Long-term outsourcing deals defy market trend

Two public sector organisations have entered into long-term IT outsourcing contracts, despite their reputation for trouble.

Two public sector organisations have entered into long-term IT outsourcing contracts, despite their reputation for trouble.

Paul Phillips

This week, Northern Ireland's Social Security Agency endorsed a £20m, ten-year deal with EDS and PricewaterhouseCoopers, while Ofsted signed a £28m, seven-year deal with Logica for IT support for its Early Years education initiative.

The public sector's lengthening record of problems with outsourcing includes crises at the Passport Office, the Inland Revenue and most recently the Home Office.

Chris Cherrington, market consultant at Frost and Sullivan, said, "There are benefits and faults to outsourcing. If it is done properly then it works, but if it is done for the wrong reasons, for example cost savings, it can be pretty torturous. Typically, public sector outsourcing has proven problematic because of political and trade union interference."

Cherrington claimed that the public sector tended to focus on short-term cost gains rather than long-term relationship building.

"A ten-year contract does provide stability. However, the trend in the private sector outsourcing industry is that companies implement the outsourcing of their IT function a little bit at a time. If this works then companies gradually increase the degree of IT outsourced. With government contracts this softly, softly approach isn't taken. Instead they just look at the bottom line," he commented.

A spokeswoman for the Department of Social Security in Northern Ireland countered, "One of the primary aims of the outsourcing contract is to improve customer service and efficiency. The length of time, 10 years, allows government systems to be continually improved and maintained."

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