Continental European governments will find it easier to cut IT costs than UK

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Governments across Europe want to cut their costs. Moving public sector IT to outsourcers is a starting point.

 

But it seems that the continental Europeans will have a lot more to gain from this than the UK.

 

I say this after reading TPI's latest analysis of the European outsourcing market.

 

It revealed that the UK accounts for 92% of public sector IT outsourcing in Europe. This leaves plenty of potential for outsourcing for European governments.

 

For Example France and Germany have large populations and big economies but yet combine these two with all the other European nations and you only have 8% of public secto IT outsourcing spending.

 

Can it be true?

 

Robert Morgan, director at sourcing broker Burnt-Oak Partners says if it is measuring contracts in monetary value it is probably the case.

 

"Especially if it includes the UK Ministry of Defence (MoD)," he says.

 

He says the MoD, for example, has an outsourced training service that costs £10bn and if you compare this to Belgium's outsourcing of its parliament work, which cost between 400 and 500m Euros, the UK's big spending is clear.

 

We should also remember that the UK government has wasted shed loads of cash on failed and inappropriate IT outsourcing.

 

See this document for the details of some of the UK government's biggest IT outsourcing mistakes.

2 Comments

Couple of questions about this headline:

1. Who says outsourcing reduces costs anyway?

Many outsourcing deals look good in the short term, but there are often many hidden longer term costs, not to mention quality and management issues. UK managers usually think only in the short term, but this is far less true in other European countries such as Germany.

2. How far will European governments be able - or willing - to outsource to cheap vendors, when the cheapest option usually means shipping work offshore, especially given the additional language barriers and the political consequences of firing their own workers to subsidise offshore workers?

For example, will French government bodies really shed French jobs in order to ship work out to India as readily as their UK counterparts? Will de-centralised German public sector organisations fire skilled local staff and risk damaging their own regional economies in order to ship work to semi-skilled offshore staff?

And which European governments will be willing to follow the UK in onshoring thousands of cheap Indian computing trainees - replacing more expensive and skilled local staff - to supply an onshore outsourcing market, and how will their own citizens respond? I can't see the French or Greeks responding to this with the same fatalism as Brits seem to.

Of course, local outsourcing already occurs all over Europe and may well increase, but this will not yield the same alleged savings as offshoring work, assuming people follow the UK lead in ignoring the hidden costs and inefficiences of the offshore model. And the political consequences may be more significant than they have so far proven to be in the UK.

UK governments have been ideologically committed to relentless privatisation and "liberalisation" for more than 30 years, but this is not necessarily the case elsewhere in Europe. Even those countries facing economic hardship after the financial crash may find it culturally/politically impossible - or strategically inadvisable - to rush down the same road as the UK.

After all, all that outsourcing has hardly proved a great success for our public sector IT in the last 10 years, has it?

In Europe they are far more concerned with the job being done properly and supporting the local economy even if it's a bit more expensive on paper.

The UK has followed the US approach of just looking at the bottom line going in, rather than taking a holistic view.

I worked on a number of UK projects, both Government and private which cost way more than expected, and suffering long overruns and delays (worst case 5 years!) due entirely to using "cheaper" offshored/onshored staff.

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This page contains a single entry by Karl Flinders published on February 1, 2011 2:15 PM.

Help navigating the IT outsourcing sector was the previous entry in this blog.

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