Businesses and public sectororganisations in the UK have enthusiastically embraced IT outsourcing. Surveys by analyst groups regularly put the UK at the head of Europe's IT outsourcing league table.
So the all-out strike against outsourcing by more than 100 IT staff at Swansea council is a timely reminder of the complexities involved in handing over day-to-day provision of IT operations to another organisation.
It shows that it is not enough for IT directors to simply focus on the bottom line benefits of transferring technology and operational IT staff to a specialist provider.
Outsourcing requires not only IT skills, but people management skills that many senior IT managers may not possess.
According to Simon Walsh,director of client services at managed service provider Computa- center, while acquiring IT capabilities is complex, cracking the technical problems is more straightforward than managing both the external and internal staff required to make sure a managed service works.
Walsh says, "It's a whole new skill set and many IT directors simply don't have the skills required to manage a service provider."
At Swansea, the staff are opposed to the council's plans to transfer them to a commercial service provider later this year, but say they are not opposed to the objective of the council's Service@Swansea project to deliver joined-up services to the city.
Instead of outright transfer, the staff are urging the council to second them to the outsourcer. Secondment will protect existing pension arrangements and other staff benefits that may not be available from the outsourcer.
They are seeking to emulate staff at Liverpool and Bradford councils that have reached secondment agreements with their employers ahead of major IT outsourcing contract awards.
While secondment may seem a simple solution, Nigel Roxburgh, secretary of the National Outsourcing Association, said some outsourcing companies may be concerned about secondment as an alternative to the established transfer of undertakings legislation, Tupe.
He said, "Some companies have their preferred way of doing things, and secondment as a halfway house does present the possibility of management problems when there are disputes or problems with the project.
"You may get some staff who are happy to work on the project, but who don't quite accept the laid down line management - it could become cloudy if they only looked to their council managers and didn't see managers at the outsourcer in the same light."
Whether staff are transferred or seconded, Robert Morgan, director of outsourcing advisory firm Morgan Chambers, believes one of the keys to successful outsourcing is tackling staff concerns head-on.
"Staff in an IT department see this horrendous thing coming towards them called outsourcing," said Morgan. "But what they have to realise is that the IT department is not a core function of the organisation, and that IT, whether run internally or externally, has to be turned into a business enabler - this can mean new openings for staff."
He said that while some staff may prefer to remain focused on application development, others, frustrated at their career prospects within a user organisation's IT department, can find greater business-related opportunities with the outsourcer.
To add to the complex people management issues, analyst group Gartner says retained internal IT teams can be the weakest link in many outsourcing deals. The internal team, left to manage the outsourcing contract, "is frequently overworked and undervalued and lacks the skills and tools to perform business-critical roles".
There is no doubt that the quality of the in-house team is a critical issue in the outsourcing process. Analyst groups estimate the cost of managing an outsourcing contract can vary between 4% and 10% of the value of the contract, but can rise sharply if the contract is managed badly.
Simply shipping staff and middle management to the outsourcer and retaining senior management to run the contract is not the best option. Heads of IT, looking to ensure that a move to outsourcing is a success, need to consider the service management skills they will require, and plan to recruit or develop them.
However, if the Swansea strike drags on, it could dampen some of the enthusiasm for outsourcing among UK IT leaders.
Michael Gough, chief executive of the National Computing Centre, which has a membership of more than 1,000 user organisations, has already urged users to hang on to IT facilities and bring application development back in-house.
He said, "IT as a commodity is a misconception put about by the outsourcing industry. Machines and networks are commodities, but identifying requirements and building value-added applications are not."
Staff factors affect outsourcing deals
- Company benefits, such as subsidised mortgages at a bank, may have to be converted into alternative monetary benefits at the outsourcer
- After the initial shock, typically 80% of outsourced staff are happy with their new position
- Retained staff, who help to manage the outsourced contract on behalf of the business, are often not well paid and miss out on professional development by their company
- Retained staff are susceptible to be poached by other companies looking to outsource their own operations
- Chief information officers or IT directors can suffer an "identity crisis" after outsourcing as they are a recipient rather than a provider of a service.
(Source: Morgan Chambers)