Detroit school system to outsource its entire IT department

To streamline its technology services and potentially save millions of dollars, the Detroit Public Schools (DPS) plans to turn administration of its information technology (IT) department over to an outside vendor.

The district’s call for vendors to outsource its entire technology department might be the first such large-scale initiative of its kind.

“Other [school district] IT departments have outsourced isolated functions, but I’m not aware of another major district that has outsourced [its] whole IT department,” said Thomas Diggs, chief information officer for the Detroit school system.

The request for proposals (RFP) went out to information services companies on June 14, and all proposals were to be submitted by July 14. Some major players in the IT arena have expressed interest.

“We are currently talking to EDS [Electronic Data Systems], IBM, and Compuware, among others,” said Diggs.

The district has had to find creative ways to solve serious financial problems. Diggs estimates a budget deficit of about $2 million. The primary reason, he says, is student enrollment, which has fallen from 180,000 during the 1998-99 school year to a projected 163,000 students this fall, allowing for less per-student state funding.

DPS hopes to save money by outsourcing its technology department to a large firm with more extensive capabilities to create and support a converged network.

“Right now, we have 35 outside contractors who undoubtedly make more money than DPS employees,” Diggs said. “Outsourcing will make it so that we only have one outside contractor. The point is not to increase overhead with more employees.”

Outsourcing of critical systems, which frequently occurs in the business sector, is becoming more common in school districts, too, as they answer the public cry for accountability, said Don Tharpe, executive director of the Association of School Business Officials (ASBO) International.

“Detroit has a CEO, rather than a superintendent, who probably walked in and asked why so many operations were being done in-house,” Tharpe said. “If I were to guess, I’d say the business world does not see as many different fragmented operations” as school districts do.

Still, it’s not often that a single company is called in to take over a school district’s technology department, he said.

The June 14 RFP marks the second effort made by the Detroit schools to turn management of a district department over to an outside service provider, following the district’s announcement in May that Office Depot would take over and run its purchasing department.

According to the RFP, the district’s goal in outsourcing its information services is “to have a fully integrated and robust processing environment.” The winning vendor must provide the following solutions, among others:

• Standardize the district’s local- and wide-area network infrastructure;

• Provide both short- and long-term cost savings in running the district’s technology department;

• Assist in the development of the district’s 2002-03 technology plan;

• Improve all district operations and assist with its six critical systems: financial management, human resources and payroll, student information, transportation, food services, and special education;

• Support a state-of-the art technology program that takes advantage of the functionality inherent in the district’s current hardware and software environment;

• Create an intelligent monitoring approach that measures against set benchmarks; and

• Implement a training plan that includes all DPS employees.

Detroit school employees are worried about the possibility of layoffs should a major technology firm take over the schools’ IT department, but Diggs is confident the district will take care of its current employees.

“It’s a little premature to say exactly what will happen to employees, but there is a statement in our [RFP] saying we want to make darn sure our employees are protected,” he said.

Outsourcing “is not a panacea for solving the district’s woes, but we feel pretty confident we can save money by doing it,” he added.

The district plans to select a vendor by early August and begin implementation of the contract before the start of classes this fall.

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