Businesses and public sectororganisations in the UK have
enthusiastically embraced IT outsourcing. Surveys by analyst groups
regularly put the UK at the head of Europe's IT outsourcing league
table.
So the all-out strike against outsourcing by more than 100 IT staff
at Swansea council is a timely reminder of the complexities
involved in handing over day-to-day provision of IT operations to
another organisation.
It shows that it is not enough for IT directors to simply focus on
the bottom line benefits of transferring technology and operational
IT staff to a specialist provider.
Outsourcing requires not only IT skills, but people management
skills that many senior IT managers may not possess.
According to Simon Walsh,director of client services at managed
service provider Computa- center, while acquiring IT capabilities
is complex, cracking the technical problems is more straightforward
than managing both the external and internal staff required to make
sure a managed service works.
Walsh says, "It's a whole new skill set and many IT directors
simply don't have the skills required to manage a service
provider."
At Swansea, the staff are opposed to the council's plans to
transfer them to a commercial service provider later this year, but
say they are not opposed to the objective of the council's
Service@Swansea project to deliver joined-up services to the
city.
Instead of outright transfer, the staff are urging the council to
second them to the outsourcer. Secondment will protect existing
pension arrangements and other staff benefits that may not be
available from the outsourcer.
They are seeking to emulate staff at Liverpool and Bradford
councils that have reached secondment agreements with their
employers ahead of major IT outsourcing contract awards.
While secondment may seem a simple solution, Nigel Roxburgh,
secretary of the National Outsourcing Association, said some
outsourcing companies may be concerned about secondment as an
alternative to the established transfer of undertakings
legislation, Tupe.
He said, "Some companies have their preferred way of doing things,
and secondment as a halfway house does present the possibility of
management problems when there are disputes or problems with the
project.
"You may get some staff who are happy to work on the project, but
who don't quite accept the laid down line management - it could
become cloudy if they only looked to their council managers and
didn't see managers at the outsourcer in the same light."
Whether staff are transferred or seconded, Robert Morgan, director
of outsourcing advisory firm Morgan Chambers, believes one of the
keys to successful outsourcing is tackling staff concerns
head-on.
"Staff in an IT department see this horrendous thing coming towards
them called outsourcing," said Morgan. "But what they have to
realise is that the IT department is not a core function of the
organisation, and that IT, whether run internally or externally,
has to be turned into a business enabler - this can mean new
openings for staff."
He said that while some staff may prefer to remain focused on
application development, others, frustrated at their career
prospects within a user organisation's IT department, can find
greater business-related opportunities with the outsourcer.
To add to the complex people management issues, analyst group
Gartner says retained internal IT teams can be the weakest link in
many outsourcing deals. The internal team, left to manage the
outsourcing contract, "is frequently overworked and undervalued and
lacks the skills and tools to perform business-critical
roles".
There is no doubt that the quality of the in-house team is a
critical issue in the outsourcing process. Analyst groups estimate
the cost of managing an outsourcing contract can vary between 4%
and 10% of the value of the contract, but can rise sharply if the
contract is managed badly.
Simply shipping staff and middle management to the outsourcer and
retaining senior management to run the contract is not the best
option. Heads of IT, looking to ensure that a move to outsourcing
is a success, need to consider the service management skills they
will require, and plan to recruit or develop them.
However, if the Swansea strike drags on, it could dampen some of
the enthusiasm for outsourcing among UK IT leaders.
Michael Gough, chief executive of the National Computing Centre,
which has a membership of more than 1,000 user organisations, has
already urged users to hang on to IT facilities and bring
application development back in-house.
He said, "IT as a commodity is a misconception put about by the
outsourcing industry. Machines and networks are commodities, but
identifying requirements and building value-added applications are
not."
Staff factors affect outsourcing deals
- Company benefits, such as subsidised mortgages at a bank, may
have to be converted into alternative monetary benefits at the
outsourcer
- After the initial shock, typically 80% of outsourced staff are
happy with their new position
- Retained staff, who help to manage the outsourced contract on
behalf of the business, are often not well paid and miss out on
professional development by their company
- Retained staff are susceptible to be poached by other companies
looking to outsource their own operations
- Chief information officers or IT directors can suffer an
"identity crisis" after outsourcing as they are a recipient rather
than a provider of a service.
(Source: Morgan Chambers)
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