How the Private Sector Does It

utsourcing is nothing new in the private sector, where the technique is a standard business strategy. In 2003, firms will spend more than $52 billion just to outsource information technology management, according to the Gartner Group, a Stamford, Conn.-based technology research firm. With no A-76 process to follow and fewer stakeholders to cry foul, companies can make-and break-outsourcing deals more quickly than their federal counterparts. Here are four ways outsourcing works in the private sector:

• IN-SOURCING: Market trends, leadership changes or a shift in management philosophy can prompt private firms to bring outsourced work back in house. "It happens all the time," says Andy Childs, vice president of marketing and business development for ADP Benefit Services, an administrative services firm based in Atlanta. In government, in-sourcing requires raising staff size limits and is rare.
• FORMAL COMPETITIONS: Private companies usually don't hold formal competitions in which their own employees compete against outsourcers. Once a private company decides to outsource, it typically just does it, says Christopher Ambrose, research director for the Gartner Group. When private companies do let their employees compete, the competitions take much less time than government competitions, says Mark Filteau, president of Johnson Controls, an Orlando, Fla.-based firm.
• MEGA-DEALS: Pacts in which entire functions and assets are handed over to outside providers are commonplace in the private sector, says Gartner's Ambrose. For example, in a 10-year $1.6 billion deal struck in March, Motorola picked Computer Sciences Corp. to run its entire IT infrastructure. Ambrose believes federal agencies are less willing to cede control to outside groups. Exceptions include the Coast Guard's Deepwater venture, which lets Lockheed Martin Corp. redesign the service's offshore fleet.
• GOING OFFSHORE: Outsourcing services overseas is a growing trend in the private sector, says Filteau. But exporting federal jobs overseas almost certainly would land federal agencies in political hot water. In March, Rep. Lane Evans, D-Ill., criticized the Veterans Affairs Department for outsourcing 125 property management jobs to Ocwen Federal Savings Bank, a West Palm Beach, Fla.-based firm that has outsourced some work to India. Ocwen has since made clear that all the VA's work will be carried out in the United States.