Outsourcing could cut UK deficit, but will suppliers touch it with a barge pole?

It seems to make sense that outsourcing the IT work of government departments will cut costs and help reduce the budget deficit.

But outsourcing in the public sector is a very different challenge to doing it in the private sector. There are many stumbling blocks over staff pay and compensation for those seen as surplus to requirements.

Will any suppliers want to take it on?

Below is the view of Dell Services’ VP EMEA Ferenc Szelenyi on the benefits outsourcing IT would bring the public sector. But at the bottom I have some comment from a prominent outsourcing lawyer to describe why this is not as straight forward as you may think.

“The current UK government expenditure now stands at around £680 billion a year, of which only around £80 billion worth of activity is outsourced. Currently, much of that spending is at a local level, but it is my view that the new coalition should eventually spread this across national government sectors. With every sector currently looking to reduce their operating costs, it is apparent that IT outsourcing has crucial part to play.”
“This is because currently, organisations in the public sector are looking to maintain services as best they can while recognising that there will be less money. Therefore, outsourcing is an ideal fit. Personally speaking, the con/lib coalition should be more concerned with commissioning the right outsourcing services rather than taking tasks on themselves. Therefore, managers in the public sector should turn to IT outsourcing at a time when improving efficiency and cutting costs is imperative. A successful outsourcing strategy provides a medium to long-term solution, which can not only deliver the necessary cost savings to ease the burden of the current deficit, but also provide improved operational efficiency and access to specialist skills and technology. This allows any new or existing government to focus on core (in-house) activities.”

“If you take IT services as a prime example, an outsourcing service provider is better placed than a government body to transfer paper to electronic records, having already made the investment in the required technical equipment, training and skills.”

“Health care is a prime example of a sector that is always being asked to fulfil the escalating needs of the patient, not to mention having to comply with the ever-changing government rules and regulations. This coalition could potentially increase these headaches, as potential indecision in policy making is unlikely to make changes required to stamp authority early on.”

And Mark Lewis, partner and head of outsourcing at law firm Berwin Leighton Paisner, says:

“Outsourcing from the public to the private sector is not straight forward because there are a number of agreements with unions in the public about how members will be treated if transferred to a supplier.”

“These agreements will force private sector outsourcers not to sack staff for a period after transfer and will also require those outsourcers to make pension arrangements for ex public sector workers and enhance redundancy payments.

“All of that means the cost of outsourcing from the public sector is significantly higher than outsourcing from the private sector.”

See also outsourcing expected to increase in local government.



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