Budget & Finance

Tech Firms Land Privatization Role

By Andrew Trotter — September 25, 2002 6 min read
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Why would a school district turn over the keys to its major technological assets—its information system, communications network, and computers—to an outside company to maintain and manage?

“They can do the job better than we can,” said Leonard Merrell, the superintendent of the Katy, Texas, schools. “We think [it] will save us money.”

The 40,000-student Katy district, near Houston, has hired the computer-and-copier giant Hewlett-Packard Co. to replace the district’s information-technology department, in one of the most far- reaching “outsourcing” deals in school technology to date.

The Palo Alto, Calif., company will be responsible for operating and maintaining the district’s network, software, and more than 13,000 computers; make all repairs and upgrades; and run a telephone help-desk that will respond to the technology problems in Katy’s 40 schools and its central office.

But some experts say the deal, and others like it, pose a set of risks that school districts must consider.

“Once the vendor has control of the [information- technology] system, they can nickel and dime you on system enhancements and modifications, and slowly raise prices,” said Nona Ullman, the managing director and “education lead” at KPMG Consulting in New York City. She added that a district might end up depending too much on the company for monitoring its own performance.

Jim Hirsch, the chief technology officer of the 50,000- student school system in Plano, Texas, raised other concerns.

“An outside group doesn’t always take the same level of interest, degree of concern ... as in-house staff does,” said Mr. Hirsch, who is also the president of the Consortium for School Networking, a Washington-based group that represents school technology officers. “You have to have an ironclad agreement, and manage mission-critical things yourself.”

‘Mission Critical’

Still, the Katy school district has signed on to what appears to be a new wrinkle in the privatization movement—the outsourcing of school information technology, which districts have tended to guard tightly as a “mission critical” function.

Over the past two years, the school districts of Detroit; Richardson, Texas; and Dayton, Ohio have outsourced many of their information-technology functions, and the New York City system is currently considering bids for two different projects to outsource major pieces of such operations. In recent years, most technology outsourcing in schools was in the areas of professional development and computer training, according to Quality Education Data, a Denver-based company that tracks figures on school technology use.

QED’s latest survey of public school districts found that more than 30 percent planned to outsource at least some of their network administration and hardware installation in the 2001-02 school year. And 8 percent planned to outsource their technology help-desks.

In doing so, observers say, school districts are joining a trend that has swept the business world over the past few years, as organizations have tried to focus on their “core competencies” and leave the digital headaches to technology companies.

Hewlett-Packard, Compaq (which merged with Hewlett in April), Dell Computer, EDS, International Business Machines, and smaller technology companies have plunged into the school outsourcing business as a way to make up partly for stagnation in the hardware market.

Outsourcing can take several forms, such as consulting contracts, maintenance agreements that districts purchase along with computers and other equipment, and contracts with application service providers—companies that offer software that school personnel, students, and parents can use online.

Superintendent Merrell said the Katy district began studying the possibility of outsourcing from the example of Texas’ Richardson district, which signed a computer-maintenance agreement with Compaq last year as part of a purchase of new computers.

Contract Accountability

Even experts like Ms. Ullman and Mr. Hirsch, who are quick to point out the pitfalls of turning a school district’s technology operation over to a private company, say such a relationship can also provide many benefits.

To begin with, technology companies have specialized technical-staff employees that most districts could never afford to hire, and the companies typically strive to keep those workers at the peak of training in the latest technology. Technology companies also have broad experience in systems and software that can benefit districts—by identifying problems of software compatibility, for instance.

Some companies, like Hewlett-Packard, have large help-desk operations that can offer, at a low cost, customized services that are tailored to a district’s needs.

“There’s no question, from the school district perspective—maintaining inventory, keeping a really clean asset-tracking system, keeping qualified staff, [the outsourcing company can provide a great savings],” Mr. Hirsch said.

Ms. Ullman added that “the reasons people would do it is lower cost or better service, or they don’t have the internal capacity to do it at all. Often the district cannot afford to hire IT staff, which often command the same salaries as the superintendent.”

In Katy, the $1.5 million annual contract with Hewlett-Packard will come up for renewal every year. The company is required to meet a specific set of performance standards, Mr. Merrell said.

The company will report to the district regularly on the amount of time the district-wide network is not working. It will also provide data on how long callers to the district help desk—now based at a Hewlett-Packard facility in Atlanta—must wait before the phone is answered, the volume of calls, how long it takes before questions are answered, and the delays schools experience in getting repairs done.

Mr. Merrell said the district’s goal is to have “the system up 99 percent of the time or higher,” to have calls to the help-desk picked up within 30 seconds, and to have most questions receiving “instantaneous answers.” At the longest, equipment or software breakdowns must be corrected within two days, he said.

“We can monitor that, and also monitor it by talking to users, how much down time they have, how quickly problems are resolved,” Mr. Merrell said.

As part of the deal, he said, Hewlett-Packard has hired 10 of the district’s 13 technicians. They will work in the district under an on-site manager employed by the company.

The other three technicians remain on the district’s staff, retaining some in-house capacity to maintain more than 20,000 items of equipment, as well as software for student reporting, financial accountability, communications, and other functions.

Hewlett-Packard has agreed to provide ongoing technical training to all 13 staff members.

George W. Warren, Hewlett-Packard’s K-12 business director, said the company’s first goal is to better understand the technology environment in schools. Then it plans to focus on helping schools learn how to use technology to raise student achievement.

“We’ll learn how to do this better and better and better,” he said.

Funding for this story was provided in part by the Ford Foundation, which helps underwrite coverage of the changing definition of public schooling.

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