Kansas inks deal to outsource IT to Chicago-area company
Union official says state employees fear dozens of job losses
The state will retire a mainframe used by four major state agencies and contract with a private company in its stead, drawing concern from state employees about potential impending layoffs.
The state has inked a five-year contract with Illinois-based Ensono for more than $14 million to replace an IBM mainframe, as recommended last January in a state efficiency review commissioned by the Legislature.
The January efficiency study laid out several opportunities for IT-related savings across state agencies.
John Milburn, spokesman for the Department of Administration, said Wednesday the contract to drop the mainframe is the first of these that the state is carrying out. Asked whether the state will proceed with the other recommendations, he said, “Those efforts are not as far along as the mainframe, but discussions and planning are ongoing.”
Rebecca Proctor, executive director of the Kansas Organization of State Employees, said she has heard concerns from IT workers who say they were called to a meeting last week to discuss the decision regarding the mainframe. IT workers are concerned they will lose their jobs, and that outsourcing these services sends taxpayer dollars out of state.
One IT worker emailed Proctor following the meeting to say it appeared dozens of employees would be laid off.
Milburn confirmed a meeting had taken place but said he does not have specifics about potential job cuts.
“It’s unclear at this time just exactly how many will be affected,” he said.
Asked about the concern that the contract with Ensono would send public money out of state, Milburn said state contracts are sometimes with in-state and sometimes with out-of-state companies.
Proctor said the KOSE union hasn’t been informed of any layoff plan yet. The state has to notify the union at least 45 days in advance, she said.
Alvarez and Marsal conducted the state efficiency review, which is accessible online in full.
The audit says the state operates a single IBM mainframe at an annual cost of $6.38 million, including $2.4 million in labor costs. About 40 full-time-equivalent IT employees support the mainframe, which serves the Department for Children and Families, the Department of Transportation, the Department of Revenue and the Department of Labor.
“If bundled with a comprehensive data center outsourcing initiative,” the report says, “the state could generate between 15 and 25 percent in total savings or $960,000 to $1.6 million in annual savings.”
The audit recommends considering contracts with private companies not just for the mainframe, but for “all existing state-owned data centers,” which includes servers and storage.
The report says there are 60 full-time-equivalent public jobs supporting “the server, storage and data center environment,” representing $4.3 million in annual labor costs.
It estimates a potential $860,000 to $1.3 million in labor savings related to consolidating and outsourcing data center support, and says outsourcing data centers would free up an estimated 50,000 square feet of floor space and avoid future spending on revamping the server and storage environment.
The report’s other recommendations for boosting efficiency within the state’s IT functions included:
- Consolidating all network services
- Consolidating service desk and end user computing services
- Consolidating application development and maintenance and database administration
- Consolidating project management, security, management and other activities across executive branch IT
According to Ensono’s website, the company’s headquarters is in Downers Grove, a Chicago suburb. Its primary data centers are in Illinois and Arkansas, but the company and its partners have data centers “in almost every region of the U.S.”
The Topeka Capital-Journal left voicemails and sent an email to Ensono on Wednesday afternoon seeking comment and information about whether it plans to hire any of the state’s IT employees who work with the mainframe, and whether the company would locate jobs and operations related to this contract in state or out of state.
In addition to paying about $14 million in service charges over the next five years, the state has agreed to reimburse Ensono for “all reasonable, documented, and pre-approved expenses” related to performance of services. Travel and related costs will be subject to the state’s expense guidelines.
The contract also includes potential charge adjustments for increases or decreases in resource usage. Early contract termination fees would range upward of $2 million in the first year and decrease incrementally over the span of the deal.