Has Birmingham City council been brave or committed treason by offshoring jobs?

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I blogged at the end of last week following the news that Birmingham City Council is to send up to 100 IT jobs to India.

I asked the question: What do you think of Birmingham City Council's plan to offshore IT jobs to India?

This was multiple choice, with four options. These are:

The decision to outsource is

A - Inevitable
B - Brave and pioneering
C - Naïve and destined to fail
D - Other

So far I have had 28 respondents.

A total of 13 said it is naïve and destined to fail.
8 said it is inevitable
3 said it is brave and pioneering
1 said it is treason
1 said it is part of the UK's financial suicide programme
1 said it is the result of economic illiteracy
1 said it is short sighted

Here are some of the comments left by respondents.

"The savings have to come from somewhere."

"[This is] the right thing to do if it means cost savings which mean more and better services to the council tax payers."

"Customer satisfaction will inevitably decline - public services need local knowledge."

"If the council's IT requirements were straight-forward there would not be a need for a massive IT contract with Capita. Offshoring will not offer BCC what is requires."

"Local services should be delivered by local people. Service levels will decline and the cost will rise."

"The Council has to reduce costs and offshoring will reduce IT expenditure whilst maintaining same level of service."

"The hidden costs of offshoring, the huge amount of lost tax revenue for the government and soaring wage inflation in India makes this a very bad idea."

The survey is still open so please fill in the questionnaire below.

5 Comments

Regarding "Local services should be delivered by local people. Service levels will decline and the cost will rise."

I have spoken to my local services a couple of times and they know next to nothing about my local region. As long as they can answer my queries around Council tax issues or garbage collection arrangements, etc , etc, and can do the backend work of collecting the money, accounting, etc, I dont care if they are in Swindon or Mumbai

Even in the private sector there are many disagreements over whether offshoring actually saves money by the time you’ve factored in the extra costs of making it all work. In fact, even avid supporters of offshoring are admitting that their calculated savings have been severely eroded recently by soaring wage inflation in India.
So bearing this in mind, and the fact that if the work is done in the UK then the government receives a large chunk of the expenditure back in taxes, I fail to see how offshoring public sector work could possibly be a good thing and could possibly save money once the lost tax revenue is added in to the equation.

Central government should pass legislation to stop local authorities from doing this!

@Raj:
Right now, money spent on local staff by your council is recycled into the local economy, both via individual spending and via taxes. If your council ships those jobs offshore, all the money goes with them. Your council taxes will then be used to subsidise foreign workers who pay taxes to foreign governments, not ours. Less money in your local economy will contribute to rising welfare costs, greater demand for social services at the same time as staffing levels are falling, and a general decline for your community. You will end up having to pay more taxes for worse services while your local community suffers. Even if your local council is too thick to join these dots, that doesn't mean we have to follow their example.

Some good points above. I would add from personal experience

a) you will end up with two layers of IT management where there was one previously (outsourcers & council)

b) council will be vulnerable to massive ramp up of costs/ profitering down the line.

C) risks of failure remain with the council whatever the legal documents may say: the council cannot cut and run unlike some of oversized outsource companies.

SOCITM has summed up the risk and lack of benefits quite well:
http://www.socitm.net/press/article/168/outsourcing_ict_carries_many_risks_for_local_authorities_and_can_come_at_a_heavy_price_says_new_briefing_from_socitm_insight

"Socitm's Benchmarking the ICT service, which has compared costs and user satisfaction over a decade, shows that, when comparing the costs for any service, most elements will be more expensive if outsourced."

"if they cannot manage an in-house operation effectively, the likelihood is that they will not be any better at managing a contract. In addition, they may end up handing over to the supplier economies and efficiency savings they ought to be capable of making themselves."

"An associated issue is loss of in-house expertise, leaving the organisation unable to check, or even challenge, the view of the supplier. It is equivalent to the naïve householder faced with a plumber who takes a sharp intake of breath, asks 'Who did this?' and then presents a large bill. In these circumstances, urgent jobs may be done only at an excessive margin, as the supplier seeks to recoup profits lost through the typically hard-fought and costly competitive tender process. "

(I've seen that one many times as even getting a quote for doing a 5 minute job is charged at £7k i.e. 1 week of an outsourcer's project managers time)

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About this Entry

This page contains a single entry by Karl Flinders published on June 6, 2011 2:05 PM.

local government offshoring head of steam building and I think Serco knows it? was the previous entry in this blog.

Birmingham City Council's offshoring move, an isolated case? is the next entry in this blog.

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