overall."

The city has had challenges hiring IT employees in the past because the jobs required a lot of expertise, Doll said. The new arrangement will make it easier to find people who can then climb a "career ladder" in the IT department. "There are just literally more people out there with these types of skills," Doll said.

He added they are working with MCTC, Genesys Works and other groups to find more people of color to work in the city's IT department. "People of color are going into that field far more than whites across not only the United States, but the world," Doll said.

The city had handled IT itself before outsourcing in 2003. Council Member Lisa Goodman said the decision was controversial. "How do you get the best service from someone who isn't working within your organization?" Goodman said. "And how motivated are they to provide the best service for the lowest price?"

Council Member Andrew Johnson, who has helped steer the change in the last year, said the new contract was a win-win. "It's not everyday you have an opportunity to save taxpayers money, improve internal services and in-source jobs," Johnson said.

The Unisys contract officially expires in December of this year.