So the government met its top suppliers last week and told them to cut costs now and continue to do so. Minister Francis Maude sat 19 suppliers in a room to talk last week.
This could be a cut of 20%, according to a well connected source of mine.
As I am working on an analysis of how this can happen I thought I should put out question to the outsourcing community. How can suppliers cut their costs to support the government?
The suppliers will now be raking their brains to see how they can keep on-side with teh government and bring costs down.
To get the debate going here are a few ideas for cutting costs:
1 - Refinance the contracts? When the suppliers borrowed the money for some contracts, often quite a few years ago, interest rates were higher. Robert Morgan, director at consultancy Burnt-Oak Partners says there would be a one of charge for refinancing but the savings would outweigh this.
2 - Offshore more work? The top suppliers that the government invited to meet it did not include any Indian suppliers. Although most of the suppliers on the list have offshore capabilities there is an opportunity to get lower cost services from the pure play Indian firms.
3 - Government departments being more flexible? Could departments enable suppliers to offer cheaper services by tweaking the way they work?
What do you think? Any suppliers out there with good ideas?