California Lt. Gov. Gavin Newsom on Why Government Should Outsource Technology

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Feb. 7 2013 7:30 AM

Why Government Should Outsource Technology

It just can’t attract the talent that private industry can.

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Can you imagine anything similar happening at a company like Oracle, Microsoft, Twitter, or Yelp? This may be an extreme case, but the lesson is clear: Technology is not the government’s core competency. In government service, there tend to be a few people who are empowered and entrusted with an extraordinary amount of influence, usually based on seniority. Terry Childs was a brilliant technologist who cowed his colleagues into allowing him to amass total control over a critical city resource. No one in his department really knew what he was doing with all those new modems and servers, and we found out only when it was too late.

We just don’t have the resources in government to get the numbers and quality of tech employees we need. In fact, tech is usually the first place that funding gets cut. When you’re looking for programs to trim to satisfy a shrinking budget, what goes first? Police? Firefighters? Senior meals? Of course not. You cut costs that no one will protest. And every year, the first place that gets whacked is IT.

That’s how we end up with failed projects like the brand-new computer system for CalPERS, the California Public Employees’ Retirement System, which was intended to consolidate 49 old data systems into one streamlined system. Unfortunately, the project was completed two years late, cost $500 million dollars—nearly twice the original estimate—and resulted in even worse services, with longer backlogs than before it was implemented.


In 2001, California Gov. Gray Davis signed a $95 million contract with Oracle for significant IT upgrades. A huge scandal ensued, mostly because it was a no-bid contract and Davis received a $25,000 check toward his re-election campaign from Oracle just days later. But the real scandal was that the contract was a boondoggle—Oracle’s upgrade was supposed to save the state about $111 million above the contract’s cost (if the state exercised an option for additional maintenance).

But instead, an audit committee found that the state would in fact spend almost $6 million more on Oracle database licenses and maintenance if it exercised that option and almost $41 million more if it didn’t. How could this happen? It happened because no one on the government side had enough knowledge to properly assess what Oracle was promising and whether it made sense. It happened because government will never be able to lure the kind of programming talent it needs.

“Finding great engineers is really difficult,” Yelp co-founder Jeremy Stoppelman told me. “The hot tech companies in the Valley—we’ll all complain until your ears bleed about how we can’t hire the best engineers. How can city government get a team of badass engineers to work on problems if Google or Facebook or Yelp can’t hire them?”

With no stock options, no hype, and only the promise of slow, steady advance within its civil- service ranks, government has very little to offer a talented young programmer.

We have to offer the next best thing, an open platform for people to experiment, to create and distribute government apps.

Gavin Newsom is the 49th lieutenant governor of the state of California, following his two terms as mayor of San Francisco. He was the youngest mayor of San Francisco elected in more than 100 years. Previously, he founded 15 small businesses in the San Francisco Bay area after attending Santa Clara University.