Councils get a bad deal from outsourcing, says Deloitte

Local authorities have got a bad deal from kitchen sink outsourcing deals with private industry and should take their most important IT functions back...

Local authorities have got a bad deal from kitchen sink outsourcing deals with private industry and should take their most important IT functions back under the wing of the public sector, says consultancy Deloitte.

Contrary to the belief in recent years that local authorities could save money by handing their entire IT departments over to private contractors, Deloitte said outsourcing suppliers are better suited to providing "highly commoditised IT functions, such as desktop, networks and datacentres".

Councils could make "significant savings", make better use of their IT and do a better job for their constituents if they kept IT strategy and supplier management functions in-house, the firm said in a report, Taking control of IT.

"The days of the monolithic IT outsourcing deal are numbered," said Costi Perricos, Deloitte technology partner and report author. "Successful outsourcing stories remain rare in local government."

Bill Hall, director of local government IT at Deloitte, said large outsourcing deals were an inheritance of a time when central e-government investment drove a transformation in IT services. Legal restrictions prevented councils from raising the capital to manage the changes, so they outsourced to private firms who could get the loans. Now belts were tightening and restrictions on LA borrowing had been removed, councils were finding the big outsourcing deals were no longer attractive.

Perricos said councils had treated IT as though it were a "black box". The result was "failed outsourcing contracts", and a lack of "centralised control" and "adequate governance".

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