Update: Detroit schools save $3M by outsourcing IT

Officials from the Detroit Public Schools (DPS) say a groundbreaking $75 million contract to outsource the district’s entire information technology (IT) department to local computer firm Compuware Corp. has paid off to the tune of $3 million in IT-related cost savings per year.

The May 2001 agreement—in which the Farmington Hills, Mich.-based company promised to deliver IT services in human resources, financial and budget operations, student information services, and special education—reportedly marked the first time a major city school district had enlisted the help of a private company to manage every aspect of its IT department.

The $3 million figure represents a 16.5 percent savings for DPS, which Compuware credits to a series of technology upgrades and a touch of corporate-style re-engineering.

Upon signing on with Compuware, DPS—the nation’s tenth largest school system—underwent a host of technical renovations, such as the addition of a district-wide, web-enabled eMail system; the replacement and upgrade of network components, including hardware and communications lines; the installation of T-1 data connections at all remote locations; the replacement of outdated hardware with high-speed servers; upgraded software for payroll and human resources management; an improved IT help desk, and an expanded student information system.

That’s no small endeavor, considering the Motor City contains more than 268 schools and 163,000 students.

On the personnel side, Compuware came to Detroit with an eye on core competencies. The company brought in experienced Compuware employees to fill roles previously held by less qualified DPS employees, while creating more suitable positions for displaced workers within the district or at the company itself.

“A whole lot of people were just in the wrong jobs,” said Marvin Ritter, director of the district’s application management center.

Ritter, who blamed a unionized employment system for the department’s inefficiencies, said Compuware was able to accomplish its goal of streamlining information technologies and saving money simply by evaluating the various skill sets and abilities of department employees.

According to Ritter, the district had several workers who either were engaged in roles they were unqualified for or were stuck in posts that undermined their talents. Now, nearly two years into a five-year contract, school administrators say Compuware’s presence has enabled educators to focus less on infrastructure and more on learning.

“Our goal when we contracted Compuware was to improve the efficiency and effectiveness of our technology operations,” said DPS Chief Executive Officer Kenneth Burnley. “Compuware has done just that, allowing us to concentrate on providing our students with an outstanding education.”

At the time of the agreement, eSchool News reported that DPS was in search of creative ways to deal with a $2 million budget deficit, which education officials blamed on declining enrollments (see http://www.eschoolnews.com/news/showStory.cfm?ArticleID=1321). That’s when the idea came to cut down on the $20 million spent internally per year to operate IT services.

Today, as budget deficits loom large for school systems nationwide, the quest for potential cost savings is a high priority for nearly every administrator. Still, industry researchers warn that outsourcing—though efficient—harbors no guarantee of a financial windfall for schools.

According to Bill Rust of Connecticut-based IT research firm Gartner Inc., outsourcing is an excellent way for a school system to measure the efficiency of its workers. “But I’m not convinced it will save you money,” he said.

Rust, who co-authored a 2000 report on the topic, said outsourcing generally assists schools in accomplishing three goals. It helps streamline processes, cutting down on the amount of time it takes to complete a task; it ensures that service will be maintained at a constant level; and it enables schools to predict a budget more easily for the section of business being outsourced.

Whether or not schools save money during the process depends in large part on how efficient their operations were before the arrival of corporate partners, he said.

Another option to consider is partial outsourcing. According to Rust, no school system should feel obligated to outsource an entire segment of its operation. Given the new demands of the No Child Left Behind Act and other educational reforms, however, outsourcing might alleviate needless stress on overworked and underprepared district employees in certain circumstances. Significant new requirements for student information management, data warehousing, and data mining might be among those circumstances.

“You need to have someone who understands costs, [who can] compare what you can get in-house [with] what is available elsewhere,” Rust said.

Though Compuware has experienced success in its involvement with DPS, according to school officials, the company has yet to take on full-scale commitments from other school districts. Still, it’s an opportunity Ritter said the company is looking into. “We are beginning to earmark schools as a new avenue,” he said. “We believe we can help them.”

Added Compuware Chairman and CEO Peter Karmanos Jr.: “I’m pleased by the success of this agreement. Our services have helped DPS staff focus on the serious business of educating students.”


Detroit Public Schools

Compuware Corp.

Gartner Inc.

eSchool News Staff

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