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Table of Contents

Insights
Excitement Builds Around Incentives

Customer Voice
Email, Not Phone Home

Incentives Create Clear Sailing

Supplier Voice
Incentives Build Relationship Outsourcing

ERP Ties All Systems Together

Analyst Voice
Incentives: Don't Sign an Outsourcing Contract Without Them

Legal Voice
Including Incentives in an Outsourcing Contract

Special Feature
Insurer Discovers It's Good Policy to Outsource

Insuring A Good Result With Outsourcing

BPO Voice
Let Our Sales Force Be With You

Government Perspective
Performance-Based Contracts

NASA Launches Outsourcing Initiative

Better Care For A State Hospital

Out Of This World IT Support

Academic Voice
Getting Ready For Tomorrow

Intellisource, an IT support company, is used to launching new ideas with NASA. The Vienna, Virginia company, which has been a NASA subcontractor from its inception, was able to win one of the nine master contracts from NASA's Outsourcing Desktop Initiative for NASA (ODIN) because of its expertise and its heritage with the space agency.

The company currently services the Goddard Space Flight Center in Maryland and is a member of Science Applications International Corporation's (SAIC) team that manages NASA headquarters in Washington, D.C. Intellisource's mission, which is not impossible, is to provide the space agency's staffers with help desk information, infrastructure support and a dial tone.

Government outsourcing, like private sector outsourcing, requires the supplier to learn and operate in the customer's corporate culture. In NASA's case, each space center has a different feel. "One of the challenges when working with NASA is to implement and adapt our outsourcing model to their culture," says Tor Opsahl, an Intellisource senior vice president.

While the NASA staff wrote an extensive model for ODIN so its suppliers would be clear what the agency expected, communication covering the gray areas can still be as scratchy as voices from the space shuttle back to Houston. "Because the model is so complex, it's sometimes hard to translate the model to all levels. And this is true on both sides," says Opsahl.

Learning To Understand Service Level Agreements

The service level agreements, which form the core of the outsourcing contract, are new to both NASA and Intellisource's technical staff. Until this contract, neither side had worked in this new type of environment. "Some people didn't appreciate or understand the service level agreements," observes Opsahl.

The supplier says that the customer had to learn how "to be more hands off." He acknowledges this is difficult since older outsourcing models allowed NASA staffers to select and determine how its IT suppliers did things. "Now the dynamics have changed," he says.

Since incentive based outsourcing is relatively new for government agencies, Opsahl says they like pilot programs because they can test the efficacy and efficiency of this new outsourcing model. The executive says a government agency will outsource a few hundreds seats as a test. If the test is successful, then it will roll out the program for everyone.

Supplier Likes the Incentive Model

Intellisource likes the incentive model because of the economic opportunity that's built into the contract if it implements ODIN requirements as promised. "It's a classic risk-reward scenario," he says. "We like the rewards and we're willing to take the risk."

Opsahl is also excited about Intellisource's strategic alliance with SAIC. He says the agreement has allowed both companies to select the best people from both companies to field a team that can produce the home runs. This structure leverages people, skills and investments, creating a win-win situation for both suppliers and the customer.

Opsahl says this is the first time Intellisource has established a strategic alliance with a competitor. The situation is working out so well the companies are now preparing bids together on government and commercial contracts.

Fortunately, the data is demonstrating incentive-based outsourcing is an effective way for the government to outsource vital but non-core functions. "We have the numbers to prove it works," Opsahl says.

The outsourcing executive is optimistic that this kind of outsourcing is the best type for NASA. Time will level the rough spots. "Change like this doesn't happen the first day of the contract," he says.

Lessons from the Outsourcing Primer:

• When dealing with government agencies, suppliers must still adapt to their corporate cultures, just like they must in the corporate world.
• Alliances help two suppliers work together to bid for more business.
• When adopting a new outsourcing model, use patience. Change doesn't happen overnight. And this applies to both sides.
• Pilot programs are a good way to introduce incentive marketing to people used to other outsourcing mechanisms.

Publish Date: July 2000

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NASA Launches Outsourcing Initiative

Copyright © 2000 - Everest Partners, L.P.

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